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SADC seeks investment in energy

by Joseph Ngwawi in Mbabane, Swaziland - SANF 13 no 8
Southern Africa will soon convene a special conference to present its multi-billion-dollar energy infrastructure development plan to potential funders.

SADC Council of Ministers chairperson, Prince Hlangusemphi of the Kingdom of Swaziland said the investors’ conference is one of the issues approved by the Council which met ahead of a SADC Extraordinary Summit in Mbabane.

He said the conference, which will be jointly held with a ministerial workshop is intended “to showcase investment opportunities in the energy sector in SADC.

SADC Executive Secretary, Dr Stergomena Lawrence Tax said the Secretariat is committed to the operationalization of the 2016 summit theme of “Resource Mobilisation for Investment in Sustainable Energy Infrastructure for an Inclusive SADC Industrialisation and the Prosperity of the Region.”

“To this end, we have secured funding to support a proposed High-Level Ministerial Workshop and a Regional Investors’ Conference on Regional Energy Projects to be officially launched by His Majesty King Mswati III in his capacity as SADC chairperson,” Dr Tax said.

She said the workshop and conference are expected to open up opportunities for investment in the energy sector “as well as leverage additional resources, focusing on specific flagship projects.”

Most of the energy projects to be presented are contained in the SADC Regional Infrastructure Development Master Plan (RIDMP) approved by SADC leaders at their 32nd Ordinary Summit held in August 2012 in Maputo.

The Energy Sector Plan of the RIDMP estimates the total cost of additional electricity generation capacity for the region to be in the range of US$114 billion to US$233 billion.

The related transmission investment costs to support new generation capacity are about US$540 million. This transmission investment does not, however, include planned transmission interconnectors and national backbone lines.

The Energy Sector Plan identifies 89 energy infrastructure projects, some of which will be showcased during the planned High-Level Ministerial Workshop and Regional Investors’ Conference on Regional Energy Projects.

According to the Energy Sector Plan, flagship projects in the electricity sub-sector include Inga III Hydropower Project in the Democratic Republic of Congo and the Mphanda Nkuwa Hydropower Project in Mozambique.

Inga Dam situated on the Congo River has the potential to produce about 40,000 megawatts of electricity, according to the Southern African Power Pool.

Dr Tax said special attention will be placed on the finalization of the SADC Resource Mobilisation Framework (Alternative Sources of Funding SADC Regional Programmes) during the ministerial workshop.

The framework will explore six different but co-related alternative sources of funding to determine how fiscal space could be created to enable SADC member states to finance regional programmes, projects and activities.

The six options for innovative sources of financing regional integration in SADC are the introduction of an export and import tax; a tourism levy; a financial transaction tax; a lottery system; philanthropy; and regional events.

It is estimated that SADC has potential to earn in excess of US$1.2 billion annually from these alternative sources of funding, a development expected to wean the region of dependency on International Cooperating Partners (ICPs).

It is estimated that less than 10 percent of regional projects are presently funded by SADC member states while the balance comes from International Cooperating Partners, according to the Secretariat.

This situation has compromised the ownership and sustainability of regional programmes.

The ministerial workshop and investors’ conference come against the backdrop of efforts by SADC to improve its power generation and transmission capacity in the face of shortages of electricity in the region.

The prevailing instability in the sector is compounded by many other factors, including the current reality where access to energy takes a national rather than regional approach; tariff levels that are not cost-reflective and caught between the viability and access conundrum; capacity issues at both national and regional levels; and energy sector reforms that are generally perceived to be moving at a sluggish pace.

A number of long-planned projects have failed to take off as the private sector appears reluctant to engage in partnerships with governments due to various challenges.

Private players often cite the poor returns, a function of tariff regimes that are not cost reflective, inappropriate financing formulas and poor governance as key factors in limiting their participation.

In addition to the impact of lack of investment in new infrastructure over the years, the region’s generation capacity is likely to suffer from the effects of climate change and the stronger El Nino-induced weather conditions that have seen dam levels in most countries dropping.

This situation has prompted most member states to resort to various coping mechanisms that include load shedding as well as other demand side management measures while longer term solutions are being sought to remedy the situation through improved supply.

Over the decade or so, a number of countries in SADC have had to resort to load-shedding as a stop-gap measure to conserve energy.

While load shedding has succeeded in restraining the overall electricity demand in the region to some extent, the measure has also affected socio-economic growth since the availability of energy is one of the key enablers of sustainable development, and is essential to the industrialization agenda.

The southern African region has a low access to electricity of about 42 percent compared to around 36 percent for the East African Community and 44 percent for the Economic Community of West African States, with some SADC countries having below five percent rural access to electricity.

The petroleum and gas sub-sector is plagued by volatile prices and although the region is endowed with coastal petroleum and gas resources, these are not directly available to the region, either due to foreign commitments or the lack of necessary infrastructure to exploit, process, store and distribute throughout the region.

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