Economic growth in Africa depends on increased access to electricity, but structural barriers often deter private investors according to analysts speaking at a meeting in Amsterdam.
According to the vice president of Shell International Gas, Africa makes up 12 per cent of the world population, but only uses 3 per cent of the commercial energy. The potential for growth is very significant, he observed, but regulations and political instability often deter investment in African utilities.
From a private sector perspective, a key factor is the reform of legal and financial frameworks for the electricity sector and liberalization of markets. This is necessary to establish long-term investor confidence, Graham Ward of Price Waterhouse Coopers said.
The European Investment Bank, which has first hand experience of the region, has found tariff levels can be a problem. It has invested in 40 power projects in Africa, with mixed success. In some cases it has run into difficulty trying to secure adequate prices for power.
The chief problem area is tariffs, according to Justin Loasby, head of the bank’s Southern African and Indian Ocean division. Tariffs are never high enough, he said. This is the one area that governments should look closely at getting right.
