March 4, 2010 / 5:44 AM / 8 years ago

Africa ready for energy transformation: World Bank

<p>Kiambere Power Station plant in Machakos District December 8, 2006. REUTERS/Antony Njuguna</p>

WASHINGTON (Reuters) - Just as Africa spent a decade transforming its telecoms market that connected huge swathes of the continent, the World Bank’s top official for Africa sees the next giant developmental leap in the power sector.

New technology and legal reforms in Africa’s telecoms market opened the way for a boom in affordable mobile phone service, said Obiageli Ezekwesili, vice president for Africa at the World Bank.

A similar transformation could repair Africa’s power sector that has suffered from years of underinvestment.

“The next big thing that will happen on the continent is going to be massive investment of private capital into Africa’s energy sector,” Ezekwesili said in an interview with Reuters.

The changes are being forced by a critical shortage in power supplies across Africa that is stifling economies.

Chronic energy shortages in South Africa, the region’s economic powerhouse, have forced its government to turn to the World Bank for a controversial $3.75 billion loan to fund a coal-fired plant, which is drawing criticism from environmentalists because of effects on climate change.

South Africa’s urgent need for an energy infusion made the project necessary, Ezekwesili said, adding that the government has committed to a long-term plan to move toward more investments in renewable sources of energy.

“There is no viable alternative to safeguard South Africa’s energy security at this particular time,” Ezekwesili said. South Africa’s Eskom, he said, provides 95 percent of the country’s power but also 45 percent of Africa’s needs.

In the same way new telecoms technology gave Africa affordable cell phones, so too can private sector investment bring power to millions of people in the region through renewable sources, said Ezekwesili, who is from Nigeria.

Across a continent endowed with ample resources to meet all of its energy needs, only one in four people have access to electricity, World Bank figures show. The OECD estimated that Africa will need to spend up to $500 billion in the next two decades to meet power demands.

FINDING THE POWER DEALS

There are already signs that countries, including Uganda, Cameroon, Mali, Rwanda, Kenya and Togo, are teaming up with power investors to help expand power generation capacity.

Ugandan President Yoweri Museveni has highlighted the urgent need for more power to keep that economy growing at a rapid pace. Last year, Museveni said his country wanted to more than double its energy capacity by exploiting two gas deposits and completing two hydro dams by the end of 2010.

Power specialists say the main obstacles to investment in the sector are associated with bureaucratic red tape, lack of planning and difficulty finding the projects that financiers will back.

This is where the World Bank’s private-sector lender, the International Financial Corp, hopes to help by combining private capital and expertise.

In Senegal, where the government has divided the country into 11 electricity concessions, which will be opened to private-sector bids, IFC has invested about $750,000 in Comasel, a unit of Morocco’s electricity utility.

The project will use a mix of grid connections and individual solar kits to bring power to 300 rural villages.

These investments were also an opportunity for private companies to work alongside national utilities in public-private partnerships to help finance power deals.

Just as mobile phone business in Africa has taken off with pre-paid phone cards, a similar strategy could work for lighting up Africa.

Much of the changes will also come with the “neighborhood effect,” in which successful change in one country influences others, said Ezekwesili. “The next generation of sector-specific reforms is in energy,” she added.

She cited Uganda’s Bujagali hydro power project, a 250-megawatt power generating facility located on the Nile also funded by the World Bank, as an example of a transformative project in Africa’s energy sector.

The project developer, Bujagali Energy Ltd, will sell electricity directly to Uganda’s transmission company, promising to lower the cost of power and reducing the country’s reliance on expensive thermal plants.

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