Tuesday, March 15, 2011

Sub-Saharan Africa needs to spend $41bn/y to meet power needs

Sub-Saharan Africa needs to spend $41bn/y to meet power needs

By: Jade Davenport
14th March 2011


Sub-Saharan Africa�s energy sector requires an investment of $41-
billion each year, approximately 6,4% of the region�s gross domestic
product, to address the region�s significant shortfall in electricity

This was according to African Development Bank division manager for
Eastern and Southern Africa energy finance, Emmanuel Nzabanita, who
told delegates at an energy summit in Cape Town on Monday that Africa
was suffering from a severe infrastructure deficit, which was
hindering economic development.

Nzabanita said that total infrastructure financing needs for sub-
Saharan Africa was estimated to be $93,4-billion each year and just
under half of that total was required for the energy sector.

The entire installed generation capacity of 48 sub-Saharan African
countries was 68 GW, which was about the same as Spain�s generation
capacity, said Nzabanita.

Chronic power shortages plagued 30 African countries, and only one in
four Africans had access to electricity.

In order to meet demand, keep pace with projected economic growth, and
provide additional capacity to support the rollout of electrification,
the energy sector in Africa was required to install approximately 7
000 MW of new generation capacity each year.

Nzabanita said that closing the large energy-financing gap would
require improving the creditworthiness of utilities and sustaining the
recent increase in external finance to the sector.

It was believed that the financing gap could be reduced by $3,3-
billion a year if power utilities� operating inefficiencies were
addressed, by $2,2-billion a year if improvements were made in cost
recovery, and by $300-million a year if capital budgets were better

However, foreign investment was crucial to significantly reduce the
African energy sector�s financing shortfall.

According to the African Development Bank, new major non-Organisation
for Economic Cooperation Development power financiers, particularly
Chinese and Indian export-import banks, had emerged and increased
their investments from an almost zero-base to an average of $2-billion
a year between 2005 and 2007. The Asian banks were predominantly
financing hydropower projects.

While Asian public investment was growing, Nzabanita said that private
sector investments in Africa�s power sector was still rare, averaging
about $1-billion a year between 2005 and 2007 with the bulk of such
investments going into 3 000 MW of independent power projects.

Nzabanita elaborated that the way to address Africa�s severe power
shortage was with the assistance of the private sector.

Thus, it was essential that African governments focus on the creation
of public-private partnerships (PPPs) to attract more private sector

The best PPP units had established programmes of prioritised
investment opportunities with features including clear political
support, a proper legal and regulatory structure, a transparent
procurement framework, and support services to facilitate implementing
project timetables. These features reduced uncertainty, lowered the
risk profile, and improved viability of PPP projects.

Nzabanita added that, given the continent�s abundant natural resources
and the many innovative environment-related financing instruments
available, Africa had the opportunity to grow under a low-carbon,
clean energy path.

�Africa must develop its energy needs in a clean way,� concluded

Edited by: Creamer Media Reporter

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