Global effort to fight energy poverty in Africa is launched at the World Economic Forum

Energy security and generalised access to modern energy are key factors determining the failure or success of the sustainable social and economic development of societies. In sub-Saharan Africa, half a billion people, or three quarters of the population, lives without access to electricity. This is a major barrier to human development since both issues are strictly correlated (graph 1, click to enlarge). Sub-Saharan African countries consistently rank at the bottom of the Energy Development Index [*.pdf] (table 1, click to enlarge).

For this reson, energy poverty is key at the World Economic Forum on Africa (WEF-A) taking place from 13 to 15 June in Cape Town, South Africa. New initiatives are underway to help tackle the problem, that is finally beginning to be recognised by the international development and aid community as one of the core elements of any development strategy. At the WEF-A, the Development Bank of Southern Africa (DBSA) today agreed to join the World Economic Forum’s Energy Poverty Alliance as part of a drive to provide basic electricity to African citizens. Jay Naidoo, Chairman of the Board, and Paul Baloyi, Chief Executive Officer and Managing Director, Development Bank of Southern Africa, have committed to host the Energy Poverty Action Management Unit (EPAMU) at their offices in Midrand. Energy Poverty Action (EPA) was launched at the World Economic Forum's annual meeting in 2005 in Davos.

The Energy Poverty Alliance is a private sector initiative that delivers business expertise and best practices to reduce energy poverty. The three initiating partners, British Columbia Hydro and Power Authority (Canada), Eskom (South Africa) and Vattenfall (Sweden), have already committed to developing pilot projects in Lesotho and the Democratic Republic of Congo, initially providing electricity to more than 70,000 people.

Goals of the EPA are:

• developing local capacity in construction, operation, maintenance and revenue management
• ensuring the participation of local communities. The greatest use of local resources, both with respect to labour and material, will maximize development gains
• promoting a culture of payment for electricity through the delivery of high-quality services
• promoting investment in the power sector across the developing world through the efficient delivery of rural electrification systems and revenue management
• promoting a market within governments, utilities, commercial companies, communities, donors, banks or NGOs which have a mandate or interest in rural electrification and have the means to pay for the necessary investment
• designing and installing the energy system, including considering the full range of potential solutions (e.g., biomass, hydro, solar, wind and inductive power, lowcost grid connections, pre-payment systems)
• empowering/training local organizations in charge of the operation and maintenance of the system
• guaranteeing financial sustainability by designing the system such that the end users pay all costs required for the ongoing operation and maintenance; social and environmental sustainability will also be included

Christoph Frei, Director of Energy at the World Economic Forum, described the DBSA's partnership as a key milestone for the World Economic Forum's Alliance. "This provides a good platform to link international business capability with local community needs, to develop a brand for electrification projects, and help develop financing mechanisms," he said . Frei added that the Energy Poverty Alliance is an ideal vehicle to engage more companies in developing electricity infrastructure:
sustainable development :: energy security :: energy poverty :: developing countries :: electricity :: biomass :: bioenergy :: renewables :: Africa ::

"EPAMU will be developed into a centre of excellence that will employ skills and expertise from some of the most committed energy companies in the world. By developing sustainable, replicable models to address the challenges of energy poverty, EPAMU will facilitate the creation of local capacity, empowered to manage energy service delivery, maintain infrastructure and identify opportunities for future expansions. The key element is local empowerment and local economic sustainability, i.e. that the power systems are operated and maintained without the need for subsidies or transfers from the outside," said Steve J. Lennon, Managing Director, Resources and Strategy, Eskom, South Africa.

"The joint solution of using alternative sources of renewable energy, expanding the national and regional grids, and using innovative cost effective technologies will contribute to more individuals, industries and businesses gaining access to electricity; this is what EPA offers. And Eskom confidently supports EPAMU and its goals of increasing energy access in Africa," said Lennon.

African competitiveness
Also today, a new report from World Economic Forum, the World Bank and the African Development Bank on Africa's competitiveness was released which shows that African businesses can become far more competitive, but that African governments and their international partners will need to improve access to finance, rebuild infrastructure and strengthen institutions.

The conclusions, released today at the launch of a major new report, The Africa Competitiveness Report 2007, reflect research efforts of three institutions – the World Economic Forum, the African Development Bank and the World Bank. Low access to financial services emerges as a major obstacle for African enterprises, but poor infrastructure, corruption and weak institutions also make African goods and services less competitive in the global marketplace. The report also points to the growing number of success stories in the region that show the steps countries can take to improve business conditions.

