Power supply in developing countries is becoming a severe headache to the already embattled African economy which is striving to free itself from the bondages and cuffs of the COVID-19 pandemic.

It is widely recognised that the availability of modern, reliable and efficient energy services is an important and indeed essential driver for economic development. Most countries in Africa, however, face major challenges in trying to achieve their development and social obligations because of inadequate access to electricity, a situation which needs to change if the continent and its sub regions are to be economically competitive with other developing regions of the world and realize their sustainable development goals. This time, the power situation has weighed on the performance of currencies, for both African economic giants and small ones.

According to the International Renewable Energy Agency (IRENA), as many as 30 countries in Africa have electricity outages because supply lags demand, one of the most significant obstacles to socio-economic development.

The International Monetary Fund has projected a 3.5% economy growth for the Sub-Saharan Africa but the beginning of the year has been curtailed by extensive blackouts which have heavily affected the currency performances of the Africa including the leading economic giants: Nigeria, South Africa and Kenya.

The Rand, Shilling and Naira’s poor performances in 2022 have been heavily linked to power outages. The Rand saw a mixed performance during the early two weeks of the year, with a dull performance dominating. The same took shape in the Naira with the Shilling following the same path.

Intensive power cuts have rattled the rand performance during the first week of January with the currency hitting 16 against the single greenback the weakest since December 14th of 2021. Despite the effects of COVID-19 on the rand’s performance in 2021, extensive blackouts are arguably one of the core reasons why the Rand dropped momentum in 2021 by 8%. The performance disorder has continued to pour into 2022, which is not good for the nation, Southern Africa and Africa as a whole.

Similarly, Naira was positioned in the intensive care unit during the early days of January despite bouncing by 6% from the tatters of 2021. Apart from civil wars, corruption and COVID-19 impacts, massive power cuts by the State’s power utility counted more to the dismal performance.

For Kenya, the trend is the same although the currency is trying to make some reproves. Power cuts are adding more misery to the economic growth of the nation. This will have an effect within the Est African region and Africa in particular.

Why Nigeria, South Africa, Kenya’s currency dumbness gains focus

Blessed with a bountiful of natural resources including oil and coal, Nigeria is the Africa’s economic powerhouse with an aggregate GDP of $468.6 billion according to the International Monetary Fund. South Africa is one of the largest trading partner of Nigeria. Therefore, the impact on its economy directly or indirectly affects both Northern and Southern Africa economies.

Similarly, the same goes on with South Africa, which is Zimbabwe’s largest trading partner. Boasting with vast deposits of gold, South Africa is the Africa’s second largest economy, and the economic harbour of Southern Africa. South Africa plays a fundamental role in supplying goods and services both in Southern Africa and across Africa. This makes the economics of the state vital to give as a case study.

Popularly known for growing tea, Kenya is the economic power house of the Eastern Africa. Zimbabwe also exports most of its sugar in Kenya, which is also Africa’s third largest economy. With such data, the economy of Kenya proves relevant.

Relationship between power supply, currency performance and economy

Power supply has a great effect in the performance of a currency of any country. This in turn has an impact on the overall economy.

Every country depends on its manufacturing, agricultural or mining industries, from Europe, America, across Asia to Africa. Power is energy. Mining industries need to be powered by electricity. Most economic countries in Africa depends on mining and which requires a lot of power supply. To manufacture products, power is a catalyst. In modern agriculture, irrigation facilities require electricity to function. When there is no efficient power supply, all weighs on the economics of the country.

When a country produces more, its GDP grows. A high GDP reflects larger production rates, an indication of greater demand for a country's products. An increase in demand for a country's goods and services often translates into increased demand for the country's currency. This speaks out to the importance and effect of power supply on currency and effect.

Impacts of an unstable currency

Currency fluctuations can lead to higher prices. If the prices of items go up, money loses tits purchasing power. This makes it more difficult for consumers and for businesses to plan savings and investments. People may lose confidence in the currency as it is losing value rapidly. This speaks to the current situation the Zimbabwean is facing. This is not good for an economy.

Unstable currency makes local goods expensive as manufacturers put import costs weight on consumers. This makes a country’s exports less competitive as they become expensive. This is bad news for an economy.

