This is a meeting memo from the Africa All Party Parliamentray Group. A full audio recording of the event together with slides from the panel presentations is available here.
Photograph: Sameer Halai/SunFunder/Gigawatt Global
There is growing commitment among African countries and institutions to pursue inclusive green development. The African Union and UN Economic Commission for Africa are increasingly calling for green solutions for Africa’s energy deficit with ambitions to learn from history and experiences of other regions to leapfrog traditional, carbon-intensive methods of growth. African Development Week has just concluded in Addis and saw the launch of the latest Economic Report on Africa- Greening Africa's Industrialisation. The report argues that the economic and environmental benefits stemming from greening Africa's industrialisation make the environmental approach the only viable option for the continent's continued development.
Further, Goal 7 of the UN’s Sustainable Development Goals is to ensure ‘access to affordable, reliable, sustainable and modern energy for all’ by 2030 which compliments the African Union’s Agenda 2063 for Africa to be ‘recognized globally as a continent respectful of its environment, ecologically conscious based on sustainable development and renewable energy’. However, Dr Lopes of UNECA has calculated that investments of the order of 70 billion US dollars would be needed for Africa to add the needed 300 gigawatts of electricity capacity from renewable sources in Africa by 2030. He recognised that in addition to increased revenue collection, these investments need to be mobilised from the private sector - domestically and through FDI.
On the 22nd March the Africa APPG with support from the Emerging Africa Infrastructure Fund and AFFORD-UK hosted a panel event which aimed to explore the opportunities and challenges in mobilising private sector capital for sustainable and accessible energy infrastructure in Africa and the best policy approaches to support African led renewable energy initiatives. Members of the panel included Edward George, from Ecobank, Julia Prescott from EAIF and David Kennedy, Director General for Economic Development, DFID .
Introducing the session, the chair of the APPGA and Labour MP, Chi Onwurah MP, said,
“Sustainable and accessible energy infrastructure in Sub-Saharan Africa is incredibly important and needs to be at the top of the agenda.
“The APPGA exists to promote meaningful and positive relationships between Africa and the UK. It is in the interests of both the UK and African nations to work together to support Africa’s economic development. This session will contribute to spreading knowledge of the many initiatives already in place and informing policy development.”
Edward George of EcoBank spoke first and set out the challenge of meeting need and demand for electricity in Sub-Saharan Africa, saying that African demand for electricity is continuously growing. He said the gap between what exists now and what is needed is enormous and explained that Nigeria has a generating capacity similar to that of London, but Nigeria has a population 20 times bigger.
“The gap between what exists now and what is needed is absolutely enormous. 40% of Africans have no access to power and in some individual countries the figure is much higher.”
Mr George saw micro-generation schemes, such as M-KOPA, as an increasingly viable, practical and affordable way of powering homes and small businesses in areas remote from mainstream electricity generation and distribution facilities.
He went on to say that in many parts of Africa electricity distribution networks were often hundreds of miles from remote rural areas and that is no realistic prospect of these places being connected to national grids.
“For the many thousands of settlements in deeply remote rural Africa a big part of the answer is micro-generation. There is technology now in operation in over 100,000 homes in rural Africa that combines small scale solar generation for cooking and lighting with energy for mobile phones. Mobile phones give access to payment and other financial services and improve access to markets in areas like farm and forest products, tourism and craft production.”
Julia Prescott of The Emerging Africa Infrastructure Fund (EAIF) spoke second and drew attention to the 15 new sustainable energy projects across nine African countries in EAIF’s new business pipeline. If they all reach financial close, they will provide a total of 665 megawatts of electricity.
EAIF is a member of the Private Infrastructure Development Group. The Fund is a public-private partnership supported by the governments of the UK, The Netherlands, Sweden and Switzerland, private sector banks and development finance organisations.
Julia Prescot said that EAIF is already a leading provider of debt funding to the sustainable energy sector in Sub-Saharan Africa.
“These new projects have the potential to significantly widen access to sustainable electricity, help stimulate economies and make public services like education and health more productive. They are prime examples of how EAIF contributes to mobilising private sector capital and enterprise to bring a wide range of benefits to people and economies.”
Finally, the meeting heard from David Kennedy who explained that DFID’s prime aim is to contribute to alleviating poverty through the structural transformation of economies. He said people cannot be brought out of poverty without economic development. Lack of energy capacity is the single biggest constraint to economic growth.
Mr Kennedy focussed on DFID’s role in the energy sector and emphasised the importance of encouraging legal and regulatory structures in Sub-Saharan countries that enable investment and improve the ability of energy markets to work effectively, competitively and efficiently.
Following panel presentations, the panel opened up for a question & answer session with an audience made up of parliamentarians including Amanda Holloway MP & Lord Steel, African diplomats, and representatives from the private, NGO and academic sectors.
A representative from CAFOD highlighted the importance of focusing on local business enterprises and civil societies to achieve sustainable energy goals and not just large scale corporations and solutions. Mr Kennedy responded that there is no prejudice over what scale projects gets DfID capital but reiterated that large scale infrastructure is important but it is not an either/or situation. Edward George agreed that off grid and small scale is important but argued that the private sector should be directly behind this. Julia Prescott conceded that medium sized projects make a real difference in countries because they are easier than large scale projects to implement and added that if EAIF could aggregate smaller projects, then EAIF would be very interested in supporting medium scale projects.
Another issue raised was who is collecting data on which people and organisations are benefitting from FDI investments in sustainable energy infrastructure. EAIF and DFID responded that they were collecting data from their projects to ensure “companies are hitting the mark”.
Onyekachi Wambu from AFFORD who stepped into the Chair for Chi Onwurah during votes, asked what support there was from DFID and EAIF to support local content requirements in models where infrastructure is being scaled up. He also asked whether there was a danger that if local content requirement was prioritised by African Governments it would discourage private investment.
Julia Prescott from EAIF replied that they were always looking for the most efficient cost which would also encourage competition and therefore lower local prices as a whole. She added that it does not make sense to import large amounts of infrastructure but conversely there are rarely local providers of the equipment needed. She concluded that it was difficult to prioritise local content requirements as there is the risk of not getting the lowest cost output.
David Kennedy added that in all foreign direct investment (FDI) programmes it is important to explore the possibilities of getting local supply chains operating as opposed to importing everything. He questioned whether there should be targets for local content requirements and echoed Julia in difficulties of a trade-off between cheapest costs and local content. He said local markets are often very thin and DFID wants to enhance the capabilities of the local supply base to make the connections so that it makes sense for FDIs to use local partners rather than importing materials. Edward George added that in addition to manufacturing capabilities it’s about know-how and training local people to run programmes themselves.
This memo has been adapted and expanded from the original event press release prepared by Martin Roche communications adviser to EAIF. See here.
For more information, please contact Hetty Bailey at the Africa APPG on firstname.lastname@example.org