The possibility of load shedding by Eskom in South Africa this winter is larger than the Day Zero water crisis that engulfed Cape Town until last month, independent energy expert Ted Blom told Fin24 on Wednesday.
Eskom, however, told Parliament in April that South Africa’s electricity grid is “stable” as the country heads into the winter months when electricity usage rises.
Eskom told Fin24 on Wednesday that load shedding this winter is not likely, as it implemented plans to manage a shift in plant performance and coal-stock levels.
Blom, however, said Cape Town’s Day Zero was avoided by people starting to save water ahead of time. Eskom, on the other hand, only sent out tenders for emergency coal supplies last week after permission was obtained from National Treasury.
Although Eskom’s new board is trying to follow compliance in the process, Blom claims the power utility’s management should have foreseen six months ago already that there would be a problem with enough coal supplies for the winter electricity spike.
Apart from his own knowledge of the industry, said Blom, his claims are substantiated by reliable sources at Eskom.
“Chances are more than 50% that there will be load shedding this winter. Where is Eskom going to find coal? Coal does not just fall out of heaven. You have to mine it. You need skilled miners and equipment for that,” he said.
He suspects Eskom has a coal shortfall of about a million tonnes per month and is of the view that, even when all is in place to obtain more coal supplies, it will take three to five months to catch up on the backlog – in other words, during the winter period.
Eskom issued a statement in April indicating that seven of its power stations’ coal stockpile levels stood at 20 days, below the required target.
Eskom told Parliament’s portfolio committee on public enterprises that the coal supply issues are made worse by the fact that Tegeta is in business rescue.
It also told Parliament in April that it has plans in place to manage its primary energy resources and achieve healthy stockpiles across its power stations.
“Eskom has already admitted that it is between 3 and 5 million tonnes of coal short. That is more than half of its stockpiles,” said Blom.
“Eskom’s board now consists of a lovely bunch of new guys, but they don’t know anything about the electricity industry. At least half of Eskom’s board should consist of people with knowledge of electricity generation and coal mining.
“Electricity is crucial for South Africa’s economy and diesel has already been used for generation since January at a rate of more than R1bn per month.”
In Blom’s view, South Africa’s energy sector needs a major revamp in which regulation loopholes are closed.
“If Cyril (Ramaphosa) is serious, he should upgrade energy generation regulations and avoid rogue behaviour in the industry,” said Blom.
In his view, energy needs to be declared a basic industrial input factor and every measure taken to keep it as cheap as possible.
“Sensible energy policy is probably the most relevant topic in Africa at this time, and the South African policy is clearly not the one to emulate. We need to start our thinking from the ground up, rather than continue with the patchwork efforts of the past. Without affordable cheap energy, economic growth is not possible,” he cautioned.
Blom will be a speaker at the upcoming African Utility Week taking place in Cape Town from May 15 to 17, during which over 7 000 decision makers from more than 80 countries will discuss energy and water issues faced on the continent.
Fin24 reported last week that Eskom said it is not bailing out Gupta-linked Optimum Coal Mine, which is in business rescue. This was in response to a report by City Press, claiming the proposed business rescue plan for Optimum would see Eskom pay twice as much for half the coal it can get from the mine.
Eskom has said it is in discussions with the mine’s business rescue practitioners and no agreement has been reached.
The Nordic countries Denmark, Finland, Norway and Sweden hosted the Nordic Energy Days conference from September 13 through 14 at The Innovation Hub in Pretoria. The countries have over the last 10 years collaborated amongst themselves to develop an innovative energy mix focused on effective system integration, grid stability and sustainable energy solutions.
The Nordic countries outlined their experience and the function of their energy mix, with Finland’s Deputy Minister of Economic Affairs and Employment Petri Peltonen stating:
“We have very advanced electricity and energy systems and our grids have been connected for decades. The Nord Pool has now been in operation since the 1990s and it is the world’s largest exchange for electricity …. We are trying to increase the share and production of renewable energy from various sources, Finland being focused on bio-based sources and our colleagues in hydro, wind and others …. The South African government objectives are also ambitious regarding renewable energy in particular and I think our mission is really to first of all open up our experiences, lessons learned, the positive and at the same time also connect the best of our resources, companies, agencies, research organisations with our South African counterparts during the Nordic Energy Days.”
