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Drought plunges Kariba Dam hydropower to record lows

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kariba dam

Power shortages in Zambia and Zimbabwe undermine their struggling economies.

Drought has brought record-low water levels at the Kariba Dam on the Zambia-Zimbabwe border, forcing significant power cutbacks and rationing.

The crisis at the world’s largest man-made reservoir threatens to further weaken the growth outlook for the two countries at a time when they face falling commodity prices. The struggling mining industry has been particularly hard hit.

The reservoir fell to 11 percent of capacity in late January before rising slightly to 12 percent this month after dam authorities cut hydropower production to 25 percent of capacity. A year ago, the dam, which is fed by the Zambezi River, was at more than 50 percent capacity but drought and heavier than expected water usage resulted in the decline.

Power shortage could last years

While authorities may avoid a shutdown of the hydropower production, power shortages are expected to last for years. According to the World Bank, the power deficit could last at least until 2018 and possibly until 2020.

Henry Kapata, spokesman for Zambia’s state power utililty said power blackouts were averaging eight hours a day or more when imports were limited.

Kapata said the power deficit totaled 630 megawatts in January. The utility’s goal is to reduce the deficit to less than 160 megawatts by August, he said.

Mining industry suffers

Kariba Dam

The power cuts have dealt a significant blow to a mining industry that was already in trouble.

Zambian mining interests in August agreed to cut hydropower consumption by 30 percent as the problems became evident last summer. In Zimbabwe, mines and other major users were ordered to cut their consumption by 25 percent in October.

As a result of cutbacks and global price declines, mining growth has stalled.

In Zambia, where mining accounts for 80 percent of exports, production of copper, also was expected to decline this year. Two major mining companies suspended operations and cut thousands of jobs following the decline in copper prices and thousands of jobs were lost.

Effective January 1st, the government increased power tariffs by 25 percent in an attempt to encourage mining companies to invest in power generation.

In Zimbabwe, where minerals account for 55 percent of all exports, production fell slightly in 2015, according to the Chamber of Mines of Zimbabwe. The total value of mineral shipments declined steadily between 2012 and 2015 from $2.2 billion to $1.8 billion because of low output and declining prices globally.

Finance Minister Patrick Chinamasa has said the power crisis has become an obstacle to economic growth in Zimbabwe and the government is putting a priority on power projects.

“We regard power generation as our number one priority to move the country toward an economic recovery,” Chinamasa told the Parliament in December.

Engineers see risk of dam collapse

Even as the drought eases, a larger crisis looms for the Kariba Dam. Engineering experts have been warning for years that the dam wall is in danger of collapse.

The low water level reduces the pressure temporarily, but “the bigger picture of the state of Kariba dam is critical,” said Kay Darbourn, author of an extensive 2015 report on the dam.

Darbourn said factors including high rainfall that will feed water inflows locally and from other regions as well as potential earthquake activity, “could all contribute to the likelihood of failure of the Kariba Dam.”

The report, “Impact of failure of the Kariba Dam,” (pdf) said 2014-2017 was a crucial period of danger for the dam, while a project to repair it will not be completed until 2025.

Bedrock at the foot of the dam erodes

The dam was built in 1959 on a seemingly solid bed of basalt. However, torrents from the spillway have eroded the bedrock at the foot of the dam and a large crater now undermines the base of the dam wall.

Engineers have warned for years that the dam, which is 128 meters tall and 579 meters wide, will collapse and the floodwaters will breach Mozambique’s Cahora Bassa Dam, knocking out about 40 percent of southern Africa’s hydroelectric supply.

An estimated 3.5 million lives would be at risk in Zambia and Zimbabwe as well as further downstream in Malawi and Mozambique.

Fears were heightened in January when an earthquake measuring 4.6 on the Richter scale struck less than 60 kilometers away from the dam. The dam has withstood quakes as high as 5.5. Authorities are assessing whether the quake caused additional damage to the dam.

Munyaradzi Munodawafa, spokesperson for the Zambezi River Authority (ZRA), manager of the dam, said Zambia and Zimbabwe had raised about nearly all of the $300 million needed to fix the structure. Work was expected to start early in 2016.

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Zambia’s kwacha weakens on low dollar supply

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambia’s kwacha weakened more than 1 percent on Tuesday on tight dollar supply, sending the currency of Africa’s second-largest copper producer down 1.25 percent to 11.25 per dollar by 1302 GMT.

“Scant dollar inflows continue being snapped up by interbank and corporate players and is likely to sustain pressure on the kwacha in the near term,” Zambia’s National Commercial Bank said in a note.



