Africa’s chronic power problems are taking a heavy toll on economic growth and productivity. The region has inadequate generation capacity, limited electrification, low power consumption, unreliable services and high costs.
Africa’s generation capacity is woefully inadequate. The installed generation capacity of the whole of sub-Saharan Africa, 48 countries, is 68GW – no more than Spain's. As much as one quarter of that capacity is unavailable because of aging plant and poor maintenance.
Only about one-fifth of the sub-Saharan population has access to electricity. At current trends, less than 40% of African countries will reach universal access to electricity by 2050.
The cost of producing power in Africa is exceptionally high and rising. The small scale of most national power systems and the widespread reliance on expensive oil-based generation make the average cost of producing power in Africa extremely high.
Power consumption is tiny and falling. Per capita electricity consumption in Sub-Saharan Africa (excluding South Africa) averages only 124 kilowatt-hours a year, barely 1% of the consumption typical in high-income countries. Power shortages have made service even less reliable.
Inadequate power supplies take a heavy toll on the private sector, and the economic costs of power outages are substantial. Many African enterprises experience frequent outages and in many countries backup generators represent a significant proportion of total installed power capacity.
Power sector investment needs
Addressing Africa’s chronic power problems will require major investment in the refurbishment and expansion of power infrastructure. The total spending needs of the power sector amount to US$40.6 billion a year, or 6.4% of the region’s GDP.
Existing spending on the power sector is US$11.6 billion, just over one-quarter of what is required. Existing spending represents 1.8% of regional GDP, although in the non-fragile low-income countries, this share increases to 2.9% of GDP.
Existing resources would go further if the sector operated more efficiently. Addressing the operating inefficiencies of the power utilities could reduce the funding gap by US$3.3 billion a year, improving cost recovery would bring an additional US$2.2 billion a year, and US$0.3 billion a year could be recouped by improving execution of the capital budget.
Even if all these inefficiencies could be eliminated, a sizable power sector financing gap of $23 billion a year would remain. Three-quarters of this financing gap is a shortfall in capital expenditure, while the remaining quarter is a shortfall in operation and maintenance spending.
Commitments to the energy sector, by region
In 2010 ICA members doubled their commitments to the energy sector to US$12.9bn. This is primarily due to huge increases in the North Africa Region (US$4.9bn) and the East Africa Region (US$2.5bn). The Southern African Region (including South Africa) received US$4.8bn. Compared to these regions, energy sector support for West and Central Africa Regions was marginal in 2010 with US$0.3bn and 0.4bn respectively.
In ICA’s list of top 20 commitments to regional infrastructure projects in 2010, the strongest commitment went to an energy project: the Medgaz Pipeline in Algeria with estimated project costs of US$1.3bn. In 2010, the European Investment Bank (EIB) committed the amount of US$663m as an investment loan to this energy project.
The World Bank made exceptional commitments with US$5.5bn (of which US$4.42 was Non-ODA) to this sector, accounting for 42% of total ICA member finance, followed by the EIB with 17% (US$2.25bn) and Japan with 13% (US$1.17bn). The detailed list in Annex 5 of the ICA 2010 Annual Report provides further information on total ICA member commitments.
ICA Funding to the Energy Sector by Region, 2006-2010, in billions US$
Source ICA. For the latest figures on all sectors, consult the 2010 ICA Annual Report.
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.