Ambassador of Sweden to South Africa Cecilia Julin added:
“The Nordic cooperation is really strong and I think that’s what we want to share with South Africa as well … because we get inspired by SADC to show possibilities to work in the Southern African Power Pool. We can share experiences from Nord Pool and how we can work together.”
Day one of the conference was focused on opportunities for the Southern African Power Pool (SAPP) teaming up with the Nordic countries. Norwegian Deputy Minister Ingvil Smines Tybring-Gjedde stated that embracing the diversification of energy sources will minimise the effects of global warming, whilst significantly enhancing the share of energy between countries within the SADC region as it has done for the Nordic countries.
The Nordic countries have shown a particular interest in working with the region by assisting in the facilitation of cross-border cooperation. The countries also indicated a desired involvement in ensuring energy security in Europe by developing a prolonged relationship with the African continent.
Special energy adviser to the South African presidency Silas Zimu said on this point:
“Let us learn from what the Nordic countries have done …. Public companies need to put measures into place.”
The second day of the conference highlighted the technical side of the energy sector focused on clean technology and grid technology. In a session on clean technology, DNV GL Africa’s business manager Robert O’Keefe talked on the decarbonisation of the energy system within the next 30 years due to increased efficiency in energy generation leading to a significant decrease in the overall demand of energy. He went on to state that the global use of fossil fuels to generate energy would decrease from 81% to 50% by 2050, which can be troubling for Southern Africa as a region profoundly endowed with coal as a source for power generation.
To effectively support the integration of clean energy into the SAPP it is vital for the region to develop a stable grid. Stig Uffe-Pederson, Deputy Director General of the Danish Energy Agency, highlighted the importance of these technologies, mentioning:
“This is also a story about making a green transition. This is about investing and setting long-term political projections and a stable framework that allows this transition. In that way, you are actually able to sustain economic growth while you reduce your energy emissions and while you also reduce your energy consumption.”
The challenges in the power sector in Nigeria grew with time in the face of weak infrastructure, vandalism, electrical accidents with several electrocutions, and poor service. For the purpose of implementing a strategy to reduce fatality and injury rates in the power sector, as it impacts on service delivery, health and safety of utility workers and the general public, the Nigerian Electricity Regulatory Commission (NERC) put in place the Nigerian Electricity Health and Safety Code Version 1.0, released in 2014. This practical document formulated with best industry practices to achieve the standards of health and safety as required under Part III Sections 32 (1)(e) and 32(2)(b) of the EPSR Act 2005.
Despite this code and other applicable safety guidelines, such as the Nigerian Electricity Supply and Installation Standards Regulations 2015, the level of electrical accidents, the fatality and injury rates, are still on the increase.
Electrical accident especially when it involves people, both utility workers and the public as well the environment, usually leads to huge expenditure, which has a deep effect on the triple bottom line (Profits, People and Planet) of business sustainability. Hence, managing the health, safety and environmental risks prevents losses and reduces attendant accident costs including compensation, medical expenses, regulatory penalties and fines, reputational damage, operational losses and legal consequences.
The duty of business is survival
According to Peter F. Drucker, an Austrian-born American management consultant, educator and author, whose writings contributed to the philosophical and practical foundations of the modern business corporation, avoidance of loss is paramount to business success. Drucker states: “The first duty of business is survival, and the guiding principle of business economics is avoidance of loss – not maximisation of profit.” Hence, avoiding losses – including those that occur as a result of our failure to integrate appropriate safety risk assessment into the power industry in Nigeria and the entire global village – will eventually promote and sustain the profitability and health of the players in the industry.
Be that as it may, in order to prevent accidents, and increase the bottom line of players in the industry, three critical safety factors (unsafe behaviours of the utility workers, poor public perception of safety and unsafe network conditions in terms of the electrical infrastructure) have been identified to have contributed to over 90% of accidents that have led to injuries and fatalities in both the utility workers and the public in Nigeria. Therefore, to avoid losses and improve performance, operational excellence and profitability, risk management programmes must focus on these three critical elements.
In terms of the unsafe behaviour of the utility workers, the players in the industry – especially in the distribution, transmission and generation companies – should embark on strategies that will enhance attitudinal change of the workers so that the safety culture is improved and sustained. Examples of such strategies include behavioural-based safety programmes, reward system and consequence management, safety counselling sessions, strategic safety meetings like toolbox talks, safety huddles and contractors’ safety engagements, safety learning sessions, and field safety monitoring and compliance activities.
