Energy
Energy Financing Needs and Trends
There is a chronic shortage of electricity supply in at least 25 countries in sub-Saharan Africa. At 68,000 megawatts (MW) the entire generation capacity of the 48 countries of Sub-Saharan Africa is no more than that of Spain.
As a result of under-supply, 77% of households in SSA are without electricity depriving them of a host of basic services such as lighting and directly restricting progress on the Millennium Development Goals – universal access on current trends is at least 50 years away. In rural areas the picture is worse with only 12% of households having access to electricity.
There is also a negative impact on economic growth. 48% of firms currently identify deficiencies in electricity infrastructure as one of the major obstacles to doing business. Power outages in Africa are reported to occur, on average, 56 days per year, costing manufacturing companies 5% to 6% of their revenue, while the informal sector experiences about a 20% loss in revenue per year. The situation will get worse if rising urban demand is not met.
A significant amount of generating capacity is not in a suitable and usable condition and results in many firms having to operate their own diesel generators – at extremely high cost. Around 20% of Africa’s installed power generation capacity is now emergency generation.
The main causes of the crisis are lack of long-term lack planning, insufficient investment, poor maintenance, corruption, and the inefficiency of power utilities. In the short-term, high economic growth, droughts, conflict and rising oil prices have accelerated the pace of the problems.
Table: 2007 Annual Report 2ICA commitments to the energy sector by region 2006 to 2007
Source: ICA
To increase electricity access from 23% to 35% by 2015, sub-Saharan Africa (excluding South Africa) would need to add about 3000 megawatts of new generation capacity and have to connect 3 million new households per annum.
This would require a total investment of $47.8 billion each year, shared almost equally between capital expenditure and operations. This is equivalent to 6.7% of sub-Saharan Africa’s GDP, against current spending of 3%.
Total ICA commitments to the energy sector were $3.9 billion in 2007, a rise of almost 62% on the $2.4 billion committed in 2006. Multilateral donors accounted for 84% of the total and bilateral donors the remaining 16%. The World Bank’s commitment more than doubled, from $700 million in 2006 to $1.5 billion in 2007.
Case Studies
Energy: Bujagali Hydro-power project
Uganda’s macroeconomic performance is threatened by an acute electricity crisis which is affecting its rate of economic expansion. In 2006, only 5% of the population had access to electricity, resulting in one of the lowest per capita energy consumption rates in the world.