Africa’s poorest people are paying among the world’s highest prices for energy, according to a new report by the Kofi Annan’s Africa Progress Panel.
The report, dubbed Seizing Africa’s Energy and Climate Opportunities 2015, shows that millions of energy-poor, disconnected Africans, who earn less than $2.5 a day, constitute a $10-billion a year energy market.
In sub-Saharan Africa, 621 million people lack access to electricity — and this number is rising. This size of the market points to significant opportunities for investment and household savings.
According to the report, Africa’s highly centralised energy systems only benefit the rich and bypass the poor.
Released in Cape Town last week, the report notes that bottlenecks in the energy sector and power shortages are costing the region two to four per cent of GDP annually, undermining sustainable economic growth, jobs and investment. It calls for heavy investments by governments in the energy sector.
“One of the greatest barriers to the transformation of the power sector is the low level of tax collection and the failure of governments to build credible tax systems,” the report stated.
Domestic taxes can cover almost half the financing gap in sub-Saharan Africa, and redirecting $21 billion spent on subsidies to wasteful utilities and kerosene to productive energy investment, social protection and targeted connectivity for the poor would show that governments are ready to do things differently.
“I urge African leaders to take that step,” said Mr Annan.
Additional revenues can be mobilised by stemming the haemorrhage of finance lost through illicit financial transfers, narrowing opportunities for tax evasion and borrowing cautiously on bond markets.
The report notes that energy systems in Africa are chronically under-financed, as about three-quarters of government spending is allocated to operations and maintenance, leaving little scope for investment in an expanded, more efficient and equitable energy system.
Two-thirds of the energy infrastructure that should be in place by 2030 has yet to be built, while demand for energy in Africa is set to surge, fuelled by economic growth, demographic change and urbanisation.
The energy gap between Africa and the rest of the world is widening. Excluding South Africa, which generates half the region’s electricity, sub-Saharan Africa uses less electricity than Spain.
It would take the average Tanzanian eight years to use as much electricity as an average American consumes in a month. In Nigeria, an oil-exporting superpower, 93 million people lack electricity. A woman living in a village in northern Nigeria spends around 60 to 80 times per unit more for her energy than a resident of New York City or London.
Fifteen years ago, per capita energy use in sub-Saharan Africa was 30 per cent of the level in South Asia, now it is just 24 per cent and still falling.
Excluding South Africa, consumption averages around 162kWh per capita per year. This compares to a global average of 7,000 kWh.
The international community has set the goal of achieving universal access to modern energy by 2030 while sub-Saharan Africa is not on track to achieve that target.
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According to the report it will take Africa until 2080 to achieve universal access to electricity.