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High-Level Workshop on PPP Implementation in Energy Sector in Africa: Challenges, Best Practices, and Trends

This workshop in Addis Ababa examined Africa's energy sector, financing needs, challenges, opportunities, and the role of PPPs for infrastructure development. Key figures, financing gaps, and sector trends were analyzed. Challenges included private sector involvement, regulatory frameworks, and political stability. Opportunities for hydropower, private sector participation, and continental policies were highlighted. The conclusion emphasized the need for private sector engagement, regional integration, and political support for infrastructure development in Africa.

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High-Level Workshop on PPP Implementation in Energy Sector in Africa: Challenges, Best Practices, and Trends

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  1. High-Level Workshop on “Public-Private Partnerships’ implementation in the Energy Sector in Africa: Challenges, Best Practices and New Trends”, Addis Ababa, 30.06-01.07.2011 Addressing Africa's Energy Sector: Status Analysis and Main Challenges Callixte KAMBANDA Infrastructure Specialist

  2. Outline of the Presentation • Status Analysis: Some key figures • Status Analysis: financing needs • Main Challenges • Opportunities • Conclusions

  3. Status Analysis: Some key figures • 7% GDP growth needed to achieve the Millennium Development Goals (MDGs); • What role can play infrastructure development? • e.g., if all African countries were to catch up with the level of Mauritius, per capita growth in the region could increase by 2.2 percentage points and with Korea this would be 2.6; • Meeting Africa’s infrastructure needs calls for US$93 billion every year (about 15 percent of • the continent’s GDP).

  4. Status Analysis: financing needs (1/2) US$ billion Source: AICD, 2009

  5. Status Analysis: financing needs (2/2) • Generation capacity has been stagnant for >20 years; • The US$ 40.8 billion per year would allow to finance substantial investment and maintenance programs: • additional 7,000 MW per year of new power generation capacity; • enable regional power trade by laying 22,000 MW of regional TL; • More than five million new power connections per year.

  6. Challenges (1/3) Total ICA members Financial Support to African Infrastructure per sector (in Billions of US$). • Trend in finance for the energy sector is encouraging: US$ 12.9bn in 2010 (the upward trend started in 2008 (US$ 3.7 bn ) to 2009 (US$ 6.6 bn )); • The financing gap remains still high (AICD findings: US$ 29.2 bn required every year). Source: ICA 2010 Annual Report preliminary results

  7. Challenges (2/3) • How to involve more the private sector? • Regulatory, legal and institutional frameworks required to attract private financing; • Political stability; • Market size:53 States, from which the bulk have populations of fewer than 20 million and economies smaller than $10 billion => need for enhanced Regional Integration; • Lack of capacity to deal with PPPs (risks allocation, financial modeling, sovereign guarantees, etc.); • Implementation of PPPs at regional level; • Need to empower regional bodies to deal direct with private investors, e.g. Power Pool signing a PPA; • High level political support needed.

  8. Challenges (3/3) • Power is Africa’s largest Infrastructure Challenge: • Up to 2008, more than 30 African countries experienced power shortages and regular interruptions to service; • Overall, the economic costs of power outages can easily rise to 1–2 percent of GDP; • About 44% of financing needs are for the power sector.

  9. Opportunities (1/3) • Untapped potential Hydropower resources (only about 8% used); • RECs with their specialized institutions (Power Pools) as an institutional strength; • Observed appetite for private sector participation; • Policies: Africa is setting consensual continental priorities: PIDA (Progr. for infrastr. dev. in Africa) and Institutional Architecture for Infrastructure Development (IAIDA).

  10. Opportunities (2/3) Overall Africa’s economic growth trend is encouraging; Source: Africa Economic Outlook, 2009

  11. Opportunities (3/3) Africa is behind all other regions in developing its hydro-potential Untapped potential Hydropower resources (only about 8% used) Source: AICD, 2010

  12. CONCLUSION • Africa’s infrastructure financing needs are huge: public finance alone not sufficient; • Private sector involvement is required; • African countries need to strategize how to engage with private sector, including building required capacity and business environment; • Huge opportunities for Africans and partners in power infrastructure development; • Regional integration and more empowerment of regional power pools are key; • Overall requirement: high level political support, especially for regional programs.

  13. Thank youICA Secretariatc/o African Development BankPO Box 3231002 TUNIS BELVEDERETUNISIAwww.icafrica.org Callixte KAMBANDA Infrastructure Specialist c.kambanda@afdb.org

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