Today, we talk to Mr. Yohannes Gebremeskel, an Energy Policy Expert and Economic Affairs Officer. We interviewed Mr. Yohannes through email and thank him for sharing his knowledge with us about Energy and Infrastructure in Africa and the benefits and challenges that the region is experiencing. Mr. Yohannes is currently working for UNECA’s private sector division in Addis Ababa, Ethiopia.
- Would you please tell our readers a bit about yourself, Mr. Yohannes?
My professional background is in Economics and Finance, completing my studies at Asmara University. I subsequently pursued further education in Natural Resources Economics. I worked as Associate Director of Policy Research at an institute within Michigan State University. Starting with the Sub-Regional Office for Eastern Africa of the UN Economic Commission for Africa based in Rwanda as regional energy policy expert, currently I am working for UNECA in the Private Sector Division in Ethiopia as energy policy expert, and Economic Affairs Officer, with a focus on Africa.
- How can ensuring sustainable energy boost development for Africa, in general, and Eastern Africa, in particular?
Energy is fundamental to sustainable development, a recognition of which has led to its inclusion as Goal #7 among the Sustainable Development Goals. Social development, such as the provision of health and education service, is tied partly to the availability of energy. Industrialization and small scale economic activities are supported and facilitated by reliable and affordable power supply. Challenges, such as electricity interruptions, load shedding, rationing and others have had economic impacts in Eastern Africa in the recent past, leading to losses amounting up to 3% of GDP. Measures since 2012 have addressed many of these issues in Eastern Africa, and currently the region is facing the prospect of better energy supply largely due to the phasing out of expensive thermal options and expansion of electricity supply from clean energy sources. Of course, with a goal of sustainable energy for all by 2030, much policy, planning and investment attention is still required in Africa to bridge remaining gaps, where more than 640 million people in the continent remain without access to electricity. Countries need to sustain their positive measures in infrastructure development at large as a foundation to meet economic development goals.
- How can the underdeveloped countries manage to sustain energy and make it affordable for the people?
This, indeed, is a critical challenge, for which two sets of approaches are pursued. Traditionally, to make energy affordable, the State often subsidizes tariffs (prices) at socially affordable rates. This results in substantial financial responsibility for the public sector as the cost of energy in Africa is often very high, largely due to generation technologies used and high losses in transmission and distribution networks. It is not uncommon to find such electricity supply losses of above 30%, leading to high costs of delivered electricity. The second approach, which is getting policy traction today, is to stay away from artificially lowering electricity tariffs, and instead work on developing cheaper energy sources, improving network infrastructure to cut losses and bring the real cost of energy down and passing the saving to consumers without resorting to major subsidies. Fortunately, the cost associated with solar energy technology, for example, has dropped by more than 70% within five years and is expected to decline further as efficiency of the technology has also improved. These clean energy technology cost and efficiency improvements offer a great advantage for countries focusing on sustainable energy development, as they offer both sustainability and affordability advantages. Therefore, as developing countries pursue rapid development of their clean energy assets, the affordability challenge associated with these technologies has eased, offering a scope for passing these benefits to consumers.
- What are the main natural resources that Africa can benefit from?
Africa is endowed with valuable natural resources, and some are needed in high-tech industries. The resources range from traditional minerals, such as gold, copper, diamond, and oil and gas, to precious earth minerals necessary in the evolving global tech industry. As UNECA has been advocating for years now, reliance on natural resources alone will not lead Africa to an industrialized and advanced economy. Raw natural resources will have to be connected to greater value capture through industrialization. From the processing of natural resources locally to creating new backward and forward linked domestic industrial activities, much of the value of natural resources beyond their raw material value can be captured locally. In fact, a number of African countries have already instituted local content policies to use policy and legal instruments to induce local value capture. Evidence since the 1960s has clearly demonstrated that endowment of natural resources alone is insufficient to trigger industrialization without a deliberate effort to industrialize on the back of natural resource endowments in Africa. There are already good examples of this in Africa. Local companies processing cocoa into chocolate, or tea and coffee growers exporting processed and packaged products, as well as local processing and trading of precious metals are some of the lessons we need to look at closely.
- As many of the African countries’ national infrastructure networks remain disconnected, could you please mention some of the reasons and solutions?
