Bank director: Africa needs private sector power investment

World Bank Managing Director Juan Jose Daboub completed nearly a two-week tour of Africa finding enormous pent-up demand for power sector investment.

Visiting seven African countries from October 26-November 8, Daboub found, starting in the 1990s, investment in Africa deteriorated, few new assets were added, and needed sector reforms repeatedly were postponed. The World Bank said private sector investment has failed to fill the gap in an environment of global insecurity, corporate scandals, and poor investment returns.

The World Bank said Daboub toured Uganda’s largest hydropower plant (180-MW Nalubale) with Minister for Energy and Mineral Development Dandi Migereko. Daboub urged the government to work more closely with the private sector to identify lasting solutions to Uganda’s power shortages.

�We are helping Uganda to add 50 MW, in addition to the recently installed 100 MW of emergency thermal power to respond to the current crisis, and also to fast-track the construction of a 250-MW hydropower plant at Bujagali Falls to bring costs down,� Daboub said. (HNN 10/10/06) �But the best long-term solution will require significantly expanded private sector investment in building more capacity.�

IDA aims to leverage private sector investment

The World Bank’s International Development Association (IDA) has more than doubled financing for energy projects in the last five years, aiming to leverage private sector resources to the greatest extent possible. The bank said it also has recognized that hydropower projects bring special challenges, including long gestation periods, high development costs, and intense public scrutiny.

The World Bank group also is helping support regional energy interconnections and power pools so that energy-poor countries can import electricity from energy-rich neighbors for much lower prices per kilowatt-hour.

In Senegal, another stop on Daboub’s tour, IDA is helping to address power shortages through projects supporting the extension of electrical services to the rural areas through private concessionaires as well as the development of new generation capacity. Daboub noted more needs to be done, particularly to implement long-overdue reforms.

�Senegal needs to allow private power generators to enter the market, and to ensure sustainability, it needs to reform the power utility, reduce budget transfers into the sector, and bring tariffs to cost-recovery levels,� Daboub said. �The most expensive power is the power that you don’t have.�

The bank’s recently completed Investment Framework for Clean Energy and Development predicts that Africa will need to invest US$4 billion per year to bring power access rates up from 24 percent today to 35 percent by 2015 and 47 percent by 2030.

The bank said private sector interest in power is reviving, and the bank is working with its International Finance Corp. and Multilateral Investment Guarantee Agency to negotiate risk-sharing terms that will elicit private interest as well as to seek private sector participation in the sector, including leases, management contracts, or concessions when full privatization is not possible.

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