‘$1.9tr Required To Fund African Energy Infrastructure’ – Report

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‘$1.9tr Required To Fund African Energy Infrastructure’ - Report  There is a huge gap between supply and demand for electricity in Nigeria and other African countries, and also a significant funding gap, underscoring what appears to be a bleak future for African power markets.

According to the ‘Middle East and Africa Market Outlook Report’ released this week, about $1.9 trillion is needed to fund investment in African energy infrastructure between 2018 and 2040.

The report, which was exclusively obtained by The Nation, said based on financing trends, of the amount $1.6 trillion is likely to be forthcoming, leaving a gap of some $244 billion.

The Middle East and Africa Market Outlook Report highlights the power sector with a focus on developed regions, as well as emerging markets.

It explores core findings of the business opportunities, regulatory environment in the Middle East’s power market and more about the planned projects and investments in Africa’s emerging utility markets.

The report, which described Africa as a “chronically underpowered part of the world,” said across the continent, about 844 Terawatt-hour (TWh) of electricity was generated in 2020.

This was just 3.1 per cent of the global total, even though Africa is home to around a fifth of the world’s population.

It noted that more than half the total was generated in just two countries: South Africa with 240TWh and Egypt with 199TWh.

According to the report, that leaves most countries with relatively little power, particularly in sub-Saharan Africa where fewer than 47 per cent of people had access to electricity in 2019, according to the most recent data from the World Bank.

It, however, noted: “The situation is far worse in rural areas, where just 27 per cent had access, compared to 83 per cent in urban areas.”

The report also said North African markets and a few of the more developed, smaller economies are better placed, as Mauritius, Seychelles, Egypt and Tunisia had 100 per cent access to electricity, and Morocco and Algeria were not far behind.

It, however, said among the continent’s biggest economies, South Africa had 85 per cent access to electricity, while Kenya was at 70 per cent and Nigeria was at just 55 per cent.

At the bottom of the league table, according to the report, is South Sudan, with an access rate of just 6.7 per cent and Chad with 8.4 per cent.

The report noted that the shortage of electricity in many African markets provides plenty of opportunities, but they tend to be accompanied by numerous difficulties too, from political instability and other governance issues to economic ones such as unreliable access to hard currency to pay for imports of vital equipment.

“These challenges mean that private sector capital is often in short supply and, as a result, funding for power projects in Africa often relies on public sector sources,” it said.

The report said, for instance, that from 2000 to 2019, Africa received $109 billion in public commitments in the energy sector, $50 billion of which came in 2010-2019, according to the International Renewable Energy Agency (IRENA).

It added that of the total, almost $64 billion was for renewable energy projects, including large hydropower schemes.

“Most of the capital was provided by international donors, including other governments and Development Finance Institutions (DFIs), using a combination of debt and grants,” the report said.

It listed the ranks of regular supporters to include China, France, Germany and the UK; multilateral development banks are the World Bank and African Development Bank (AfDB); and DFIs such as FMO of the Netherlands and KfW of Germany.

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