Safety awareness programmes
The illegal construction of homes under power lines, trading near electrical equipment, working illegally with electricity assets (without permission from the distribution companies, wiring houses in the wrong manner) are among the poor public safety habits. Yes, attitude plays a role here but lack of safety awareness and government intervention with respect to enforcement of laws plays a major role. In order to overcome these challenges, the players in the industry should organise public sensitisation programmes using the media including print, electronic and wordofmouth. They can also engage in safety discourse in the communities, organise awareness on power safety in schools as a corporate social responsibility initiative, paste safety warnings/caution signages, and work with government to prevent encroachment on power lines as stipulated in the Nigerian Electricity Supply and Installation Standards (NESIS) Regulations 2015 Vol. 1 (chapter 3 Section 3.1).
Furthermore, unsafe network conditions like failure of the relay system, use of undersized conductors, poorly maintained electrical equipment and bent poles usually lead to accidents. Therefore, to prevent any untoward incident in the industry, there is an urgent need to carry out network technical audits, so as to identify unsafe network conditions and implement corrective actions. Meanwhile, the distribution and transmission companies should carry out quick-win programmes such as network safety monitoring and periodic facility safety assessment (FSA) to identify unsafe network conditions and fix immediately.
In conclusion, it is pertinent to be cognisant that a robust safety risk management programme, that will enhance operational excellence and profitability, requires commitment from the top management of every facet of leadership from both the corporate organisation and government. Hence, no matter how laudable the programme is, its workability and sustainability is dependent on the leaders in the industry. ESI.
Old Mutual was recently awarded a five-star Green Star SA Existing Building Performance rating for its Mutualpark offices in Pinelands, Cape Town. This rating by the Green Building Council South Africa (GBCSA) is said to make it the largest existing building to achieve this rating in the southern hemisphere.
Old Mutual also unveiled its Mutualpark solar installation, which is claimed the largest corporate solar carport in South Africa. It consists of 3,600 solar panels over about 14,500m2. With output just over 1MWp (mega watt peak) and covering 565 carports, the solar photovoltaic system will produce enough electricity to cut up to 8% of Mutualpark’s consumption. This equates to one free month of Mutualpark’s electricity per year or about R4.5m per year.
Finding solutions to the challenges of our time
Speaking at the handover of the Green Star SA certification and the official opening of the Mutualpark solar project, Rose Keanly, COO of Old Mutual Emerging Markets, said that the certification and solar installation underscore Old Mutual’s commitment to making a positive impact on broader socio-economic and environmental issues in the country. It proves that big corporates are able to make a meaningful difference by being resourceful and thinking creatively to find solutions for the challenges of our time.
“Given rising electricity tariffs and the current constraints on South Africa’s electricity supply, energy efficiency is critical to economic growth and stability. Responsible environmental management is one of the five pillars that define our responsible business approach. As Mutualpark is home to 7,000 employees, the building is one of the largest consumers of electricity in the Western Cape and this project now enables us to free up a significant amount of electricity on the City of Cape Town grid.”
True green building
Brian Wilkinson, CEO of the GBCSA, said that Mutualpark represents what a true green building should aspire to be – energy efficient, resource efficient and environmentally responsible. “A five-star Green Star SA performance certification in a complex of this size is truly remarkable. What is even more remarkable is that some of the buildings at Mutualpark date back to 1954, debunking the myth that green building performance is only possible in new buildings. This is, by far, the largest green building in South Africa and it is fitting that Old Mutual, who we all know as ‘the big green’, has demonstrated its leadership by achieving this certification.”
The GBCSA’s Green Star SA certification system regards five stars as “South African Excellence” and for Old Mutual to demonstrate its commitment to environmental responsibility in such a significant way shows true leadership, he said. “Old Mutual now joins the league of what we like to call Planet Shapers, demonstrating to all stakeholders that operating premises in an environmentally responsible way is both achievable and makes business sense – doing well by doing good,” said Wilkinson.
Group Climate Change Strategy
In addition to its Green Star SA rating achievement, Mutualpark was also commended by the City of Cape Town at the recent 2016 Energy Efficiency Forum Awards for its efforts to reduce energy consumption.
Keanly said Old Mutual will continue to monitor, manage and reduce its direct and indirect environmental impact. “This is in line with our Group Climate Change Strategy, which aims to improve the completeness and accuracy of our emissions data.”
She added that in Johannesburg construction is on track to complete Old Mutual’s new 12-storey 30,000m² head office in Sandton by end 2017. The new building will also target a five-star Green Star SA rating from the GBCSA for office design.
