December 30, 2014
Development Experts Make the Case for Big Investments in Sub-Saharan Africa
Six of the best performing economies have come from Africa in the past six years, but energy poverty continues to be a significant barrier for national and human development goals. According to a panel of development experts, sub-Saharan Africa will need to power its factories, hospitals, schools, and other foundational infrastructure with cheap and reliable sources of electricity, and, at least in the near future, that will likely come from hydro and fossil fuels.
Africa has experienced massive economic growth over the last decade, but in order for this growth to translate into significant development outcomes, big investments will be needed to provide electricity to the 600 million sub-Saharan Africans who lack it, said a panel of development experts at Breakthrough Dialogue.
Lack of cheap and reliable energy is a significant barrier to continued economic growth. While some advocates have suggested that small-scale, distributed renewable energy technologies can meet the needs of sub-Saharan Africa, two of the panelists argued that Africa’s power sector will much more diverse, and, at least in the near future, dominated by hydro and fossil fuels.
“In 2001, in an editorial piece at the Economist, Africa was described as a hopeless continent,” said John Asafu-Adjaye, a development economist at the University of Queensland. “Almost a decade later, the narrative on Africa has changed. Six of the best performing economies in the world have come from Africa.”
While Africa’s rapid economic growth holds promise, sub-Saharan Africa lags behind the world, and particularly the rest of the developing world, in terms of basic indicators like infant morality, maternal mortality, literacy, and access to health care. The major constraint to making deeper inroads into poverty, said Asafu-Adjaye, is a lack of energy access.
“Lack of power means so many things,” said Mimi Alemayehou, formerly of the Overseas Private Investment Corporation. “It means women giving birth in the dark, children who either cannot study at night or don’t go to school, and business that cannot function. Nigeria loses about 2 percent of GDP each year due to power outages.”
“When you look at electricity consumption across the globe, the consumption of the average person in sub-Saharan Africa is about 530 kWh per year, which is far below the average of 1,500 kWhr per person for developing countries,” said Asafu-Adjaye. “For Africa to catch up, we have to greatly increase electricity consumption, and this will have to come from cheap energy sources.”
Given their high cost and a lack of infrastructure to support them, at least in the near-term, renewable technologies like solar will not be able to power Africa, argued Asafu-Adjaye. Renewables may become useful in the medium-term, but only once significant investment is directed toward new power plants and rehabilitating old ones.
“Renewables cannot do the heavy lifting,” he said. “We need to invest in the power grid in order to power industries, modernize agriculture, and power schools and hospitals. Going forward, sub-Saharan Africa needs to exploit cheap sources of energy, and this could come from oil and coal.”
Doug Norlen, senior program manager at Friends of the Earth, cautioned against absolute faith in large infrastructure projects, as many don’t actually expand energy access and instead hurt the poor. He cited a recent study by Oil Change International, which evaluated a range of World Bank projects on whether they delivered energy services to those who needed it most and concluded that very few of them did.
“If we’re going to target energy access to the poor, then we need to have much clearer goals and criteria and rule out the projects that don’t achieve the objectives we seek,” said Norlen.
Norlen also argued that the increased cost of large infrastructure projects and grid extension, combined with the declining cost of renewable energy prices, add to the justifications for the expansion of distributed generation in rural areas, where 84 percent of people without access to electricity live.
“We often hear that off-grid and mini-grid are unaffordable and unscalable,” he said. “But Bangladesh didn’t get the memo: solar home systems rose from 25,000 to 2.8 million in the last decade. The average monthly installation rate has reached 80,000 units. I think we need to watch the Bengladeshi as one model for the future.”
According to Alemayehou, broad regional differences are a big determining factor in whether other African nations will be able to “leapfrog” from coal to renewables, in the way that Africans leapfrogged landline phones to mobile technology.
“I think for Africa, because the need is so great, with 600 million people in the dark, every energy source needs to be on the table including coal,” she said. “We can’t make blanket statements. In my country of birth, Ethiopia, 90 percent of energy is clean because we have hydro. But you go south to Mozambique, and trust me, gas will be developed way before solar.”
There are other tradeoffs associated with focusing exclusively on certain renewable technologies in the name of the environment, she said. As the US Executive Director of the African Development Bank, Alemayehou oversaw the proposal for the Gibe dam project, which planned to double the installed capacity of Ethiopia.
Rising pressure from environmental groups like International Rivers, heightened by the approaching Copenhagen climate change conference, ultimately forced the African Development Bank, the World Bank, and the European Investment Bank to withdraw funding from the dam. In the end, the Chinese funded the project.
“Unfortunately, I don’t think the Chinese care much about the Pelosi Amendment or other things we had carved out in our project, including additional funding for community engagement,” said Alemayhou. “The Ethiopians got what they wanted in terms of doubled capacity, but the issues that the NGOs raised are still there.”
Aleymayehou made the case that multilateral investment institutions such as the World Bank are critical players in Africa’s development. Private developers have not yet reached critical mass in the poorest countries, she said, and regional institutions are starting to take shape, but currently aren’t enough.
Asafu-Adjaye qualified this view, adding that governments need to make their countries more attractive to investors. “China may not be that concerned with poor governance, but if we want others to join, [sub-Saharan African governments] needs to get [their] house in order in terms of reducing corruption and red tape. I think the future lies in private investment.”
So, how optimistic should we be about Africa’s future? There is a good policy discussion happening right now in Washington and around the world, argued Alemayehou, citing the post-2015 discussion of the Millennium Development Goals, the House passage of the Electrify Africa Act, and President Obama’s pledge of $7 billion from the US government.
“I hope we stay engaged … If we are to reduce energy poverty we need to be involved,” she said. “Nothing is going to be perfect. The [legislation] will not completely please the coal side, and it won’t completely please the clean energy side, but we need to at least agree on something and move forward.”
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