Business
*No economy in the world can progress without secure energy supply
*The AfDB invested US $1.5 billion to Light up and power Africa in 2016
ALTHOUGH African countries have spent money on energy during the last decades, the investments made have not kept pace with the continent’s population economic growth that increased the need for energy. Lack of reliable, abundant power is seriously hindering the continent’s transformation.
It is generally accepted that no economy in the world can progress without a secure energy supply. In the same vein, it is clear that the surest way to transform Africa and guarantee progress for its people, is to generate cost-effective power in a continent with abundant energy resources. There is a need for Africa to achieve universal access to electricity. Its energy poverty persists despite the continent’s enormous potential in renewable energy: 325 days of strong sunlight, 15 percent of the world’s hydropower potential, and good potential in wind and geothermal energy.
Despite this huge energy potential, more than 645 million people, the majority of them in rural areas, have no access to electricity. More than 30 countries report regular power outages that result in loss of working days (and income, including worker earnings), and economic output.
By 2050, Africa will have the same population as that of China and India’s combined today, with rising consumer demand from a growing middle class. The cities will be booming, as the number of urban areas with populations of millions of people will rise.
US $1.5 billion to Light up and power Africa in 2016
Even though the continent’s economy is growing strongly and remains a bright spot in the global landscape, access to electricity remains a challenge. The AfDB is determined to change this quickly, and that is why it has launched the New Deal on Energy for Africa. The Bank’s goal is to help achieve universal access to electricity within 10 years. To achieve this vision, the institution has rolled out its plan to invest US $12 billion in the energy sector over the next five years and leverage US $45-50 billion from the private sector. The Bank plans to connect 130 million people to the grid system, 75 million people through off-grid systems and provide 150 million people with access to clean cooking energy.
The African Development Bank is at the forefront of the renewable energy and “Off-Grid Revolution” in Africa. It also hosts the Africa Renewable Energy Initiative, jointly developed with the African Union that has attracted US $10 billion in investment commitments from G7 countries.
Bank Group approvals for the Light up and power Africa priority projects in 2016, US $ 2 billion were 72.8 percent higher than in 2015, with the bulk of the financing coming from the AfDB (non-concessional) window. In addition, external financing of US $61 million was channeled by the Bank, mainly from the Climate Investment Funds (US $24 million), the Global Environment Facility (US $11 million), and the European Union-Africa Infrastructure Trust Fund (US $10.5 million).
As an institution, the AfDB has demonstrated its capacity to deliver for Africa. To achieve its vision to Light up and power Africa, AfDB has financed well-structured public and private sector projects in the sector. Nearly 50 projects were approved in the energy sector in 2016 by the Board of Directors, with the largest ones having cross-sectoral implications in areas such as governance.
For instance, an operation for strengthening the power distribution network in Côte d’Ivoire, financed by an AfDB public loan of US $149 million in 2016, aims to build a 150-MW facility that will supply electricity to 252 local communities in the Montagnes district, catalyze the development of mining and agro-processing, and ultimately create some 3,000 direct jobs.
Only half the population has access to electricity in Kenya. Electricity costs more in Kenya than in other countries on the continent. The country has made electrical power sources diversification a priority and developed the Menengai Geothermal power project, financed by AfDB to the tune of US $503 million. With a production capacity of 400 MW, the plant will provide reliable, clean and affordable electricity to thousands of households and industrial structures.
In Mali, two important operations in the renewable energy sector were approved in 2016. The 33 MW Segou Solar Independent Power Producer (IPP) project, Mali’s first utility-scale solar project, financed by an AfDB senior loan of US $8.5 million along with a Climate Investment Funds senior loan of US $25 million, will generate 52.7 GWh annually, about 10 percent of the country’s current capacity. The 42 MW Achwa 2 IPP project in Uganda will generate 162 GWh of hydropower annually. The Bank Group provided a senior loan of US $20 million toward the investment cost of US $110 million.
Countries that have recently benefited from the Bank’s funding in the energy sector include Benin (US $27 million); US $11 million and US $7 million loan and grant to South Sudan (Juba Power distribution system rehabilitation and expansion project).
2016 also marked the completion of two energy projects approved in 2007 and 2009. A project to scale up electricity production, transmission, and distribution on the island of Santiago, Cabo Verde – financed to the tune of US$6.52 million through the ADF window – increased the installed capacity of the Palmarejo power plant by 22 MW. It improved access to electricity for households and businesses from 61 percent of the population in 2006 to an estimated 95 percent in 2015, reducing the country’s energy import bill. A similar project in Lesotho, financed by an ADF mix of loans and grants totaling US $14.8 million helped extend connections to 6,230 consumers.
Facts are figures and may not tell the full story of Africa’s whooping energy deficits. Lack of access to electricity in urban and remote areas in Africa will continue to jeopardize education, health technologies and businesses, if there are no immediate solutions. Action must be taken immediately keeping in mind that the reason several thousands of Africans have been migrating to Europe is because of lack of jobs and shrinking economic opportunities back at home. However, although the AfDB is the institution to deliver, it can only do so with the strong support of its partners.
At the final pledging session for the African Development Fund 14th replenishment in November 2016 in Luxembourg, Bank Group President Akinwumi Adesina sent Bank deputies a clear message: “Investing in Africa is investing in your homeland security as well,” he said. “I make a plea, not for the African Development Bank, but for Africa. Times are difficult all over these days, nonetheless, we also believe that Africa deserves significant support, even in the midst of challenges. Africa is the beneficiary for its people are tired of living in the dark. It is urgent to light up and power Africa.” – AFDB
— May 24, 2017 @ 17:25 GMT
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