East Africa’s transmission and distribution (T&D) industry has lots of potential and is ripe for investment, according to a new study from research analysts Frost and Sullivan.
The T&D industry in Kenya, Tanzania and Uganda carries high potential due to the solid macro- and socio-economic policies that have led to increased investment, says the study East African Transmission and Distribution Industry.
Thembie Chehore, energy and power systems research associate at Frost & Sullivan, said: “Recent political developments in some of the countries have led to fears within the international investor community. However, sound policy implementation and further industry liberalisation will result in strong socio-economic gains for the countries, and financial gains for investors that are swift and knowledgeable enough to invest in the region.”
As members of the East African Power Pool (EAPP), Kenya, Tanzania and Uganda have embarked on regional interconnection projects in order to enhance the T&D industry, and foster co-operation and economic growth.
Several major projects are underway including the US$1.26 billion, 1,045 km Eastern Electricity Highway between Kenya and Ethiopia, and the US$1.12 billion, 1,600 km Zambia-Tanzania-Kenya Interconnector.
Commenting on the regional intiatives, Mr Chehore, said: “This type of integration benefits all the member states because it allows countries with a power deficit to easily import power. It also allows countries with a surplus power production to export the surplus power and generate income.
“EAPP projects require huge investments, but at the same time, they present an opportunity for all T&D industry participants.”
Industrial energy demand
Among the key growth drivers for the T&D industry in the region is the steady growth of the industrial sector in Kenya, Tanzania and Uganda. This has a direct effect on the T&D sector due to increased demand for power.
In addition, the three countries have attracted, and are expected to continue attracting, increasing foreign direct investment. Power sector-specific programmes, such as the Power Africa Initiative announced by US President Barack Obama, will also drive FDI into the East African T&D industry and the region’s power sector as a whole.
Another major growth factor for the T&D industry, although indirect, is the discovery of oil and gas in the region. “Significant oil and gas discoveries in the region will increase interest and investment,” explained Chehore. “The oil and gas industry is dependent on the power sector and, as a result, this presents a huge opportunity for investors and the governments involved.”