Shocking Africa, global energy use disparities

The Africa Progress Panel (APP), chaired by the former secretary-general of the United Nations and Nobel laureate, Kofi Annan, published its annual report last week.

The Ritesh Anand Column

The Africa Progress Report 2015 is titled Power People Planet: Seizing Africa’s Energy and Climate Opportunities.

The APP consists of 10 distinguished individuals from the private and public sector who advocate equitable and sustainable development for Africa. Members of the APP include Strive Masiyiwa, Bob Geldof, Robert Rubin, former Nigerian president Olusegun Obasanjo, and CEO of Credit Suisse Tidjane Thiam.

The 2015 report focuses on power, people and the planet.

According to the report, 2015 marks a turning point for sub-Saharan Africa (SSA). The summits on sustainable development, financing and climate change are swinging the spotlight not only on Africa’s needs to accelerate development and adapt to global warming, but also onto the region’s urgent energy crisis.

Two in three Africans lack access to electricity. South Africa accounts for over 60% of SSA’s energy consumption while over 600 000 Africans are killed every year due to air pollution caused by the use of solid biomass for cooking. SSA needs to urgently address its energy needs if it is to enjoy long-term success.

This crisis is also a moment of great opportunity for Africa to seize it’s opportunity to meet the energy needs of the continent while remaining cognisant of the climate change issues. Demand for modern energy is set to surge, fuelled by economic growth, demographic change and urbanisation. As the costs of low-carbon energy fall, Africa could leapfrog into a new era of power generation. Utility reform, new technologies and new business models could be as transformative in energy as the mobile phone has been in telecommunications.

Renewable energy is at the forefront of the changes sweeping Africa, which is registering some of the most remarkable advances in solar, geothermal and wind power. With world leaders due to meet in Paris in December to settle on a new global climate change deal, Africa has a chance to show the way to a low-carbon future while putting in place policies needed to reduce its vulnerability to the effects of climate change.

Despite 15 years of sustained economic growth, power shortages, restricted access to electricity and dependence on biomass for fuel are undermining efforts to reduce poverty.

The energy gap between Africa and the rest of the world is widening. Fifteen years ago, per capita energy use in SSA was 30% of the level in South Asia, now it is just 24% and still falling.

SSA is desperately short of electricity. The region’s grid has a power generation capacity of just 90 gigawatts (GW) and half of it is located in one country, South Africa. Electricity consumption in Spain exceeds that of the whole of SSA. Excluding South Africa, consumption averages around 162 kilowatt hours (kWh) per capita per year. This compares to a global average of 7 000 kWh. It would take the average Tanzanian around eight years to consume as much electricity as an American uses in one month.

Average figures mask the extent of Africa’s energy deficit. Two in every three people — around 621 million in total — have no access to electricity. In Nigeria, an oil exporting nation, 93 million people lack electricity. Angola has five times the average income level of Bangladesh but Bangladesh has far higher levels of access to electricity (55% versus 35%).

On current trends, it will take Africa until 2080 to achieve universal access to electricity. Universal access to clean cooking facilities would occur around 100 years later, sometime after the middle of the 22nd Century.

The social, economic and human costs of Africa’s energy crisis are insufficiently recognised. Energy sector bottlenecks and power shortages cost the region 2-4% of GDP annually, undermining job creation and investment. Companies in Tanzania and Ghana are losing 15% of the value of sales as a result of power outages.

Most of Africa’s schoolchildren attend classes without access to electricity. In Burkina Faso, Cameroon, Malawi and Niger, over 80% of primary schools lack access to electricity.

Governance of power utilities is at the heart of Africa’s energy crisis. Governments often view utilities primarily as sites of political patronage and vehicles for corruption; providing affordable energy can be a distant secondary concern.

Africa’s poorest households are victims of one of the world’s greatest market failures. According to APP, 138 million households comprising people living on less than US$2,50 a day are spending US$10 billion annually on energy-related products, such as charcoal, candles, kerosene and firewood. Translated into equivalent cost terms, these households spend around US$10/kWh on lighting, which is about 20 times the amount spent by high-income households with a connection to the grid for their lighting. The average cost for electricity per kWh in the US is US$0,12 and in the United Kingdom it’s US$0,15.

What would it take to expand power generation and finance energy for all?

According to APP, current energy-sector investment levels are just US$8 billion a year, or 0,49% of GDP. This is inadequate. It is estimated that the investment financing gap for meeting demand and achieving universal access to electricity is around US$55 billion, or 3,4% of Africa’s GDP in 2013.

While this financing gap figure is large, it has to be placed in context. Energy financing is an investment with the potential to generate high social and economic returns by increasing productivity, job creation and economic growth.

Almost half of the gap could be covered by increasing SSA’s tax-to-GDP ratio by 1% of GDP. Additional revenues could be mobilised by halting the wasteful subsidies now transferred to loss-making utilities, stemming the finance lost as a result of illicit financial transfers and cautious recourse to bond markets.

Aid can play a crucial and supportive role. African governments themselves should mobilise around US$10 billion to expand on-grid and off-grid energy access. The international community should match this effort through US$10 billion in aid and concessional finance aimed at supporting investments that deliver energy access to populations that are lagging behind.

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