(Reporting by Chris Mfula; Writing by Nqobile Dludla; Editing by James Macharia)

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Most of Zambia plunged into blackout

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LUSAKA (Reuters) – Zambia was plunged into a blackout on Tuesday affecting almost the whole of the country, the state power utility Zesco Ltd said.

“Almost the whole country except for Southern and Western province has experienced a power failure but we are yet to establish what has caused it,” Zesco spokeswoman Bessie Banda told Reuters.

Most of Zambia was affected by a power blackout on Dec. 11 because of a technical fault and supply was restored only the following day.

The southern African country, the continent’s second biggest copper producer, has been grappling with power shortages related to a searing drought as levels in the Kariba dam, which provides much of the nation’s electricity, drop.

Zambia’s Konkola Copper Mines (KCM), owned by Vedanta Resources, said after the Dec. 11 blackout it would suffer slight output losses.

An electricity shortage and weaker copper prices due to slower growth by top consumer China have threatened output and jobs in the mining industry, with the slow-down putting Zambia’s currency on the back foot against the dollar.



(Reporting by Chris Mfula; Writing by Ed Stoddard and Richard Balmforth; Editing by Kevin Liffey)

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Zambia to introduce sliding mineral royalty tax in 2016

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambia, Africa’s second largest copper producer, will in the first quarter next year introduce a new sliding mineral royalty tax that will be adjusted depending on metal prices, a government spokesman said on Tuesday.

Zambian royalty taxes will range between 3 percent and 9 percent depending on the global price of metals, presidential spokesman Amos Chanda said.


(Reporting by Chris Mfula; Editing by Joe Brock)

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IMF says Zambia’s electricity price to attract investment in power sector

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambia’s electricity price hike will ease power shortages that have put pressure on the economy of Africa’s No. 2 copper producer, the International Monetary Fund (IMF) said on Thursday.

Zambia’s economy is likely to grow by less than 5 percent in 2015 due to the power crunch, which has hit output at mining firms, already grappling with a slide in global copper prices, the government of the southern African nation has said.

Zambia’s energy regulator allowed state power utility Zesco to raise the average price of electricity to 10.35 U.S. cents per kilowatt hour (KWh) from 6 U.S. cents per KWh. The new tariff became effective on Thursday.

However, mining companies were unaffected by the increase because most of them get their power from Zambian power supplier Copperbelt Energy Corp. which buys electricity from Zesco in bulk and sells it to mining companies including the local units of Vedanta Resources and Glencore.

“Today’s increase in electricity tariffs is a key part of laying the foundation for needed investments in new power generation,” IMF country representative Tobias Rasmussen told Reuters.

“The move, on its own, does not ensure full cost recovery in electricity provision, but this is an important step towards putting the power sector on a sustainable footing and overcoming the electricity shortages that have plagued the economy.”

Zesco Ltd had applied for the higher tariffs in October, saying it had to increase the price of electricity due to rising costs and a depreciation of the kwacha currency, which had pushed up import prices.

Zambia’s electricity deficit rose to 985 megawatts (MW) in September from 560 MW in March as water levels in reservoirs at its biggest hydropower station fell due to drought.

Zambia’s power generation capacity stands at 2,200 megawatts (MW), with the bulk of the electricity produced from hydropower, but supply is often erratic. Zambia’s output fell to 1,900 MW in March due to low water levels in dams.


(By Chris Mfula. Editing by James Macharia and Mark Potter)

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Zambia’s Lungu says won’t take over struggling mines

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambia does not plan to take over mines that have shed jobs after a sharp fall in global copper prices, President Edgar Lungu said on Thursday, backtracking from a warning earlier this month that the state would take over such mines.

Lungu said the economy would grow at a slower pace than previously estimated due to the struggling mining industry and electricity shortages, but that government would implement austerity measures to cope with the decline.

“The government can run the mines but we have no intention to take over the mines,” Lungu said, adding that government tried its best to keep the job losses to a minimum and that the troubles in the sector would lower economic growth.

On the job losses in the mines, Lungu said during a speech from his office that the government had tried its best to keep the job losses to the barest minimum.

“We would have lost all the jobs if we insisted on no job losses. The mines have told us why these jobs are being lost. The challenges in the mining sector are bound to continue. The government can run the mines but we have no intention to take over the mines,” he said.

Lungu earlier this month warned that he would not allow Glencore’s local unit to lay off workers.

The company has been cutting its copper output to support flagging global prices.

Vedanta Resources’ Zambian unit Konkola Copper Mines KCM) said it would mothball its loss making Nchanga underground mine by the end of the month.


