Spintelligent Ltd, Absolute Power Africa, ALSTOM SA (Pty) Ltd, Bundu Power Generators, Eskom Enterprises, Gearhouse South Africa (PTy) Ltd, GroFin Capital, Lanstar, Meissner, National Electricity Regulator, NRGF Power Projects cc, Power Institute for East and Southern Africa, Renergy Technologies (Pty) Ltd, Uptime Power (Pty) Ltd, ABB Powertech – Cegelec Consortium, AES Kelvin Power (Pty) LTD., Africa Energy Policy Research Network, AGAMA Energy, Alcatel-Alsthom, Amandla Power Systems International

The development of Africa’s electrical power sector is a prerequisite for growth in other industries. A regular, consistent power supply will do much to attract foreign investment and entice international companies to establish operations in Africa. Unfortunately, a combination of droughts, wars and aging equipment has contributed to an irregular and sparse electricity supply in many African countries. Notable examples in recent years have been Nigeria and Kenya, where severe power shortages have had serious consequences for the local economies.

Africa’s power sector is dominated by South Africa in Southern Africa, Egypt and Morocco in North Africa and Nigeria in West Africa. 82 % of Africa’s power comes from the northern and southern regions alone, with three-quarters coming from five countries – Egypt, South Africa, Libya, Morocco and Algeria. Approximately 50 % of power in Africa is generated from coal based facilities, although this figure is projected to decrease to 36 % by 2020, with many of the new developments running on natural gas. Hydro electrical power is also a significant contributor, with the hydro potential of the Democratic Republic of Congo alone reported to be sufficient to provide three times as much power as Africa presently consumes. Africa’s electricity consumption is expected to grow at a rate of 3.4 % per year over the period between 1999 and 2020. Africa stands to benefit in the future from interconnection projects initiated and implemented by the New Partnership for Africa’s Development (NEPAD), an initiative that sees investment in Africa’s infrastructure as a high priority. All NEPAD power projects are aimed at boosting electrical power generation, distribution and transmission in Africa.

A look at the electrical power industry in Africa reveals a number of trends common to most African countries. Privatisation and restructuring of government-owned power companies has been a feature of almost every country’s governmental policy over the last ten years. Power shortages and irregularities have forced many countries to look to neighbours to supplement their supply, with regional networks and power pools arising as a result. Power shortages have also brought a number of new projects to the fore, with large multinational power companies establishing a growing presence, particularly as natural gas discoveries have made combined-cycle plants competitive economically.

Coupled with these issues, the inevitable environmental considerations, while at this stage not as prevalent as in Europe and North America, are becoming of increasing concern to the industry as governments bring environmental policies into line with the rest of the world. Finally, power supply in Africa brings with it issues unique to Africa and the developing world – black empowerment, electrification of rural and peri-urban areas, electricity theft and free electricity for the poor.

Regional power networks
Power sharing has become more prevalent in the African electrical power context in recent years. In line with developments in the regional economies, such as the formation of the Southern African Democratic Community (SADC) and the Economic Community of West African States (ECOWAS) , neighbouring countries have seen benefit in the sharing of electricity. This has enabled countries like South Africa, who have surplus power, to run their stations at maximum output without the risk of an oversupply of power. Conversely, countries with limited or unreliable power generation capacity now have access to power, without the intensive capital investment required to construct new facilities. Countries can purchase power in bulk enabling them to redistribute it locally at a cheap price. Another advantage that power sharing brings is flexibility – demand peaks and troughs can be better managed with the larger pool of power.

Regional networks have occurred both on an informal basis, where neighbouring countries simply agree to share, and on a more formalized basis, such as with the Southern African Power Pool (SAPP), where a number of countries have been linked and purchase power at regulated prices. Countries linked through the SAPP network are: South Africa, Mozambique, Zimbabwe, Zambia, Namibia, Botswana, the Democratic Republic of Congo, Swaziland, Tanzania, Lesotho and Malawi. Kenya and Tanzania have recently been discussing a connection to the Zambian power grid, which would bring Kenya into the SAPP.

South Africa, Ghana and Zambia are the biggest net exporters of power on the continent.

The large number of interconnection projects throughout Africa has been a boon for companies with expertise in transmission lines, power networks and cabling. Both multinationals seeking to establish themselves in Africa and ambitious local companies wanting to expand their operations into other parts of the continent have benefited from the growth in this area.

Reliability of power supply
The unpredictability of power supply in many African countries is one of the main hindrances to economic growth. The reasons for this irregularity of supply are numerous and diverse. Wars across the continent have left generation facilities damaged and transmission lines cut. Apart from the physical damage caused by sabotage and war, many governments’ budgets have been stretched to the extent that maintenance of facilities has become a low priority. In addition, many countries have been left with unreliable, aging equipment with little means of upgrading. Nigeria is a prime example, operating at approximately one-third of its installed capacity due to aging facilities.

Africa’s unpredictable weather patterns, usually seen as the scourge of the agricultural sector, have also had their effects on electricity supply. Droughts in East Africa in 1999-2000 had a serious impact on the hydroelectric facilities in the region, with Kenya in particular suffering from severe power shortages. Ghana’s hydroelectric facilities were also adversely affected by droughts during the late 1990’s. Cameroon uses 30 diesel stations as back-up power during extended droughts.

Finally, the demand for power in Africa is growing at a rate that is leaving many countries unable to keep up. Rural electrification initiatives, low electrification levels at present and high population growth rates all contribute to this high growth in demand. To meet demand new installations are required on a regular basis.