Keanly concluded that Old Mutual will continue to seek ways to become progressively more resource efficient while supporting a healthier local environment for people to live and work in.
Six hundred “green mosques” are to be created in Morocco by March 2019 in a national consciousness-raising initiative that aims to speed the country’s journey to clean energy.
If all goes to plan, the green revamp will see LED lighting, solar thermal water heaters and photovoltaic systems installed in 100 mosques by the end of this year.
Morocco’s ministry of Islamic affairs is underwriting the innovative scheme, paying up to 70% of the initial investment costs in a partnership with the German government.
Jan-Christophe Kuntze, the project’s chief, said: “We want to raise awareness and mosques are important centres of social life in Morocco. They are a place where people exchange views about all kinds of issues including, hopefully, why renewables and energy efficiency might be a good idea.”
Morocco has established itself as a regional climate leader with high-profile projects, ranging from the largest windfarm in Africa to an enormous solar power plant in the Sahara desert, which opened earlier this year.
In November, Marrakech will host the COP22 climate summit to discuss preparations for implementing the Paris climate agreement.
The country’s environment minister, Hakima el-Haité, told the Guardian that religion could make a powerful contribution to the clean energy debate, shortly before an Islamic declaration on climate change last year.
“It is very important for Muslim countries to come back to their traditions and remind people that we are miniscule as humans before the importance of the earth,” she said. “We need to protect it, and to save humankind in the process.”
The new green mosques project plans to do this with established technologies that can be adapted to public buildings and residential homes. By training electricians, technicians and auditors, it hopes to direct Morocco’s clean energy along the path followed by German’s Energiewende, (energy transition).
But Kuntze stressed that Germany was offering technological support, rather than financial opportunities for its own industries.
“We are not representing any German business interests at all,” he said. “The good thing about this project is that the Moroccan government came up with the idea themselves. It is something new and really innovative and it has not been tried anywhere else before, to my knowledge.”
The initiative has broken new ground for gender equality in Morocco too. Many mourchidates (female clerics) have been involved in the project, as well as imams, and about a quarter of the participants in recent seminars have been women, Kuntze said.
Under the project’s energy service contract model, contractors will eventually be paid by the energy savings generated from the clean power systems they install. As the renovations should cut the mosques’ electricity usage by 40%, these should be substantial.
The first 100 mosques to get a green makeover are mostly based in big population centres – such as Rabat, Fez, Marrakech and Casablanca – but the project will quickly move on to smaller villages and towns. With 15,000 mosques dotted around the north African country, the idea’s growth potential is clear.
The objective was to kickstart a renovations industry for sustainable companies that could employ many Moroccans in the clean energy sector, Kuntze said.
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In East Africa, the Rwanda Green Fund, which is best known in the country as FONERWA, has opened the next round for submission of proposals from all leading organisations in the country to express their interest in obtaining funds.
The invitation is open to ministries, government agencies, districts, private sector companies, academic institutions and civil society organisations to submit funding proposals for initiatives that promote the mainstreaming of environmental protection, climate change and green growth into Rwanda’s economic development programmes.
Rwanda Green Fund – primary focus
It is reported that for this intake around, the Rwanda Green Fund is aiming at projects and programmes developed primarily in line with sectors of Rwanda’s economy, including energy, agriculture, transportation, environment, urban and rural settlement, water and sanitation.
According to local media, the fund requests applicants to demonstrate in their proposals according to the various sectors –wide green and climate resilient initiatives that will improve the performance and sustainability in implementing sector programmes.
To understand the requirements, applicants are encouraged to get more information from the Programmes of Action outlined in Rwanda’s Green Growth Climate Resilience Strategy.
Alex Mulisa, coordinator of the Green Fund explained that: “Climate mainstreaming is about ensuring the environment and climate change are at the core of our development plans, policies and strategies. We want to invest in initiatives that bring all stakeholders to the table to incorporate
Mulisa continued: “By bringing everyone on board, we know the return on investment for Rwanda’s socio-economic development and natural environment will be immense.”
In terms of the energy sector, the procurement of this funding would mean that the sector will be on its way to achieving the target of 70% electricity access to the population by 2018. In 2015 the percentage stood at 23% access rate.
Last month, Jean-Bosco Mugiraneza , the chief executive of Rwanda Energy Group stated that to achieve the set target government is working on both on-grid and off-grid solutions to achieve the target. This will be divided into 48% on-grid and 22% off-grid.
