Africa’s Energy Sector Set to Grow Without Bottlenecks

A lack of political will can slow the development of power projects.
Published: Wed 16 Jul 2014

Many more power projects are reaching closure now as some of the key bottlenecks are being addressed by various governments, says Lisa Pinsley, American Capital Infrastructure at the Africa Energy Forum.

Dealing with bottlenecks

The lack of political will to get the deal done has the potential of being the biggest bottleneck. If this will is not there, progress will be really slow, explains Pinsley.

Pinsley points out that in the earlier Africa Energy Forums, one deal would reach financial closure each year. In the past two years, this has taken off. Countries like South Africa and Nigeria have experienced much success, as well as medium sized markets.

Another bottleneck is fuel supply. Sometimes it is difficult to get supplies to the plant due to a number of reasons. For instance in Nigeria, there is a lot of gas but the government kept the regulated price of gas so low that none of the gas suppliers were incentivized to sell any gas. A commercial price has now been set with American Capital Infrastructure. This price will now incentivize the supplier to get the gas out of the ground and to the plant.

Deregulating the gas market is also critical, explains Pinsley, but then it can quickly become an infrastructure issue. “With gas prices going down globally, we need to get this into Africa. I have seen many projects in development now where LNG, floating and land-based re-gasification units are brought in. We hope that some of these projects will come into fruition within the next year or two.”

Follow-on investments

“As someone in private equity, I want follow-on investments. I don’t want to go into one small country and leave. We are always looking to see who has opened up their markets and are keen to attract investment. A government’s will must be there before we invest,” explains Pinsley.

A change in behavior towards power development and investment will experience a snowball effect as other countries are successful in attracting investment. “Role players need to be proactive when it comes to initiating and closing a deal. You can’t just wait for things to happen and a wider focus should be adopted,” says Pinsley.