Keeping the lights on in East Africa
Mark Kapchanga looks at how East African countries need to ensure reliable power in order to maintain economic growth
The financier of Africa’s largest hydroelectric power plant in Ethiopia has pulled out of the project, citing overwhelming pressure from environmentalists.
The African Development Bank (AfDB) says it is no longer feasible to continue focusing on the controversial Gibe III dam construction due to the risks associated with it.
The withdrawal from the $1.7-billion project, which is 40 per cent complete, is a blow to investors, who had banked on the plant for affordable power supply.
In the last three years, Africa has been a hotspot for foreign investors, with China, Japan, Brazil, Europe and the US scrambling for opportunities. China in particular has made huge investments in resource-heavy sectors such as construction and manufacturing sectors. By July, Beijing had injected close to $20 billion in the continent.
But economic growth in Africa has not been in tandem with the pace at which these investments are streaming in. Today, economic growth in Africa is scarcely 10 per cent due to the rising cost of doing business.
A conspicuous challenge has been the unreliable and expensive power supplies. In Tanzania, blackouts have become a norm with production hours cut from the average of eight to five hours a day. The case is similar to Kenya. Manufacturers have bitterly complained about the rising cost of business, which has hampered the industry’s growth.
“We cannot keep talking about making Kenya a middle class income nation by 2030 if we cannot create a conducive business environment. The country needs to focus more on exploiting alternative energy sources such as wind, geothermal and gas,” said Betty Maina, the Chief Executive Officer of Kenya Association of Manufacturers.
Currently, Africa growth engines hugely rely on drought-prone hydropower. More than 13 countries use it for 60 per cent of their energy.
Often compared to China’s Three Gorges, the Gibe III Dam, if completed, would be the world’s fourth largest. It will generate over 1,800 MW of power. The Ethiopian government expects to earn $407 million annually from power exports.
Kenya is expected to import more than 500 megawatts (MW) to check on the recurring power outages that have had biting effects on the manufacturing sector. According to the Ethiopian Electric Power Corporation, more than 200 MW will be exported to both Djibouti and Sudan. Additionally, a feasibility study is underway to consider exporting 50 MW to Yemen via Djibouti, Somalia, Eritrea and Egypt.
Opponents of the project say the dam would have detrimental effects on the environment. “The reservoir will cause the lake’s water level to drop by as much as 23 to 33 feet within the first five years,” said Ikal Ang’elei, the founder of the Friends of Lake Turkana, and winner of the 2012 Goldman Environment Prize for Africa.
In 2009, the European Investment Bank pulled back its funding, saying the dam would massively affect the ecosystems. A year later, the World Bank also withdrew from financing the project. The World Bank, however, has promised to give a $684 million loan to build a 1,000-kilometre electricity transmission line from Gibe III into Kenya.
The former World Bank vice-president for Africa, Obiageli Ezekwesili raised a redflag over the way in which the Ethiopian government was managing the shaky project. In particular, she queried the environmental impact assessment report, saying it was not “conclusive”. She also questioned the manner in which the Ethiopian authorities awarded the contract to an Italian firm, without competitive bidding.
Whereas many would-be financiers of the dam have withdrawn their funding for the project, the Industrial and Commercial Bank of China says it will put $500 million into it.
While the social and environmental impacts of these projects are huge, there are those with the school of thought that the region is thirsty for reliable power supplies.
“Ethiopia’s electricity generation capacity will go up; power cuts will be reduced and electricity will be extended to at least some of the more than 70 per cent of the population without access,” said Seleshi Bekele, a senior researcher with the Addis Ababa-based International Water Management Institute.
Mark Kapchanga 2012