(Reporting by Chris Mfula; Writing by Mfuneko Toyana; Editing by James Macharia)

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Zambia’s 2016 economic growth seen below 4%

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambia’s economic growth will fall below 4 percent in 2016 due to a combination of domestic and international pressures but expansion in Africa’s second-largest copper producer will pick up in subsequent years, the World Bank said on Thursday.

“We expect growth to fall below 4 percent in 2016 and an improvement in growth in 2017 and 2018,” World Bank senior economist Gregory Smith said at a media briefing.

Severe electricity shortages, a plunge in global copper prices to record lows and a faltering currency have hurt the southern African country’s economy. The government forecasts growth at 4.6 percent in 2015.


(Reporting by Chris Mfula; Writing Mfuneko Toyana; Editing by James Macharia)

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Glencore’s Zambia copper mining unit lays off 4,300 workers: company and union sources

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Glencore’s Zambian unit has laid off 4,300 workers, union and company sources said on Tuesday, as the mining and trading company deepens cuts in copper output to support flagging prices.

“The company started giving out the letters of redundancy yesterday and has continued with the exercise today,” one union official said, referring to Glencore unit Mopani Copper Mines.

The union source said around 5,000 employees working for contractors would also lose their jobs as Mopani would only maintain two contractors specialized in the sinking of shafts.

Mopani had said in a letter dated October 21 giving notice of redundancy to mine unions that the firm was still losing millions of dollars and had to take action to secure its long term viability.

Mining companies are under Zambian law required to labour unions at least one month’s notice before laying off employees.

Zambia’s President Edgar Lungu said earlier this month he would not allow Glencore’s unit to lay off workers.

Mopani was expected to pay the 4,300 workers a total of $33 million, two company sources with knowledge of the retrenchment plan told Reuters.

Swiss-based Glencore has pledged to cut its net debt to $20 billion by the end of 2016 to regain the trust of investors after its shares tumbled to record lows this year.


(Reporting by Chris Mfula; Editing by James Macharia)

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Zambia needs measures to lower deficit, restore confidence: IMF

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – The implementation of measures to lower Zambia’s fiscal deficit will go a long way towards restoring market confidence, the International Monetary Fund said on Friday.

“The pressures on the economy have not only reflected the impact of external shocks but also the waning market confidence,” the IMF said in a statement.

“Fiscal discipline has been undermined by additional spending commitments that stand in contrast to lower-than-budgeted revenues.”


(Reporting by Chris Mfula; Writing by Stella Mapenzauswa; Editng by Joe Brock)

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Zambia lifts benchmark rate to record 15.5% to curb inflation

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambia’s central bank raised its benchmark lending rate to a record 15.5 percent on Tuesday to curb soaring inflation which nearly doubled last month as the currency of the African copper producer weakened sharply.

The rate hike, the first since November 2014, also came after a steep fall by Zambia’s kwacha brought on by tumbling copper prices as the consumption in top copper consumer China slowed along with its economy.

The southern African nation had kept the key rate unchanged at 12.5 percent in August, saying it predicted inflation would breach the regulator’s 7 percent target by year end.

“Keeping inflation expectations anchored in single digits is critical,” Central Bank Governor Denny Kalyalya said.

But consumer prices rose to 14.3 percent from 7.7 percent in September, as Zambia’s currency weakened.

The central bank also lifted the cap restricting commercial bank lending rates to a maximum 24.5 percent to allow better functioning of the credit market, Kalyalya said.

The Zambian kwacha firmed 1.36 percent to 12.41 after the rate hike but later traded up 0.56 percent at 12.5000.

“This should allow the kwacha to at least stabilise,” Standard Chartered Bank Africa economist Razia Khan said.

“A more significant reversal of recent losses would require some turnaround in copper prices and much higher interbank rates.”

Economic growth is expected at 4.6 percent in 2015 due to weaker global activity and lower commodity prices as well as a domestic electricity crunch, but would tick up to 5 percent next year, finance minister Alexander Chikwanda said in the 2016 budget speech.

Zambia suffers from severe power shortages. The state utility firm Zesco Ltd has cut the electricity supply to mining firms and doubled prices for other industrial users and household consumers.

Despite these measures, the price of copper, Zambia’s main export, was still low and power outages were expected to continue putting pressure on the kwacha and spiralling inflation, BanABC head of Treasury John Mapiye said.

“We expect yields to rise and that may attract foreign portfolio investment in securities and help strengthen the kwacha temporarily,” Mapiye said.

“The cost of borrowing will increase and ultimately this will filter down to the consumer hence we still expect to see an upward spiral in the rate of inflation.”


(By Chris Mfula. Additional Reporting by Nqobile Dludla in Johannesburg; Editing by James Macharia and Raissa Kasolowsky. Reuters)


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