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East Africa’s energy mix diversifying

The economic growth of Uganda, Kenya, Tanzania and Rwanda are inherently connected to the development of power infrastructure. As urbanisation and industrialisation fuel the need for electricity in cities, government focus on energy development will provide a platform for both private and public sector participants to contribute. Moreover, it is expected that the energy mix in East Africa will diversify from its predominant dependence on hydro, affording additional opportunities for power infrastructure advancement.

Analysis from Frost & Sullivan finds that the demand for electricity in East Africa is expected to grow at approximately 5.3% a year up to 2020. To meet these requirements, generation capacity would have to increase by 37.7% in Uganda, 96.4% in Kenya, 75.3% in Tanzania and 115% in Rwanda.

Large gas finds have placed East Africa on the map as a major participant in the world gas market. However, limited regulatory and institutional capacity, shortcomings in technical capacity and political risks are slowing down improvements in power infrastructure. The challenge is compounded by the lack of local skills and resources. The need for external contractors and consultants to work on infrastructure projects will also escalate costs. Hence, foreign investments in the East African energy sector will be vital to establish a platform for skills growth and knowledge transfer.

“In light of the significant investments needed over the next eight years, the power infrastructure segment is dependent on the private sector,” Frost & Sullivan energy and environmental research analyst Joanita Roos says. “The government, in conjunction with development partners, must build a more favourable business environment to facilitate growth.”

It is crucial for global investors to understand the unique opportunities and challenges of the individual countries in the region; East Africa has the lowest access to electrical power and smallest per capita generation compared to all other sub-regions on the continent. While gas development plans, financing for infrastructure and international partnership is critical for successful development of the power sector, returns will be slow.

“Focus on intraregional energy and trade integration will help reduce costs and ensure greater reliability and sustainability of power supply. If strong cross-border interconnectors develop to enable consistent power flows across the region, Rwanda, Uganda and Tanzania can make a mark as net exporters of electricity.”