“Energy– sector bottlenecks, corruption and power shortages are estimated to cost Africa some over 4% of GDP annually, undermining economic growth, employment creation and investment.”
Harare- Despite massive blackouts which are rattling the Sub-Saharan continent from Kenya to South Africa to Nigeria, and Zimbabwe, Africa still boasts with significant untapped fossil and renewable resource reserves to generate power. However, the key question this article will address is why the continent still lags in energy productivity despite having the resources on ground. However, it is of paramount importance to have an appreciation of the general situation of energy mix in Africa vis a vis productivity, supply vs demand and population growth. Africa is home to 17% of the world population but only accounts for 4% of global power supply investment. In the 2021 International Energy Agency’s report, only 58% of the continent’s population had access to electricity and two-thirds of Africa’s existing grids are considered unreliable. Excluding South Africa, nearly one billion people across 48 countries in sub-Saharan Africa share roughly the same generation capacity of Germany providing for 83 million people.
Energy challenges if not addressed will continue to spike as the continent’s population is expected to surpass 2 billion by 2040 while being the fastest growing by 2030 overriding India and China. In order for Africa to achieve its SDGs relating to energy, its generation capacity will need to be doubled by 2030 and multiplied fivefold by 2050, according to International Energy Agency’s 2021 report. If unmet, the energy demand-supply gap will be detrimental to Africa’s standard of living and greatly hinder economic growth more than currently witnessed.
Energy crisis, particularly electricity which this article seeks to unpack has submerged economies of many countries postst-COVID-19 era as countries tried to rebound from the COVID-19 economic slowdown. it has been exacerbated by the Russia’s invasion of Ukraine which spiked energy global prices through the roof. Nations, including Southern Africa’s economic power house, South Africa, East Africa’s economic harbour, Kenya and Africa’s largest economy, Nigeria have embraced record electrical blackouts ranging up to 18 hours a day, a situation that rattled currency performance, productivity and economic performance as a whole. This is despite Africa having all resources neccesary to be electricity self-sufficient.
Energy demand in Africa has been increasing at an annual rate of around 3%, the highest among all continents, while energy supply continues to lag significantly. Industrial performance has been tormented with productivity scaling down. This was notably in according to the African Development Bank, (AFDB), 2021 report which says over 645 million Africans have no access to energy, corresponding to an electricity access rate for Sub Saharan Africa at just over 40%, the lowest in the world. Per capita consumption of energy excluding South Africa was also measured at 180kWh, compared to 13 000 kWh in the United States and 6 500 kWh in Europe. Electricity demand in Africa, according to International Energy Agency was at 700 tera-watts-hour (TWh) with the North African countries and South Africa accounting for over 70% of the total.
Agenda 2063 is Africa’s blueprint and master plan for transforming Africa into the global powerhouse of the future. It is the continent’s strategic framework that aims to deliver on its goal for inclusive and sustainable development and is a concrete manifestation of the Pan-African drive for unity, self-determination, freedom, progress and collective prosperity pursued under Pan-Africanism and African Renaissance. In order to accelerate economic and industrial development there is need to generate more energy to power industries and for domestic purposes.
By 2025, the continent expects to be energy self-sufficiency with an increase of on-grid generation adding 160 GW of new capacity, increase on-grid transmission and grid connections that will create 130 million new connections by 2025, 160 per cent more than today Increase off-grid generation to add 75 million connections by 2025, 20 times what was there in 2021 and increase access to clean cooking energy for around 130 million households.
Access to energy is crucial in accelerating better living standards, reducing cost of doing business and unlocking economic potential and jobs creation. Africa’s energy potential, especially renewable energy is enormous, yet only a fraction is being employed. Hydro power provides around a fifth of current capacity but not even a tenth of the total potential is being used according to AFDB.
Energy sector bottlenecks and power shortages are estimated to cost Africa some 2 – 4 per cent of GDP annually, undermining economic growth, employment creation and investment. Research data shows that companies in Tanzania and Ghana are losing 15 per cent of the value of sales as a result of power outages. South Africa’s economic growth has been hobbled for a time now by severe electricity generation capacity constraints and frequent ‘load shedding’. In Zimbabwe, post pandemic era, companies have struggled to get sufficient energy with telecoms giant, Econet Wireless and mining outfit, Riozim bemoaning the government to take action. Riozim gold production even plummeted by 8% in 2021 and 2022 due to scarcity of electricity.
An estimated 600,000 Africans (mostly women and children) die annually due to indoor air pollution associated with the use of fuel wood for cooking. Children under-perform for lack of electricity, since over 90% of Africa’s primary schools lack electricity. Lives are at risk in African hospitals, as life-saving equipment and services lie unused because of eratic power supply.
Africa’s energy mix
The pie-chat below shows Africa’s generation mix by 2021
Hydropower is the main provider of renewable electricity in Africa with over 37 GW of installed capacity. The continent has the highest untapped hydropower potential in the world, with an estimate of only 11% of its potential being utilised. Similarly, the technical potential of solar, bioenergy, wind and geothermal energy is also significant. Most African countries are increasing investment in solar and hydropower technologies and projects that are currently under construction are expected to add 33 GW of renewable energy capacity.
