Power to Rent in Sub-Saharan Africa

Last week, Botswana’s energy utility, Botswana Power Corporation, signed a contract with Chinese firms for the development of a 600 megawatts (MW) power station. The contract was concluded with China's construction consortium, China National Electric Equipment Corporation and Shenyang Blower Works Electro-Mechanics Import and Export Co. Ltd (the CNEEC-SBW Consortium), to build the Morupule B power station. With this investment, Botswana aims to expand its generating capacity and eventually reduce dependency on energy imports. The country is heavily reliant on foreign energy supply and its major power supplier is Eskom in South Africa.

Not only does Botswana need to improve its existing generating capacity, but so do other African countries as well. Power outages are frequent in the sub-Saharan region, which on average counts 14 power outages in a typical month. The economic loss for companies represents around 6 percent of sales due to power outages. This is much higher than in other regions in the world with 8 power outages and a 3 percent loss of sales for Eastern and Central Europe, and 3 power outages and 4 percent loss of sales in Latin America and the Caribbean. Infrastructure, and in particular a lack of power capacity and reliability remains a major constraint for doing business in most African countries.

For many sub-Saharan countries, the short and sometime longer term solution is the installation of rental power plants which are offered by private sector companies. When existing generating capacity is insufficient, electricity utilities and governments can opt for renting mobile power plants for a period from a few months to even several years. Sub-Saharan Africa was the region with the highest number of private rental contracts signed and the region with the highest capacity of energy rented during 2002-2007.

In 2007, Gabon, Sierra Leone and Uganda concluded private rental projects with a total capacity of 95 megawatts (MW). The length of the contracts ranges from one year in Sierra Leone to three years in Uganda. However, rental power plants are costly and should remain a temporary solution to bridge the gap until utilities and governments succeed to improve efficiency and provide reliable power supply.

Doing Business is currently developing a new indicator on infrastructure, which will measure the time, number of procedures and costs it takes to get a new electricity connection for a business across the world. The findings of this new indicator might inspire governments to necessary reforms to improve efficiency and capacity of utilities.