Image: Ismagilov © 123RF.com RES4Africa and PwC have released a new study Private Sector Participation in African Grid Development. The study identifies underfinancing, inefficiency and insufficient extension of electricity grids as the main obstacles to Africa’s access to energy.
Africa’s electricity grids are characterised by infrastructural flaws, inefficiency and limited coverage, preventing universal access to electricity and hampering the continent’s development.
The analysis is focused on ten countries (Algeria, Ethiopia, Ghana, Kenya, Morocco, South Africa, Tanzania, Senegal, Uganda and Zambia) and was presented at a virtual event organised within the framework of RES4Africa’s strategic programme, Grids4Africa. The gathering benefitted from the participation of important representatives from African and international private and public sector entities (Enel, PwC, Umeme, EPRA, Ghana Energy Commission, IFC, ARM-Harith Infrastructure Investment, Schneider Electric and MIT/Comillas/FSR).
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Transmission and distribution networks on the continent require major improvements and are likely to become the real bottleneck in Africa’s sustainable development. Electrification efforts risk being outpaced by the continent’s population growth and, where access to electricity is available, losses are high (up to 29%) and the reliability of electricity supply tends to be substandard.
The study highlights a chronic lack of investments as the main reason for this status quo: public utilities suffer from staggering quasi-fiscal deficits (implicit subsidies), averaging 1.5% of GDP in the ten sample countries. In order to compensate for these issues, many public utilities resort to increased tariffs, leading to a reduction in the customer base and, ultimately, getting trapped in a vicious cycle.
According to the analysis, the solution to break the cycle consists of extending private participation, which is currently an exception in the overall African energy panorama. Increasing the role of the private sector will also reduce structural imbalances and maximise returns from new business models.
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The recommendations emerging from the study point towards major regulatory reforms to be promoted by an independent energy authority, guaranteeing market fairness and transparency. Additional interventions are targeted regulations, an adequate remuneration of private utilities, unbundling and liberalisation and, finally, institutional commitment and support.The Private Sector Participation in African Grid Development study is available online.
