Inside Business Africa INSIDE BUSINESS AFRICA AUGUST 16 2017 1cdr - Page 20

I N S I D E B U S I N E S S A F R I C A Africa Report July 30 - August 13, 2017 (REIPPPP). The programme seeks to accelerate private foreign investment in renewable energy and since 2013 it has delivered 5,243MW through 79 different projects. South Africa has targeted 18,800MW of electricity to be supplied through renewable energy by 2030. While the South African model is the envy of the rest of Africa, it is not necessarily the ideal model to follow. While the REIPPPP has been a success with each round of bidding - there have been four so far, pushing prices down - the renewable energy rounds have also imposed contingent liability of around R250bn ($19.11bn) onto the national treasury of South Africa. Very few African countries could support this burden. Indeed the rest of the sub-Saharan African countries struggle to entice renewable energy investment mainly due to a lack of creditworthy power buyers such as utilities, according to Ana Hajduka, CEO at Africa GreenCo. "The problem with other African countries following the South African model is that there are very few creditworthy offtakers, therefore, the government has to give some kind of support over the power purchase obligations of its utility," says Hajduka. "This means the government will cover the liabilities of the utilities. But these [liabilities] are usually very large obligations which are encumbering very heavily indebted governments, so it's an unsustainable proposition to continue down this path." The lack of creditworthiness sorely impacts on the availability of funding that can be raised for power projects such as solar infrastructure projects. Just under half of all the power utilities in sub-Saharan Africa are able to cover their operating expenditure, leading to deficits, with several countries losing in excess of $0.25 for every kWh sold. Only Uganda and the Seychelles were able to recover their costs. One of the main reasons so many utilities are unprofitable is because of the low tariffs they charge. Although South Africa's power utility Eskom is also heavily indebted, the country's economy is the second strongest in Africa. But for the other African countries to attract similar investment similar to South Africa, then it is vital that they commission projects even if the cost is above market rates, according to Andrew Johnstone, CEO of renewable energy fund Climate Investor One. "Success breeds success," he says. "What other African governments should increasingly do is actually initiate programmes by going out into the market and saying not only are we open for business but this is the deliverable programme we are putting into place." However, the renewable energy market in Africa is cur rently experiencing a slowdown because of the drop in prices of solar panels, which, while good for customers, has caused major disruption, with market players waiting to see if the price will get lower before mobilising. "At the moment, many African governments have adopted a wait-and- see strategy and they are waiting for prices to bottom out," adds Johnstone. "However, it is advisable to get some deals on the table today, while recognising that it might be more expensive than the deal you're going to do tomorrow. But you need to have successful projects going so that other investors can see that it works in your country." As officials plan their next move, a breed of solar entrepreneurs continue to fill the space. Operating at a much s m a l l e r l e ve l , c o u n t l e s s ke e n businessmen and women have taken to Sachi DeCou 20 u t q solar and are making it work. Sachi DeCou founded a company called Juabar that operates a network of solar charging kiosks in Tanzania. DeCou uses energy from her panels to sell to entrepreneurs who then offer the electricity to their communities. Juabar's entrepreneurs are earning profits of between $75 and $150 per month and operating out of 30 kiosks. On a larger scale M-Kopa Solar provides "pay-as-you-go" renewable energy to more than 140,000 households in Kenya, Uganda and Tanzania and demonstrates the success of those who enter the solar industry. The company was set up in 2011 and since then has added around 4,000 homes each week, charging customers $0.45 per day plus an original deposit of $35 to take home and use a solar kit. Innovative solutions While solar power does provide Africa with a great opportunity to accelerate cheap power distribution across the continent, African governments need to develop innovative solutions to attract foreign investment to scale up infrastructure development, and answer the burgeoning energy call. 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