Africa needs to fix energy problems to accelerate, sustain growth: ECA

Addis Ababa – Africa will not be able to accelerate and sustain growth without adequate access to energy, says Economic Commission for Africa’s executive secretary, Vera Songwe.  

In remarks to the 12th African Economic Conference that opened in Addis Ababa on Monday, Songwe said underdeveloped energy infrastructure and growing demand could help attract more private sector investment and accelerate energy development.

“However, for this we need to improve the governance processes for contracts awards, and licensing to ensure populations get affordable prices, improve the governance of energy utilities most of which are under-performing and most of all, improve the governance of our regional power pool institutions,” she said.

Over 600 million people currently do not have access to energy in Africa, a situation the ECA Chief says cannot be allowed to continue. Sub-Saharan Africa, according to a recent report, has only 300,000 km of power lines compared to over 10 million km in the European Union.

“Access to energy is not due to lack of resources,” said Songwe to delegates attending the high-level conference.

She said with Africa’s major hydro resources, the continent could produce over 283 gigawatts of energy and ensure its population has access to energy.

Songwe also talked about agriculture on the continent, saying 40-65 percent of the labour force in Africa is today engaged in the sector, most of them women.

However, she said, the governance processes regulating agriculture in Africa were still fraught with weaknesses.

“Land rights are not secure, the procurement process for inputs such as fertiliser and other inputs remains highly political in many countries, undermining the productivity of the sector and most of all profitability,” said Songwe.

She said appropriate macro-economic policy framework was critical for the continent to foster structural transformation.

“Of equal importance is the need to prioritise financing for development. While it is comforting to note that Africa’s domestic resource mobilisation efforts have improved over the last decade, the continent needs to do more,” the ECA Chief said.

Estimates of Africa’s financing needs are enormous, she said, around $93 billion per year to finance the infrastructure gap; about US$60 billion or more to finance the Sustainable Development Goals (SDGs); $50 billion annually to meet the cost of climate adaptation; and US$25 billion annually to achieve universal access to energy.

“The total funding is therefore big. We also know that Africa’s funding needs outstrip its current domestic resource capabilities – due to low domestic savings, shallow capital markets, weak financial intermediation, large informal sector, illicit transfer of funds and public financial management and governance challenges,” said Songwe, adding to achieve the SDGs, development finance strategies need to go beyond filling financing gaps.

“While official development assistance will remain a vital source of external public finance for the poorest and most vulnerable countries, it will not be sufficient. Effective domestic resource mobilisation will be at the core of financing sustainable development.”

Songwe also spoke about “the perverse effects of illicit financial flows on African economies” which she said continue to reduce the continent’s ability to make investments needed in education, health, science, technology and infrastructure to achieve its goal of industrialisation.

Africa loses US$100 billion annually to illicit financial flows representing around 4 percent of the continent’s GDP.

“As such, strengthening the institutional architecture designed to tackle these flows must be a priority for the continent,” she said. – ECA

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