Economics and Politics of Electricity- The Case of SA

Today, 25 African countries face an energy crisis and the World Bank has recently stated that only 26 per cent of the Sub-Saharan Africa population has access to electricity, in spite of various interventions by international agencies to address the continents' energy power crisis. In fact the number of African households without electricity access is projected to rise from 590 million in 2008 to 700 million in 2030, following the growing population in the continent against the background of inefficient power systems.

The irony is that the African continent is well endowed with energy resources but most remain untapped. To combat the energy crisis, many countries have had to contract expensive diesel-fuelled emergency generation plants – in some cases, the estimated annual costs are equivalent to more than one percentage point of growth domestic product (GDP). 


Some solutions to this problem include: boosting cross-border power trade, improving existing utility companies, improving access to electricity on a large scale, while helping countries chart low-carbon growth paths. A major portion of the challenges require massive infrastructure investments, however there are some opportunities for distribution and supply companies.  However for the private sector to participate, the economics and politics of electricity need to be understood- as shown in this piece on South Africa. 

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World Bank decision is crucial for South Africa's economic future

ENERGY FORECAST 2010

The World Bank’s decision, due on Thursday this week, whether to give Eskom a $3.75-billion loan - the bulk of which will be used to complete its 4 800MW Medupi coal-fired power station in Limpopo, with the balance to be invested in wind and concentrated solar power projects - could have a telling influence on the country’s economic development in the immediate years to come. If activist environmental groups have their way, disputed global long-term environmental benefits will get preference over domestic short- to medium-term economic necessity.

The background facts are that the present-day South African economy is two-thirds larger than it was a decade and a half ago on the back of substantially increased electricity needs, to which supply has not kept up. To achieve the growth rates going forward, which are required to ensure social stability, sustained job creation and poverty alleviation, increased generating capacity is needed urgently.

With the development of alternative renewable electricity still some years away from affordability and sustainability, coal seems to be South Africa’s only hope to keep the economy going during the bridging period until alternatives come on stream in any meaningful way. Fact is that for now, coal remains South Africa’s most abundant and affordable energy source.

The Medupi plant is a first of its kind which will be using the most efficient and lowest emission coal-fired technology available.

Minister of Finance Pravin Gordhan, in a recent article, wrote: “If there were any other way to meet our power needs as quickly or as affordably as our present circumstances demand, or on the required scale, we would prefer technologies that leave little or no carbon footprint. But we do not have that luxury if we are to meet our obligations to our people and to our broader region. South Africa generates more than 60% of electricity produced in sub-Saharan Africa.”

Activists still say “no”

To the environmental lobby groups, these arguments are not good enough. Staging a protest in front of the World Bank’s Pretoria offices 10 days ago, environmental watchdog Earthlife said the loan would be unhealthy for people in the vicinity of the proposed Medupi power station. It also would impact negatively on the country’s carbon footprint.

Earthlife organiser Makoma Lekalakala said that for environmental and social reasons, the World Bank must not grant the loan to Eskom.

“If the World Bank grants the loan, that means greenhouse [gas] emissions are going to increase and at the moment, South Africa is the highest greenhouse emitter in Africa. In that way, we will be doubling our emissions,” said Lekalakala.

Coal is not the future of generating energy in South Africa, which has abundant renewable power resources. Demonstrators also sarcastically awarded Eskom the Fossil Fool Award for even having considered the loan.

The narrow focus of activist groups, however, does not always achieve the most desired results in the long run. In the Untied States, today the world’s largest economy, still relies for more than 50% of its power needs on coal-generated electricity, with a massive negative impact on the global environment.

This picture, however, could have been dramatically different if it were not for the 'successes' of the activist lobby against nuclear power in the 1970s, which stunted the development to its full potential of that much 'cleaner' electricity option.

The fact that South Africa has plans in place to reduce the expansion of its carbon footprint over time and start reducing it before the middle of this century, again brings to the fore the question of why it should be expected now of developing countries effectively to pick up the tab of the past carbon overindulgence of the developed world.

Political complications

In the interim, Eskom’s loan application further is politically complicated by the involvement of the ANC as a player in the electricity sector.

Opposition leader Helen Zille of the Democratic Alliance (DA) has chosen the fact that the ANC’s investment arm has a 25% stake in Hitachi Power Africa - a main supplier to the Medupi power station - as a front to do political battle with the government.

