The heat map of Africa from outer space is a stark contrast from other continents, a scenario that US President Barrack Obama pledged to help change through a $7 billion program aimed at lighting up approximately 20 million homes.
Power Africa, a private-sector led initiative launched in 2013, pledges to install 10,000 megawatts of electricity in Sub-Saharan Africa where hundreds of millions of people do not have access to reliable lighting.
The initiative, which has initially prioritized Tanzania, Kenya, Ethiopia, Ghana, Nigeria and Liberia, is a high-profile attempt to lift the continent from the doldrums as far as power generation and distribution are concerned.
Blame has often been laid on the feet of corrupt governments who plunder resources and disregard infrastructural development while others claim unevenly distributed resources (fossil fuels and water) leaves some countries hopeless.
However, a bulk of this finger-pointing has been spared for foreign investors (including multilateral lenders) who stand accused of being less bothered to release funds to light Africa over the past two decades.
“Since the mid-1990s, external finance to Africa’s power sector has averaged only around US$600 million per year of public assistance, plus a similar volume of private finance,” the World Bank, which recently committed $5 million to Power Africa, said in a statement.
Eduard Stephenson, Ernst & Young’s (EY) Africa Capital & Infrastructure Advisory EAC Lead, told AFKInsider that mismanagement of existing energy facilities has the net effect of scaring away potential investors, stagnating funding.
Many African countries consistently fail when it comes to ensuring that whatever little power is generated is billed to the consumers, and the resulting revenues invested in expanding the grid.
This, Stephenson argues, scares away investors who do not find it worthwhile to invest their money in capital-intensive projects which will in all likelihood neither be self-sustaining nor profitable.
“Countries need to prove to the international investors that they can protect their resources and this includes maximizing on revenue collections, reducing tampering, theft and reining in on technical losses,” Stephenson told AFKInsider in an interview.
“A failure to do this has in the past several years seen international investors shy away from making significant investments.”
He however noted that this negative trend has in the past years been slowly but steadily changing.
He opined that more power firms – and governments which in most cases own them – have been showing a growing will to protect investments, something which is positive.
“All is not lost; there are many utility firms which are now on the forefront of developing infrastructure in their country with electricity being one of the key sectors,” Stephenson said.
One of the ways that regimes in Africa have introduced to help maximize revenue collections is the introduction of prepaid meters.
Prepaid meters are currently being used in several countries including Uganda, Zambia, Zimbabwe, Lesotho, South Africa, Kenya and Namibia.
In Kenya, the sole power distributor Kenya Power introduced prepaid meters three years ago and has to date installed over half a million of the gadgets across the country.
The State-owned firm has gone a step further and now plans to connect 5,000 customers to smart meters – an improvement of prepaid meters which allows for two way communication between the company and the user.
Kenya Power says it has set aside 150 million shillings (about $1.65 million) for use in the two-year pilot project which will for starters connect customers whose monthly power bills exceed 100,000 shillings ($1,100).
Ben Chumo, the firm’s managing director, told AFKInsider that the smart meters once installed on a pilot scale will save the company about 700 million shillings ($7.7 million) in four years therefore justifying a countrywide rollout.
The introduction of the smart meters comes at a time when the utility firm’s unpaid bills (listed as electricity receivables in their accounts) have reached 9.1 billion shillings ($100 million) as of June 2013.
“Smart meters will among other things automatically detect any tampering that may occur along the lines, ensuring therefore that our lines are operating normally,” Chumo told AFKInsider.
“We can remotely switch off any client who fails to pay, making our billing more efficient than it is. These are just some of the many benefits of smart meters which we expect will give us substantial savings once we install them.”
Stephenson’s EY and an investment company called Peu Capital are currently installing smart meters to about half a million electricity consumers in City of Tshwane – South Africa’s administrative capital city.
According to Stephenson, all customers are expected to be connected by 2016.
As the two countries lead the continent in smart metering, it remains to be seen whether their hopes to improve their operations will come to pass.
More importantly is that if these gains are indeed realised, it will be important to keep an eye on how foreign investors and multilateral lenders who have in past years shied away from the “unprofitable” Africa will react.
If smart meters are indeed the answer – or part of the solution – to Africa’s dark problem, this will be proven in the next couple of years.
