26 June 2008 – Experts have warned that African governments must loosen their grip on power utility companies or face an acute shortage of energy.

ElectricityIt was reported that Africa could fall into a deep crisis within three years if existing power generation capacity is not expanded and if the continent’s over-dependence on hydro power continues.

Under investment has played a major role in the shortages the continent currently faces, despite having "huge potential" to meet energy needs.

Africa currently has a combined generation capacity of 110 000MW, but required capacity is estimated at 390 000MW it was reported at a conference in Nairobi this week.

Mismanagement was cited as one of the major challenges facing the industry, despite more attention being focussed on financing challenges.

"Funding should be the least of our challenges," said Edward Njoroge, the managing director of Kenya’s KenGen and the president of the Union of Producers, Transporters and Distributors of Electric Power (UPDEA) in Africa.

"Leadership and good governance have come short of expectations," he said. He said governments often appointed power sector managed without the necessary experience.

"They have refused to let go the management of these firms and continue to appoint people they can control and manipulate to give contracts and reward cronies," he said.

During the 1980’s and 90’s, many governments liberalised their power sectors, often under pressure from the World Bank and International Monetary Fund.

However, many of those that have not reformed their power sectors now want government to provide enabling platforms for utilities to meet mandates, but without interfering with management.

Utility companies were urged to work on long term plans and cooperate with one another to form regional power pools.

"We have observed a change in thinking about a common African power pool, and more importantly there is progress in enacting regulation that supports this shift," said Vishal Agarwal of PricewaterhouseCoopers (PWC), which undertook a report detailing the views of utility executives across the continent.

The report further highlighted views that improvement in capital markets around Africa will provide new investment opportunities for raising funds. There was also some pessimism around "demand-led development of alternative energy sources."

Ageing infrastructure and low generation reserve margins were listed as the major challenges facing the energy sector. Additionally, shortage of skills and knowledge was becoming a critical issue.

Delegates were challenged to see the growing demand for power as an "opportunity to expand generation and distribution businesses."