Powering Africa: Facing the Financing and Reform Challenges

Africa faces chronic power problems, including insufficient generation capacity, low connectivity, poor reliability and high costs, all of which constrain development. Power capacity additions in sub-Saharan Africa (excluding South Africa) since the 1990's were very small. Historically, investments in the power sector in Africa have come mostly from governments or public utilities (with foreign aid support). In recent years, these sources of funding have been flat. The fastest new sources of funding are from independent power producers and from China. To understand the determinant of the new sources, the author analyses the effect of several key factors and finds unexpected results, such as there is no obvious correlation between unbundling, or the presence of an independent regulator, and the level of private investment through independent power producers; or that there is no correlation between Chinese investment in generation and resource rich countries (dispelling the myth that Chinese firms are only interested in Africa's resources). The report delivers several recommendations that indicate that more attention needs to be given to issues related to planning, procurement and contracting as well as securing revenue flows.