Inflation is likely to occur following a devaluation because imports are more expensive causing cost push inflation. When a currency continues to devaluate it will ultimately trigger hyperinflation.

African power sector status

Electricity is the lifeblood of any economy. Gross Domestic Product per capita is generally three to five times greater in North Africa where less than 2% of the population is without reliable power, IRENA says. In sub-Saharan Africa, the problem is far more acute and will require billions in new investment.

By 2050, Africa is expected to grow from 1.1 billion people today to 2 billion, with a total economic output of $15 trillion. To achieve this, the energy sector needs to be refurbished. Focus on HEP

Many countries in Africa are still meeting a large proportion of their national energy demands from Hydro-Electric Power which is now less reliable given the rise of rapid climate changes which are culminating in severe droughts. Hydropower is dependent on rainfall, and is therefore vulnerable to drought. Many sub-Saharan African countries have experienced serious droughts in the past, which have affected hydro power generation and are likely to become more frequent in the future. Zimbabwe, Lesotho, Malawi, Zambia and South Africa faced electricity challenges due to droughts that continued to dominate 2019-2019 season. In 2019, Kariba Dam water levels reached record lows causing a severe power outage. Power outages spilled into 2020-21 causing an 8 percent decline in gold production from RioZim and production havoc in various companies.

Besides that, HEP faces deficient maintenance, poor procurement of spare parts and high transmission and distribution losses making it unreliable to shoulder economic growth.

Thermal Power

Coal is one of the dominant power source used in Southern and Central Africa for electricity. It is mainly used by Zimbabwe and South Africa in Southern Africa. South Africa holds over 35,053 million tons of proven coal reserves and was ranked 8th in the world and accounting for about 3% of the world's total coal reserves while Zimbabwe holds circa 553 million tons of proven coal reserves as of 2016, ranking 38th. However, the coking plants for the two nations are ageing, not enough to cater for demand. The whole drama was added when South Africa signed a US$8.5 billion deal to distance itself from coal production, which is the main power source in the country.

Nevertheless, with huge coal reserves amounting to over 735 million tonnes, more investments are needed in the sector to revive the power industry. The ageing power plant at Eskom hugely impacted Rand performance in 2021 and is still even in 2022.

South Africa, Mozambique, Zimbabwe, Nigeria and Tanzania are some African countries with leading coal reserves. If exploited efficiently, the economies of the states will boom at large.

Renewable Energy Sources

Renewable energy and energy efficient technologies have not attracted the level of investment or policy commitment they require and have not been widely disseminated in the region. Resources allocated to developing renewable energy technologies and energy efficient systems have gained a smaller footprint in comparison to resources allocated to the conventional energy sector, except for HEP. However, they are an ideal to deal with African power challenges given the world’s call to use cleaner energy and droughts that are impacting the generation of HEP.

Renewable energy refers to energy forms that cannot be easily depleted. Renewable energy sources occur naturally, and encompass energy forms, such as wind, solar, hydro, biomass, geothermal, tide and wave energy.

Solar Energy

Apart from wind, geothermal and biomass energy, solar energy is the best-known renewable energy technology in Africa. Despite having one of the best solar regimes in the world, Africa is still a trivial player in the global solar market. A set of factors has led to a market failure that keeps solar off Africa’s grids.  The inability to connect and market solar “on to the grid” has kept major solar companies out of Africa and has made solar a tool with limited markets, an expensive choice.

Major stumbles to the development of African’s solar sector in Africa is lack of capital and political.  As is still the case in much of the developed world, actors who think “big” manage electricity sectors from Cape to Cairo. Centralised power from large coal, hydro and petroleum plants have been the order of the day for decades among African power companies with PV power projects given less attention.

However, when considered seriously, solar can solve the power problems in Africa.

Benefits of renewables to Africa

Renewable energy could play a vital role in minimising fuel imports and load shedding by providing an alternative to thermal-based electricity in the form of solar power units, cogeneration and geothermal energy. They offer diversification in energy generation, thus strengthening energy security and ultimately boost productivity. In countries where oil and petroleum is used for electricity generation like Sudan and Nigeria, the use of renewable energy technologies such as biomass-based cogeneration could replace the use of oil products, and lead to considerable savings in foreign exchange.

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