Financing Challenges for Electricity Projects in Sub-Saharan Africa: Reviewing Old Models and Exploring New Ones

Abstract

Energy access remains a decisive problem in many Sub-Saharan African countries. Decades of international involvement, through various approaches, have not succeeded in making significant improvements. This article presents traditional financing approaches and analyzes the problem they face. In particular, the imbalance of power and interest between non-African and African players is highlighted. New models are then reviewed, pointing to some key changes to adopt in energy projects: smaller project size, local control over financing sources, innovative financing schemes, and increased private and African ownership. Projects should also be conceived in relation to Sub-Saharan African countries' governance capacity.

KEYWORDS:

• business model
• electricity
• investment
• public-private partnerships for infrastructure

Notes

Source. Briceño-Garmendia et al. (2008).

Sources. IDCOL, 2010; Grameen Shakti, 2011; SolarAid, 2011; Roy and Nightingale, 2010.

A sentence in the annual report of ICA summarizes that point: “In fact, the more complex the projects become (in particular in blending with grants, for instance), the more Conditions Precedent the borrowers have to satisfy, and the slower the disbursement rate becomes” (ICA, 2009).

Private Infrastructure Development Group. PIDG members are the UK Department for International Development (DFID), the Swiss State Secretariat for Economic Affairs (SECO), the Netherlands Ministry of Foreign Affairs (DGIS), the Swedish International Development Cooperation Agency (Sida), the International Finance Corporation (IFC)/World Bank, the Austrian Development Agency (ADA), Irish Aid, and KfW.