Jeremy Naylor: As African nations move ahead economically, the demand for power is increasing enormously across the continent, what’s being done about it? How are the projects that are being proposed or under way being financed? Well, Maree Roos is an associate of CRESCO Project Finance, a financial advisory firm assisting with the development of projects through to a bankable stage.
Jeremy Naylor: You’ve been looking specifically at the southern African power markets; that is a dozen or so countries south of Democratic Republic of Congo and Tanzania. What are your thoughts?
Maree: Well, that’s an interesting question. First of all, you are right, we have seen substantial growth in these countries. Especially the economic activity, as well as the electricity demand, in these countries over the last couple of years have been fairly robust, despite the economic turmoil in the rest of the world. These countries have undergone major economic growth. Our projections are now, I believe, that these countries will keep on growing for the foreseeable future.
Jeremy Naylor: Is there an appreciation, do you think, of the power that is needed across the region? Do you think people really appreciate just how much there is going to have to be provided? What’s your view of the demand side?
Maree: Again, I would say it varies. If you speak to the people in the know, I think there is a good appreciation that there is a big need for major investment in the electricity industry. Not only in the power generation sector, but also the transmission and distribution sector. As the economy is growing, we need to make sure that the electricity sector keeps pace, and are able to support those economic growth and activities.
As such, I think there is an appreciation about the size of investments that are needed as well as the scale of investments that are needed. However, I think more work needs to be done. We need to spread the message, not only in southern Africa. We need to take this message forward to countries around the world that are interested in making investments in southern Africa.
Interviewer: It seems to me that the government in Mozambique is particularly interested in this; why is that?
Maree: It’s a good point because I think Mozambique is quite unique. Mozambique has got a number of very interesting dynamics coming into play at the moment. First of all, Mozambique sits on very substantial hydro potential which will enable them to move large hydropower stations that will be able to power the industry.
On top of that, they also have fantastic oil resources and more recently, they’ve made substantial natural gas discoveries. These three energy forms, in the short, medium and long term, will push the economic development forward in Mozambique as well as in southern Africa, in a substantial and meaningful way.
Interviewer: What about the interconnections between the different countries in southern Africa; how good are they? How easily able are they to export power?
Maree: At the moment, there is no doubt that the number of interconnections are not enough and that they are weak. We certainly know there is an urgent need to strengthen those interconnections. If you can imagine a spider’s web, there is complete interconnection between the different countries, and that is what we should aspire towards.
At the moment, we don’t have that, and as a result, major investments are needed. Utilities as well as governments will have to play a substantial role in making sure that the policy, regulatory and legal environments are conducive towards these investments that are needed.
Jeremy Naylor: You use the word, ‘investment’; who is the funding behind all this? Who is going to provide the money?
Maree: Look, given the scale of investments that are needed, I don’t think there is only one institution. I think the answer lies in a combination of investments. We are looking at public investments; of course utilities as well as governments will have to step in. They will have to come and play a meaningful role in investments, but that would not be enough.
We also need private investments and major private investments. These need to be in the form of power generation as well as transmission lines to make sure that the necessary infrastructures are developed and are put in place. Then the people can benefit from the gains of having access to having low cost and reliable electricity.
Jeremy Naylor: If you are bringing in the private sector, there has got to be a profit in it, what about price projections? Has it got to be able to sustain a profit?
Maree: It’s an interesting point because at the moment, prices in southern Africa are generally low and I think most of the utilities, as well as the governments, are working towards rebalancing those tariffs and charges. This is to make sure they reflect the profit supply and that they will be able to sustain ongoing future investment. But it’s a slow process because it can’t be done overnight. It will have to be done according to a plan.
I think there is realisation and if you speak to most of the utilities and the government, there is also an appreciation that that needs to be done. It is a question of, ‘they have to step it up’ otherwise the investments won’t be sustainable. The profit motive is there, it’s appreciated, but I think tariffs will have to be adjusted to compensate for that.