Electrification Africa The Challenge: Background
Electrification Africa The Challenge: Background
Electrification Africa The Challenge: Background
The Challenge
Background
Electricity is the backbone of economic development. However, still the African continent
lags far behind the world on its electrification especially in rural areas. Furthermore, private
sector is the vehicle of choice for electricity sector development. However, private sector
involvement in the energy business requires a number of upstream ground work
prerequisites from a risk aversive financiers perspective. Consequently, there exists a need
to furnish an environment that is attractive for private investor. This requires a strong
regulatory framework that ensures the private capital of the leveled playground. There is a
great lack in this aspect within the African continent.
Africa Europe Action Plan is the background for cooperation between Europe and Africa in
Energy. The conventional wisdom in Africa tells us to follow the development model already
trekked by developed countries. However, historically speaking, those Mega projects
established in the developed world came in succession of multiple smaller projects. The
Choice of private sector as the vehicle of choice for infrastructure projects puts a huge
burden on the African countries.
Infrastructure Investment Characteristics:
i- Long term investment
Infrastructure investment is a long term investment with pay-back periods that may
go up to 15 or 20 years. This hugely increases the risk of the investors. Therefore,
the investor should seek higher returns to efficiently utilize its funds.
ii- Asset specific
Support technical and political dialogue on: projects and programmes for
interconnections, access, capacity building;
the credit worthiness of the off-taker together with its accounting practices as a pre-requisite
for engagement into further ventures in business. Consequently, there exists a dire need to
bring the international practices afore to the African utilities to assist in promoting their
profile.
Cross Border Energy Trade Guidelines
Energy cross border trade is a difficult issue to tackle. However, established guidelines for
cross border trade should increase competitiveness of the electricity industry within the
continent thus increasing its appeal to private investors.
Transmission and Distribution Utilities Benchmarking and Performance
Enhancement
Parallel to the establishment of the aforementioned guidelines, a performance monitoring
mechanism that covers technical, financial, and economic performance of the energy sector
should be put in place. This mechanism is primarily concerned with the Electricity sector
natural monopolies, viz., transmission and distribution. This mechanism shall monitor the
impact of the introduced policies and provide feedback for necessary actions whenever
necessary. They require the establishment of a performance measurement mechanism to
guarantee a minimum service level for the customer. Indeed, incentive regulation requires
the establishment of such mechanism in place to allow the gains of improved performance
to pass through to the customer.
Capacity Building
Lack of capacity is a chronic problem in the continent. It is a challenge to build, sustain, and
grow this capacity within the continent. However, no due effort shall be spared to invest in
African people.
SMEs in Energy
The African continent is endowed with a multitude of renewable resources including solar
potential, geothermal, wind, and lush forests. However, some of those resources are not
exploited because of competitiveness to other forms of fossil energy. The other, viz.,
biomass is exploited in a non sustainable manner ending into the shrinking forestry in
Africa. The challenge is how to devise a policy on renewables to bring up this potential while
achieving the development goals in a sustainable manner.
One big advantage of the renewable projects is the modularity of the project itself. This is a
business opportunity for the continent small investors. There is a need to bring in a whole
set of legislative tools within a policy framework to tap into the SMEs potential to engage in
the energy business in Africa. The prices offered by the Renewables of Africa are
competitive with all other types ofgeneration including hydro. The question is how to
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introduce this business in a manner that will eventually result in a spiral positive feedback
loop that will result in the economic growth of the business.
Conclusions
The African continent is facing an electrification challenge. The challenge is huge and
should not be under estimated, especially, with the private sector set as the means to
bridge the financing gap for the infrastructure investment. Numerous ground works are
required to establish this investment friendly environment. SMEs in energy, especially
renewables, is a fast parallel track for the electrification of the continent. Still lots of
background work needs to be done, however, counting on the continent inventory of
entrepreneurship this path may provide wider economic benefits to the continent at large.