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Energy as an engine of Africa’s industrialization
With the lowest power consumption per capita in the world, sub-Sahara Africa is arguably the darkest section of the global village with investments, social and economic growth and jobs creation hobbled by frequent outages, load shedding and total black outs. Over 645 million Africans lack access to electricity.
Yet the continent is rich in energy resources, with well over 10 terawatts of solar potential, 350 gigawatts of hydroelectric potential, 110 gigawatts of wind potential, and an additional 15 gigawatts of geothermal potential. All of these is outside Africa’s huge reserves of coal and gas, which can provide some of the continent’s cheapest electricity.
Surrounded by these energy wealth, most Africans still wonder why their countries are so power poor. From the comfort of their friend’s home in the Kingdom of Lesotho, Augustine and his wife Anna, usually spend their evenings staring at the vast Katse dam, the highest dam in Africa, located on the Malibamatso River. They marvel at the evidence of what Mankind can achieve. Lesotho sells billions of litres of the “White Gold” from this dam to neighboring South Africa; the dam also pumps 72 Megawatts of electricity into the national grid.
Completed in 2009, the Katse dam’s imposing 132 KV transmission towers and lines that connect to the grid disappear into the horizon, beyond the towering Maluti mountains that have stood firm for at least 200 million years. Augustine is however moody, most of the time. Saddened by the fact that many of his compatriots still do not have access to electricity, several of their vital social and commercial needs remain unmet due to lack of electricity.
This scenario is Africa-wide. The lack of access to electricity cuts off the vital wants of society. Clearly, children underperform for lack of electricity as schools and homes lack electricity and lives are at risk at hospitals across the continent, as lifesaving equipment lie comatose, unable to be deployed for the purposes they were purchased and installed for.
For these reasons and more, Anna and Augustine are hoping that Africa’s business and political leaders will put Africa’s industrialization and energy drive at the top of their agenda during the 53rd annual meetings of the African Development Bank in the coastal city of Busan, South Korea in May 2018. Thankfully, this year’s annual meeting’s theme is “Accelerate Africa’s Industrialisation”.
Korea holds interesting memories for Augustine. The happiest moments of his life were in May 2002. That was the month his home was connected to the distribution network with a pre-payment meter and this happened just before the commencement of the 2002 FIFA World Cup jointly hosted by Japan and South Korea. The electricity meters and lines connected to Augustine’s community were courtesy of a US$36 million Utilities Sector Reform Project, financed by the African Development Bank, the World Bank and the European Union.
Augustine worked with the project team as a driver. He witnessed the evolution of the project between 2000 and 2007, driving engineers and project managers around his mountainous country and parts of South Africa. The smiles of tens of thousands of new electricity customers are permanently etched in his memory: from deep rural cross-border pilot electrification projects in Dili-Dili (where it was cheaper to be connected from South Africa) to the Letseng diamond mine (renowned for its large stones) and an ultra-modern ski resort in Mokhotlong (frequented by rich tourists); and to Semonkong village (which has the highest waterfall in Africa) and is supplied by a 2MW mini-hydro power plant run by the national utility company.
They recall the problems folks in Lesotho faced in 2008, when Eskom (the South African utility, that has over 40, 000 MWs installed capacity) unexpectedly restricted supplies to the Lesotho Electricity Corporation (LEC, a 100 MW customer). This led to load-shedding and increased costs. However, LEC was able to buy power, from as far away as Mozambique, thanks to a functioning electricity market under the Southern African Power Pool (SAPP). Mozambique also has the Mozal aluminum smelter plant, which commenced operations in 2000 and produces over 500, 000 tonnes per year for export, and recently for the local downstream industry. Mozal is the largest industrial employer in Mozambique.
Similarly, Zambia, Botswana and the Democratic Republic of Congo also have huge copper reserves that can be refined locally and used for electrical cables and equipment to drive the transition to green power in the SAPP and the rest of Africa.
Augustine recently heard on the news that Eskom currently has excess capacity, which it is planning to export to its neighbors. Eskom is also the sole off-taker for over $19 billion of investments under a 2013-2018 globally acclaimed Renewable Energy Independent Power Producer (REIPP) auction program. This is driving industrialization and will accelerate South Africa’s transition to green growth.
The African Development Bank, as one of the lead financiers in South Africa, providing over $2 Billion to the power sector, is working with other development partners to replicate this success across Africa. This is underpinned by the Bank’s performance in 2017 – when it approved 31 energy projects in 23 countries, totaling $1.4 Billion.
In the same fiscal period, the Bank’s private sector investments rose by 40% to $400 million, with 100% renewable generation projects, including base-load hydro and solar generation projects in Morocco and Côte d’Ivoire, and key cross-border transmission interconnectors in the West and Central African Power Pool networks. These networks will facilitate the establishment of regional power markets, reduce carbon footprint and accelerate industrialization through the conversion of the region’s vast natural resources like the conversion of bauxite to aluminum, iron ore to steel and gas to fertilizers, and processing of rice, cocoa, fruits and vegetables.
Female entrepreneurs like Anna abound across Africa. Anna remembers how access to electricity enabled her to quit working long hours at one of the huge Taiwanese-owned textile factories in Maseru. That was when she took the bold step to become an entrepreneur. Things are looking up for Anna and her household. This winter will be nice and warm. Their home overlooking the dam now has a solar water heater and a Solar Home System. The authorities will soon replace their old pre-paid meters with smart meters and they will certainly not miss watching any of their favorite matches at this year’s FIFA World Cup in Russia.
After the World Cup, Augustine will have to go see his old friends in high places. He has also heard the rumours and needs to go confirm things for himself. He’s heard through the local grapevine that further industrialization of his community and country is in the offing. Investors are looking for local partners to co-invest and work on a plethora of projects: a 50 MW wind, 20 MW solar and a 500 - 1000 MW hydro power projects, in Mafeteng. The projects have been initiated by the Bank’s Sustainable Energy Fund for Africa grant). He needs to know how communities and SMEs like him can align with the unfolding positive realities of modern industrialization.