It doesn’t pay to connect Africa’s poor to the grid

ELECTRIFICATION was the greatest achievement of the 20th century, according to the US Academy of Engineering. But for 1.2 billion people in sub-Saharan Africa and developing Asia, electricity was still a dream in 2011.

More than 300 million people in India were without access to electricity, which the International Energy Agency defines as consuming at least 250kWh a year for a rural household and 500kWh for an urban one.

Nigeria, Indonesia, Ethiopia, the Democratic Republic of Congo, Bangladesh and Pakistan each had more than 50 million people without power. Another 43 countries, virtually all in sub-Saharan Africa, had at least one million people with no electricity.

The big obstacle to electrification in Africa is not constructing power stations and overhead power lines. It is working out how to help households — many with limited and irregular cash flows, little collateral and no access to credit — to pay for the investment needed to bring electricity to them.

In March, an official from the US Agency for International Development testified to the Senate foreign relations committee: “Over a year, a refrigerator uses six times more electricity than a Tanzanian citizen, and it would take an Ethiopian citizen two years to consume the amount of electricity that an American does in three days.

“Sub-Saharan Africa [excluding South Africa] generates 28GW of power for more than 900 million people — about the same as Argentina generates for 42 million people. And, on any given day, a quarter of that energy is unavailable due to inefficient, outdated infrastructure.”

No electricity means no develop- ment. Symbion, an independent power producer, told the committee: “Without electricity, they [the rural population] have no lights and their children must do their homework under dangerous paraffin lamps. Using a computer for schoolwork or anything else is impossible.”

War, corruption, a lack of investment, poverty and the distances involved in bringing power to remote communities have all contributed to the failure of electrification. More than half of urban dwellers in subSaharan Africa have access to electricity, but the comparable figure for rural communities is below 20%.

In most countries, local or regional utilities pay for the construction of generation and transmission assets and then recover the cost from their customers.

But in much of Africa and Asia utilities struggle to charge customers enough. Political interference prevents them from charging a high enough price to recover their costs and non-payment or late payment is endemic. Even in areas served by power plants and distribution systems, electricity theft and the non-payment of bills are common.

The returns on rural electrification have been low and the risks high. Symbion complained to the Senate that it was owed $70-million (about R730-million) at the end of February by utilities in one African country.

Foreign investors remain wary. Africa attracted an average of just $8.4-billion in foreign direct investment in utilities in 2011 and 2012, according to the UN Conference on Trade and Development.

The Obama administration is trying to promote a more coordinated approach while boosting exports for US construction firms and equipment manufacturers. The Power Africa Initiative, launched last year, aims to install 10 000MW of generation capacity, connect 20 million new customers and improve power reliability across the continent.

The US Agency for International Development, as well as the ExportImport Bank of the US, the Overseas Private Investment Corporation and US representatives at the multilateral development banks, have been instructed to make electrification projects a priority.

But unless the payment and credit problem can be resolved, electrification is unlikely to make much progress. —