Africa’s Power Struggles: From Independence to Today
Annually, 25 May is given to celebrating Africa Day, the day on which the African Union was formed in 1963. The celebration afforded us the opportunity to reflect on the performance of the African continent over the past 58 years. Our discussion focussed on the ground that has been covered over the years, the impediments to large-scale investment today and innovation in the sector, particularly renewables.
Significance – State Struggles, Private Progress
Significant progress has been made in the battle to attain universal power coverage with most gains being made in the past two decades. However, countries are lagging behind in securing financing for the larger-scale grid connected projects that are needed. In 2019, the International Energy Agency (IEA) said that the continent would need to invest USD120 billion in power infrastructure annually to be able to meet the UN’s target of universal electrification by 2030[1]. Funding pressures are even more acute now as the pandemic compounds legacy issues. Ghana, Nigeria and Cote d’Ivoire for example are all currently grappling with load shedding (or often do).
Ghana: The former Gold Coast started its post-independence power journey with the construction of the Akosombo hydroelectric dam that, at the time, provided ten times more energy than the country was consuming. However, following a period of macroeconomic instability and coups by the time multiparty democracy was restored in 1993, access to electricity stood at only 30% of the population. However, external support and domestic political will have driven that up significant – to around 82% in 2018 (67% in rural areas). Even so, progress is choppy. Currently, most of the capital Accra is covered by an oft-overlooked load shedding schedule that makes planning for businesses extremely difficult. The country has missed its set goal of universal electrification by 2020 (now 2025) and wants to include over 1,300MW of renewable power supply by 2030 as per the Renewable Energy Master Plan launched in 2019[2] (revised from previous target of 10% of renewable energy into the national mix by 2020). The energy minister, Matthew Opoku-Prempeh[3], has reiterated the need for increased production moving forward as well as renegotiating power purchase agreements with independent power producers. The 2021 budget contained significant provisions for expanding and improving the transmission networks, the first step on a long-overdue assignment. Rumours also exist around the re-concessioning of the state energy company, Electricity Company of Ghana (ECG)
Nigeria: Seeking to improve access to electricity at the time of independence Nigeria instituted energy subsidies that have been an Achilles heel for the sector ever since. Nevertheless, access to electricity has risen from an estimated 26% of the population in 1990 to around 57% in 2018. However, endemic problems face the sector. Lagos is the commercial capital, accounting for an estimated 25% of national GDP. On its own, Lagos is the tenth largest economy in Sub-Saharan Africa. And yet, it is not uncommon to have only 1 hour of grid connectivity daily. As stated in the Renewable Energy Master Plan, the authorities intend to access to power to 90% by 2030 from its present 57% and to increase the use of clean energy to 25% in 2025 and 36% in 2030[4], from the current usage of around 16%. These plans are ambitious. Whilst the political preferences may be genuine, the political capital is lacking. Buhari is coming to the constitutionally mandated end of his term in office, so the focus is already on who may succeed him in 2023. Any sway he does still hold within the ruling APC is spent on the security situation, energy concerns do not seem to feature highly at all on a list of priorities. Reform is further undermined by legacy debt issues and governance failings. See: Nigeria attacks on election facilities threaten political stability.
Cote d’Ivoire: Usually a bastion of energy stability, 94% of the country is currently connected to the grid, up from just 34% in 2013. This has mostly been achieved through partnerships with the private sector and backing from partners such as the World Bank. The aim is that by 2035, 99% of the country will have access to power and 42% of energy will come from renewable sources, hydroelectricity alone already accounts for 16%. In the short term, however, it is currently struggling with power outages caused by low water levels at hydroelectric dams and poor supplies to fuel the country’s two main gas plants. The problems are expected to persist through to August. The country is currently reaping rewards sown over the past decade that have seen policies leading to liberalisation of the power sector including the the award of a 12-year power distribution concession for Compagnie ivoirienne d’électricité (CIE) in 2020. There has been significant political turbulence in recent years including elections and the death of two prime ministers within eight months due to ill health. And now, Cote d’Ivoirre is anticipating the return of former president Laurent Gbagbo after ten years in effective exile. However, the next elections are scheduled for 2025 and in the interim, President Alassane Ouattara exerts considerable and consistent influence on policy direction. See: Cote d’Ivoire following the loss of a second prime minister in 8 months.
Meanwhile, every challenge presents an opportunity and the one business model that seems to be gaining traction and showing the potential for scalability is the provision of small renewable (usually solar) sources of power to homes and businesses. Here are some companies that have caught our eye:
Lumos: Operating in Nigeria and Cote d’Ivoire, it provides small solar installations for homes that can power household appliances. It has partnered with MTN to allow for a minimal upfront payment with the balance being paid off in instalments.
BBoxx: Operating in 10 African countries, they have provided over 1.7 million people[5] with access to clean energy. Customers have units installed and then operate on a pay-as-you-go system that can be paid using mobile money.
Redavia: Provides small-scale solar farms to businesses either on-or off-grid in West and East Africa. The systems can be purchased or leased as per the needs of the customer. Most useful for seasonal agricultural activities, mining and construction activities.
PEG Africa: Established as a B Corp, it operates across Ghana, Ivory Coast, Senegal, and Mali employing over 1,000 people[6]. Its focus is currently on providing small solar devices for small electronic items such as phones, radios and fans. Customers pay in monthly instalments.
Outlook – Everything to play for
The present public sector constraints are significant but (a) ground covered in past decades is indicative of the potential looking forward, and (b) new business models are already showing potential to boost life quality and productivity for the individuals, households and SMEs that are the driving force for economies in the region. Moreover, the digitisation, industrialisation and regionalisation agendas being cited by national governments, civil society organisations and all the way up to the regional bodies and their international community stakeholders rest on their success. See: AfCFTA Progress Update - May 2021.
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[1] If this were to happen, the same report says that a 50% increase in energy capacity would lead to a quadrupling of the size of Africa’s economy.
[2] Energy Commission (2019). Ghana Energy Sector Master Plan. Accra
[3] Widely seen as a no-nonsense enforcer and well trusted by the president, he delivered on the flagship program of the previous administration at the education ministry.
[4] Rural Electrification Energy (2016). Renewable Energy Master Plan. Abuja
[5] Self-reported
[6] Self-reported
*Photo credit: (c) Songhai Advisory
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