Anton Eberhard leads the Management Programme in Infrastructure Reform and Regulation at the University of Cape Town’s Graduate School of Business. His research focuses on private investment in power projects in Africa and mechanisms to improve sector regulation.
Katharine Nawaal Gratwick, PhD, is a former Senior Researcher of MIR and works as an independent consultant.
“Despite gross underfunding, there are success stories on the African power horizon…”
Economic and social development depends critically on infrastructure, for which electricity may be among the most important inputs. Sub-Saharan Africa (SSA) has among the lowest rates of electricity access in the world – less than 30 percent. Furthermore, excluding South Africa, SSA is the only region for which per capita consumption of electricity is falling. The total installed capacity in the region amounts to less than South Korea’s, and this limited supply is costly and unpredictable, imposing heavy tolls on social and eco- nomic development.
It has been estimated that about 7,000 megawatts (MW) need to be added each year (2005-2015) to meet suppressed demand and provide additional capacity for electrification expansion. Such an investment would cost approximately $27 billion per year. Presently, funding to the electricity sector (for capital expenditure) is estimated at just $4.6 billion a year; hence, an annual funding gap of more than $20 billion exists. Public sources – utility income and fiscal transfers – contribute only about one-half of current capital investments, highlighting the urgent need for increased private investment, including public-private partnerships. Across Sub-Saharan Africa, the push towards private investment in electrical generation dates to the early 1990s, but the journey has not been smooth. Significant lessons may be identified, including: understanding the limited pool of investments, together with the importance of public stakeholders in equity and debt alike; the increasing application of partial risk guarantees (PRGs) to mobilize finance; and the emergence of more non-OECD partners. We note a number of success stories, including Kenya, South Africa and (potentially) Nigeria, whose policy innovations have replication potential in other Sub-Saharan African countries and beyond. (purchase article…)