Professor Ifediora’s Speech at the Africa Infrastructure Development Conference, Zurich, Switzerland
Good Afternoon Ladies and Gentleman.
As is always the case, I am in my elements when discussing the means and ways we may move the African continent from one that is primary-resource and commerce-based to that propelled by industrial productivity, and advanced information technology. As we speak, many African states have solved two of the four major problems all nations must face in their quest for sustained economic growth; by these I mean efficient financial services, telecommunication, road infrastructure, and energy. Nigeria, Ghana, and South Africa have done remarkably well in areas of financial services and telecommunication; what bedevils their economies now are inadequate road infrastructure and steady-state supply of electricity. This, unfortunately, is true for all African countries.
In order for African countries to achieve sustained economic and social development, they must industrialize their economies. But this is only possible if the problem of energy shortage is solved; about 50% of running a business in Africa may be attributed to the cost of off-grid and on grid supply of electricity. This problem, coincidentally, is the subject of the forthcoming summit in Madison, Wisconsin, USA, in May, 2017 (Africa Summit on Energy 2017).
Africa has incredibly enormous energy resources, much beyond what it needs to service its own needs. But paradoxically suffers acute deficiencies in energy generation. By the World Bank’s estimates, at least over half of the continent’s population does not have access to electricity, and for those fortunate to have access, the level of production is often unable to satisfy demand. The International Energy Agency (IEA) expects the total demand for electricity in Africa to increase at an average rate of 4% a year till 2040, and the demand from the industrial and service sectors to more than double in the same period. Generation capacity in Africa thus needs to expand exponentially to meet this anticipated increase in demand.
Eighty-two percent of Africa’s electricity was generated from fossil fuels in 2012. By IEA estimates, another 81gigawatts (GW) of thermal capacity will have been built in sub-Saharan Africa in 2030; however, the current level of investment of US$8 billion per year in electricity production is inadequate to meet the region’s current and future energy needs. The IEA further estimates that about US$46 billion of investment in the region’s energy sector would be required each year to provide a steady-state supply of energy to the sub-continent.
Currently, the quality of sub-Saharan Africa’s electricity supply is abysmal. There is, on average, a power outage almost every two days in the sub-continent, and in most countries outages occur daily. The economic consequences of erratic supply of electricity are strongly felt through reduced productivity, and higher cost of electricity for users. Attendant losses have been estimated to depress the Gross Domestic Product of the sub-continent by 2% every year.
By all accounts the deficiency of energy is perhaps the most important contributing factor to the continent’s grossly underdeveloped manufacturing base. Without reliable and sufficient energy, the economies of constituent countries would retain for long their current status as a market place for foreign imports. For instance, as of 2016, Nigeria’s energy sector has the capacity to generate 12,522MW of electricity through the combined effort of 26 power plants enabled by 140 turbines. Even if the sector were able to deliver this much power to a country of more than 150 million people and growing, it would still be grossly inadequate. The disturbing fact, however, is that the highest amount of energy generated from this capacity to date is 5074MW (largely from the effort of 74 functional turbines; the remaining 66 turbines are in various stages of disrepair).
Nigerians, as reported in the 2010 Power Reform Roadmap, self-generated light and power estimated to be over 6000MW through diesel and petrol driven private generators, and spent over US$10 billion in the process …far more than was spent on grid-based electricity. The social cost of self-generated power borne by Nigerians by way of environmental degradation, air and noise pollution is yet to be estimated. In contradistinction, South Africa, with a population of 54 million has a generating capacity of 44,000MW, with a per capita energy consumption of 4,800Kwh; for Nigeria the figure stands at 126Kwh per capita. According to the same federal government’s 2010 report, Nigeria, in order to meet its energy needs over the next ten years would need to add 10,000MW of power each year to its generating capacity at an annual cost of US$3.5 billion.
Ghana, with a population of 27 million, has total power generation capacity of 2946 MW; with growing pressure from commercial and household demand for electricity, and a steadily rising population base, the country’s National Energy policy agency predicts that an installed capacity of 5000MW by 2016 would be necessary. In a parallel analysis, the Institute of Statistical, Social and Economic Research estimated in 2014 that Ghana would lose between $320 million and $924 million per annum in productivity and economic growth, and its Gross Domestic Product would shrink between 2% and 6% annually due to inadequate power supply.
Concluding remarks and summary.
For Africa to meet its goal of sustained economic growth, it must industrialize its economy. But industrialization requires, in the first instance, the ability to achieve a steady-state of electricity supply with the most minimal interruption. Such state of reliable power supply has eluded Africa for decades despite millions of US dollars spent in this regard. As well understood by both policy makers and private citizens in the country, the absence of such steady-state of power supply is not due to want of resources or the requisite human capital; Africa has ample supply of these. It is, unfortunately, a result of an absence of a well-defined national consensus on the subject, and a dedicated effort that makes such endeavor a collective necessity and a societal imperative. Some African countries (Nigeria, Ghana, South Africa) have done exceptionally well in solving two of the puzzles a country needs for sustained development …telecommunication, and an efficient financial sector…the remaining two…. power supply and a dependable transportation network, are seriously lagging, and in need of immediate attention.
The beneficial externalities to other sectors from an enhanced and vastly improved energy sector would be transformational in magnitude in terms of cost of doing business, efficiency in the provision of services, and the ability to engage in actual manufacture and assembly of durable goods. Not least in the litany of benefits is the prospect that Africans would confidently set aside their environmentally damaging generators, and join other advanced economies in the experience of uninterrupted supply of power.
I thank you.