In this third article on the subject of clean energy, climate change and poverty reduction we highlight emerging trends and case studies as reported in the 2015 Africa Progress Report (“APR”) where some African countries can be considered success stories in providing solutions to the problems at hand and others are failing completely.

We start by giving a sad story of Tanzania exactly as it was reported in the 2015 APR:

“Tanzania’s state energy provider, the state-owned Tanzania Electric Supply Company (“TANESCO”) has accumulated debts that are so large as to compromise the county’s entire budget, forcing government to undertake painful fiscal adjustments. In 2012, transfers from the national budget to cover losses amounted to 0.3 per cent of GDP. Non-payment of bills to power providers and other suppliers amounted to another 1 per cent of GDP, undermining incentives for private investment in the process. TANESCO’s operations contributed to one of Africa’s largest current account deficits and a deteriorating fiscal deficit, which reached 6.8 per cent of GDP in 2012/2013. Rising demand and under-investment in maintenance and operations has exacerbated power shortages. Outages are especially common during the dry season as the water levels fall in reservoirs serving hydropower stations. Reliance on emergency power provision has reinforced underlying economic problems. In 2013, TANESCO was spending twice as much on emergency provision as it was receiving in revenue, adding to an already large operating deficit. The company was forced to borrow US$250 million on commercial terms with a government guarantee. It also received a direct budget transfer of US$220 million, financed by the World Bank and the African Development Bank.

The most recent episode involves allegations over the irregular withdrawal of US$124m from an escrow account jointly held by TANESCO and Power Tanzania Ltd. (IPTL), a company formed under a public-private partnership agreement. A Parliamentary Public Accounts Committee has raised concerns over the acquisition of IPTL from a Malaysian company by a company called Pan Africa Power Solutions, through a British Virgin Islands connection and linkages to a businessman prominent in Kenya. The parliamentary committee has raised concerns over transfers from the escrow account into off-shore funds. Payments include over US$70 million to one of Tanzania’s richest men. While several senior political figures have been forced to resign, the committee’s investigations have run into a web of offshore accounts with unknown beneficial ownership structures. Tanzania’s Revenue Authority (TRA) has called for Interpol to investigate. Whatever the precise circumstances and scale of illicit payments, the diversion of resources from an energy system unable to provide reliable power or to reach 7.2 million Tanzanians has been considerable. Ironically, the parliamentary session during which the report was presented was disrupted by a power outage.”

This is the story of Tanzania exactly as reported in the 2015 APR. It points to the loss encountered by utilities due to their inefficiencies and corruption. This picture is the same for most of the utilities in Africa. It has to change if Africa is to prosper and take a leadership role in this sector.

Despite the bleak picture painted above on Tanzania, there has been policy shift in a bid to turn things around as reflected in the paragraph below from the 2015 APR:

“With power demand rising by over 10 per cent a year and perennial electricity shortages acting as a brake on growth, Tanzania is reorienting its natural gas priorities. There is a growing emphasis on developing the country’s huge natural gas reserves in the Ruvuma Basin to supply local industry and create jobs at home. While foreign investors and several donor governments have been unsympathetic to the policy shift, there has been some initial success. The Songas gas-to-power project now provides Tanzania with around one-fifth of its grid-based electricity, reducing dependence on imported fuels and seasonal unreliability associated with hydropower. Around 30 industrial companies receive electricity from Songas. Songas has a 20-year power purchase agreement with TANESCO, signed in 2004. The electricity is sold for around US$0.055/kWh, which is well below the equivalent costs of electricity generated using imported fuel. Songas has saved Tanzania a reported US$1.8 billion since it began operation”.

This Tanzania story illustrates the point that it is not impossible to turn things around and take a leadership role. The efforts simply need to be accelerated.

A more success story painting a much brighter future is the energy transformation in Rwanda as reported in the 2015 APR:

“Rwanda has put in place ambitious plans to increase power-generation and expand access to electricity. Sustained engagement by the country’s leaders and reform of the electricity utility has opened the door to wide-ranging investment opportunities. Current plans envisage that 70 per cent of the population will have access to electricity by the end of 2017, up from 12 per cent in 2012. Over the same period, the strategy aims at increasing electricity generation from about 100MW to 1,160MW. The increase would come from a range of sources. Hydropower will be the main technology, but solar PV, geothermal, biogas and peat will also be used as new sources of energy. Total investment requirements for 2013-2017 are estimated at US$4.2 billion, or US$845 million a year under a proposed accelerated plan. Public financing will cover around 40 per cent of the cost. However, the financial viability of the strategy depends on public-private partnerships”.

This one example that most of Africa must follow. In future articles we will continue with more trends and case studies as reported in the 2015 APR, highlighting more examples in Africa and successful international examples that may be adopted by most African countries in reforming their energy sector.