Without affordable, reliable electricity, healthcare, education and business potential is curtailed. Countries that are able to meet the energy needs of all their citizens are wealthier, more resilient and better able to advance human development.
Restricted access to energy is the focus of the Africa Progress Panel’s latest report Power, People, Planet: Seizing Africa’s Energy and Climate Opportunities. It highlights that Africa is presently far from being on track to achieve the seventh Sustainable Development Goal, which calls for ensuring access to affordable, reliable, sustainable and modern energy for all by 2030.
This trend can be turned around if the region’s energy challenge is given the urgent and sustained political attention that it deserves.
Africa’s economic performance over the past decade has been impressive. At a time when growth rates around the world have been low, sub-Saharan Africa’s GDP has increased by 5 percent to 6 percent annually.
Yet in marked contrast to other emerging markets, strong economic growth has not led to energy transformation. The tide of wealth is rising but per capita use of electricity has stagnated. Nigeria has outperformed India on economic growth and produces almost as much economic output per person. Yet India’s energy consumption per capita remains significantly higher than that of Nigeria.
Many countries, including Brazil, Indonesia, Thailand and Vietnam, have demonstrated that it is possible to accelerate progress towards universal energy access. In Africa, countries as varied as Ethiopia, Ghana, Kenya, Rwanda and South Africa have shown that rapid advances are achievable. The common denominator is political will.
The African Development Bank (AfDB) estimates that around half of the needed finance to power Africa is already available. With new leadership that is committed to placing energy at the very top of the Bank’s agenda, the AfDB is well positioned to be a major catalyst in transforming the region’s energy systems.
Africa cannot afford to be unambitious. Leaders must change the “politics of power” by making a sharp break from existing, highly centralised energy systems that largely benefit the rich and bypass the poorer members of society.
Improving the overall governance of the energy sector and changing utility practices will take a deep commitment to changing structures and entrenched politics.
In many countries, power utilities are nexuses for political patronage and corruption. Many are now viewed less as a mechanism for delivering affordable energy for all than as sites for rent-seeking.
They have also often been targets of intense public anger, much of it well deserved. Mismanagement has led to considerable waste of public resources and an accumulation of large debts. In 2010, sub-Saharan Africa’s energy utilities were operating with deficits estimated at 1.4 percent of regional GDP, some $11.7bn. This represents five times the level of publicly financed investment in the energy sector.
There are also some long-running systemic failures. Africa is losing an estimated $8.2bn annually through power sector inefficiencies associated with poor cost-recovery, distribution losses and other factors. By selling electricity at prices that are less than the cost of production – in part for populist political gain – utilities have been unable to generate the revenues needed to invest in operations, maintenance and new infrastructure.
Reliance on emergency power adds to this vicious circle. Generating electricity through emergency power provision typically doubles the cost of electricity. Utilities experiencing power shortages typically enter into short-term contractual arrangements with emergency power providers who install new capacity, usually in the form of oil-fired generators. The leasing terms are often onerous – and utilities have to meet the cost of oil imports.
This year’s Africa Progress Report makes several recommendations on how to change the politics of the power sector in Africa.
First, governments must set out strategies for achieving universal access to energy, aiming at a 10-fold increase in power generation by 2040, while laying the foundations for a low-carbon transition. New technologies, policy reform and innovative business models offer promising pathways. Ethiopia, Kenya, Rwanda and South Africa are already setting examples
Second, leaders must tackle vested interests and break the webs of political patronage in energy utilities. Utilities must be required through legislation to publish the terms of all off-take arrangements and emergency power-purchase agreements. Tendering should only be done through locally registered and regulated companies.
Third, contract and negotiation transparency must be increased in international energy deals, while Africa’s renewables revolution must be placed on a transparent and well-managed foundation.
All the proposed changes to the political economy of energy in Africa are possible if there is sufficient will to act. The 2030 target is achievable.
As APP Chair Kofi Annan says in his foreword to the report, we simply must “act now and act together”.
Published in: This is Africa