ZIMBABWE’S efforts to attract foreign investment in the energy sector are being hindered by high upfront costs associated with verifying and assessing individual projects, according to a Zimbabwe National Chamber of Commerce (ZNCC) survey.
Industry experts have warned that the cost of hiring a foreign firm to verify and assess energy projects in Zimbabwe is prohibitively high, eating into initial capital outlays and deterring investment in the sector.
The ZNCC’s 56-page report titled, 2024 Annual State of Industry and Commerce Survey, offers insights into how high costs of verification has become a barrier to entry for many investors.
“The current IPPs [independent power producers] licences have a lifespan of 25 years and about two to four years of that are being lost in the project preparation phase.
“Expertise to verify and assess most individual projects (before a licence is issued) costs around US$200 000 when a foreign firm is engaged and is paid upfront. This amount is considerably high, eating into the initial project capital outlay,” the survey said.
“Sometimes Zera officials only recognise certification or verification from specific experts or companies which should carry out the verification and assessment process and it is not always a guarantee that the certification from such will be the final. This uncertainty discourages some potential IPPs to dare start the process.”
In recent years, the government has been trying to attract foreign investment in the energy sector as part of its efforts to address the country’s chronic power shortages.
However, the high upfront costs are among the many challenges being faced by investors in the sector.
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Other obstacles include bureaucratic red tape, corruption and a lack of transparency in the licensing process.
To address these challenges, the government has been urged to streamline the licensing process, reduce the upfront costs and facilitate transparency and accountability, according to industry experts.
Last week, Energy and Power Development secretary Gloria Magombo told our sister paper, Zimbabwe Independent, that the country has secured US$3,2 million from the African Development Bank to develop renewable energy sources.
She said consultants from the continental lender were in the country to assist in developing the projects.
“We have a programme which is being funded by the African Development Bank. We have already got international consultants who are in the country doing these projects,” Magombo said.
“There are five contracts over the money, which we were given by the African Development Bank. There is also a project for Zera [Zimbabwe Electricity Regulatory Authority], for the regulatory accounting system, for licensed companies.”
Zimbabwe has been facing energy challenges in recent years, including power outages and inadequate infrastructure.
The country has struggled to meet its energy needs, resulting in frequent power cuts and disruptions to businesses and households.
