Tradition. Innovation. Performance. Worldwide.

Fresh from the Press

Clients, Company

Africa’s Renewable Energy Potential

An energy deficit has effectively stunted Africa’s development, with an estimated 70 percent of people in sub-Saharan Africans without reliable access to electricity. In Gabon and Nigeria for example, manufacturing struggles as electricity remains costly and inconsistent. According to the African Development Bank (AfDB), manufacturers in sub-Saharan Africa experience an average of 56 days of shutdown time per year due to power outages.

Fossil fuel-based power generation is the most expensive form of energy globally, yet it is the largest source of electricity generation in Africa. This is the least of concern for a continent simply trying to boost its total power capacity from the current 147 GW, according to the African Development Bank, which is equivalent to the total capacity installed in Belgium, and what China installs every one to two years.

According to the International Energy Agency (IEA), sub-Saharan Africa will require more than $30 billion in investment to achieve universal electricity by 2030. Rural sub-Saharan Africa will require the vast amount of the funds, with more than 85 percent of those living in rural areas lacking access to reliable electricity.

An emerging concern for carbon emissions and sustainable development has created an opportunity for renewable energy on the continent. Recognizing the opportunity and challenges, regional bodies, including the Economic Community of West African States (ECOWAS), have developed rural renewable energy development agendas. ECOWAS member countries have established the Center for Renewable Energy and Energy Efficiency (ECREEE), forming strategic development pacts with several international organizations that includes the United Nations Food and Agricultural Organization (FAO) and the United Nations Industrial Development Organization (UNIDO). ECOWAS members target nearly 20 percent for the renewable makeup of energy by 2030, which include off-grid electricity serving 25 percent of the rural population. The Southern African Development Community (SADC) and the East African Community (EAC) recently agreed to create similar regional renewable energy programs.

Here’s a look at the current renewable landscape in sub-Saharan Africa

#1 Hydropower

Hydropower provides great opportunities across the entire sub-Saharan African region. The Grand Renaissance Dam in Ethiopia is expected to deliver up to 6,000MW to the country, with neighboring Djibouti and Somalia inquiring about the potential of importing such energy. But a recent spat between Egypt, Ethiopia and Sudan stresses the challenges in sharing water resources, especially those pertaining to hydropower potential. Studies also indicate that Ethiopia’s growth in hydropower may not necessarily mean cheaper electricity for its neighbors. Somalia already pays $1.00/kwh to specific providers of cross-border energy.Hydro-projects also can be very costly. To combat the costs and even greater logistical and political challenges, the United Nations announced plans to expand the Clean Development Mechanism (CDM), which has generally benefited hydropower projects, by establishing regional centers in Togo and Uganda. This mechanism should help West Africa realize a greater percentage of its hydro-potential, as East and Southern Africa have outperformed other regions to date. Guinea has already announced plans to the dam the River Niger upstream of river’s inner delta. Mali wants a part of the project as the dam will likely affect the country’s water resources. The Democratic Republic of Congo’s (DRC) plans for a large hydro-project on the Congo River will also likely match the attention given to Ethiopia’s Renaissance Dam.

#2 Biofuels

Biofuel energy production remains limited, despite the fact that the sector grew to an estimated 300 million liters in 2012. In Zambia, Tanzania and Cote d’Ivoire, investors are using jatropha (a drought-resistant genus of flowering plants) in the development of a biodiesel plant. In Mozambique, NDZiLO’s ethanol plant, in partnership with CleanStar Ventures and Novozymes, provides ethanol to rural populations who have long-depended on charcoal (which has tripled in price in the last three years). In Zimbabwe, a community-based biogas plant is being constructed in Harare to convert organic waste to energy. Other African countries, including Kenya, plan to install similar plants. Crest Global Green Energy continues to make noise with biofuel production in Mali, Guinea and Senegal. Whilst land concessions continue to raise concerns, better land policies and improved mixed farming for food and energy should silence critics.

#3 Wind

Sub-Saharan African wind production is booming, with East Africa seeing a major bump in wind energy generation. Wind energy commitments in Kenya skyrocketed from zero in 2011 to $1.1 billion in 2012, underscored by the Lake Turkana Wind power project which will provide 300 MW to the Kenya electrical grid. A 150 MW wind farm in northern Senegal and a 52 MW wind farm in Ethiopia signify the growing interest in wind in Africa’s poorer countries. According to the World Bank, areas with promising wind potential include north of 34%, 6% and 5% of the households in Ethiopia, Ghana, and Kenya respectively.Due to wind speeds, the greatest potential for wind power exists in West Africa. A few wind projects of 30 to 50MW in Senegal is just the start. Wind projects in Cape Verde, according to energy officials, could help the country escape its dependence on fuel imports.

