Power consumes half of the infrastructure funds

The Africa Infrastructure Country Diagnostic Report suggests that the cost of addressing Africa’s infrastructure needs is around $93 billion a year from the existing funding of $45 billion a year to realize its transformation and development.

The Report dubbed ‘Africa’s Infrastructure: A Time for transformation’ was launched by World Bank last week at the African Development Bank offices in South Africa.

The report covers a wide range of infrastructure including data on the power, transport, irrigation, water and sanitation, and information and communication technology.

Half of the fund is expected to address the continent’s current power crisis that is hindering Africa’s growth.
Power consumes 44 percent of the infrastructure funds, followed by water and sanitation, transport, ICT and irrigation.

In a power presentation by Vivien Foster Lead economist in the World Bank in charge of Sustainable Development in Infrastructure a major turnaround is needed.

Improved regional power trade is also required to have cheaper energy and major subsidies, institutional inefficiencies should be tackled.

It is hoped that if regional power trade comes into play, generation costs will fall, and full cost-recovery tariffs could be affordable in much of Africa.

According to Foster the existing funding also involved leaking because of low cost recovery and operational efficiency causing a funding gap of $31b and efficiency gap of $17b respectively. The power sector also faces a financing gap of approximately $23 billion a year.

The operational inefficiencies of power utilities cost $3.3 billion a year, deterring investments in electrification and new capacity, while under-pricing of power translates into losses of at least $2.2 billion a year.

Full cost-recovery tariffs would already be affordable in countries with efficient large-scale hydropower- or coal-based systems, but not in those relying on small-scale oil-based plants.

Many African countries, such as Ethiopia, Malawi, and Senegal, the negative effect of deficient infrastructure is at least as large as that of crime, red tape, corruption, and lack of financing.

According to the report, 48 Sub Saharan Africa countries with 800 million people generate same power as Spain with 45 million people.

Some of the reasons attributed to the power challenge include failures to bring on new capacity to keep pace with demands of economic growth, droughts that reduce hydro power in East Africa and oil price hikes.

Ends