Solar energy
According to the International Energy Agency, Africa has the 60% of the globe’s best solar resources, but only 1% of solar generation is utilised. The agency alluded that only 5 gigawatts of solar PV, less than 1% of the global total has been installed. To achieve its energy and climate goals, Africa needs US$190 billion of investment a year, between 2026-2030, with two thirds of it going to clean energy. However, this requires a big chuck of funding, mostly from western democratic societies. Solar can help Africa alleviate its energy crisis but the continent is at its early stages of building solar resources. Statistics report that in 2022, 9% of Africa’s power generation was based on solar and other renewables while solar capacity grew by 13%between 2019 and 2020. BP projects that around 30% of Africa’s energy production will be derived from solar by 2050.
Wind power
Africa’s technical wind resource potential is more than 59 TW, however capacity from projects under construction and currently installed have only tapped into 0.01% of this potential. International Energy Agency reported in 2021 that the currently installed wind capacity was 6,491 MW while 1,321 MW is under construction. Installed cost for onshore wind is the second lowest of renewable energy technologies, behind solar, at US$1,473/kW. South Africa has the greatest wind capacity, followed by Egypt, Senegal and Morocco. Wind energy generation increased by 14% and solar energy generation increased by 13% in 2021, while total renewable energy generation increased by 11% in 2020 compared to the previous year.
Bioenergy
Africa has a vast variety of bioenergy feedstock’s to meet Africa’s burgeoning demand for modern energy services and thus most African countries are gradually adopting bioenergy technologies. More than 10% of the renewable energy supply in 2050 is expected to be some form of bioenergy. Installed bioenergy capacity is estimated at 1,709 MW while 151 MW is still under construction. Bioenergy installed cost is estimated at US$2,141/kW.
Hydropower
Africa has abundant hydropower potential. With only 11% of its hydropower potential utilised, the continent has vast opportunities to develop new projects. Hydropower accounts for 17% of the electricity generated across Africa and remains one of the lowest-cost sources of electricity. Total installed cost for hydropower is favourable at US$1,704 per kW. Estimated hydropower capacity of 37,251 MW is currently installed while 20,403 MW is under construction (IEA report 2021). Hydropower in electricity generation exceeds 80% in countries such as Malawi, the Democratic Republic of Congo, Ethiopia, Mozambique, Uganda and Zambia.
Nuclear power
South Africa currently has the continent’s only commercial nuclear power in Africa. The sole operating nuclear power project is generating 1,940 MW in South Africa, while 100 MW is under construction in South Sudan. Ghana, Kenya, Egypt, Morocco, Niger and Nigeria are considering adopting nuclear power and have engaged with the IAEA to assess their readiness to embark on a nuclear programme. Countries such as Algeria, Tunisia, Uganda and Zambia are also evaluating the feasibility of nuclear power.
Geothermal energy
Kenya is the largest geothermal energy producer in Africa, with its power production contributing approximately 40% of the country’s electricity supply. East Africa is successfully harnessing its geothermal capabilities with installed geothermal capacity estimated at 824 MW in Ethiopia, while 3,953 MW is under construction in Ethiopia, Kenya and Uganda.
Natural gas
Gas proven in 2021 amounted to 455 tcf. Natural gas reserves in Africa totalled over 620 trillion cubic feet in 2021. Nigeria housed the largest reserves in the continent, around 200 trillion cubic feet – equivalent to roughly three percent of the proved global natural gas reserves. North Africa accounted for nearly half of the continent’s total gas reserves, with Algeria concentrating the highest amount, some 159 trillion cubic feet. There has been a series of discoveries of natural gas in Southern Africa, Mozambique, South Africa, Zimbabwe and Tanzania with Mozambique’s gas huge gas shipments to the international community expected to commence in 2025. Total Energies declared force majeure on the 13.2 mtpa Mozambique LNG project in April 2021.
The graph below shows natural gas reserves in Africa 2021, by main country (in trillion cubic feet)
The data above shows that Africa has enough energy mix to sustain its hunger for electricity. However, despite such huge resources and reserves, Africa still faces insatiable thirsty for electricity.
In 2021-202 period, major currencies were downplayed by power scarcity which counteracted productivity. The Naira, Rand and Kenyan Shilling all succumbed to energy crisis in 2021 and are at their historical record lows in 2022. More worrisomely is that even in nations where there are vast energy reserves are also suffering the same fate.
What needs to be done
Africa needs to create a more favourable environment to attract private and foreign investments to fully harness its energy potential and provide modern energy to its people. Mozambique’s gas project which resumed this year has been stopped due to political intolerance and civil wars. The same can also apply to Invictus Energy when the political and economic environment remains tough and unfavourable. The company might keep on exploring without tangible production.