South Africans are increasingly opting for green property solutions in both their residential and commercial investments. This is excellent news for property values in the future, and is increasingly setting the standard for planning and construction.
According to a recent study of industry stakeholders by US-based construction think-tank Dodge Data and Analytics, “green building” – that is, designing buildings to limit their environmental impact – is making strong headway in South Africa. It estimated that around 41% of the country’s construction activity in 2015 was green. This was the highest of the 13 countries surveyed.
The countries surveyed include both mature markets for green solutions (such as Germany and the UK), and emerging markets (such as India and Colombia). The average level of green construction activity across all 13 was 24%.
Moreover, South African firms report high expectations of green work in future. Some 61% expect green building to account for more than 60% of their operations by 2018.
Green buildings are rapidly becoming the big story of the real estate industry.
Green buildings make sense
Conventional buildings make a significant contribution to greenhouse gas emissions, and consume large volumes of water.
From the perspective of environmental protection, green buildings make sense. It’s particularly encouraging to note that the Dodge study found that going green in South Africa was driven by a sense of it being ‘the right thing to do’, and by the requirements of clients. This shows that environmental concerns are increasingly integrated into the property market.
For South African property owners, the experience of power outages and escalating electricity tariffs make green solutions such as solar power a practical consideration.
Although greening a building – whether building new or retrofitting – can be expensive, the savings in future operational costs invariably make the initial investment worthwhile.
Green buildings are about comfortable and productive living that takes into account the realities of our environmental stresses. They are also an excellent investment: green features can add to the value of a property and make it vastly more attractive to buyers. And they are also the future: what is considered distinctly green today, will be standard in years to come.
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– It’s just after two p.m. on a sunny Saturday and 51-year-old Moses Kasoka is seated outside the grass-thatched hut which serves both as his kitchen and bedroom.
Physically challenged since birth, Kasoka has but one option for survival—begging. But he thinks life would have been different had he been connected to electricity. “I know what electricity can do, especially for people in my condition,” he says.
“With power, I would have been rearing poultry for income generation,” says Kasoka, who is among the estimated 645 million Africans lacking access to electricity, hindering their economic potential.
“As you can see, I sleep beside an open fire every night, which serves for both lighting and additional warmth in the night,” adds Kasoka, inviting this reporter into his humble home.
But while Kasoka remains in wishful mode, a kilometer away is Phinelia Hamangaba, manager at Pemba District Dairy milk collection centre, who is now accustomed to having an alternative plan in case of power interruptions, as the cooperative does not have a stand-by generator.
Phinelia has daily responsibility for ensuring that 1,060 litres of milk supplied by over a hundred farmers does not ferment before it is collected by Parmalat Zambia, with which they have a contract.
“Electricity is our major challenge, but in most cases, we get prior information of an impending power interruption, so we prepare,” says the young entrepreneur. “But when we have the worst case scenario, farmers understand that in business, there is profit and loss,” she explains, adding that they are called to collect back their fermented milk.
The cooperative is just one of several small-scale industries struggling with country-wide power rationing. Due to poor rainfall in the past two seasons, there has not been enough water for maximum generation at the country’s main hydropower plants.
According to the latest Economist Intelligence Unit report, Zambia’s power deficit might take years to correct, especially at the 1,080MW Kariba North Bank power plant where power stations on both the Zambian and Zimbabwean side of the Zambezi River are believed to have consumed far more than their allotted water over the course of 2015 and into early 2016.
The report highlights that in February, the reservoir at Kariba Dam fell to only 1.5 meters above the level that would necessitate a full shutdown of the plant. Although seasonal rains have slightly replenished the reservoir, it remained only 17 percent full as of late March, compared to 49 percent last year. And refilling the lake requires a series of healthy rainy seasons coupled with a moderation of output from the power plant—neither of which are a certainty.
This scenario is just but one example of Africa’s energy and climate change nexus, highlighting how poor energy access hinders economic progress, both at individual and societal levels.
And as the most vulnerable to climate change vagaries, but also in need of energy to support the economic ambitions of its poverty-stricken people, Africa’s temptation to take an easy route through carbon-intensive energy systems is high.
“We are tired of poverty and lack of access to energy, so we need to deal with both of them at the same time, and to specifically deal with poverty, we need energy to power industries,” remarked Rwandan President Paul Kagame at the 2016 African Development Bank Annual meetings in Lusaka, adding that renewables can only meet part of the need.
