August 19, 2013-There has been much made of the idea of African ‘lion’ countries, mimicking Asia’s famous ‘tigers’. There is no reason Africa shouldn’t start behaving like Asia — hordes of international businessmen should travel to air-conditioned offices and lavishly appointed bars in cities like Nairobi and Dar Es Salaam well within my lifetime. There are many thorns that need to be removed from the paws of these lions. But I do propose that renewable energy, in particular geothermal energy with its formidable baseload potential, can help provide both the energy and cultural electrification that sub-Saharan Africa needs, bringing international partnerships and healthy and competitive economies with it.
Foreign investment can offer the necessary head start, but must eventually transition to a self-sustaining industry.
The GeoPower Africa conference covered this subject in July at Dar Es Salaam. The flow of news on investment into the region seemed to reach a high ebb: A new geothermal energy project in Lake Assal, Djibouti was announced to have found its financiers not one week after the conference closed, and one of the event’s keynote companies, AfDB, joined in the $32 million project by the Sustainable Energy Fund for Africa (SEFA), the African Development Fund, the Global Environment Facility, the OPEC Fund for International Development (OFID), and the Global Geothermal Development plan (GGDP).
Rwanda’s NewTimes published a piece soon after the event on the opening of three wells to explore for geothermal resources on July 19th. An interesting point to note is that KenGen, which mentioned its move into consultancy at the event, was contracted to do the surveying. Two points to note here: First, the highly desirable and vaunted African approach, Africans developing Africa as opposed to simply offering bits of land to foreign investors; second, a positive example of an African company developing its expertise so that it can present itself as a diversified energy company offering a range of services. With any luck KenGen might find itself opening offices across and beyond the continent in years to come. One-off injections of cash and capacity can’t match the potential of real partnerships and home-grown powerhouses.
Recognize the individual characteristics of each country.
“Africa is too vast and its countries are too diverse to follow a single script,” said Rhonda Zygocki of Chevron in a Huffington Post blog. Moving away from the idea of Africa as Africa will be key in identifying the key Lion countries that will pull the entire sub-Saharan region toward growth and stability. Americans and Brits should treat Tanzania, Ethiopia, Kenya and all other countries as separate entities.
Investors in geothermal energy, like any other industry, will need to perceive a business case for setting up shop in the African Lion countries. Said Lynn Tabernacki of the United States’ Overseas Private Investment Corporation (OPIC):
A number of countries are poised to join in Kenya’s success in the geothermal sector. Of course, a fair number of countries in the Greater Rift Valley have viable geothermal resources. These resources, contrasted against the high tariffs in countries reliant upon diesel generation, make these markets attractive from a commercial perspective. The leading countries, though, are those that have been able to pull together the public and private support to adequately reduce the perceived risks to investors. For example, a country must have a regulatory framework supportive of both investment and energy sector development. It must also provide investors with an expectation of political stability and a business culture evidencing the sanctity of contract…Aside from Kenya, we have heard from geothermal developers in Uganda, Tanzania, and Ethiopia. Hopefully projects in any of those countries can be developed on a reasonable timeline given the knowledge that everyone has gained from the Kenya experience.
The right projects for the right countries.
It is time to prove the high potential sub-Saharan economies through well-managed energy projects that will bring populations in the region access to the essentials they need. And many of these countries are crafting plans to do just that.
The GeoPower Africa summit saw some constructive and frank input from KenGen’s chairman Titus Kitili Mbathi and other expert board members on how to get a geothermal energy project really moving. “Drill!” was the message. You must survey, look for resources, then get right in and drill. You can keep surveying and consulting and considering indefinitely — but if the project needs to move, it needs to move. The energy is there, as a presentation from WWF later emphasized. It always has been, it just needs to be unlocked.
So are these the countries that companies will send their business development executives to once they’ve cut their teeth in Hong Kong and Singapore’s Raffles Place? Are these the countries that will propel the entire region toward those coveted investment rating upgrades? And is energy the key?
Kenya is established in the geothermal sector, and the next hot markets are likely Djibouti, Ethiopia, and especially Tanzania.
“Tanzania’s booming economy is set to attract new FDI in almost all the key sectors including infrastructure and energy. However, it is the energy sector, particularly renewable energy projects which is expected to accelerate FDI flows into Tanzania,” said Albert Rweyemamu of ATI about his home country. “Ambitious programs such as the U.S. ‘Power for Africa’ initiative and Pan African institutions such as ATI expect to play a bigger role in providing the necessary financing and risk mitigation support in generating clean power not only for Tanzania but also for the entire continent.”
