Strong partnership will boost power generation in Africa, officials say
The African Development Bank (AfDB) together with its partners in power generation in Africa have concurred that strong partnership will realise the Power Africa initiative.
The remarks were made during the “Power Africa Roundtable” on Wednesday, May 21, at the Bank’s Annual Meetings in Kigali. The session focused on what could be the biggest challenges investors and financiers face when looking to invest in power projects in Africa.
Alex Rugamba, the Director of the Energy, Environment and Climate Change Department at AfDB, said the Bank was proud to be part of the Power Africa initiative, which was unveiled on June 30, 2013 in Cape Town, South Africa, by US President Barack Obama. The initiative aims to double the number of people with access to power in Sub-Saharan Africa.
This goal will be achieved by unlocking the substantial wind, solar, hydropower, natural gas, and geothermal resources in the region to enhance energy security, decrease poverty and advance economic growth.
“As part of our journey to implement the Power Africa initiative, AfDB has just approved a major policy-based operation to support Angola with structuring its energy sector and improving the climate for private sector participation,” said Rugamba.
“We are also supporting utilities in becoming more bankable so that independent power producers become confident, for example in Tanzania, we are working with them to restructure and reform the energy sector and make it a utility that is performing better than it is right now.”
He noted that as part of the Bank’s Regional Integration Agenda, AfDB is supporting the regional power pools and investments in cross-border infrastructure, particularly transmission lines.
“There are a number of facilities we host at the Bank some of which are aimed at supporting project preparations – for instance the Sustainable Energy Fund for Africa (SEFA),” he highlighted.
“We also have NEPAD infrastructure project preparation facility, which is aimed at preparing transformational regional projects. The Bank will be involved in some of the complex continental initiatives – for instance hydropower projects in the Democratic Republic of Congo.”
Rugamba stated that the Bank also hosts the Africa Hub for Sustainable Energy for All and a number of initiatives that leverage private financing.
According to Helen Tarno, the Founder and Managing Director of Aldwych International, an energy company active in the growing economies of Africa, the risks associated with investing in power generation in Africa are significant.
“The primary challenge is often related to national regulatory and legal policies which too often include subsidised tariffs, weak collection and restricted investment regimes,” she said.
“A history of economic instability can compound the challenges which can lead to large currency fluctuations and increased risks of nonpayment by state-owned utilities. It’s important that there be a strong foundation for power investment.”
Tarno noted that her company is engaging in power generation in Kenya and Nigeria and focuses on expanding its scope across the continent.
She emphasised strong power economic management, having good regulatory frameworks and welcoming investment regimes as paramount in accelerating power investment projects on the continent.
“Investors might still need a credit-worthy government, and multilateral development banks willing to provide support to accelerate investments in the energy sector,” she added.
Makhtar Diop, World Bank Vice-President for Africa, said the global bank has made tremendous progress due to strong cooperation with USAID, the Organization of the Petroleum Exporting Countries and the AfDB.
“To accelerate the process are looking at a situation where off-takers are participating in power generation. For instance, we are seeing a lot of progress on generation signing deals, and it’s because we are facing a higher private sector involvement in generation.”
Diop noted good progress has been made in interconnection in sub regions, for instance in Eastern Africa in both generation and transmission.
“What we are doing with AfDB is identifying missing links in energy transmission especially in fragile states where there are still huge power deficits and boost their capacity to close the energy gap.”
Power Africa will start by working with African governments, the private sector, and other partners such as the World Bank and AfDB in the countries of Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania – to add more than 10,000 megawatts (MW) of clean, efficient electricity generation capacity.
Power Africa aims to make electricity access available for 20 million people and commercial entities, which will enhance energy resource management capabilities, allowing partner countries to meet their critical energy needs and achieve sustainable, long-term energy security.
The AfDB expects to allocate as much as US $3 billion over the next five years. This will leverage at least four times more investments in the energy sector.