Economies of Load Shedding:
No Voltage, High Impact
On 17 May 1960, a modern era began for Northern Rhodesia with the commissioning of the man-made marvel known as Kariba Dam. This brought the promise of electricity, technology, and life-easing appliances for the 3.1 million Northern Rhodesians who keenly followed the progress of this monumental project. The Kariba Dam and the electricity it generated were set to become the lifeblood of the brand-new country that it would morph into in four short years. More importantly, this project was the spark needed to drive an economic boom by establishing efficient and cost-effective manufacturing processes. It was truly the dawn of a new and exciting age.
Fast forward to present-day Zambia, and Kariba Dam remains the primary source of the country’s electricity supply. One significant difference, however, is that Zambia now has nearly 20 million people living within its borders; the vast majority depend on the grid’s electrical supply, leading to the Zambian energy quandary. In contrast to the dam’s heyday, Zambia has grown its manufacturing sector exponentially, increasing the nation’s overall electricity demands. Players in the sector require more electric energy than ever to maintain optimal operations, which, in most cases, can be as much as 24 hours a day. Notably, the country is experiencing one of the worst rain seasons in recorded history, resulting in ever-dropping water levels in Lake Kariba.
Public discourse surrounding national grid management emerged after the nation declared the drought a national disaster. The dreaded term “load shedding” was whispered in hushed tones as the country braced for the inevitable outcome. To equitably manage the strenuous energy demand placed on the hydropower stations, a decision to enforce a load management schedule was implemented. This schedule varies for residential, industrial, and farming sectors and is further divided into groups, often updated weekly. While residential areas may experience a specific rotational schedule, industrial and farming sectors might have different timings to accommodate their operational needs. However, these schedules are rarely adhered to strictly, leading to extended disruptions that have undoubtedly impacted the local economy.
Discussions with a Zambia Association of Manufacturers representative provided an insightful assessment of the status quo. The projected impact of load shedding on the manufacturing sector and the economy is expected to be negative, the magnitude of which cannot be quantified without numbers. With the third quarter of the year well underway, there is an increased likelihood of a lengthy load-shedding period as water levels in Kariba continue to plummet as the year progresses.
This begs the question: how does the manufacturing sector cope with load management? With various other factors affecting the local economy, it is becoming increasingly challenging for manufacturers to deal with the long-term effects of load shedding due to several reasons:
Challenges to Continuity
Unexpected interruptions pose a challenge to manufacturers, as planning ahead for production is essential in these times. Some production lines employ heavy machinery that requires a minimum two-hour start-up period to heat up before they can be used in production. For example, a four-hour load management rotation meant that only two hours were left for production in each rotation. However, on an uninterrupted eight-hour rotation, manufacturers can expect to achieve their production deliverables for that period. Ideally, from a continuity perspective, the manufacturing sector would benefit most from a load management schedule that prioritises daylight hours for production, leaving the nights for load shedding. From a logistical point of view, this would relieve workforces of rejigged shifts in which workers are in a state of standby, ready to deploy when the electricity supply is unexpectedly restored.
Increased Cost of Production
With these changes in the cost of production, the inevitable outcome would be an increase in the prices of manufactured goods. In keeping with basic business practices, the additional costs incurred are ultimately passed on to the consumer. However, this outcome is yet to be reflected in the consumer’s cost of living. A look at the Jesuit Centre for Theological Reflection (JCTR) Basic Needs and Nutrition Basket shows a curious trend in 2024 – the BNNB sat at ZMW9,555.53 in January, surged to ZMW10,603.40 in February, and then decreased to ZMW10,307.01 in March.
While it is unclear whether these price fluctuations directly result from the increased energy costs shouldered by manufacturers, local manufacturers have historically borne the brunt of increased costs resulting from load shedding due to the competition they face against imported products. Most imported products enter the market at relatively lower prices, and by increasing their prices, local manufacturers risk losing customer loyalty, which is, for all intents and purposes, driven by price sensitivity. More prominent manufacturers spend considerable resources to continue production while absorbing the costs in the short term and not passing them on to the consumer. Sadly, this is not a tenable position in the long term. Price increments will become inevitable the longer this energy crisis plays out.
Impact on SMEs
A segment of the manufacturing sector that cannot be ignored is the SME sector. By virtue of their relatively small size and limited access to capital, SMEs tend to be hardest hit by unforeseen contingencies as they may not readily possess the capacity to employ alternative power supply sources such as generators, inverters, or solar power. As a sad consequence, historically, SMEs either scale down or completely shut down production. This is a precedent from load management in previous years, and this trend is likely to continue for SME players who fail to adapt to the prevailing situation.
This brings us to the future… are we to accept this doom-and-gloom scenario or exhibit unprecedented levels of “bounce-back-ability” through resilient perseverance and innovation? The latter seems like the most likely outcome, especially with the recent drive to increase the use of alternative energy generation options. The road will be long, and the road may be bumpy, but numerous pivotal learnings will be gleaned along the way.