To address the issue of power supply reliability, countries have adopted a number of strategies. In some countries where the loss of power has been critical to the economy, stop-gap solutions such as diesel barges and temporary generators have been introduced. During Ghana’s droughts a 30 MW plant was installed using light fuel oil for generation. Nigeria’s energy crisis during 2000/2001 was countered by a number of emergency measures introduced by President Obasanjo to ensure that a stable supply of power was available by the end of 2001.

Many African governments are starting to view hydroelectric power with skepticism and are viewing a move away from hydro power dependency as the best long term solution to reliability problems. Other countries are reviewing hydroelectric facilities, increasing dam storage capacities to allow for fluctuations in water supply.

Power sharing with neighbouring countries through regional networks has also been viewed as a medium-term strategy. Lean times as a result of droughts or maintenance down time can be covered by purchasing power from the regional grid. The ultimate long-term solution remains, however, the installation of new facilities. The large number of new projects in recent years bears testimony to the fact that for some countries this is the only viable solution that will meet future power needs.

Rural electrification
Electrification levels in Africa are low, especially when compared with Europe and North America. South Africa and Eqypt have the continent’s highest electrification levels at approximately 70 %, while the average for the SADC region is only 20 %. This picture is changing, however, as African governments are starting to realize the importance of electrification for the well-being of the local economy. A number of countries have committed themselves to electrification goals for the short to medium term.

Ghana, Senegal, Burkina Faso and Cote d’Ivoire in West Africa have all recently announced rural electrification programmes. Burkina Faso aims to have completed electrification of about one-seventh of the country’s 350 communities by 2010. Cote d’Ivoire estimates that new generation facilities will allow 200 villages to be electrified each year. Ghana’s National Electrification Scheme will bring electricity to all communities of 500 people or more by 2020. A similar plan in Senegal will bring power to 150 rural towns, meaning all villages of 3000 people or more will be electrified by 2004.

Approximately 18 % of Zambia’s population have access to electricity at present, while the government’s Rural Electrification Program aims to bring this figure to 50 % before 2004. Namibia hopes to improve social conditions by bringing electrification to 250 000 households by 2010. Zimbabwe has extensive plans to use solar power to provide lighting in rural homes and power for small and medium rural industries.

Rural electrification has raised a number of issues for power companies and the African governments they service. Many of the rural communities to be electrified are situated in such remote locations that to connect them to the national grid is costly and often impractical. Alternatives include wind power, solar power and small diesel or petrol generators. Developments in solar and wind power technology are making these forms of generation more and more attractive, particularly in the rural African context. South Africa, Egypt, Ghana and Uganda are some of the countries reviewing photovoltaic electricity systems for installation in rural areas. Kenya has the highest use of photovoltaic systems in the world, with nearly 20 000 units sold annually.

Governments in Africa are beginning to view provision of electricity as part of their responsibility alongside basic services such as sanitation and clean water. In South Africa, the government has introduced a policy of free electricity up to a certain number of units, designed to make electricity affordable for all.

The large number of electrification projects on the go makes Africa a continent of opportunity for companies in the business of distribution and transmission of electricity, suppliers of cable, experts in the field of solar and wind power and construction and engineering service providers.

Privatisation and restructuring of the industry
Restructuring of national utilities has been a worldwide trend in recent years, with privatization of state organizations aimed at bringing greater efficiency to the industry. In Africa, almost without exception, governments have reviewed policy to allow private players into the industry. In some cases the motivation for privatization has been strengthened by World Bank recommendations to do so. Typically, Independent Power Producers (IPP’s) are introduced as generators of electricity who then sell power to the state. Also common are Build-Own-Operate-Transfer (BOOT) and Build-Operate-Transfer (BOT) schemes and large multinationals such as Electricite de France (EdF), US-based AES Corporation and Germany’s Siemens have established themselves in countries based on their experience in these kind of projects.

A number of key players in the African electrical power industry have been privatized recently. Senegal’s Societe Nationale d’Electricite (SENELEC) was partially privatized in 1999. Energie du Mali was privatized towards the end of 2000, with Saur International (65 %) of France and IPS (35 %), a member of the Aga Khan fund for Economic development both claiming stakes in the unbundling. Egypt plans to separate its generation, transmission and distribution activities, with the distribution companies to be privatized eventually. Nigeria’s National Electric Power Authority (NEPA) has also been earmarked for privatization, with the company to be split into 30 separate units to make it more attractive for investors.

AES Corporation purchased 56 % of Cameroon’s state utility, SONEL, for US$70 million in July 2001. The remaining 44 % will stay under the control of the state. SONEL is one of Africa’s larger power producers, with an installed capacity of 800 MW. Mauritania’s state power and water company has been split in two to facilitate the privatization of the country’s power industry. The Ugandan Privatisation Unit has invited tenders for two state owned companies, the Uganda Electricity Distribution Company and the Uganda Electricity Generation Company.

The South African Government plans to restructure Eskom in order to improve efficiency and accountability within the company. Most of Eskom’s activities, with the exception of power transmission, will eventually be privatised. Eskom Enterprises, a wholly owned subsidiary of Eskom, was established in 2000 to develop and commercialise Eskom’s non-regulated activities and aims to become a leading player in the African electrical power industry. The first privately owned facility is expected to be constructed before 2010.

Shaun Bakamoso

Greetings. I'm Shaun Bakamoso, and I'm thrilled to be your guide through the dynamic world of business news in South Africa here at With a passion for staying informed and a keen interest in the ever-evolving landscape of business, I've dedicated myself to providing you with timely, insightful, and comprehensive coverage of the latest developments impacting the South African economy. / Instagram