Banker: Investment key to end Africa energy crisis

African countries need to develop regional power grids and attract more investment to the sector if they want to avoid the power shortages plaguing the region, a senior World Bank official says.

A long-running drought, chronic under-investment, conflicts in some countries, and higher global oil prices have contributed to power outages and rationing across sub-Saharan Africa this year, forcing businesses to curtail production and factories to close.

Vijay Iyer, sector manager for the energy group in the bank’s Africa region, said the crisis could shave off 1 to 2 percent of gross domestic product growth in some countries.

“Stepping up Africa’s electricity generation and access will need quantum jumps, which requires money, capacity, and commitment from countries about being more proactive about their sectors and more bold about reforms to underpin the investment, both private and public,” Iyer said.

In a recent speech in Australia, World Bank President Paul Wolfowitz said the goal was to increase access to energy to the poor to 47 percent by 2010 from a current 23 percent.

“We need to work to meet that energy demand; we can’t run away from the problems, and the idea that we can manage their development without energy growth is simply not a possibility,” Wolfowitz said.

Developing energy projects in Africa has not only been expensive because of the difficult terrain and risky environments, but pressures from environmental groups have made the private sector more cautious about investing in power.

Congo’s Grand Inga a beacon of hope

In the Democratic Republic of the Congo, the US$40 billion Inga hydropower power project has long been a beacon of hope for improving the region’s power supplies. The project would target a capacity of 40,000 MW and link the continent’s power pools when completed. (HNN 11/17/06)

A related plan by African countries seeks to link five existing power pools on the continent into a single resource to optimize generation and distribution.

“Countries have been thinking too long about energy security within their borders, but energy security solutions lie cross-border,” Iyer said. “Therefore, regional energy planning and trade hold the key for the future.”

Part of the solution, Iyer said, is to increase financing by donor countries for energy projects in Africa. Currently, donor funding for energy in sub-Saharan Africa is about US$1.2 billion a year, of which US$600 million to US$700 million is from the World Bank.

World Bank could bring donors together

Here, Iyer said, the World Bank could play a vital role by bringing together donors to increase funding.

“Alternative and renewable energies are a good solution, but energy for all is still a big dream in Africa,” said Iyer. “If we can get to energy for half in the next 10 to 15 years, it will require a scale of energy resources and access,” he said.

Iyer said governments also need to step up their efforts to attract more investment by promoting bankable projects and showcasing them to potential private-sector investors, he said.

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