OFF THE GRID – PLUGGING THE POWER GAP
PAY-AS-YOU-GO POWER IS FAST EMERGING as a viable off-grid solution
David Humphrey, Global Head: Power & Infrastructure at Standard Bank As global sector head, Power and Infrastructure, David is responsible for developing Standard Bank’s involvement in the growth of this core sector in Africa, and helping clients expand their activities into or within Africa. David has had a career in asset based deals in Europe and Africa, and has specialised in rail and telecoms. As global head, David oversees industries such as conventional power, renewable energy, construction and cement, as well as transport. He was formerly employed at the Strategic Rail Authority and then Babcock & Brown (B&B) in the UK, specialising in rail finance. He was involved in many of the major projects in the late 1990’s and 2000’s, including the West and East Coast Main Line developments in the UK, and investment in the rolling stock market in Europe, including the purchase of Angel Trains from RBS in 2008.
With power shortages hampering economic and social development across much of sub-Saharan Africa, new and existing technologies are coming together to allow alternative off grid solutions to complement the conventional grid system in getting power to the largest number of people quickly.
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uilding a fully fit for purpose electrified grid in Africa has become increasingly challenging and the downturn in the commodity cycle in the last two years has added to the challenge. Capital outflows from Africa have resulted in the continent having significantly weaker balance sheets to fund capital expenditure, and this has been further exacerbated by the expectation that a stronger US economy will cause an increase in dollar interest rates, and the increase in repayments will further weaken emerging economies saddled with dollar debt. We now have a vicious circle – the ‘African emerging market problem’, weakening currencies, capital outflows and reduced investment capacity, each spurring the other on in an unfortunate way. The hard choices about infrastructure delivery that emerging market economies need to take have now arrived at Africa’s doorstep. Governments do not have the balance sheet to fund all necessary investment. What needs to be done? The private sector needs to take on most of the investment, but
2016 Africa Energy Yearbook
against sound and reliable regulatory and legal frameworks that investors can trust. Most importantly, infrastructure investment needs to be in local currency. This means multilaterals (IFC, EIB, AfDB etc) and DFIs must decrease the amount of dollar lending and increase the amount of local currency lending in African countries. However this will take some time. Government to government loans should not be discounted either, but here again local currency funding by the developed market Government (e.g. China, US, EU) should become the norm, not the exception. Certainly the successes achieved in South Africa’s renewable programme can be replicated across Africa, where opportunities abound for solar, wind, hydro and gas projects, but where only 20% of people are connected to power grids. Innovative models for project finance are going to be needed to help fast track energy projects in Africa and bridge gaps that existed previously. 87