2014 Sub-Saharan Africa Power Outlook

The second edition of the Sub-Saharan Africa Power Outlook, prepared by our Infrastructure & Major Projects Group was launched at our Global Power and Utilities Conference in London on 07 October 2014.

Dear reader,

It is our pleasure to introduce to you the 2nd edition of the Sub-Saharan Africa Power Outlook, which has been prepared by our Infrastructure & Major Projects Group. The high growth of Sub-Saharan countries and the current developments in the power sector provide a broad range of new topics since the first edition of this report was launched in 2011.

Sub-Saharan Africa is seen as a new frontier of growth and the economic growth rates have
shown immense potential during the last decade.
In the same time it increasingly became a common understanding that this growth is only possible when the power sector is in line with the national development plans. Wherever the power sector lagged or the plans were poorly executed, the economic growth slowed down. In that case, it is no wonder that the old clichés like ‘the dark continent’, ‘low electrification rates’, ‘poor collection rates’ or ‘underinvestment in Africa’, are used to describe the power sector.

But the widely recognised trends like urbanisation, growing population and increasing wealth, more discoveries amongst the wealth of natural resources or a deepening financial sector, leaves the power sector with no other chance but to respond. Simultaneously, the power sector experiences its own changes with, amongst others, impacts on increased proliferation of off-grid power solutions, a renewed focus on regional integration, further regulatory reforms and the clean energy drive. Therefore the current developments in the Sub-Saharan countries are dispensing with the clichés itself.

Nevertheless, Sub-Saharan Africa is also facing the trilemma of security of power supply that has a low carbon footprint (sustainability) and is affordable (energy costs). For the region, the trilemma is both a challenge and an opportunity. A challenge – especially coming from an old, unreliable and inefficiently maintained infrastructure with assets from the nineties and politically-driven regulations and tariffs. But because of the high demand of new assets and infrastructure, there is a necessity to develop directly with regards to the compatibility of all three goals set in the trilemma.

There are currently various country-specific initiatives underway to improve the power sectors’ infrastructure and to increase the number of power generation plants as well as transmission and distribution lines. Often these plans are integrated in national development plans and linked to social, economic and climate goals. There are two main ways of realising the plans. The one direction lies in upgrading, refurbishing and process optimisation for existing generation assets, and the other direction goes to building new assets.

Both result in a higher, more effective and efficient as well as affordable capacity in the power market.

Due to the high power demand, the expanding plans are huge and require a lot of investments
to be realised either from public or private side. Unfortunately, the plans have not materialised
as far as they could. The current tariff structure
is the biggest barrier for more investments and implementations in the power sector, as the tariffs often are politically driven, low and unpredictable, and therefore offer limited long-term and sustainable investment opportunities.

How the countries deal with these challenges can be seen on the two contrasting, but both successful developments in Nigeria and South Africa. Nigeria went through one of the boldest privatisation initiatives in the global power sector over the last decade which, amongst others, led to a higher tariff structure and includes several reforms over the
last decade. A strong institutional mechanism was established and, during the privatisation process, the expectations of both the investors and the employees working in the power sector were adequately addressed. South Africa launched in accordance with the Integrated Resource Plan,
a state-governed Independent Power Producer Procurement Programme. The success of the renewable energy programme resulted in the design of further, especially base load, programmes for coal, gas, co-generation and hydro, which will be launched soon. The interest of private investors
for the renewable programme was significantly higher than the requested capacity and is a good sign for further developments. Both countries can be seen as role models for pushing forward the energy transformation albeit with vastly different and contrasting strategies.

The 49 Sub-Saharan Africa countries face a lot of similar challenges with regards to the power sector but, as different as the countries are, the priorities, the solutions and the developments are different. The selected country profiles highlight some of the specific developments and show examples of opportunities to realise the national or even cross boarder plans for an improved energy sector.

We hope you will enjoy reading this publication and we wish you all the best in discovering the Sub-Saharan Africa Power sector. Contact us should you want to discuss either your own Sub-Saharan Africa experience or a more detailed view on one of the associated countries and the current developments.

To read the report, click here.

David Okwara

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