Africa's Acute Power Problems

According to the IMF Regional Economic Outlook Report of 2008 Sub-Saharan Africa (SSA) faces major infrastructure challenges in the power sector.  The report finds that SSA’s electricity infrastructure is the least developed, least accessible, least reliable, most expensive to operate, and the highest priced of any region in the world. 

For instance as stated in the Report, the entire generation capacity of the 48 countries of SSA, at 63 gigawatts (GW), is comparable to that of Spain. If South Africa is excluded, SSA’s generation capacity falls to 28 GW, about the same as Argentina (2008 figures).  Moreover, the region’s generating capacity has been stagnant for many years and the growth of the sector is barely half those in other developing countries. To make matters worse, as much as one-fourth of SSA’s plants are currently not in operating condition.

Additionally, rates of electrification in SSA are correspondingly low. About 24 percent of SSA’s population has access to electricity versus 40 percent in other low-income countries, and electrification is proceeding more slowly than in other low-income countries.  Furthermore, the region has a fraction of the consumption rates in other regions and, excluding South Africa, SSA’s consumption is only about 124 kilowatt hours (kwh) a year, less than one-tenth that of China.

On cost, although electricity tariffs in some SSA’s countries have been kept low, the cross-country average tariff is rather high at US$0.13 per kwh—about double those in other parts of the developing world and almost as high as in OECD countries. Nevertheless, the prices fail to cover costs and unreliable power supply further adds to the cost.

The issue of power outages is also of critical concern.  African manufacturing enterprises report power outages on an average of 56 days a year, costing firms 5–6 percent of revenues. That is why many firms operate their own diesel generators, at a cost of about US$0.40/kwh. In the informal sector, where firms rarely have the capital for backstop generation, lost revenues from power outages can be as high as 20 percent.

The issue of electricity is central to not only trade and investment but also crucial for advancement of social issues in SSA e.g. schools, hospitals and hence worthy of reform.