A solution to Africa’s power deficit

Energy has driven a social and industrial revolution throughout the DRC over recent years and further developments are now being planned to cement the country’s economic future.

The African nation’s energy sector had been struggling with ageing infrastructure and power plants that had endured a lack of maintenance and investment, but in 2014 the entire industry was liberalised to entice development. Regulatory frameworks were revised and a series of important projects were launched, offering a variety of opportunities to international and domestic parties alike.

“To develop and modernise the sector by opening it up, a law was passed in 2014 to liberalise the power system,” explains Jeannot Matadi Nenga, Minister of Energy and Water Resources. “Our government is now calling upon the private sector to come and invest in the country’s energy sector.”

Part of the reason for this drive is the country’s energy policy, which was launched in 2013 and has targets until 2030. “Our policy was to first achieve the goal of doubling the rate of access to electricity for the population by 2017, from 9 per cent to 18  per cent,” explains Bruno Kapandji, Mission Head for the Grand Inga Development and Promotion Agency.

Such an aim was designed to ensure that the demands of households across the country, including communities in rural areas as well as those in large suburban dwellings, were met. There has also been a sustained focus on ensuring the country’s industries are able to grow, with reliable access to a ready supply of electricity that can power the wider economic activity at the centre of the government’s development strategy. And while energy access has been the main goal, the wider target was to empower development across the Democratic Republic as a whole using all manner of renewable power sources including hydropower, solar and biomass systems.

Challenges have emerged but the potential of the country is immense. Usable energy potential in the DRC has been estimated at 100,000 megawatts (MW), representing over 40 per cent of the overall African hydroelectric potential, and about 13  per cent of the global potential.

“To develop and modernise the sector by opening it up, a law was passed in 2014 to liberalise the power system. Our government is now calling upon the private sector to come and invest in the country’s energy sector”
Jeannot Matadi Nenga, Minister of Energy and Hydraulic Resources

The country has already extended access to electricity to around 15 per cent of the population and numerous projects are now being implemented, designed to expand access to the 18 per cent target by 2017, which will then ultimately rise to 32 per cent by 2030. Power stations are being revamped  through substantial investment programmes while new plants are also being developed alongside projects focused on solar. However the main focus has predominantly been hydropower.

Liberalisation has opened up the sector, creating an environment that is enticing international investors to explore the opportunities available in the energy industry. The reforms have been far reaching and have included a complete restructuring of the national electricity company (SNEL) and the way it operates, ensuring it is now focused on commercial imperatives making it a better partner for private firms seeking assistance with energy development projects. The strategy has also seen the DRC’s government make great strides in supporting these measures, with its energy policy intrinsically linked to macroeconomic and industrial growth.

Firstly a regulatory authority has been set up that will oversee the country’s power activities, ensuring that the African nation offers a sector that is competitive and attractive for investors, delivers real efficiency gains and achieves development goals. More than 780 sites have already been identified as having the potential to generate hydropower, although they vary widely in size.

The common link, however, is that Prime Minister Augustin Matata Ponyo and Energy Minister Matadi want to see the private companies engaged in the DRC’s energy sector and investing across both huge infrastructure projects and smaller developments.

Many of the reforms introduced in 2014 have already gone some way to providing a rich seam of opportunities for commercial outfits, while developments to the legal framework of the country’s energy sector have also further improved accessibility. The result has been a growth in public-private partnerships, while the country has also collaborated with global operators and organisations such as the World Bank and the African Development Bank to support the sector’s growth.

However while the DRC may well offer a wealth of opportunities to domestic and global investors, there are an array of clear challenges that lay in the path of would-be investors. General energy infrastructure across the country needs improvements and the sector is beset with plants that require extensive investment and renewal to bring them up to necessary standards.

The inability of the sector to provide a consistent level of energy supplies to industry also impacts every area of the economy, with the likes of miners being particularly hard hit by the country’s energy deficit. Access is also low, even at an improved level of 15 per cent, against a pan-African standard of between 30 and 40 per cent.

“Today we have an energy deficit beating down the mining industry, but we believe that in this area we can further collaborate with external partners to improve energy production,” says Prime Minister Matata Ponyo.

Indeed, as the prime minister points out, these challenges are also now being seen as opportunities, and following the liberalisation of the sector the potential for growth has been increasing steadily. Mr. Kapandji, who is overseeing the Grand Inga project, is clear as to why opening up the sector was so vital for the country’s energy sector but also its wider strategy for socioeconomic growth.

