Lighting up Africa
The majority of African people are without access to electricity. This has to change in order to transform the continent into an economic success.
Through its commitment to bring improved quality of life through investment and infrastructure, the Development Bank of Southern Africa (DBSA) is looking towards the future of the region and making plans to develop a robust, reliable and prolific energy infrastructure that will bring light to all.
The lack of power resources is limiting the impressive economic growth potential of the African region.
Countries such as Ghana and Tanzania battle legacy systems and limited infrastructures and yet are among the seven fastest growing economies in the world.
To continue this level of development there needs to be a commitment towards resolving the power issues and bringing about change.
“If you look at sub-Saharan Africa the majority of these countries are constrained by power inadequacies,” says TP Nchocho, group executive for South African financing at the DBSA.
“In Tanzania almost every third hour the electricity trips. The same is true in Nigeria and there is a lack of efficient energy producing infrastructure. This is due to a number of factors that include age, lack of maintenance and lack of investment.
"These can be developed through the services and support provided by the DBSA. Our debt and equity loan facilities signify our commitment to supporting government’s national priorities through financing infrastructure programmes that are geared to improving the security of energy supply and optimising the energy mix which is needed to accelerate the economic growth of the region.”
Sub-Saharan Africa requires around $93.3-billion annually to finance the infrastructure and the energy sector accounts for 44% of this amount.
Add to this the fact that there are countries with electricity coverage below 17% and that the existing power sector is only spending $11-billion annually, and of that amount only $7-billion is recurrent and $4.6-billion is capital expenditure.
This is, according to Nchocho, hardly a drop in the ocean in terms of what is needed by the continent. South Africa has the largest economy in the region with an installed electrical capacity of approximately 44 170MW with an estimated increase to 54 893MW in 2012.
In March 2013, the available capacity was 41 074MW with a peak demand of 42 416MW, which puts pressure on the owner to build a stronger reserve margin.
The country accounts for around four-fifths of the installed and available capacity in the Southern African Development Community and produces 85% of the region’s power supply.
“Starting here in South Africa, we must recognise that we have a shortage which can hold back our growth and so we have to give priority to investing in new capacity here,” says Nchocho.
“We believe investment in the local power generation and transmission infrastructure for renewable power will stimulate the development of the green economy which is a key priority in creating jobs and growing the South African economy. This will help form a strong backbone to support South Africa’s energy demands over the next 15 years.”
The DBSA has worked closely with the department of energy in South Africa to open up the field to independent power producers (IPPs), particularly around renewable energy.
The bank approved loan facilities amounting to R9.6-billion for renewable energy projects to support the establishment of the renewable energy sector in South Africa and these formed part of the 28 successful preferred bidders of the first bid window for the Renewable Independent Power Producers Programme launched by the department in August 2011.
The DBSA is to potentially fund an additional five projects in the third round of the programme later this year. Overall, the goal is to drive renewable energy growth to produce 42% of the total generated capacity by 2030.
“Our vision is to make a difference to the lives of people by rolling out finance for infrastructure that will see a lasting impact on the country over the next 15 to 20 years,” says Nchocho.
“We are working closely with government and utilities to help them tackle the challenges in South Africa and create long-term, economically viable solutions.”
It is not just here in South Africa that the DBSA is making its mark; there is also significant investment and attention placed on the SADC.
Moe Shaik, group executive for international financing at the DBSA, believes that the key challenges across Africa are to increase generation capacity and bring more energy to the grid, and to do this in a sustainable way.
“There are two ways in which this needs to be addressed,” says Shaik. “The first is in institutional reforms and more efficient management in the generation and distribution of energy, and the second is that they need to do so sustainably.”
One of the leading concerns surrounding the energy crisis in the SADC is that the cost of running the utilities is more than turnover, and the DBSA is working with local institutions to find ways to ensure that financial sustainability which will, in turn, promote the economy and improve production.
In addition, the inefficiencies in the legacy systems are having an impact on the amount of power that is generated and how well it is distributed and these are problems that require patience, co-operation and a steady hand.
“We are taking a role where we are bringing in the private sector to help us increase generation, improve efficiencies of the utilities and engage in the cost recovery of the energy being sold,” says Shaik.
“We’ve got to ensure to meet current demand and projected growth for African countries. The figure is quite simple — it’s 7 000MW a year — and if Africa is not bringing this to the grid you have to improve demand-side management and the lag in that area is huge across the continent.
“These are the challenges for the next 15 years and, as development financing institutions, we’ve got to be able to bring the politicians and the utilities into a common understanding to make sure this gets done.”
Shaik says the DBSA can see the continent lighting up and strives to find ways of working through the minefields of politics and problems to create solutions that work.
“The energy sector portfolio sees the DBSA provide both funds and services to commercially viable and sustainable development projects that contribute to economic development, regional integration and the empowerment of local communities.
“In South Africa, the DBSA will continue to work with municipalities in order to ensure that they can provide the right level of infrastructure related services to the communities they serve. Across the continent, the DBSA will remain dedicated to offering financial support for infrastructure development in SADC.”
The contents and photographs in this article were compiled with, paid for and signed off by the Development Bank of Southern Africa. This article forms part of a larger supplement