#4 Solar

Senegal pledged to meet more than 30 percent of its rural energy requirement through solar power. Mozambique and Zimbabwe among those following Senegal’s lead to combat their energy deficit. According to Mozambique’s Energy Ministry, more than $15 million has been invested in solar power. From this investment total, $13 million came solely from Fundo de Energia, which is under the auspices of the Mozambique Ministry of Energy. In rural Rwanda, mini-solar projects provide energy access to local schools and farmers, who would otherwise be without power. Strengthening legislation across sub-Saharan Africa for managing solar energy off-grid could massively boost projects in this sector.

#5 Geothermal

Geothermal energy continues to emerge as a potential hidden gem in the sub-Saharan African electricity grid. Recent projects in Ethiopia, Rwanda, Ghana and Nigeria speak to the potential and rising interest as geothermal opportunities are also related to the emerging gas and oil discoveries. The recent $4 billion geothermal plant project in Ethiopia could set the standard for projects in the region. Still this source of energy may present the greatest challenges as exploratory costs are very high for foreign investors while many governments are still developing the knowledge capacity for the sector. According to Burkina Faso Minister of Mines and Energy, Lamoussa Salif Kaboré, the country possesses geothermal potential but little research has been conducted to verify this assertion. Yet it is a common assertion from many ministers in mining, especially oil & gas, countries. The $66 million Geothermal Risk Mitigation Facility for East Africa established by the African Union, the European Union-Africa Infrastructure Trust Fund and the German Ministry for Economic Cooperation, supports surface studies and exploration drilling. Such risk management capital and support could bid well for the geothermal sector in the near future, potentially changing assertions of hope into reality.

#6 Outlook

Coal and gas power plants will continue to grab headlines in Africa. New gas discoveries in Tanzania and Mozambique as well as oil booms in Angola and Ghana should not overshadow Africa’s enthusiastic efforts to develop renewable energy.Rural populations could benefit greatly from such efforts. One local living outside Rwanda’s capital Kigali, best summarized the opportunity and return: “Investors are not talking renewable energy like oil and gas, but renewable has benefited me at this stage.” The solar panels providing energy to a local school spoke greater volumes than his words.

 

Company

Financing Projects Financing Infrastructure Construction Projects

East Africa is the fastest growing region on the continent, with economic growth expected to expand by 5.6% this year, well above the continental average of 4.5% or South Africa’s 3.1%. Infrastructure project finance and development is therefore crucial for East Africa to reach its full potential. The region has demonstrated a strong ability to attract international interest and construction project finance, with many mega infrastructure construction projects currently underway in the region.

Examples of Construction Project Finance Sources:

Kenya’s Standard Gauge Railway (SGR)

This is a new rail system spanning between Mombasa and Nairobi, and is currently the most ambitious infrastructure project in the country. The 609km-long line is expected to cost US$3.6 billion, with China’s Exim Bank meeting 90% of the infrastructure project finance and the Kenyan government providing the remaining 10%. The SGR is a direct effort to connect East Africans and their economies, and in so, lower the cost of doing business, attract further foreign investment and construction project finance to further accelerate growth and development.

Jomo Kenyatta International Airport, Nairobi

Airports are a priority. In keeping with its position as its position as a major African gateway, Kenya is building a new terminal at Jomo Kenyatta International Airport in Nairobi, also known as ‘the Greenfield Terminal.’ The construction project finance is largely being met by the African Development Bank, at an estimated cost of $612 million. The terminal will span 178,000 msq and handle 20 million passengers a year.

Moi International Airport, Mombasa

In 2014, Kenya signed a US$66 million agreement with the French Development Agency for financing construction upgrades to Moi International Airport in Mombasa, which is a major entry point for tourists and business travellers, with an increasing number of airlines flying in directly from Europe.

