Africa’s electricity grids are characterised by infrastructural flaws, inefficiency and limited coverage, preventing universal access to electricity and hampering the continent’s development. This morning, RES4Africa and PwC presented the new study Private Sector Participation in African Grid Development examining the phenomenon, its causes and viable solutions. The analysis is focused on ten countries (Algeria, Ethiopia, Ghana, Kenya, Morocco, South Africa, Tanzania, Uganda, and Zambia) and was presented at a virtual event organised in the framework of RES4Africa’s strategic programme, Grids4Africa. The gathering benefitted from the participation of important representatives from African and international private and public sector entities (Enel, PwC, Umeme, EPRA, Ghana Energy Commission, IFC, ARM-Harith Infrastructure Investment, Schneider Electric, and MIT/Comillas/FSR).
Transmission and distribution networks on the continent require major improvements and are likely to become the real bottleneck in Africa’s sustainable development. Electrification efforts risk being outpaced by the continent’s population growth and, where access to electricity is available, losses are high (up to 29%) and the reliability of electricity supply tends to be substandard.
The study highlights a chronic lack of investments as the main reason for this status quo: public utilities suffer from staggering quasi-fiscal deficits (implicit subsidies), averaging 1.5% of GDP in the ten sample countries. In order to compensate these issues, many public utilities resort to increased tariffs, leading to a reduction in the customer base and, ultimately, getting trapped in a vicious cycle.
According to the analysis, the solution to break the cycle consists in extending private participation, which is currently an exception in the overall African energy panorama. Increasing the role of the private sector will also reduce structural imbalances and maximize returns from new business models.
The recommendations emerging from the study point towards major regulatory reforms to be promoted by an independent energy authority, guaranteeing market fairness and transparency. Additional interventions are targeted regulations, an adequate remuneration of private utilities, unbundling and liberalization and, finally, institutional commitment and support.