Africa needs to embrace technology and innovation. Up to date, Africa heavily rely on old methods processes and technologies both in government and private sector. For example, ESKOM of South Africa and ZESA of Zimbabwe. Africa’s source of energy is largely dominated by ageing power plans from the colonial era. Corruption has hugely contributed to inadequate capital investments in the energy sector and poor maintenance of existing energy infrastructure amid pressures of rising populations and mildly growing economies. However, billions of United States dollars are required to invest in the energy sector. This is where reforms, both political and economic comes into play. In 2021, the United Kingdom, USA and Canada labelled Zimbabwe a high risk investment area due to abuse of human rights, political intolerance and rampant corruption. If left undressed, African leaders risk plunging the continent into an existential crisis illuminated by chronic inflation, depressed production and poor living standards. There is need to curb corruption and illicit financial flows.
Corruption, abuse of human rights, social unrests and commercial risks such as the failure by state organisations and public to pay their bills have discouraged private and foreign investors. Perceived and actual investment risks are higher in Africa than any continent.
Africa needs to scale up in electricity sector investments for generation and grids, for which it currently ranks the lowest globally, as it accounts for only 4% of global power supply investment despite being home to 17% of the world’s population. Investments for a more reliable power system, specifically regarding transmission and distribution assets is essential. There is need to improve energy infrastructure maintenance practices in order to improve efficiency. International Energy Agency estimates that Africa loses 16% of power sufficiency to old infrastructure, mostly installed during the colonial era. For example, ESKOM of South Africa and ZESA of Zimbabwe are typical examples where poor colonial infrastructure is still operational, leading to prolonged blackouts, ranging to 18 hours a day.
There is also need to denationalise the energy sector. A clear example of this should be of Mozambique’s Cahora Bassa plant, operated by an independent producer and it has been successful in exporting electricity in Southern Africa. Mozambique is actually a net exporter of electricity. Not dismissing the good in parastatals, but African states are mostly corrupt driven as manifested in Transparency International and how governments conduct operations. A clear example is of ESKOM, which was once a great power house but now is in tatters with issues of corruption also brewing. There should be more energy sector diversity. This has paid off in Russia (Gazprom), British Petroleum and in China where the grid companies control not only the grids’ system operation but also serve as the sole power trader in their geographical separated markets.
In Zimbabwe, Nyabire solar, whose output will be bigger than Harare thermal by 2023and Muzarabani gas and oil projects are typical examples. Indeed, government’s involvement in national utilities has caused high political interference which has led to poor management and weak financial conditions. Governments can barely afford to run their own power stations, then they can’t certainly afford to do all alternative projects. In fact, there is need to treat energy sectors like supermarkets and real estates, like 1+1=2. There is need to de-monopolise the energy sector.
The problem with African leaders is that they run their countries with trauma of colonisation. Imagine if ZESA, ESKOM and Nigeria’s power industries were privatised with the abundance of gas, coal, HEP available? Nationalisation of grids and power utilities has made it hard to uphold transparency and accountability on energy development. An American firm won the tender for the construction of the Dema Power plant in 2016, but the government cancelled the contract and awarded it to Sakunda Holdings, which had not even placed a bid. The Zimbabwe Electricity Distribution Company (ZETDC), a subsidiary of Zimbabwe Electricity Supply Authority (ZESA), paid US$4.9 million to Pito Investments for transformers in 2010. The transformers were never delivered. Similarly, the Zimbabwe Power Company paid US$196,064 South African rand to York Investments for gas that was never delivered, and US$67,000 for coal that was never delivered. Corruption is at the heart of why Zimbabweans are suffering through prolonged power outages.
There is also need to de-monopolise the energy sector amends policy uncertainties, inadequate infrastructure grids, unstable financial situations and limited access to private and foreign financing which are the major barriers to fuller utilisation of energy reserves in Africa. The legal and regulatory frameworks remain patchy and inconsistent. Sound regulatory frameworks play a crucial role in attracting domestic and foreign private investments for renewables. For example, section 8(1) of the Electricity Regulation Act of South Africa provides that ‘no person may’ generate, distribute, transmit, or trade-in electricity without a licence. There is a need for ‘no’ be replaced with ‘any’, meaning the nature of the provision will change entirely. If amended, it will provide that ‘any person may’ generate, distribute, transmit, or trade in electricity without a licence. South Africa’s rolling blackouts are caused in the final analysis by Eskom’s de facto monopoly in electricity generation – particularly generation that makes use of coal and nuclear sources of power. No independent power producer is authorised to make use of these sources, giving Eskom a significant leg up over its potential competitors.
At domestic level, African countries needs to reform the power sector and create sufficient opportunities for investments while strengthening regulatory frameworks. Governments should focus on reforming efforts on their power utilities and energy subsidies. Reforms and clear regulatory frameworks can improve the financial and operational efficiency of utilities, many of which have been struggling with financial issues and have been heavily subsidised by the state.
Meanwhile, at the continent level, higher power sector integration could contribute to the development and use of affordable and reliable renewable energy for the African people. This will also provide the right condition of economies of scale for large renewable energy projects. However, there is need for governments and utilities to step up coordination to increase investment in transmission infrastructure, establish regional markets and improve regulation for cross border trading.
Therefore, for Africa to end its energy crisis nightmare, there is need to address domestic issues, ranging from corruption, implementing dovish economic and political reforms, upholding democracy, invest in energy infrastructure and incentivise private and international financial support for its quest for access to energy and sustainable development.