Indeed, infrastructure interconnection in Africa is limited. This has hindered economic and trade links within the continent, where intra- African exports stand at below 20% compared with intra-Europe exports of nearly 70%, that of Asia at 60% and North America at 31%. There is much scope to improve this in Africa; however, this requires a greater degree of regional infrastructure development and interconnection. Some of the major challenges for regional infrastructure development include different and non-harmonized regulations among countries, lack of regional regulatory bodies, complexity of regional projects and associated financing risks, political challenges, financial settlement and other economic constraints today. With the adoption of the African Continental Free Trade Area (AfCFTA) agreement, it is expected that some of these barriers will be addressed sooner than later. Furthermore, the Program for Infrastructure Development in Africa (PIDA), initiatives of the African Union Commission and that of UNECA in the infrastructure space are geared towards alleviating some of these regional infrastructure development challenges. Examples include the prioritization, for implementation, of 16 major continental infrastructure development projects under PIDA; the electricity sector regulation harmonization work of AUC; and the regional infrastructure financing and energy regulatory environment assessment work of UNECA. However, there is need for further concerted regional and continental efforts, in the spirit of AfCFTA, to address some of these gaps by member States and Regional Economic Communities. This will require addressing the soft policy and regulatory challenges, and bridging the infrastructure gap through the development of concrete and bankable regional projects along with viable models of investment.
- Major challenges for energy and infrastructure in Africa?
As part of the role UNECA plays in tracking progress on the achievement of sustainable energy development (SDG7) in Africa, we have been paying attention to progress in African countries. So far, we have observed that the policy for sustainable energy development in Africa has improved markedly. For the first time in 2017, the rate at which population electricity access grows in Africa surpassed that of population growth, leading to decline in the number of people without electricity. We expect that this trend will continue with sustained policy and investment focus in the energy sector. Furthermore, we observed that efforts of the public sector in energy capacity development are complemented by the private sector, where some 13% of the energy capacity development in the continent is undertaken by the private sector. Despite these positive developments, major challenges remain to be addressed.
These include the development of national capacity for energy sector planning to gear the sector to a sustainable clean energy transition; financing new energy development through public, private and public-private partnership approaches; improving the energy regulatory environment to accelerate investment; creating conductive environment for the sustainable introduction of decentralized energy technologies, such as household solar technologies; and minimizing energy wastage by improving on energy efficiency from generation to consumption, along the value chain. Then there is the regional interconnection dimension that countries are currently working on. Given the appreciable renewable energy endowment of African countries, addressing some of these challenges will lead to progress towards tapping these resources for the development of the energy capacity at country and regional levels, in support of the economic aspirations of countries.
- What are your thoughts regarding Eritrea’s development plans, energy and infrastructure?
Eritrea has huge potential in the energy sector. Assessments so far show vast wind energy capacity, particularly along coastal Eritrea with wind resources classified as ‘world class’, and solar energy potential is equally attractive. Further assessment is required to see the full potential of geothermal resources in the country; however, as Eritrea is in the rift valley system, potential development of geothermal energy can be expected. Eritrea has sufficient energy resources to consider energy independence; even better, consider being part and parcel of a regional energy market both as exporter and importer in a dynamic regional system. With the decline in the cost of clean energy technology, Eritrea’s potential for clean energy development looks even more promising. In terms of electricity access, based on assessments we have done in the 14 Eastern African countries, Eritrea stands in the top five by number of people with access, next to Seychelles, Kenya and Comoros. Despite the challenges of the recent past related to power shortage and load shedding, similar to the challenges we observed in Eastern Africa, there have been recent improvements in stabilizing supply. The regional environment has also changed markedly. All these open some challenges and opportunities for Eritrea.
- Anything you might want to share with us at last?
The recent Intergovernmental Committee of Senior Officials and Experts meeting in Asmara attracted participants from Eastern Africa. The meeting, jointly organized by the Sub-Regional Office for Eastern Africa of UNECA and the Government of Eritrea, was successfully hosted. It led to fruitful Eritrea-UNECA engagements on various policy areas of interest. I look forward to many more of these engaging policy deliberations of regional and continental nature in Eritrea to share experiences, challenges, and successes.
- Thank you.