The role of private sector participation in Sub-Saharan Africa’s energy sector

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Africa Energy Indaba to reveal how private sector participation in electricity distribution remains essential to accommodate the expanding needs of Africa.

There is a strong correlation between electricity consumption and economic growth. However, electricity inaccessibility and unremitting power shortages hamper initiatives for economic growth and raising the standard of living for almost 1 billion people across sub-Saharan Africa (SSA).

Inadequate generation capacity, transmission and distribution networks, along with high power-loss levels are critical factors contributing to the region’s power deficit.  Expanding capacity and improving performance of generation, transmission and distribution of electricity requires considerable investment and while various governments prioritise expanding electricity supply, many require private sector capital as they simply cannot raise the finance that the necessary advancements require.

The fundamental intricacies between electricity distribution network owners and investors and customer-service facets of distributing power deem private sector participation, a challenge with regards to distribution as opposed to generation and transmission thereof.

Private sector participation in electricity distribution is critical to accommodate the expanding needs of sub-Saharan Africa. SSA is projected to observe the most significant increase in electricity demand amid the largest regions of the world between now and 2040. This expected rise in demand can be attributed to certain driving factors:

*Source: Article –  A Private Path to Power in Africa
 https://www.atkearney.com/web/china/energy/article?/a/a-private-path-to-power-in-africa-article

To accommodate this projected rise in energy demand, SSA authorities need to channel more capital investment to its power sector. However, SSA governments with substantial budget deficits are financially incapable of improving or expanding electricity distribution infrastructure. Evidently, a capital injection from external sources is required to make reliable, accessible and affordable electricity available to the continent’s growing population. If the government can establish solid structures for private sector participation in electricity distribution, this funding issue could be resolved.

Successful private sector participation initiatives require a holistic approach to seven interrelated factors where a constant, systematized collaboration between various stakeholders address shared strategic objectives. These crucial factors for effective private sector participation implementation are setting transparent consensus objectives, selecting the right model, planning for the long-term, finding and keeping the right partner, building an integrated business case, managing regulatory and principal-agent risks as well as measuring impact.

It therefore stands to reason, that an appropriately structured private sector participation can effectively bridge the gap between the surging demand for electricity in sub-Saharan Africa and the lack of supply thereof, where governments are unable to fund the improvement and expansion of distribution grids.

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About Africa Energy Indaba

The Africa Energy Indaba is Africa’s premier energy conference dedicated to driving energy investment, trade, and innovation across the continent. Held annually, the event brings together industry leaders, policymakers, investors, and stakeholders to discuss key issues, explore opportunities, and shape Africa’s energy future.

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