Slow pace of power

Africa’s investment in electricity lags other continents but there are many opportunities

Sub-Saharan African governments should be aiming to increase electricity generation capacity tenfold and achieve universal access to electricity by 2030, the Africa Progress Panel (APP) says in its “Power, People, Planet” report.

Africa is lagging well behind the rest of the world in access to electricity and is likely to fall even further behind.

The APP is chaired by former UN secretary-general Kofi Annan and includes 10 high-profile individuals, among them former pop star Bob Geldof, businessman Strive Masiyiwa and former Nigerian president Olusegun Obasanjo. Its targets are more demanding than the International Energy Agency’s recommendation that Africa raise energy generation by 4%/year to 2040. Annan says in the report that Africa has the advantage of not being locked into old, highcarbon technologies. Some African countries are already leading in low-carbon, climateresilient development.

Sub-Saharan Africa consumes less electricity at present than Spain. About 600 000 Africans, half of them children under five, die every year from household air pollution caused by fumes from cooking with wood and charcoal.

Energy constraints cost the continent 2%-4% of GDP/year and, indefensibly, Africa’s poorest people pay the highest prices for energy, Annan says.

A woman in a northern Nigerian village pays 60-80 times more for her energy than a resident of New York or London.

Sub-Saharan Africa has only 90 GW of electricity generation capacity, half of which is in SA. It would take the average Tanzanian eight years to consume as much electricity as an American consumes in a single month. Angola has five times the average income of Bangladesh but Bangladesh has 55% access to electricity while Angola has 35% access.

The APP estimates it would cost US$55bn/year to 2030 for the region to meet demand and achieve universal access to electricity. Domestic taxes could cover about half of that cost, but low levels of tax collection are a major constraint. Governments could also redirect about $21bn currently subsidising wasteful utilities and kerosene towards productive energy investment. More money could be raised by halting illegal financial transfers and tax evasion.

The APP says at the heart of Africa’s energy crisis lies poor governance of utilities, which are primarily seen as opportunities for patronage and corruption rather than power providers. The underinvestment in energy is about $8bn/year, or 0,49% of GDP. But energy investment can produce high social and economic returns.

Already some progress is evident, but it is not enough to constitute a breakthrough, the APP report says. Since 2000, net electricity generation has risen 4%/year in 33 countries. Domestic and foreign investment has been mobilised. There are 130 independent power providers in subSaharan Africa and about 27 private equity investments were made in energy between 2010 and 2013, valued at $1,2bn. Catalysts include President Barack Obama’s Power Africa initiative, increased energy cooperation between Europe and Africa, Chinese project finance for large-scale power projects, and SA’s renewable energy programme. But African countries need to scale up their domestic resources and mobilise long-term financing, the APP says.

Africa is the continent most at risk from global warming, according to the Intergovernmental Panel on Climate Change, and the poorest will bear the brunt of extreme events. Renewable energy has a critical role to play, as the costs are coming down and these technologies offer the advantages of speed and decentralisation.

The APP recommends that African governments

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0 should, among other things, cut their pro-rich energy subsidies and step up the pace of reform of energy governance. The international community should create a global connectivity fund under the Sustainable Energy for All (SE4All) partnership, which is designed to support universal access to energy and promote renewables but lacks financing mechanisms. Governments with comprehensive plans for universal access could submit applications for finance which the SE4All could raise through a mix of government and international loans and aid.

The World Bank and African Development Bank (AfDB) should help to provide

More than 2 years guarantees and align Africa’s risk premiums with market realities to reduce the financing costs associated with energy projects. Up to $100bn in private finance could be raised if development finance institutions and donors committed $10bn to capitalise the AfDB’s “Africa 50” fund.

Last week the third UN international conference on financing for development was held in Addis Ababa. According to the UN news centre, general assembly president Sam Kulesa said some of the crucial areas on which agreement was needed included mobilising domestic resources, enabling countries to access long-term finance for infrastructure at affordable rates and increasing private sector participation.