The huge energy market barriers in Africa

The energy market in Africa is relatively struggling to meet up with the massive demand from consumers, with more than 620 million Africans still unable to access electricity.

The ever growing population which keeps placing huge strain on the 1.7GW of daily energy supplied in the region makes the situation even more pathetic.
Unfortunately, there are several barriers hindering power investors from coming into the market to ameliorate the crisis.

In this article we shall be looking at some of these barriers and their impact on the long term future of the energy market in Africa.
Huge cost of power equipment: Power equipment cost has sky rocketed over the past few years, with the fluctuation in major fiat currencies to local currencies in Africa. This has discouraged a whole lot of investors from going into the market. Equipment like Power Transformers, Generators, cables are imported and the cost of bringing them to their various destinations eats deep into the cost of the overall project. This has created operating losses at the generation, transmission and distribution supply chains.
The market is highly subsidized: The energy cost in Nigeria, where the government heavily subsidizes electricity tariff goes for $0.05 per Kwh even as the huge cost of energy production doubles that of the fixed energy tariff, thus discouraging a lot of energy producers from getting involved in the market. To meet up with the huge overhead cost, the Energy regulators recently increased electricity tariff by 45% to help utility companies recover most of their funds.
High import duties: The import duties on power equipment have been on the increase over the year, which has negatively impacted on investor’s interest in the energy market. A near zero import duty of power equipment would have ideally been a stimulus to break the huge barrier posed by the constant review of import duties in Africa.
Government unstable policy: Part of the barrier hindering new investors from coming into the energy market is the unstable policy of government. Issuing of operating licence that is supposed to be seamless and stress free for example can sometimes take a while to get approved due to changing policies that may require one form of documentations or the other.

One government may introduce free tax regime while another government may come into power and abolish the same tax regime, thus creating uncertainty in the mind of investors.

The Solarex Energy Solution will hopefully create a functional ecosystem despite these obvious barriers and help actualize the hunger for energy in Africa. This will be achieved via the establishment of collaboration with relevant stakeholder within the country of operation to ensure that these barriers do not affect the implementation of the Solarex ecosystem.
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Editor

Program Coordinator, Nigeria