New technology ‘will assist Africa’

NEW technologies will help Africa lower the cost of producing renewable energy, resulting in the continent leapfrogging mega electricity generation and distribution systems already in existence in other parts of the world, says an international investment expert.

Washington-based International Finance Corporation principal investment officer Marcel Bruhwiler also noted telephony as another example where Africa has also benefited from being a late developer.

This is a sphere where the continent has avoided the need for investment in landline telecommunications by jumping straight into mobile telephony.

Mr Bruhwiler told the SuperReturn Africa Private Equity & Venture Capital conference on Thursday that an estimated $30bn annually was required to bring Africa’s energy industry to a level where it could compete with Southeast Asia. But about $20bn of this was required for transmission and distribution and only one third for generation.

“The big question is whether the continent really needs to invest $20bn per annum in transmission and distribution. I think going forward the answer is no. I think technology will change things in such a way that a generation-distribution model will emerge with very small-scale operations down to rooftop photovoltaic panels or small generation plants for mines and industries in remote corners of Africa which will have no distribution.

“I think we are all a bit of dinosaurs in thinking what power generation is. Technology will drive the landscape going forward.

“We see tremendous cost-cutting on renewable power, particularly for photovoltaic. There is an emerging technology for battery storage which will be commercialised in the next decade.”

Governments would have less of a role in this form an energy which provided the biggest opportunity for classic private equity investments, which in the past have not been actively involved in infrastructure development in Africa.

Mr Bruhwiler said these forms of renewable energy were not commercially viable at the moment but he was confident that technology would drive change and bring down costs. Rooftop solar panels in SA were already commercially viable.

Global law firm King & Wood Mallesons emerging market specialist and partner Patrick Deasy believed that more private equity funds would be invested in infrastructure in the next few years. More bankable deals were on the horizon as regional integration in Africa progressed and leaders demonstrated greater political will to drive development.

The lead times of five to seven years for infrastructure projects in Africa, compared to two to three years for other countries, created uncertainty for investors and had in the past been a drag on the bankability of projects.