To be an economic powerhouse, the West African region will require new power solutions and investment to improve energy access. The process to de-risk investment in new business models is being undertaken by various sectors to help accomplish more reliable power infrastructure.
The World Economic Forum (WEF) said an estimated $93 billion is needed annually until 2020 to fund infrastructure development. Increased urbanization, growing consumer markets and broader ties to the global economy are putting additional pressure on the need for African economies to steam ahead with these investments.
In West Africa, the surge of regional players and multinationals into the region’s finance, retail, FMCG, oil, energy, and mining sectors, is opening up key economic opportunities for Africa’s fastest growing region. Foreign direct investment (FDI) flows to African countries increased by 5%to $50 billion in 2012 even as global FDI fell by 18%, according to UNCTAD’s annual survey of investment trends reported in 2013. FDI flows to West Africa declined by 5% to $16.8 billion. Of investment channeled to the two major oil-producing countries of the region, FDI to Ghana remained stable at $3.3 billion, but inflows to Nigeria declined by 21% to $7.0 billion, accounting for much of the diminished flows to the region. However, Nigeria is reacting by privatizing its power sector, with the state owned distribution and generating companies sold into the private sector in October. The sector is poised for substantial investment pending the first five-year regulatory review which will be announced in the near future. This review will have to balance the need for investment to drive better efficiency and reliability of service against the price the sector will be allowed to charge consumers. But if the price is investment conducive and correct incentives are put in place, rapid improvement should be expected over the next 2-3 years.
Launched in 2010, the Program for Infrastructure Development in Africa (PIDA), headed by the African Development Bank, aims to implement infrastructure projects of $68 billion by 2020. These projects will galvanize Africa’s economic development by removing the infrastructure impediment. The areas of critical interest in African infrastructure are roads, railways, ports, water, and energy.
Nigeriais one of the continent’s strongest agricultural markets, enjoying reforms and capital investment; Senegal is pinning growth on further exploration of its deep sea oil blocks; Cote d’Ivoire is working with the International Monetary Fund and World Bank to implement technical and institutional reforms to reduce the electricity sector’s burden on the budget; and in Cameroon the government’s long-term development strategy aims to address shortfalls in transport and energy infrastructure.
In Standard Bank’s press release, it said that it looks “forward to playing its part in helping drive West Africa’s economic success as it continues to expand and develop its franchise in West Africa, as demonstrated by the recent opening of its representative office in Abidjan in Cote d’Ivoire.”
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