Africa Focus: Power shortage holds back development in Sub-Saharan Africa: report

Continued development in Sub- Saharan Africa is only possible when the power sector is in line with national development plans, said a report released on Tuesday.

While the continent is blessed with power resources, the infrastructure and utilization are low, which is holding the continent back, said the report by Klaus Findt, Head of Infrastructure in Africa, KPMG, a global network of professional firms providing audit, advisory and tax services.

Findt released the report in Cape Town ahead of the 2015 World Economic Forum on Africa, scheduled for June 3-5 in Cape Town.

It is estimated that 300 billion U.S. dollars will be needed for all of Sub-Saharan Africa to have access to electricity in the next 15 years. Currently, the region is at 25 percent which equates to one-sixth of the world's average, taking consumption per capita into consideration, according to Findt.

Sub-Saharan Africa is seen as a new frontier for investment and expansion and the economic growth rates have shown immense potential during the last decade.

"Urbanization is driving the need for energy and power in Africa and, as a result, we are seeing a number of initiatives underway from privatization to planned projects for the exaction of resources and a host of traditional fossil fuel-based energy and renewable energy initiatives to meet this growing demand," Findt said.

Many African governments are looking at proactively spearheading power development within their respective countries, prioritizing areas to ensure projects move forward. In fact, governments in Africa have recently placed increased focus on energy projects, said Findt.

It is estimated that approximately 45 billion dollars is required per annum to fund the generation, transmission (including interconnectors) and distribution of electricity sub-sectors on the continent.

With this, Africa is still intensely dependent on fossil fuels. While certain governments are proactively looking at available alternatives, the development of renewable energy will largely be driven by government policies, and the primary focus at the moment is to close growing demand-supply gaps, rather than making changes in the energy mix, Findt noted.

"The region is characterized by aging power infrastructure that is unable to meet the current power demands," he said.

Facing various challenges, countries such as Morocco, Kenya, Tanzania, Uganda, Ghana, Nigeria and Senegal, for instance, have opened their doors to foreign and local investors in their power sectors, said Findt.

"And there have been successful cases of independent power producers (IPPs) projects in North, West and East Africa," he added.

Findt spoke positively of the successful IPP model in South Africa.

The South African government successfully implemented the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which entered into its fourth round in June 2014 with the first round of projects recently having reached a financial closer.

"The success of the REIPPPP in South Africa is evident. It showcases the private sector's willingness to invest in the power sector, where there is a transparent and well-designed procurement process, transactions provide reasonable levels of returns and key project risks are mitigated by government," Findt said.

"Pooling and leveraging commitments of governments and private- sector partners is critical if we are to overcome the barriers that have constrained Africa's power sector, which ultimately will constrain its economic growth and development," Findt concluded. Endi