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Funds availability, long-term plan and clear policy will unlock potential of African energy sector – Dames

A range of panellists debate the state of energy in Africa.

31st January 2014

By: Sashnee Moodley

Senior Deputy Editor Polity and Multimedia

  

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Huge sums, a long-term plan and clear policy frameworks are needed to ensure a thriving energy sector in Africa.

This is according to State-owned power utility Eskom’s outgoing CEO, Brian Dames, who said earlier this month that the continent had some of the fastest-growing economies and an abundance of primary energy sources. He was speaking during a debate on the State of Energy in Africa at the University of the Witwatersrand Business School, in Johannesburg.

However, he stressed that certainty in the policy environment and management capacity to exploit this endowment were needed.

He said while South Africa at least had an electricity plan, it needed to properly implement it.

“For the rest of continent, this is what is lacking,” he said, adding that certainty regarding government’s implementation of its policy decisions was also crucial.

Local publishing company EE Publishers MD Chris Yelland conceded that while there were notable successes in some energy sectors, such as South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), there were also notable failures.

“We’ve seen the turbulence in the South African electricity supply industry at management level, and that includes Eskom management, Cabinet, the Department of Energy, the Department of Public Enterprises and municipalities. There is no consistent, coordinated policy framework and vision, and that is a problem,” he stated.

Meanwhile, growth consulting company Frost & Sullivan Energy & Power Africa business unit leader Cornelis van der Waal said that, to ensure Africa attracted investments and had successful energy sectors, the continent needed to avoid being perceived as a homogenous region.

Management consulting, technology services and outsourcing company Accenture South Africa energy MD Ken Robinson said there was a strong opportunity for South Africa to provide energy solutions for the rest of Africa. “We have the construction companies involved in civil engineering and we can industrialise the building of transformers in this country and for the rest of Africa. We can supplant the Chinese and the other global investors looking to Africa as a market and make it our market,” Robinson said.

Dames predicted that Africa’s growth would soon be regional as there was a great sense of cooperation between regions.

He commented on Southern Africa’s power pool, suggesting that the region had immense resources, such as gas, coal, hydropower and an abundance of renewable-energy sources.

Dames said East Africa had a similar power pool, noting that West Africa had a slight energy deficit. Further, while Egypt dominated the energy sector in North Africa, more needed to be done to enhance the sector.

Dames said improved energy security could be achieved through greater interconnectivity. “If everyone in Africa is connected, as people are in Europe, we can establish greater energy security. The key part for Eskom is to play a role in generation projects in the region and in integrating electricity networks, as well as in making sure we get power to flow freely in Southern Africa,” he stated.

Yelland agreed that Africa had an abundance of primary and human energy but noted that it needed to be “harnessed and unleashed”.

He said he did not believe that finance was a constraining factor, as it was just a matter of “reaching out to the available finance sources”.

Yelland highlighted the success of the REIPPPP and pointed out that the private sector had invested billions of rands into renewable energy.

He stated that South Africa and Africa had an “institutionalised monolithic monopoly that has got a grip on the energy sector and is not allowing new players to come in”.

The restructuring of this environment, as was being done in Nigeria, was needed.

“Nigeria is restructuring its energy sector because of the total failure of the State-owned enterprises that have [monopolised] the industry,” Yelland said.

 

Van der Waal argued that it was important for Africa to invest in itself as some of the largest companies on the continent held a significant amount of funds and did not “know where to invest it presently”.

He reiterated that if policy certainty was created, along with an environment in which companies could be sure that they would get returns on their investments, development finance institutions would not be needed as the private sector would have the finances required.

While Robinson believed that companies could take “a risk and invest in Africa”, African Development Bank regional director Ebrima Faal argued that the private sector would not invest where there was uncertainty.

He said projects needed to be derisked as was the case with the REIPPPP. “Government was able to derisk the programme and pass it on to the private sector. It’s a collaborative effort and a public–private partnership that will make this happen.”

Van der Waal pointed out that to create the further certainty required for investment, country leaders needed to keep in mind the best interests of their countries in the long term and not in five-year terms of elected leadership.

While policies could be amended from time to time, he said, they should not be changed with each newly elected government.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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