Investor-friendly energy laws in EA key to success of power project

IMF managing director Christine Lagarde speaking in the concluding roundtable at the Africa Rising Conference on May 30, 2014 at the Chiasson Conference Center in Maputo, Mozambique. AFP PHOTO/IMF/STEPHEN JAFFE 

By SCOLA KAMAU Special Correspondent

In Summary

• Africa needs $300 billion funding for power projects but the beneficiaries may have to review laws governing the sector if they hope to compete favourably for the money with Nigeria and South Africa, which have standardised terms for investors in power projects.

• From Washington bearing gifts: Who got what in East Africa?

East African Community countries will benefit from the $26 billion pledged for power projects during the recent US-Africa Summit in Washington, US, but they will be required to review their energy policies to attract more investors.

Citi, Dangote, Standard Bank and General Electric are among 30 companies that committed $14.7 billion towards power initiatives targeting 16 African countries where power shortages significantly add on to the cost of doing business.

The World Bank committed $5 billion in new technical and financial support for energy projects in Kenya, Tanzania, Ethiopia, Ghana, Liberia and Nigeria that partner with US President Barack Obama’s Power Africa initiative.

“Power outages cost more than five per cent of GDP in Malawi, Uganda and South Africa; and between one and five per cent of GDP in Senegal, Kenya and Tanzania,” Standard Bank said in a statement.

Tanzania, Uganda and Kenya have been struggling with energy the mining and exploration laws, which has seen licences of some investment firms revoked and others challenged in court.

Citi committed $2.5 billion incremental capital to improve access to electricity for millions of people across Africa as part of Obama’s Power Africa initiative.

Citi operates in over 40 countries in Africa with offices in 16 countries, including in key markets such as Nigeria, Ghana, Kenya, Tanzania and South Africa.

Dangote Group signed an agreement to jointly invest $5 billion in energy projects in sub-Saharan Africa with Blackstone Group funds.

The US government has committed more than $7 billion in financial support and loan guarantees to the Obama initiative over the next five years.

General Electric announced a $2 billion investment toward infrastructure, training and supply-chain development. GE, which says Africa is its “most promising growth region,” generated $5.2 billion in revenue on the continent in 2013.

“The US government and the World Bank Group are working now on specific tasks and milestones that could help to achieve one quarter of Power Africa’s goal of generating 10,000MW of new power in sub-Saharan Africa,” said Dr Jim Yong Kim, the World Bank Group president.

Africa needs $300 billion funding for power projects but the beneficiaries may have to review laws governing the sector if they hope to compete favourably for the money with Nigeria and South Africa, which have standardised terms for investors in power projects.

The World Bank estimates that one in three Africans, or 600 million people, lack access to electricity