Private sector investment slowly returning
Energy projects in Africa back in fashion
October 7, 2005
 By Lynda Loxton
Cape Town - There were signs that the private sector was again interested in investing in energy projects in Africa, albeit on the margins, African parliamentarians were told yesterday.
Anton Eberhard, a director at the University of Cape Town's Graduate School of Business, told a forum organised by the South African parliament and the UN's department of economic and social affairs there had been "a huge increase" in private investment in energy from the 1990s and into 2001/02, not just in Africa but around the world.
But this had been halted by a series of international financial crises, which made investors more cautious about the power sector and Africa as a whole.
"We are only just beginning to see a slight recovery," Eberhard said, adding that it was "still too early to say whether we will see a second wave of private investments over the next decade".
This break had forced African governments to re-examine their policies and review the drive to encourage private investment.
South Africa had decided that state-owned Eskom should be the dominant player, while bringing the private sector "in on the margins".
Eskom announced this week that it would largely finance its new R282 billion upgrade itself, although independent power producers (IPPs) were expected to start operating in 2008 to produce 30 percent of the generating capacity needed.
Ebehard said this trend had been seen in Zambia and several other countries, which had prevented the development of full competition.
But there was still "widespread recognition that the old models of a vertically integrated state-owned monopoly is still in trouble in many respects ... something still has to be done to reform the old model", he said.
This was being done through corporatising the utilities, getting them to sign performance contracts and setting up separate "independent" regulators to monitor them and approve prices.
Eberhard said there had been "a new wave of private sector investment in the form of management contracts, in leases and concessions and new investments in IPPs".
Many civil society groups were against the involvement of the private sector in such key areas as energy. Eberhard said that while "there had definitely been cases where private sector participation had not been good for poor people, there were also many examples of where they had benefited in terms of access and prices".
Northern Electricity, a private company in Namibia, had in five years more than doubled the access to energy by the poor while at the same time bringing down prices. This had been done by improving billing systems, collection rates and customer service.
The private sector was already quite heavily involved in the energy sector in Africa, mainly through IPPs and concessions, which were mostly found in west Africa but were now slowly moving down the continent. The private sector was also involved in management contracts.
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