She has written to the World Bank, asking whether a finding by the public protector, that former Eskom chairperson Vallie Moosa acted improperly in awarding a R38.5-billion Medupi contract to the Hitachi consortium, would influence the loan application.

Referring to calculations that the ANC is set to gain at least R1bn from the contract, she wrote in her weekly newsletter to supporters that “it is no exaggeration to say that if the loan is granted and the deal goes through, no opposition party may ever be in a postion to compete fairly with the ANC again. The ANC will entrench its single-party dominance and, in doing so, gravely weaken our democracy."

She also indicated that the DA would be meeting with the World Bank’s local chief Ruth Kagia and would lobby board members ahead of Thursday’s decision. She wanted Eskom to get the loan, but only on condition: that Chancellor House (the ANC’s investment arm) pulls out of the consortium which is building the power station.

Africa's Energy Infrastructure

Africa's 5 power pools are well illustrated in the 2010 Energy Atlas. The Energy Atlas also shows the current energy projects in the continent including the % of population with access to power. Despite various efforts to generate increased renewable and non renewable energy, Africa is the only continent estimated to generate less power than demand necessitates, in the next few decades.  

                                               Click to enlarge

Source: Africa Energy

The Green Wall of the Sahara and Sahel

going green... 


The Sahara desert experiences one of the harshest weather conditions in the world. The very dry, sandy winds and hot weather conditions certainly affect trade output and patterns in this region. For instance as sand dunes move, they bury villages, roads, oases, crops, irrigation channels and dams, causing major economic damage and increasing poverty and food insecurity.This groundbreaking transcontinental project tries to address this.

African nations on the desert border south of the Sahara are taking action to halt the march of sands by creating a great wall of green. They are contributing to the prevention of desert advancement and the development of the Saharo-Sahelian zones in order to ensure sustainable natural resource management and poverty reduction.

The “Great Green Wall” project is largely a multi-species vegetal belt 15 km wide that will link Dakar and Djibouti and stretch over a distance of about 7000 km. However it won’t be a continuous band of trees, but may be rerouted if necessary to avoid obstacles (streams, rocky terrains, mountains and rock hills) or go through inhabited areas, stretching from Mauritania in the west to Djibouti in the east.

The initiative will be a set of cross-sectoral actions and interventions aimed at the conservation and protection of natural resources with a view to achieving development and particularly, alleviating poverty. The trees however will be "drought-adapted species", preferably native to the areas planted, and so far about 37 suitable species have been identified. 

The African Union officially adopted the Great Green Wall initiative in December 2006 as one of the pillars of a rural strategy which reconciles development and environment. At the 8th common session of the Conference of the Heads of State and Government held in January 2007, the African Union adopted Declaration 137 VIII approving the Initiative "Green Great wall of Sahara. "

The plan benefits from Africa-EU Climate Change Partnership support and is implemented in collaboration with the Community of Sahel-Saharan States (CEN-SAD). The Project has been in the works for several years with sources indicating funding difficulties and concerns regarding its maintenance. Nonetheless, it is expected that tree planting will soon begin. The great green belt will be 7000km long and 15km wide, at a cost $3 million to plant. The west-most section will be planted in Mauritania, Mali, Burkina Faso, Niger, Nigeria, and Senegal, while the eastern section will be planted in Chad, Djibouti, Eritrea, Ethiopia and Sudan.


Being a transboundary Programme, the implementation of the Great Green Wall Initiative would require some degree of policy harmonization for the implementation of issues such as transboundary range, ecosystems, water management and joint afforestation programmes. The participating countries would need to review their relevant policies and legislation to accommodate community involvement in environmental resources management and ownership of the benefits. 

Meanwhile the Food and Agriculture Organization has recently published a manual featuring a project in Mauritania which successfully fixed dunes and stopped sand encroachment. Sand encroachment is what happens when grains of sand are carried by winds and collect in dunes on the coast, along watercourses and on cultivated or uncultivated land.

According to a Study by the Sahara and Sahel Observatory (OSS), the threat prosed by desertification is particularly acute in Africa, one of the continents most affected by the processes and impacts of land degradation and the deterioration of the communities' living conditions, particularly in the CEN-SAD area characterized by climate ranging from hyper-arid to dry sub-humid. 

Livelihoods in the countries located in this sub-region are heavily dependent on soil, water and vegetation resources, which have become increasingly fragile due to the mounting pressure being exerted on them.