“The energy sector, particularly hydroelectric power, is capital intensive because it requires important investments, and the state, whether central or provincial, does not have enough capital to revamp the sector. The goal is to always increase the access rate to electricity, and guarantee its supply to all consumers, whether for domestic or industrial use. Therefore we needed to find strategies to attract the private players while also providing them with the necessary guarantees for them to invest in the sector.”

Clearly for foreign investors, any decision to enter the country comes as part of a long-term strategy and Mr. Kapandji says the liberalisation of the sector has been framed in such a way as to ensure that the country encourages exactly that.

“By investing in a hydroelectric project, your capital will be tied up for 10, 15 or even 30 years for projects like Inga. Other small projects require five or 10-year commitments but once you amortise the initial investment, you can continue to reap the benefits in all forms.”

Mr. Kapandji adds that the positive results are not just seen through the prism of growth for the electricity industry but an uptick in wider economic activity that investors can often benefit from. “All the opportunities are created to give companies time to make money in the long term because while there is water, there will always be electricity and as long as there is electricity, there will always be customers and consumers,” he says.

Such an environment has already created fertile grounds for growth and numerous projects have enjoyed rapid success. Developments normally fall under one of three categories depending on whether they are targeted at improving the urban, industrial or rural population, and they vary enormously in scale. Hydropower stations such as Zongo II now provide 150 MW of energy while Kakobola in Kwilu has a 10.5 MW output. In Kananga, a solar project constructed by provincial government is delivering 3 MW, and further installations such as those at Katanga, Tshopo in the north, and Ruzizi in the east of the country, are now awaiting investment.

However, perhaps the most important – and potentially the most impressive – project is the hydroelectric dam known as the Great Inga Dam, which is set to deliver more than 40,000 MW production. This colossal project consists of eight separate independent phases from Inga III to Inga VIII, and while there has been much talk over recent years of development but little actual construction, it seems that with Inga III now set to launch the tide has turned.

“This is a world-class project,” says Prime Minister Matata. “And I must emphasise that we have not yet had a project in this country that has taken $12 billion [of investment], even in the mining sector. And this investment is only for Inga III, we then have Inga IV, Inga V, VI, VII and VIII in the pipeline.”

Mr. Kapandji, who has been a driving force behind the project’s recent momentum, adds, “The completion of Inga III is an absolute imperative for socioeconomic development, and a necessary condition for regional integration, as well as creating a common market in Africa.”

Intriguingly the Inga III low head project, which will deliver 4,800 MW, is being completed as part of a partnership with South Africa, which has already signed an agreement to buy half of the production totalling 2,500 MW. The development comes following the construction of Inga I and Inga II, which were constructed in 1972 and 1982 respectively. Again, largely because of a lack of maintenance and investment, Inga I and Inga II are producing far less power than they should be, meaning the case for Inga III is greater than ever and the opportunities for investors are huge.

“Inga III is without a doubt the most likely project to shape Africa during the 21st century,” says Prime Minister Matata. “Inga is an extraordinarily profitable and cost-effective site; it is a project in which the PPP scheme can work,” he adds.
Indeed it is also set to provide an export boon with countries including Egypt and Nigeria and even some territories in southern Europe could benefit from this economical energy created in the DRC. Such projects are providing the ambitious African nation with an important dossier to show to global investors the opportunities that the sector offers as it seeks to increase energy production.

“The completion of Inga III is an absolute imperative for socio-economic development and a condition of regional integration and creation of a common market in Africa”
Bruno Kapandji, Mission Head for the Grand Inga Development and Promotion Agency

“We are committed to making the DRC an energy and environment global player,” says President Joseph Kabila, underlining his confidence. “This means producing enough power to satisfy domestic demand, but also being able to export to the region and the continent as a whole.”

The government is transforming the industry to ensure it is open, accessible, and ready for competition, and so similar opportunities – and challenges – can be found across the Republic.

“Many sites exist throughout the country, where the private sector, in partnership with the DRC, can invest in the production of hydro power in a profitable manner,” adds Prime Minister Matata. It’s a point reinforced by Mr. Matadi, who says that he wants partners to “come and construct power stations, transport and manage their power, and only pay taxes, which is extraordinary.”

It is clear that while the country’s energy policy might have been stagnant for many years, the more recent steps implemented by the DRC’s government are driving both reform and change on the ground across the country. Liberalisation of the energy sector is ensuring that investors from across the world have noted the nation’s opportunities, while Inga III is helping to build confidence and provide a clear example of the sector’s potential. And there is also strong support from the government, which seems intent on ensuring that development projects are brought to fruition and deliver positive returns for the country’s citizens and its investors alike.