But former United Nations Secretary General Kofi Annan believes Africa can develop using a different route. “African nations do not have to lock into developing high-carbon old technologies; we can expand our power generation and achieve universal access to energy by leapfrogging into new technologies that are transforming energy systems across the world. Africa stands to gain from developing low-carbon energy, and the world stands to gain from Africa avoiding the high-carbon pathway followed by today’s rich world and emerging markets,” says Annan, who now chairs the Africa Progress Panel (APP).
In its 2015 report Power, People, Planet: Seizing Africa’s Energy and Climate Opportunities, the APP outlines Africa’s alternative, without using the carbon-intensive systems now driving economic growth, which have taken the world to the current tipping point. And Africa is therefore being asked to lead the transition to avert an impending disaster.
The report recommends Africa’s leaders use climate change as an incentive to put in place policies that are long overdue and to demonstrate leadership on the international stage. In the words of the former president of Tanzania, Jakaya Kikwete, “For Africa, this is both a challenge and an opportunity. If Africa focuses on smart choices, it can win investments in the next few decades in climate resilient and low emission development pathways.”
But is the financing mechanism good enough for Africa’s green growth? The APP notes that the current financing architecture does not meet the demands, and that the call for Africa’s leadership does not negate the role of international cooperation, which has over the years been a clarion call from African leaders—to be provided with finance and reliable technology.
The Pan African Climate Justice Alliance (PACJA) mourns the vague nature of the Paris agreement in relation to technology transfer for Africa. “The agreement vaguely talks about technologies without being clear on what these are, leaving the door open to all kinds of false solutions,” reads part of the civil society’s analysis of the Paris agreement.
However, other proponents argue for home solutions. According to available statistics, it is estimated that 138 million poor households spend 10 billion dollars annually on energy-related products, such as charcoal, candles, kerosene and firewood.
But what would it take to expand power generation and finance energy for all? The African Development Bank believes a marginal increase in energy investment could solve the problem.
“Africa collects 545 billion dollars a year in terms of tax revenues. If you put ten percent of that to electricity, problem is solved. Second, share of the GDP going to energy sector in Africa is 0.49 percent. If you raise that to 3.4 percent, you generate 51 billion dollars straight away. So which means African countries have to put their money where their mouth is, invest in the energy sector,” says AfDB Group President, Akinwumi Adesina, who also highlights the importance of halting illicit capital flows out Africa, costing the continent around 60 billion dollars a year.
While Kasoka in Southern Zambia’s remote town awaits electricity , the country’s Scaling Solar programme, driving the energy diversification agenda, may just be what would light up his dream of rearing poultry. According to President Edgar Lungu, the country looks to plug the gaping supply deficit with up to 600 MW of solar power, of which 100 MW is already under construction.
With the world at the tipping point, Africa will have to beat the odds of climate change to develop. Desmond Tutu summarises what is at stake this way: “We can no longer tinker about the edges. We can no longer continue feeding our addiction to fossil fuels as if there were no tomorrow. For there will be no tomorrow. As a matter of urgency we must begin a global transition to a new safe energy economy.
“This requires fundamentally rethinking our economic systems, to put them on a sustainable and more equitable footing,” the South African Nobel Laureate says in the APP 2015 report.
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Capitalism is failing Africa. A relatively small number of entrepreneurs have prospered on the continent in the past decade, becoming the face of the “Africa Rising” narrative. But hundreds of millions more have remained poor and unemployed, and lacking electricity, good schools and access to adequate healthcare.
The collective gross domestic product of the continent’s 54 nations is roughly $1.5tn — less than that of Brazil alone, at more than $2tn. Africa, with 70 per cent of the world’s strategic minerals, has about 2 per cent of world trade and 1 per cent of global manufacturing.
Capitalism has been the greatest creator of national wealth in world history, lifting billions out of poverty from Singapore to China, and from South Korea to Brazil. But Africa stands on the cusp of a lost opportunity because its leaders — and those who assess its progress in London, Paris and Washington — are wrongly fixated on the rise and fall of GDP and foreign investment flows, mostly into resource extraction industries and modern shopping malls.
They are in thrall to orthodoxies better suited for more mature economies. African countries need to focus on creating broad-based growth across sectors and social classes in order to promote jobs and labour productivity. This is what improves GDP per capita, which has remained stagnant at less than $3,000 in most African countries. Africa must stop counting malls and measure jobs and their productivity instead.
