Despite its robust growth over the past decade, sub-Saharan Africa will not make real progress toward ending poverty and sparking sustainable development until it can provide its citizens reliable access to electricity. Some countries on the continent have made significant progress toward near universal access. South Africa famously invested heavily in rural electrification after 1994, and now an estimated 80-85 percent of the population is on the grid. Ghana in recent years also has stepped up its investment in the power sector, claiming nearly 80 percent access of its population. Looking forward, donors like the African Development Bank (AfDB) and the US Government through its Power Africa program are committing billions of dollars toward generation, transmission, and distribution; AfDB estimates $527 billion already is committed toward projects through 2024.
These are positive developments. However, the positive trajectory must be balanced by a realistic look at the massive scale of Africa’s power demands. According to AfDB, nearly two-thirds of sub-Saharan Africa’s population—620 million people—lack access to power. Unsurprisingly, there are significant disparities between the continent’s richer and poorer countries; impoverished states like South Sudan and Niger see more than 90 percent of the population without power access.
Even where citizens have access to the grid, the grid often—and in some places increasingly—fails them. South Africa for the past two years has been rocked by load shedding caused by insufficient generation capacity (although new plants seem to have addressed this). Nigeria, the continent’s oil-producing powerhouse, sees frequent power cuts in Lagos and other big cities; insufficient and poorly maintained transmission infrastructure is a major reason. Countries reliant on hydroelectric generation are vulnerable to climatic conditions, with hydro-dependent Zambia in the throes of a power crisis caused by little rainfall. And even where power is reliable and accessible, cost is a concern—even though electricity often is provided at subsidized rates (that governments can ill afford), consumers often cannot afford it.
In short, the continent has a long way to go to meet its power needs. For potential investors and companies in the power generation sphere, this situation poses both immense opportunities but also innumerable potential pitfalls. Those looking at opportunities should liaise closely with US Government entities like Power Africa and also look at African partners, particularly regional entities like the Common Market for Eastern and Southern Africa (COMESA), which are increasingly getting involved in multi-country power projects. Firms also should pay close attention to countries’ risk profiles, utilizing experts to help you navigate the often complex bureaucratic hurdles they might face.
Where are the Biggest Deficits?
To help potential investors better understand the opportunities and challenges they may face, we decided to take snapshots of the five African countries with the largest power deficits, as calculated by number of citizens without access to electricity. Each of the five countries have different reasons for these shortcomings, and different potential trajectories for addressing them.
Nigeria-90 million: In terms of percentage of population with access to electricity, oil- and gas-rich Nigeria is the best performer on this list at nearly 50 percent. However, with a population approaching 180 million, this leaves about 90 million Nigerians without access to power. Also, as noted above, Nigeria is famous for its dodgy power grid, with outages and brownouts frequent in its urban areas. The reasons for this are entirely man-made. First, there has been longstanding underinvestment in capacity increases and maintenance, which can be linked in large part to massive corruption on behalf of the country’s political elites. Second, Nigeria’s regulatory environment has created an oligopoly of power distribution companies that face little domestic competition, keeping rates high and service poor. Lastly, Nigeria is plagued by vandalism of its transmission infrastructure and pipelines, largely due to citizens seeking to siphon off oil or electricity; again, poor maintenance and security are to blame. Overall, solving these problems is a question of political will, and new President Muhammedu Buhari—who ran on a strong anti-corruption platform—appears committed to addressing them. He appointed former Lagos State Governor Babatunde Fashola, considered one of the country’s most talented and effective politicians, as Power Minister in early November, a positive sign for potential sectoral reform.
Ethiopia-70 million: Highly rural and lacking in natural resources, only about 20 percent of Ethiopia’s 90 million people have access to electricity. The government, however, is embarking on an ambitious plan to change this, aiming to increase its 2,300 MW of generation capacity to about 37,000 MW in 2037. To do so, the country will primarily focus on developing its hydroelectric potential, but also look at geothermal and other renewable options. The centerpiece of this plan is development of the Grand Ethiopian Renaissance Dam, which is currently under construction and slated for completion in 2017; it alone will generate 6,000 MW of capacity. Ethiopia also has been active in engaging neighbors like Kenya on the expansion of a regional power grid, which could allow Ethiopia to become a power exporter in the coming years. Largely due to a committed government, the future in Ethiopia looks bright.
Democratic Republic of Congo-60 million: Congo-Kinshasa faces probably the most daunting challenges of any country on this list to expanding access to power to its citizens, of whom perhaps 7 million have access to electricity. Its natural disadvantages are many—massive size, non-existent infrastructure through most of the country, large rural population—but it is equally hamstrung by perpetual insecurity and war over the past 20 years, as well as a feckless, practically non-functional national government. While calm at present, likely elections in 2016 probably will raise tensions. That said, Congo also is home to the unicorn of African power generation projects, the Grand Inga Dam. Planned for more than 40 years, the project would tap into the Congo River’s enormous hydro-electric potential, generating more than 40,000 MW of power, enough to power the entire sub-region. However, the project to date has generated only two small dams, with insecurity, a lack of government capacity, and daunting cost (perhaps $100 billion for the entire project) holding it back. The World Bank in 2014 approved a grant of $73 million to prepare the nearly 5,000 MW Inga 3 dam, with expected completion in 2021, but there has been no progress to date. It is worth remembering that even if Inga makes progress, nearly all of the energy produced will be exported, particularly to South Africa. Congo’s energy picture looks bleak at present; the only bright spot is in the eastern mining province of Katanga, which is more strongly integrated with the southern and east African power grids.
Tanzania-36 million: Almost a third of Tanzania’s 50 million people have access to electricity, mostly centered around the capital Dar es Salaam and other urban centers. The country is highly rural, however, and the cost of expanding transmission architecture has held back expansion of the grid. Heavily dependent on hydropower, Tanzania like other countries in the region has been hit in the past year by low rainfall, which has created power shortages due to low dam levels. Moving forward, Tanzania intends to boost capacity by developing gas-burning power plants to take advantage of its offshore deposits; a Tanzanian concern recently received a $60 million loan to pipe gas from 15km offshore to the mainland. Tanzania also is looking to solar and other renewable sources, particularly in rural areas.
Kenya-35 million: Kenya, one of the continent’s most dynamic economies, seems like an outlier on this list. According to AfDB, only about 10 million of the country’s 45 million citizens have access to power, although parastatal Kenya Power puts access at nearly double this number. Whatever the case, Kenya is worth discussing as it displays the progress that can be made by a dynamic government committed to expanding access and boosting generation capacity. A centerpiece of the government’s efforts are its ongoing Last Mile Program, which aims to expand the grid into rural areas and boost electricity access to 70 percent of the country’s population. Kenya Power also is seeking more than $1 billion in funding to modernize and expand the power grid to boost access and minimize outages. Kenya is a key regional player in pushing for a unified east African power grid, and—already heavily reliant on hydroelectric and geothermal generation—is boosting investment in solar and other renewable energy sources.
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