The Grand Renaissance Dam, Ethiopia

Regional economic force, Ethiopia, is underway with some of the most ambitious infrastructure projects in Africa, with the Grand Renaissance Dam seen as a real flagship project. When completed in 2017, the dam will generate up to 6,000 megawatts of electricity and establish Ethiopia as a main exporter of hydroelectric power. The cost of the dam is almost US$5 billion and the construction project finance comes entirely from the Ethiopian government, with 80% of the infrastructure project finance funded from taxes and the 20% balance through bond offerings – an investment opportunity in the country for foreigners.

Light Rail Transit, Ethopia

In Addis Ababa, Ethiopia’s capital, the recently completed Light Rail Transit, the first electrified rail system in Africa, is a symbol of Ethiopia’s steady rise and modernisation. The construction project finance came from China’s Exim Bank, which provided 85% of the US $475 million required to complete the construction.

Uganda and Tanzania

In terms of financing construction projects, Uganda and Tanzania are also well underway with mega schemes. Over the next five years, through a range of commercial loans, Tanzania will inject US$14.2 billion into its rail network. The country has already signed investment agreements with China worth more than US$1 billion, which include the building of a satellite city to reduce overcrowding in the capital, Dar es Salaam.

The Karuma and Isimba Dams in Uganda

Uganda is financing construction with Chinese investment to build two hydro power plants – the 600 megawatt Karuma dam and the 188 megawatt Isimba dam. The government has signed an agreement with China’s Exim Bank for 85% of the estimated US$2 billion cost of financing construction the projects.

Further Information on Financing Construction Projects

You can find out more about the opportunities for financing construction projects in the region at The Big 5 Construct East Africa construction expo, which takes place between 2 – 4 November 2016 at the Kenyatta International Conference Centre in Kenya. This is the official exhibition of Kenya’s National Construction Authority (NCA) as part of the country’s first National Construction Week, and is the only exhibition endorsed and supported by the Kenyan Government.

Even though the NCA conference is subject to entry fees, The Big 5 workshops are free for attendees – there is a CPD-certified workshop on options for financing construction projects in the region, as well as a host of opportunities to network, source materials, services, machinery and see live product demonstrations.

Just pre-register for your fast-tracked entry into the show, where you can also network with the East Africa construction industry decision-makers, check out the latest in construction technology and techniques.

Technology

How Millennials can redefine Agri-Business in Africa

Over the years Uganda has been recognized as one of the food baskets of East Africa due to its fertile soil and adequate rain; but now the country faces the biggest food shortage crisis in its history. Bad land tenure systems, drought and outdated agricultural tools are some of the factors contributing to this crisis.

 

The shortage of food in Uganda has become so severe that South Sudan and the Democratic Republic of Congo have also been affected as they rely heavily on food supplies from Uganda. Some blame this crisis on the smallholding peasant farmers, most of whom are illiterate, utilize antiquated methods and agricultural tools, and are unable to take advantage of funds allocated to the sector to produce the food needed. So what is the solution, and how do we encourage highly educated, entrepreneurial and environmentally conscious young Africans to create agribusiness start-ups using technologies and business practices of modern farming?

Bear in mind that 21st century consumers know what they want, when they want it, and how they want it. Consumers are becoming more and more particular about the quality of the food they consume, and more discerning about its provenance, needing to know which producers it is coming from. Not only do consumers demand real food but they need nutritious, high quality, responsibly farmed food that is not detrimental to their health. In fact, they are willing to pay more for such food.

In the United States, start-ups are beginning to disrupt the way food is produced, distributed, sold and consumed; as well as how land is managed. Zach Wolf, from Stone Barns Centre for Food and Agriculture suggests that young farmers today are environmentally aware and socially active. For them, sustainability isn’t an ideal but a way of life they want to live and a choice as to how they help others to live. Farm to table is becoming a preferred trend; where the food on the table comes directly to the consumer from a specific farm or producer, without going through a store, market or distributor along the way.

Millennials are driving significant changes in the agricultural sector in other parts of the world. It’s now time for them to do the same in Africa.

The Deloitte Millennial 2017 report found that millennials in developing economies are twice as likely to be inclined to start their own businesses compared to their counterparts in developed countries. Essentially the opportunities for young African farmers have never been better; we just need to change our perceptions on how farmers should look.

While farming is without a doubt one of the most difficult industries to operate in, there is a desperate need for innovative and flexible technologies and methodologies that will improve the way we farm in Africa. There are opportunities for millennials ready to build forward thinking agri-businesses profitable enough to create jobs. The time to startup is now.