Wednesday28 August 2019 ★ FINANCIAL TIMES 3African Development
T
he African Development
Bank is building new
financing structures to sup-
port the next generation of
power companies hoping to
revolutioniseenergy distribution and
connect the 50 per cent of African
householdswithout access to electricity.
Electrification strategies have long
focused on producing energy incentral-
ised power stations and distributing it to
users down transmission lines. Highly
effective in densely populated cities,
that approach has proven prohibitively
expensive in many African countries
where the cost of last mile connections
in rural communications can reach
$2,000 per household, which utilities
companies have been reluctant to pay.
“We’ve realised that if you’re going to
connect the over 600m Africans that do
not have access to electricity you have toadopt a number of different, innovative
approaches,” says Wale Shonibare, the
AfDB acting vice-president for power,
energy, climate change and green
growth. “You can’t do everything by
extending the grid,” he says.
One of Mr Shonibare’s plans is to help
so-called distributed energy companies
— which provide off-grid, largely solar-
powered electricity solutions — to
expand and ultimately service state
utilities to provide energyto customers.
“If you weave these distributed
energy companies into utilities, the util-
ity of the future is just going to say: ‘You
want to be able to have access to elec-
tricity, and how we serve you doesn’t
really matter so much’,” he says. “There
will be a fusion of what we currently call
off-grid and on-grid.”
As state-owned utilities in many
countries have failed to maintain trans-
mission and distribution networks,
those most disadvantaged have been in
rural communities, where 493m Afri-
cansremain without access to electric-
ity, according to the AfDB.
Improvements in the efficiency and
cost of both solar panels and batteries in
the past decade has meant private com-
panies such asM-Kopa,BBOXXand
Zolahave filled the gap, providing homeand mini-grid solar systems to rural
households that state utilities have been
unable to service.
Supported by advances in mobile
payment technologies, such companies
have been able to offer pay-as-you-go
options that generate reliable cash
flows, but have been unable to expand
faster without to access to debt.
Lenders are still focused on large, cen-
tral power stations backed bybuyers
who are able to guarantee payment forfuture electricity, Mr Shonibare says.
The problem has been exacerbated, he
adds, by a “currency mismatch” for the
energy companies whose off-grid con-
sumers pay in local currency, while
funding is raised in foreign exchange.
Through a financing programme
launched last month, the AfDB isnow
offering credit guarantees to local banks
to provide local-currency lending to off-
grid energy providers. This should ena-
ble those companies to expand quicker
and reach more households.
In a trial of thescheme last year, the
AfDB helped Zola mobilise a loan facil-
ity in Côte d’Ivoire worth$27mto sup-
port an off-grid project to reach 100,000
households with pay-as-you-go solar
home systems by 2020.
In the future, the AfDB says it could
also package those cash flows from pay-
as-you-go energy consumers into secu-
ritised products to sell to local and inter-
national investors.“The whole purpose
of this is to be able to support those dis-
tributed energy companies to roll out at
a faster rate,” says Mr Shonibare.
Romain Py, head of investments at
African Infrastructure Investment
Managers, says this type of thinking has
been lacking from the power sector,
leaving large parts of the population dis-connected. “People have not followed
the advances in technologies and they
are a bit stuck from a planning stand-
point, 30 to 40 years behind,” he says.
Too often governments, multilateral
institutions such as the World Bank and
infrastructure investors have focused
on megaprojects when, to expandelec-
trification, countries should aim for a
mix of industrial power plants, on-grid
renewable projects and distributed
power, he adds.
The introduction of distributed power
companies into the energy mix should
also see a new role for governments.
Where in the past a government would
attract investment in power infrastruc-
ture with a commitment to purchase
energy directly, they now need to
“mobilise affordability through direct
and indirect means”, says Mansoor
Hamayun, chief executive and co-
founder of BBOXX.
In Togo, where BBOXX is installing
300,000 solar home systems by 2022 in
partnership with the French energy
group EDF, the government is providing
a monthly subsidy of about$4 to help
families to purchase thepower.
“Government’s role has turned
to providing a much more enabling
environment,” Mr Hamayun says.Joint effort powers drive to light up continent
EnergyGovernments,
multilateral groups and
smaller companies are
co-operating to electrify
Africa, saysTom Wilson
Half of African households
have access to electricity
Bloombergchallenges for governments seeking to
improve living standards, it does mean
that in brute aggregate terms African
markets are likely to grow for decades.
