eBusiness Weekly
Africa Moyo
Makomo Resources’ bid to construct a 600MW power plant is in limbo amid indications that purse holders are unwilling to release the funds citing “country risk”.
Country risk generally refers to the risk that a foreign government will default on its loans or other financial commitments. The term is also used to mean the broader notion of the degree to which political and economic unrest affect the securities of issuers doing business in a particular country.
In November 2016, there were indications that Makomo had secured about $1 billion from financing houses and the firm’s technical partners. Construction was therefore expected to begin at the end of the first quarter of last year, with the entire project forecast to be completed within 36 months.
However, this week, Makomo director Raymond Mutokonyi told Business Weekly that there has been no movement on the power project due to funding challenges.
“We are still stagnant; there has been no movement on the issue because of country risk. Only that I don’t quite understand the language (country risk) but nothing has started (on the project),” said Mr Mutokonyi.
Sino Hydro — which was contracted to build another 600MW thermal power plant at Hwange Thermal Power Station — carried out a feasibility study for the project on behalf of the miner and established that between $1,2 billion and $1,5 billion was required to undertake the project.
The project is seen as key in ensuring that Makomo does not have downtime due to power outages that have characterised the country in the past due to demand outstripping supply.
Currently, demand for electricity is pegged at 1400MW, against average power output of 1100MW.
Yesterday, Zimbabwe was generating 1025MW. Makomo — which mines at Entuba Colliery, almost 17km from Hwange town — has been extracting coal for the last eight years and has so far hauled over eight million tonnes.
The company’s special grant is 7000 hectares but the general grant is 20 000 hectares. Makomo has done exploration which revealed that at production levels of 3 million tonnes a year, it will have almost 40 years of operations.
But once the production capacity increases, the life of the mine will decline. Government has pledged to allocate additional concessions to Makomo. It is understood that 85 other firms have applied for mining concessions in Matabeleland North.
Makomo is now matching, in some cases surpassing Hwange Colliery Company Limited’s monthly production volumes.
The company produces thermal coal mainly used by power stations for electricity generation. It also mines coal sold as peas, mainly used to fire coal based boilers for agriculture, electricity generation, as well as refineries.
Makomo’s cobbles coal are used by tobacco farmers for curing produce as well as refractories and it also extracts rounds for use by tobacco farmers and refractories. Production is currently low at Makomo mainly due to foreign currency shortages.
Occasional payment delays by the Zimbabwe Power Company (ZPC), which buys coal from producers, are thought to be affecting operations at Makomo.
ZPC uses coal to generate electricity at its thermal power stations in Hwange, Harare, Munyati and Bulawayo. Foreign currency shortages in the country have impacted on Makomo’s ability to acquire equipment regularly, affecting production capacity.
Makomo has applied for foreign currency allocations to the Reserve Bank of Zimbabwe to beef up its equipment but has not received the amount of money that matches its A proposal has been made to Zesa that it reduces its payments for power imports to Eskom of South Africa so as to capacitate coal miners, who, in turn would ramp up production and supply thermal power stations with coal and increase power generation.
