People in Zanzibar danced in the streets in June to celebrate the resumption of power after a month-long blackout caused by failure of the power lines supplying electricity from the Tanzanian mainland. While the island suffered one of the most prolonged blackouts in recent memory, its plight is not new. In April 2008, the International Monetary Fund reported that some 30 of the 48 countries in sub-Saharan Africa have suffered “acute” energy shortages in recent years.
The causes, notes Mr. Ram Babu, the chief power engineer at the African Development Bank are many, but mostly because the continent’s power infrastructure is poorly maintained, prone to collapse and is unable to keep up with surging demand brought on by the continent’s impressive economic growth. Until recently, he told Africa Renewal, governments invested little in power companies but demanded that the companies supply electricity to the public at low rates. As a result, he explains, “Many utilities are heavily in debt. They are selling power at a cost sometimes lower than that of production. They are making losses and have hardly any resources with which to maintain their current infrastructure.”
Expanding the supply of electricity is critical for Africa’s continued economic growth and a major priority of the continent’s development blueprint, the New Partnership for Africa’s Development. But the price is high: according to the International Energy Agency, Africa needs about $344 bn to create additional electricity capacity, upgrade installed equipment and extend transmission and distribution networks to households and factories across the continent.
Electricity shortages do not only affect economic productivity. They also reduce people’s quality of life. Without power, “clinics cannot deliver babies safely at night, children cannot study longer, businesses close at sunset and vaccines cannot be reliably refrigerated,” observes Vijay Modi, a researcher on alternative fuels for Africa at Columbia University in New York.
Despite African government policies that kept electricity prices low, some 550 million people, or almost 75 per cent of the population of sub-Saharan Africa, still do not have access. In 2004 in East Africa, fewer than 3 per cent of rural people and 32 per cent of urban residents were connected to their national grids. Connection rates are not much better in the rest of Africa, with only Côte d’Ivoire and Zimbabwe exceeding 70 per cent coverage.
If most governments’ polices were to keep costs down why then are connection rates so dismal? The answer, says Mr. Babu, is that governments’ efforts to expand access have relied mostly on capping the amount power utilities can charge for use. But that doesn’t help rural dwellers and other poor consumers whose homes are not yet linked to the power grid, he points out, because they face very high connection costs instead.
In cities where grids exist, the cost of a connection may start at $200. Where there is no grid, construction and connection costs can exceed $1,500. So, “poor people in rural areas are simply not connected” Mr. Babu told Africa Renewal. Businesses and the better off are often willing to pay a little more than the current rate, if that means that power companies can keep the power on, he asserted, since blackouts can cause serious financial losses. Instead of keeping electricity prices artificially low, Mr. Babu argued, governments would be better advised to use a tiered system of charges based on consumption.
“What are needed are smart subsidies, to facilitate connection to the grid and for people who use less” he argued. Most Africans, except the very poor, are able to pay for electricity, he notes, since they already pay for candles, kerosene, firewood and other sources of power. Reducing the cost of connection while ensuring that the better off pay more for use would allow more people to connect. At the same time the scheme would provide the power companies with more income to maintain their systems.
Kenya is already experimenting with such an approach. Poorer members of the community who consume less power pay a lower rate than middle-income consumers who generally use more. Industries and large businesses pay rates that rise with their level of usage – raising additional money and creating financial incentives for conservation and efficiency. In addition, the Kenyan government is allowing private companies to generate electricity and compete to sell power to the government-run transmission company. These policies have increased the power supply and ended the blackouts that were common in the late 1990s. The government has also sold shares in its transmission company and main power producer, increasing public scrutiny and pressure for better performance.
In South Africa, the government supplies free basic electricity services to the poor in selected areas. Those not connected to the electricity grid, but who use alternative fuels, such as solar power, are granted about $6 a month to help meet the costs of maintaining and operating such systems. But these subsidies do not come cheap. They cost the government nearly $78 mn a year, and some people have asked questions about whether they can continue.
However African countries decide to finance and reform their struggling power systems, Columbia University’s Mr. Modi concluded, it is important that they take action now. “It is critical that just as economic growth rates pick up in Africa, energy access and supply does not become one of the bottlenecks.”