The jointly produced report was released ahead of the World Economic Forum on Africa where it will be discussed in-depth. It is the first report on the region’s business environment to leverage knowledge and expertise within the three organizations, marking a new level of research cooperation. The report also presents an integrated vision of the policy challenges African nations face as they build a foundation for sustainable growth and prosperity.

The five common themes that emerge from the analysis of the competitiveness landscape in Africa are:

1. Good policies are critical for a sound business environment. Policies are more important than geography or the abundance of natural resources. Countries that have implemented sound policies rank higher on competitiveness, with better growth and productivity outcomes.
2. A critical constraint to businesses in Africa is access to finance. Further, improvements in the regulatory environment (such as better collateralization, transparency and auditing) represent a necessary step for unleashing the potential of finance for competitiveness in Africa.
3. Infrastructure remains one of the top constraints to businesses in Africa. Energy and transportation are among the main bottlenecks to productivity growth and competitiveness in Africa. Firms lose as much as 8% of sales due to power outages, and transportation delays can account for as much as 3% of lost sales.
4. Corruption in Africa is a serious obstacle to improving productivity and competitiveness. The frequent payment of bribes, inconsistent enforcement of regulations, significant time spent with officials and political favours directed to special interest groups significantly impact productivity.
5. There are significant examples of success throughout the region. The World Economic Forum’s Global Competitiveness Index shows that the region, and sub-Saharan Africa in particular, lags primarily in the basics of infrastructure and education. However, many countries perform much better on issues associated with technological readiness and efficiency. Sustaining and expanding these opportunities remains a challenge.
   

“The work done by the World Economic Forum in the area of competitiveness is an important contribution to a better understanding of the challenges faced by policy-makers and the international community in their efforts to better assist these countries. This year’s Africa Competitiveness Report is a comprehensive attempt by our three organizations to place the continent in a broader international context and to cast light on the important aspects of development in the region,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

"Africa has the potential to become a far more competitive player in the global economy," said Obiageli Katryn Ezekwesili, Vice-President, Africa Region, World Bank, Washington DC. "The study finds that, while a number of governments have significantly improved the business climate in their countries, the region as a whole has much more to do to make Africa a competitive location for enterprise. These changes in the business climate, together with greater access to finance and new investment in infrastructure, should come together to advance Africa’s drive to develop, create jobs and reduce poverty."

“The key to the future of African economies is trade and investment and, therefore, the business climate. Our aims at the African Development Bank are to act as a catalyst, to enhance the investment climate and to respond to demand in support of the Bank’s development goals. This is achieved by rallying investors to look at opportunities in African countries differently. I applaud the palpable progress being made in the regulatory and institutional domains. But we must vigorously now deal with the other set of barriers – physical – that means infrastructure. It is crystal clear today that energy shortages, poor roads and inadequate communication between countries and regions constitute a real impediment to the private sector and economic growth and, in the case of energy shortages, threaten to roll back economic achievements of the last six years,” said Donald Kaberuka, President, African Development Bank (ADB), Tunis.

The report analyses many aspects of Africa’s business environment and highlights the key issues that hinder improvements in Africa’s competitiveness and job growth. This year it examines many aspects of Africa’s business environment and themes that will boost the prosperity of nations. This includes detailed assessments of the drivers of productivity and employment growth, including the rankings of 29 African countries in the Global Competitiveness Index; the competitiveness and investment climate in Africa’s four largest economies (South Africa, Algeria, Nigeria and Egypt); the effect of gender disparities on employment and competitiveness; and the role of new technologies in fostering a more dynamic business environment.

Also included are detailed competitiveness and investment climate profiles, providing a comprehensive summary of the drivers of the competitiveness environment in each of the countries included in the report.

The Africa Competitiveness Report 2007 is an invaluable tool for policymakers, business strategists and other key stakeholders, as well as essential reading for all those with an interest in the region.

More information:
World Economic Forum: Energy Poverty Action [*.pdf] - brochure.

An interesting overview of the concept of global energy security is provided by the World Economic Forum and Cambridge Energy Research Associates who jointly produced The New Energy Security Paradigm [*.pdf] - Spring 2006.

For an in-depth analysis of energy's role in social and economic development, see the still authoritative theme chapter titled "Energy and Development" in the IEA's World Energy Outlook 2004 [*.pdf]. The text contains an interesting index tieing the Human Development Index to an Energy Index, resulting in the IEA's 'Energy Development Index'.

World Economic Forum: The Africa Competitiveness Report 2007 [*.html version, *.pdf version can be found here] - June 13, 2007.