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Afdb Dangles $12bn to Develop Africa’s Energy Sector

Lusaka – Countries in Sub-Sahara Africa need to bolster energy efficiency through investments that should be scaled up to over three percent of their Gross Domestic Product from the paltry 0.4 percent and further slash subsidies on some of their petroleum products to meet demand for the over 650 million population, the African Development Bank (AfDB) has proposed.

Under a new plan billed to scale up power in the 54 African states by 2030, the continent needs to boost investment in energy from 0.4 percent of GDP to 3.4 percent and consider scaling down subsidies for among other petroleum products, diesel and kerosene.

This is according to the bank’s plan of action to bolster Africa’s energy potential in which it has dangled about US$12 billion to promote energy efficiency in several countries on the continent in the next five years.

The 15-member states of the Southern African Development Community (SADC) are also grappling to meet energy demands following persistent low rainfall in the region, spurred by the El Nino in which the sub Saharan Africa, in general, needs to scale up its potential to benefit from its funds available. According to the Pan-African financier, it will put aside about $12 billion for investment in the energy sector in Africa including solar, hydro, agriculture, and women empowerment, among others.

AFDB said in a recent report that Africa has huge potential in hydro, solar and thermal power, which all needs to be maximised to grow the continent’s energy potential.

Under the Africa Development Bank’s programme dubbed: “New Deal Initiative” that was launched last week on the side-lines of the World Economic Forum in Davos, the bank plans to add 160 gigawatts of power to the continent’s current capacity by 2025.

Under the new initiative, the bank plans to invest up to $50 billion to address the continent’s chronic energy shortages.

“What we take for granted in developed countries is a luxury in Africa. Africa has no power and it is tired of being in the dark,” AfDB president Akinwumi Ayodeji Adesina, was quoted saying in the report.

“This will be the equivalent of adding 800 new 200MW power plants – the ambition is high but it has been done in China, Vietnam and Bangladesh. It is doable.”

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Power shortages are estimated to cost Africa 2 to 4 percent of GDP every year and according to AfDB, companies in countries like Ghana and Tanzania are losing an estimated 15 percent of sales because of persistent power outages.

Hospitals, among other amenities lack the ability to provide 24-hour health care, while 90 percent of schools lack electricity, forcing many consumers to resort to wood and cow dung to heat up homes and cooking, posing a several health risk.

As a result, it is estimated that 600,000 people die yearly because of indoor pollution. Renewable energy, IRENA (International Renewable Energy Agency) estimates that 250 gigawatts need to be added to the energy capacity on the continent by the year 2030.

An estimated 130 million grid connections, AfDB said, will need to be completed in the next decade to hit that target, while a further 75 million off-grid consumers can benefit from solar systems.

But there’s likely to be an investment shortfall of up to $30 billion, which the ADB hopes will come from other inter-governmental organisations and the private sector.

Under an agreement devised by the global community at the Climate Change Summit in Paris in December 2015, developed countries are expected to help fund green energy and climate adaptation projects in Africa and deliver at least $100 billion a year in funds to all developing nations by 2020.

Meanwhile, the Organisation for Economic Co-operation and Development (OECD) estimated that about $62 billion a year was flowing out of poorer nations, which it said they are not seeing the levels of investment needed to raise people out of poverty and cope with future extreme weather impacts.

It is against this background that AfDB president Adesina noted that initial plans would be “technology neutral” pointing to South Africa’s large coal reserves and West Africa’s gas stocks alongside solar, wind and hydro.

Former UN secretary general Kofi Annan recently described the news as an “exciting moment” while urging countries to take advantage of the plans to invest in climate-friendly energy systems.

“Eventually the idea is to go green and I think Africa has the possibility of being the first continent to be a green continent,” he said.

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Meanwhile, Zambia has been cheered by AfDB’s desire to provide US$12 billion for Sub-Saharan Africa for the next five years, coming on the back of critical power shortages characterising the country.

In a statement, Zambia’s presidential spokesperson Amos Chanda noted that the $12 billion funding initiative by the AfDB was welcome at the continental level, much of which will be provided to Zambia, which has a huge potential for hydro, solar and thermal power.

Following a meeting with President Edgar Lungu on the side of the African Union Summit in Addis Ababa, Ethiopia, last week, the AfDB chief is expected in Zambia next month to discuss with government the way forward and is optimistic the country would maximise on the available resources to improve energy needs and provision for its more than 15 million population, Chanda said in a statement.

He said Adesina, who is in support of the Zambia’s government’s economic reforms, is expected in Zambia ahead of the AfDB annual meeting to be hosted by Lusaka from May 23-27 this year.

Chanda noted that Adesina encouraged President Lungu to proceed and ensure the country had cost reflective electricity tariffs unlike the meagre US$0.4-U$0.6 cents a kilowatt hour being offered especially for the domestic and industrial user.

“The AfDB president takes note that this is a difficult thing to do, but once that is done, there is a lot of money, which will come in the energy sector.

What is inhibiting that is the lack of cost-reflective tariffs,” he said.

“President Lungu has since assured Adesina and the AfDB that the process to get to the cost-reflective electricity tariffs would move progressively. AfDB, Chanda added, hailed Zambia for also setting up a women’s bank and that the bank had $300 million from which Zambia could benefit.

“The bank is excited that the Zambian women’s bank has been set up, they have announced that a significant amount of $300 million will be made available to the women’s bank under the women empowerment,” said the presidential spokesman. (Reported by Jeff Kapembwa)

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