Zimbabwe signed a $400 million deal with China's state-owned SinoHydro on Thursday to increase electricity production and ease daily blackouts.

The deal will mean a 400 megawatt upgrade for the Kariba Hydro power station on the Zambezi river, meeting an extra 18 percent of peak demand.

"We know that this project is badly needed to meet the requirement of the life of the people," said Yuzhi Wang, a SinoHydro official.

Zimbabwe production shortfall leaves residents without power for as many as 12 hours a day.

The country needs around 2,200 megawatts at peak consumption, but generates just under 1,300 megawatts thanks to increased demand, ageing equipment and a lack of investment.

"Zimbabwe and indeed the whole southern African region faces a critical power shortage and will continue to do so in the next few years," said Victor Gapare, chairman of the state-backed Zimbabwe Power Company.

Plans are also underway to revamp the Hwange thermal power station in the west of the country.