Tag: Loan

The leaders of more than half of Africa’s nations gathered this week in Dar es Salaam, Tanzania’s sprawling seaside metropolis, to commit to the biggest burst of spending on electric-power generation in Africa’s history.

The World Bank, African Development Bank and others are pledging at least $35 billion to expand electricity across a continent where more than a half-billion people still don’t have it. About half of the money will go toward solar “minigrids” that serve individual communities. The loans will come at below-market interest rates, a crucial stipulation as global lenders usually charge much higher rates in Africa, citing higher risks.

In an interview, Ajay Banga, the president of the World Bank, cast the initiative in sweeping terms where economic development met societal stability and basic human rights. “Without electricity, we can’t get jobs, health care, skills,” he said. The success of electrification, he said, is “foundational to everything.”

The summit’s promise is to get half of Africa’s 600 million unelectrified people powered up in just six years. That averages out to five million people a month. Mr. Banga said the World Bank, on its own, had not yet even passed the one-million-a-month mark.

Despite the unusually strong statements of political will, many people, particularly in Africa’s beleaguered power sector, expressed deep skepticism. In fact, some noted that one need not look farther than the host country, Tanzania, to find a cautionary tale.

Recently the world’s biggest developer of solar minigrids, Colorado-based Husk Power Systems, closed up shop in Tanzania because the government insisted that it sell its electricity at the same price as the heavily subsidized government-run electric utility.

Unable to make money at that price, Husk said, the company sold its assets, which it had spent millions of dollars on, at a steep loss. Some remain intact but are defunct. Others have been dismantled and are being sold for spare parts.

This despite the fact that Tanzania had seemed like an ideal market to Husk when it arrived there in 2015. The country’s new president at the time, John Magufuli, had earned the nickname “The Bulldozer” both for building roads and for reining in corruption. Only a third of Tanzanians were connected to the grid.

Husk’s departure left thousands of people powerless and frustrated, as they had been willing to pay Husk’s higher prices. Among them is Mwajuma Mohamed and her family in Matipwili, a community where around 200 houses and businesses briefly got power from a Husk solar minigrid that’s now caked in dust.

“When we got electricity, it was like we were normal people suddenly,” she said, showing a visitor around her darkened house. The first thing she bought, she said, was a TV, which is now back in the box it came in. “It feels unfair. It feels like we wasted money.”

Without naming Husk, Tanzania’s energy minister, Doto Biteko, said in an interview that some minigrid operators charged artificially high prices, which resulted in inflation. “We are not trying to give anyone a hard time,” he said. “But it is the government’s role to decide what is reasonable.”

Lenders are trying to address this issue head on. The loans from the World Bank and the African Development Bank put into place this week are contingent on the regulatory overhauls that, in many cases, allow for private electricity providers to compete more freely with state-run utilities. Tanzania is one of 12 countries signing such “compacts” at the summit meeting. In the coming months, 18 more are expected.

In addition to solar minigrids, a roughly equal amount of money will go toward extending traditional, existing power grids, which are mostly supplied by hydropower and fossil fuels.

But it is the plummeting cost of building solar power, driven by China’s breakneck growth as a producer of inexpensive, high-quality solar panels, that would be the mission’s main enabling factor. Not only has solar power become more affordable, it takes far less time to deploy than building a dam or power plant and has the added benefit of not emitting greenhouse gases.

“It’s the tech and the pricing. That’s why this is finally happening now,” said Raj Shah, who leads the Rockefeller Foundation, which is investing tens of millions of dollars in renewable energy projects around the developing world. “The reason almost 30 heads of state are here is because they now see this is the quickest, least-cost way to create jobs and prevent the kind of instability they see growing in their countries.”

In the time since Husk shut down the minigrid in Matipwili, poles carrying power from Tanesco, the state-run utility, arrived in the village. But they serve only a quarter as many people, and the service is inferior, customers say. Like all but four of Africa’s dozens of electric utility companies, Tanzania’s runs at a steep loss and lack of maintenance leads to frequent and lengthy power cuts.

“With Husk, we could buy a package at a set price and use however much electricity we wanted, so people like me started businesses,” said Gesenda Mwise Gesenda, the village chairman, who uses a Tanesco connection to refrigerate drinks that he sells. “With Tanesco, it actually costs me three times as much for the same amount of power. Either it is my meter going up and up, or the power cuts for hours, even days.”

The experience in Matipwili explains why lenders are increasingly favoring decentralized electrification. “What we’re seeing here is the realization that in many places where a grid doesn’t currently exist, extending it there is not cost-effective nor is it beneficial to end users, at least compared to a solar minigrid,” said Ashvin Dayal, who leads the Rockefeller Foundation’s power and climate program.

The mission’s funders say they have been clear with governments that money alone cannot solve the problem and that regulatory change is what might attract even more investment beyond the $35 billion this week.

Mr. Banga described attending a climate and energy summit in Kenya last year where he met a group of African leaders. “I said to them, ‘Hey guys, you want to be in your jobs for another few years? You have to promise jobs and quality of life. I can help you, but you need to step up to the plate.’”

Multilateral funding is never 100 percent assured, and not just because of concerns about the countries receiving aid. A new administration in Washington that is openly hostile to both renewable energy and foreign aid has caused uncertainty over the World Bank’s core funding, if only because the United States is the World Bank’s biggest contributor and holds outsize sway over who runs the institution. For now, the bank has enough money in its development aid pot to fund its electrification mission, in part because of last-minute decisions made by the outgoing Biden administration.

Mr. Banga was circumspect about the chance of hitting the bank’s electrification goals in such a short period of time, but said he hoped the investments rolled out in Dar es Salaam would spur private equity, sovereign wealth funds and local banks to follow them.

“It’s a huge mountain to climb. You can’t just decree it,” said William Brent, Husk’s chief marketing officer. “Husk is building one minigrid a day and that’s the fastest in the industry. Even if you added 10 more Husks, you’d still only get a fraction of the way there.”

Husk has built 70 minigrids in Nigeria, where it has found a receptive regulatory environment. And it said on Monday that it would enter the Democratic Republic of Congo this year.

While lenders and presidents rubbed shoulders in Dar es Salaam, however, Congo also offered a reminder of the volatility that threatens progress. Rwandan-backed rebels took the Congolese city of Goma on Monday, where some of the same funders supporting the new initiative had backed a minigrid project.

Cities fall, governments renege on commitments and debts pile up. Lenders know they are still up against the same underlying issues that have so limited investment in African infrastructure and left many countries economically hobbled.

But lack of electricity is more than just a drag on economies. It’s a drag, period, to not have electricity in a world where more than 90 percent of people do.

It means no internet, no speakers to play music, no cold beer from the fridge, no light for kids to do homework.

When Husk came to Matipwili, Mashavu Ali, 45, a mother of eight, was above all excited for one of her daughters, who had the best grades in the village secondary school. She imagined her studying late into the night.

Since they lost electricity access, her daughter has dropped to third. Ms. Ali now rents a small rooftop solar panel for roughly 20 cents a day, but the light it provides is dim and, without a battery to store power, it doesn’t work on cloudy days. Her children go to bed soon after the sun sets. And she has set aside her own dreams of how she could support them with just a little bit of power.

“My plan had been to open an ice cream business,” Ms. Ali said, sitting outside her house, surrounded by family. It was already dark out and the one outdoor bulb powered by the rented panel began to flicker. “What to say, eh? It remains an idea.”