There is no shortcut to that outcome that can ignore building industrial economies based on manufacturing. African nations must reject the misleading notion that they can join the west by becoming post-industrial societies without having first been industrial ones.
Africa should be striving for self-sufficiency and to become part of the globalised production value chain. This requires the consistent development of skilled labour, linking innovation to industrial production, as well as investment — both domestic and foreign — in infrastructure and manufacturing.
Fossil power has turned out to be a mirage in countries such as Nigeria. They need to switch to a strategy based on renewable energy that is often quicker to install and is increasingly cost-effective.
If countries across Africa are to achieve inclusive economic growth on this basis, another shibboleth must be confronted: the one which decrees that for economies to prosper and grow, governments must get out of the way of business. On the contrary, governments must lead the way, with a firm hand on the wheel and by setting policy that creates an enabling environment for market-based growth that creates jobs.
They must also keep a careful eye on market actors with regulation and oversight that has wider social objectives in view. Markets must work for society and not the other way round. That, surely, is one of the lessons of the global financial crisis.
This is not an argument for a heavy-handed statist approach that would choke productivity and stifle competition. Nevertheless, a strategic role for governments remains essential. The question is whether African governments are capable of making the right policy choices. Ethiopia and Rwanda offer hopeful examples.
African countries need to remove incentives for systemic corruption if the proceeds of growth are to be widely shared. The Nigerian government under President Muhammadu Buhari has rightly withdrawn subsidies and deregulated the importation of refined petroleum products. Next, it should review its policy of maintaining an artificially fixed exchange rate, in the face of depressed income from crude oil. This has bred corrupt arbitrage in currency markets and hurt productivity.
Another key to manufacturing-based, inclusive growth is “smart protectionism” — temporary tariffs that would protect nascent industries from the cheap imports that have rendered African economies uncompetitive on the global stage. For developing countries, such as many of those in Africa, this can be achieved within the rules of the World Trade Organisation.
For capitalism to work for Africa, just as it has for China and much of east Asia, public policymakers must shake off the shackles of orthodoxy.
Africa is uniquely placed to build a sustainable, renewable energy matrix with immense potential, says Rentia van Tonder, head of power at Standard Bank. “However, how quickly, efficiently and at what cost the continent builds this energy infrastructure will be influenced by sovereign wealth, governments’ commitments and capital markets,” she points out.
The World Bank estimates that only 24 percent of people across sub-Saharan Africa have access to electricity. Furthermore, limited, inefficient or expensive distribution networks ensure that the bulk of what little power is available is narrowly concentrated in a handful of countries and commercial centres.
The rapid evolution of renewable energy generation and distribution technology provides sub-Saharan governments with a range of new sustainable energy alternatives. However, base-load electricity remains a key driver.
“Scalable wind and solar projects are often smaller and more focused, requiring less capital and time to develop,” says Van Tonder. “Smaller renewable projects, while often generating less power, can nevertheless support growth in investment if focused on the most productive sectors of an economy through focused investment.”
Renewable energy projects also have the advantage of costing less the longer they operate, depending on the specific technology and operation and maintenance agreements. This means once they are paid off – through user-pay tariff structures that correctly reflect cost – they can be re-focused on supplying cheaper power to non-capital generating elements of the economy.
“Creating the institutional infrastructure to attract global capital at affordable rates and then manage it efficiently remains important,” says Van Tonder. “The development of local currency pools of liquidity and capital is essential. In short, if Africa is to achieve power self-sufficiency, we need to move beyond having to rely on the US dollar to fund every major project.”
While project finance is often raised in foreign currency, project revenues on the continent are generally denominated in local currency. Where the exchange rate between the currency of revenue and the currency of debt diverge, the cost of debt increases dramatically. This carries the risk of extending repayment periods – or defaulting entirely – with exponential cost implications over the long term.
Given these risks and costs, the attempts currently being made by legislators across the continent to deepen domestic capital markets should be encouraged and Pan-African multilateral forums would do well to consider how Asia and other emerging regions deepened local capital markets as a critical development enabler.
Africa stands uniquely placed to develop a diverse and sustainable energy mix, in the shortest time. The strategic use of renewables can also deliver this at the lowest costs and least environmental impact, while building energy infrastructure with the longest shelf-life addressing the long term power needs for the continent.
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