Zimbabwe: Legal Discussions with Vengai Madzima – Diaspora Investment in Zimbabwe’s Energy Development and Generation

NewZimbabwe.com has invited Mr. Vengai Madzima, Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal), to discuss legal issues affecting Zimbabweans living in the diaspora. The discussions are general in nature and those seeking specific legal advice should contact their lawyer.

Reporter: Welcome back Mr Madzima, this week we want to discuss the potential for investment in the energy sector in Zimbabwe. Does the diaspora market have room for investment in this sector?

VM: The energy development and power generation sector in Zimbabwe is an investors dream with great potential for short and long term returns for investors. To put this in context, local energy demand exceeds supply by over 100%. Total national annual energy supply averages around 1500 MW with an installed capacity of around 2000 MW compared to a national demand of around 4000 MW.

As the economy grows, the demand for energy will increase.

For example, the mining sector alone is expected to require over 2,000 MW per year by 2025. This is already more than the national average and almost as much as the current installed capacity. If we look at other investments we have discussed in recent weeks, such as agriculture, real estate development and manufacturing, the growth of these sectors depends on a stable and reliable energy supply.

Urbanisation, rural electrification and agricultural mechanisation have increased demand for electricity in national grids, creating enormous opportunities for private sector investment.

Reporter: What opportunities exist in Zimbabwe for energy generation?

VM: There are various untapped energy resources. If we start with fossil fuels, the country has proven coal reserves exceeding 12 billion metric tons of good quality coal with a calorific value of 20 to 32 megajoules per kilogram. There is also a large and untapped deposit of coal bed methane, the 11th largest in the world, I might add, a potential source of clean energy.

If we look at renewable energy sources that are more amenable to different investment thresholds, we have the best climate for the growth or production of renewable energy. If we take solar energy for example, we have high solar radiation with more than 3,000 hours of sunshine per year, which creates investment opportunities in photovoltaic technology for high-voltage solar power plants or even smaller power plants for industrial or domestic use.

The availability of several permanent rivers creates opportunities for the implementation of small and large hydroelectric projects.

There are also opportunities to use largely untapped biomass and waste from agriculture and municipal areas for energy production, with all proposed potential investment areas having potential for integration into the national grid through public-private partnerships.

Other energy sources could also be considered, for example investment in woodlots to meet the growing demand for wood for drying tobacco by the growing tobacco sector. There are currently over 100,000 registered tobacco farmers who have energy requirements for their crops, and most of these still use wood as their main source of energy for drying.

Reporter: What licenses and/or permits are required for energy projects?

VM: It depends on whether they are large or small energy projects, requirements for smaller projects may require reduced procedures and fees. However, all must comply with the regulatory framework set by law. Licenses and permits may include generation licenses, transmission licenses, environmental impact assessment certificates for projects, distribution licenses, retail licenses and construction permits.

Reporter: What typical steps might be necessary for diaspora and foreign investors to obtain licenses?

VM: To build the plant, it will be necessary to submit a detailed project proposal that addresses the technical aspects of the project and its financing structure, including potential environmental impacts and mitigation. The project will of course have to comply with the country’s laws, which include safety and technical standards set by ZERA. The foreign investor will have the additional obligation to obtain an investment license.

Reporter: How favourable is Zimbabwe’s current policy towards private sector investment in energy generation?

VM: The existing energy policy framework supports private sector investment by allowing private companies to generate and sell electricity to the national grid. This can be achieved through build-your-own-business, build-your-own-business or public-private partnerships. Various tax breaks and incentives are available to the industry, including tax holidays, duty exemptions on certain energy equipment and potential status as special economic zones.

Reporter: Thank you, Mr. Madzima, we have run out of time. We look forward to the discussion next week.

VM: Thank you.

Vengai Madzima is a senior partner at the firm Madzima Chidyausiku Museta Lawyers (MCM (legal) in Zimbabwe and can be contacted at [email protected]

NewZimbabwe.com next week there will be another discussion on legal issues affecting our diaspora readers, share your comments and experiences with us.