Africa can sustain itself, policy certainty crucial for success of energy sectors

16th January 2014

By: Sashnee Moodley

Senior Deputy Editor Polity and Multimedia

  

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Energy is a long-term investment and significant funds, a long-term plan and clear policy frameworks are needed in Africa to ensure thriving energy sectors on the continent.

This was according to State-owned power utility Eskom CEO Brian Dames, who highlighted that the continent had some of the fastest growing economies and an abundance of primary energy sources, which could enable it to sustain itself ten times over.

However, he stressed that certainty in the policy environment and the management capacity to exploit this was needed on the continent.

Speaking at the State of Energy in Africa debate at the Witwatersrand Business School, in Johannesburg, on Wednesday, Dames noted that while South Africa at least had an electricity plan, it needed to be implemented.

“For the rest of continent, that 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 some notable successes in some energy sectors, such as South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), there were also some 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 and Power Africa business unit leader Cornelis van der Waal believed that to ensure Africa attracted investments and had successful energy sectors, the continent needed to avoid being seen as a homogonous region.

He said the difference between rapidly growing Africa economically and an average growth needed to be distinguishable.

Van der Waal added that he had hope in “rapidly growing and expanding” Africa, as there were signs of significant investments, but average growth was less impressive.

He highlighted the need to enable capacity to liberate resources and use them for electricity, road and rail, ports, housing and social infrastructure, adding that these resources also needed to be managed in a coordinated manner.

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 to the rest of Africa.

He noted that South Africa had the necessary skills, despite not having funds.

“We have the construction companies involved with 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 regarded East Africa as having a similar power pool, noting that West Africa had a slight energy deficit. Further, while Egypt dominated the energy sector in North Africa, he believed that more needed to be done to enhance the sector.

While Dames cited a lack of skills as a problem, one of the other key challenges in Africa was ensuring energy security through greater interconnectivity.

“If everyone in Africa is connected, like people are in Europe, we can establish greater energy security. The key 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 did not believe that finance was a constraining factor, as it was just a matter of reaching out to the available finance sources.

Yelland again 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 recounted.

INVESTMENT AND RISK
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 with 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.”

Dames agreed and maintained that the REIPPPP was the best risk-free investment for any investor.

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 completely every time a new government was elected.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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