Zambia s economy in peril as man made reservoir dries up

(MENAFN- Arab News) LUSAKA: The last time Munandi Siatambika remembers Lake Kariba being this empty was 20 years ago. As the world's largest man-made reservoir dries the economic fortunes of Zambia continue to fall.
"The situation is quite serious looking at the rate the water level is going down" Siatambika 35 a tour guide at a lodge in Sinazongwe on the northern lake shore said in an interview. "It's likely to be even worse than in 1995."
The southern African nation the second-biggest copper producer on the continent typically generates almost half of its electricity output from a hydropower plant at Kariba. The power shortage is deepening an economic crisis as President Edgar Lungu's government struggles to cope with a plunge in metal prices a widening budget deficit and a collapse in the nation's currency.
Kariba is the world's biggest man-made reservoir by volume that straddles the Zambian and Zimbabwean border and supplies about 1830 megawatts of power to the two nations when running at full capacity. The dam was 40 percent full on July 19 less than half what it was a year ago according to official data. Fed by the Zambezi river the reservoir is 226 kilometers (140 miles) long and as wide as 40 kilometers.
Zambia's state-owned utility Zesco Ltd. has asked mining companies including Glencore Plc and Vedanta Resources Plc to curb power demand by 30 percent reducing output from an industry that makes up about 12 percent of the economy. Revenue is already under pressure after copper prices dropped 20 percent in London since January.
"A drought-related power crisis in Zambia will further erode the near-term fiscal and growth outlook" Clare Allenson an Africa analyst at Eurasia Group in Washington said in an emailed reply to questions. Power rationing "will undermine economic activity not only in mining but more broadly driving lower revenue collection."
Investors are starting to abandon Zambian assets once a favored bet because of the nation's stable political environment and average economic growth of 6.8 percent a year in the past decade. The kwacha has plunged 20 percent against the dollar this year while the government sold its third global bond last month at a yield of 9.38 percent the most ever for an African issuer in the Eurobond market.
In June Finance Minister Alexander Chikwanda cut his forecast for economic growth this year to 5.8 percent from more than 7 percent a month before the start of 8 hours a day of power rationing.
Taking electricity reductions into account expansion could be 4 percent or less this year which would be the slowest pace since 2000 according to Mushiba Nyamazana an economics research fellow at the University of Zambia.
The power crisis is also compounding problems for farmers already suffering from a 22 percent decline in this year's corn crop increasing the risk of food shortages and higher prices said Kingsley Kaswende a spokesman for the Zambia National Farmers Union.
While mining companies have the option of importing power that will cost them more than three times their normal tariffs. The government is seeking to add 60 megawatts from the Itezhi Tezhi hydropower project by the end of the year and get power from a 300-megawatt coal-fired plant in the Southern province from the middle of next year.
"The accumulation of risk factors threaten the viability of mining operations" Irmgard Erasmus a NKC African Economics economist in Paarl South Africa said by e-mail.
Zambia will enter its hottest months in October and November said Siatambika and even when the weather turns wet which it normally does in late November there's no certainty the water level will be restored immediately.
After "1995 the water stayed low for three or four years" he said standing on a sandbank on Lake Kariba and looking out into the afternoon sunlight. "It didn't just come back."