Autumn 2013 Issue
energy gap and the its role is growing swiftly. But, the reality is that there are few truly good projects in the short term and those that do exist are facing increasing complexity. Why? Many of the reasons we are already familiar with—structural inadequacies, monopolistic ownerships, difficult market and grid access for new actors, limited innovation, and political risk. Now, we have added other considerations that have resulted precisely from the opening of the sector to sustained private-sector involvement. Some important dynamics here include increasing interest from the BRICS and other countries (primarily in Asia) as sources of investment; expectations of capital safety from investors; and increasingly sophisticated demands from host countries as their experience with the private sector increases. These dynamics need not be show-stoppers—to the contrary—but they do need to be bridged. In Africa, the interplay between energy supply and demand has been particularly difficult. It is estimated that at least $40 billion a year is required to meet future demand in the African power sector, compared with current yearly investment of less than one-quarter of this amount. On the demand side, Africa’s population is growing quickly, compounding the energy shortage problems even further. On the supply side, measures need to be put in place to ensure the sector works well and is financially viable. There is a lot of work to do in this regard. One important word connects supply and demand: Sustainability. The word has several meanings in this context. To be sustainable in Africa, energy needs to be as green as possible, diverse, and affordable. A very important point to underline here is that if the energy sector in Africa is to be sustainable, it needs to be costeffective both for the population it serves and to ensure the survival of providers. Kenya: Mount Kilimanjaro
“As the political risk insurance arm of the World Bank that provides guarantees to the private sector, we underline that the sector has been a powerful instrument in bridging the region’s energy gap and the its role is growing swiftly.” CFI.co | Capital Finance International
Sustainable energy for the continent goes far beyond the sector’s environmental credentials. The challenge is a formidable one. Indeed, with Africa already grappling with a significant energy deficit and the climate change agenda moving forward, what has been difficult will become worse. How can governments, investors, and financiers manage these challenges? These players need to be creative and use credit enhancement where it can be applied to continue to attract new investment and new models. Here, risk insurance products like those offered by MIGA have a very important role to play. Investment guarantees offered by MIGA (as well
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