“The new actors are seeing opportuni-
ties because of demographics and devel-
opments that show Africa is going to
play a major role in the world,” says
Carlos Lopes, a development economist
from Guinea Bissau and former execu-
tive secretary of the United Nations Eco-
nomic Commission for Africa.
In theyears after 2008 when investors
were looking for the next great frontier,
these trends fuelled the shortlived era of
the “Africa Rising” narrative. Although
that hyperventilating term wasover-
done, itopened some people’s eyes to
the continent’s potential. These devel-
opments have been accompanied by
tangible, ifuneven, improvements in
governance and living standards.
Africa isno longer the continent of
coups and civil wars. In 1990, 12 African
leaders owed their position to a military
overthrow, with only six in charge as a
result of multi-party elections, accord-
ing to the Brookings Institution. By
2016, 45 leaders had gone through a
multi-party process. Admittedly some
of those exercises in democracy, such as
the recent disputed contest in Demo-
cratic Republic of Congo, are little more
than a sham. But in sub-Saharan Africaalmost no government owes its position
directly to a coup, therecent military
overthrowof Omar al-Bashir in Sudan
notwithstanding.
In areasfrom health to steadily
expanding economies, the picture is of
gradual improvement. Last year, six of
the world’s fastest-growing economies
— Ghana, Ivory Coast, Senegal, Djibouti,
Ethiopia and Tanzania — were African.
With a slightly different cast, that feat is
likely to be repeated this year.
Life expectancy has also improved. A
newborn baby in Africa today has an
average lifespan of 65 years. Although
that lags western Europe by 17 years, it isContinued from page 1a far cry from a few decades ago when
the crises of Aids, malaria and tubercu-
losis had cut life expectancy to below 50
in several African countries.
The news is far from all good. Many
African nations facechallenges from cli-
mate change toinadequate public
health and education. On almost all
development measures, mostlag the
rest of the world. Though the continent
is urbanising, most cities are chaotic.
Few countries haveescaped the extrac-
tive models that see them sell low-val-
ue-added commodities to rich nations.
According to the Ibrahim Foundation,
which tracks governance, African
democracy hasgone into reverse. In east
and central Africa,some leaders have
changed the constitution to prolong
their rule or heldflawed elections.
“What our people need is to have a
vision, a 10, 20 or 30-year vision,” says
Napoleon Dzombe, a Malawian busi-
nessman and philanthropist.
Yet, despite all this, the idea that Afri-
can countries can grow their way out of
poverty has gained traction, says Mr
Lopes, the development economist who
is an Afro-optimist.
A country that has epitomised steady
improvement is Ethiopia. In spite of its
volatile political situation and — until
recently at least — autocratic govern-
ment, the country of 105m people has
changed greatly over the past 30 years.
Today it is more likely to be associated
with skyscrapers and the push for mid-
dle-income status than with the famines
that defined its image in the 1980s.
Health and education indicators have
improved and the country has recorded
a decade of growth averaging about 8
per cent. “Development for me is about
the income level in my society increas-
ing everyyear,”Abiy Ahmed, Ethiopia’s
prime minister, said earlier this year.
“The level of ambition from leaders
has gone up,” says Mr Lopes, who sees a
continent that — for all its problems —
is brimming with energy. “This is
the continent with the youngest popula-
tion in the world. It will lead to a transi-
tion different from anywhere else.”Africa poised
‘to play a
major role in
the world’
‘If you’re going to connect
600m Africans to electricityyou have to adopt different,
innovative approaches’Contributors
David Pilling
Africa editorNeil Munshi
West Africa bureau chiefJoseph Cotterill
Southern Africa bureau chiefTom Wilson
East Africa correspondentLeo Lewis
Tokyo correspondentJohn Aglionby
Assistant UK news editorAndrew Jack
Global education editorMark Wembridge
Commissioning editorSteven Bird
DesignerEsan Swan
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articles.
Follow us on Twitter: @ftreports bnSource: UN Comtrade - ; Chinese customs China exports to AfricaChina imports from AfricaChina-Africa trade
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