Financing for Development: African Ministers and Development Partners Agree to fast-track regional energy projects

01/06/2007
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African Finance and Energy Ministers have undertaken to fast-track current regional initiatives such as the INGA dam project, the regional power pools, and gas pipeline projects and to explore the possibility of ceding limited borrowing authority to RECs to implement trans-boundary energy projects. The pledge was made during the second conference on financing for development which ended on Thursday in Accra, Ghana. The two-day meeting focused on feasible options for addressing the financing needs of the energy sector and how to enhance the sector’s contribution to growth and poverty reduction on the continent.

Held on the theme "Infrastructure for growth - the Energy Challenge", the conference noted with concern that besides debt relief, official development assistance flows remained stagnant. Participants however indicated that increased flows from emerging creditors were helping African countries to finance pressing development needs. To address critical problems in the energy sector and to pursue the Millennium Development Goals (MDGs), participants recognized that a wider variety of financing sources, including concessional funds would be needed.

They also noted the special challenges faced by post-conflict and fragile states as well as the need for greater responsiveness to their financing needs. They recognized the importance of sound and transparent public financial management systems for addressing Africa’s infrastructure challenges and, in this regard, they reiterated their commitments to build such systems.

In a communiqué released at the end of the conference, participants noted that African countries needed high and sustained economic growth to increase the likelihood of achieving the MDGs by the 2015 target date. They recognized the constraints imposed by the persistent international energy crisis. The communiqué underscored the importance of a vigorous response to the challenge of energy infrastructure which it said was essential in sustaining and accelerating economic growth.

"Inadequate supply of modern energy reduces productivity, hurts competitiveness, exacerbates gender inequalities, and threatens the achievement of internationally agreed goals, including the MDGs and the priorities of the New Partnership for Africa’s Development (NEPAD). For a large number of countries independent national action will not be enough to bridge the energy gap because of the costliness of energy investments and the uneven distribution of energy resources. Compounding the high investment costs are rising oil prices, weak regulatory environments, inefficient pricing policy, poor institutional capacity, and an unfavorable environment for private sector participation in the energy sector. As a result, making the best use of hydropower, natural gas, and other resources will require strengthened regional integration and the building of regional energy infrastructure," the communiqué stated.

To address the double challenge of increasing access to energy for the poor and of ensuring the reliable functioning of existing energy infrastructure, participants expressed their determination to achieve demonstrable results both at the national and regional levels.

At the national level, they expressed their determination to strengthen planning frameworks to take into account energy needs for economic growth and for poverty reduction. In this regard, energy will be integrated into national and sectoral development strategies; domestic resources will be mobilized through new financing instruments, appropriate energy pricing and payment mechanisms, and the creation of opportunities for investment by domestic investors; encourage consumers to make more efficient use of energy through energy pricing, tax incentives, and public awareness programs and promote the use of local energy resources that both contribute to energy security and the creation of jobs. They also discussed the reforming of regulations in the energy sector with a view to creating an attractive, enabling environment for private sector participation in the energy sector.

At the regional and international levels, participants undertook to fast-track current regional initiatives such as the INGA dam project, the regional power pools, and gas pipeline projects. They also promised to make efforts at strengthening regional institutions such as the Regional Economic Communities (RECs) and NEPAD as the arrow heads of regional action, adding that they would explore the possibility of ceding limited borrowing authority to RECs to implement trans-boundary energy projects.

Participants also underscored the importance international partnerships in efforts aimed at addressing Africa’s energy gap. In this regard, they welcome recent initiatives by development partners to support the scaling up of aid to the energy sector. These initiatives include additional funding for new sources of energy, the production of energy raw materials, promotion on energy efficiency and an increase in the number of energy facilities. They called on multilateral and bilateral development partners to support national priorities and development plans for energy and to review existing sectoral priorities in their cooperation with national efforts. They called on development partners to develop new funding instruments and mechanisms for trans-boundary energy projects.

The conference, which was organized in collaboration with the African Development Bank Group (AfDB) and the United Nations Economic Commission for Africa (ECA), was attended by African Finance and Energy Ministers, development partners, regional and international development financial institutions, UN agencies, State Secretary of the German Federal Ministry for Economic Cooperation and Development, representing the German Presidency of the G8 and the EU, representatives of civil society and the private sector.