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EDF Africa chief: ‘Subsidising electricity for everyone does the economy a disservice’

By Bilal Mousjid

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Posted on August 18, 2023 14:26

Capacity building and PPPs are a strong part of EDF’s Africa strategy. (REUTERS/Charles Platiau)
Capacity building and PPPs are a strong part of EDF’s Africa strategy. (REUTERS/Charles Platiau)

Valérie Levkov, EDF’s vice president for Africa, the Middle East and the Eastern Mediterranean, speaks about the challenges facing the continent and the role of renewable energy in its future.

Despite the continent’s abundant energy resources, only one in two Africans has access to electricity – a situation which continues to hamper the economic development of many countries. As they struggle to catch up, they are now being called upon to combat the climate change largely caused by more industrialised nations. How can Africa win this race against time?

Valérie Levkov, senior vice president for Africa, the Middle East and East Mediterranean at EDF, gives her views. The French electricity giant has been present in South Africa since 1978 and is active in Cameroon, Côte d’Ivoire, Egypt, Ghana, Kenya, Morocco, Mozambique, Senegal and Togo.

The African continent has immense potential, particularly in terms of renewable energies. Yet more than half of its inhabitants still lack electricity. How do you explain this paradox?

For decades, while demographics were rising sharply, investment in infrastructure was not keeping pace. Today, fortunately, there is a fairly strong awareness on the part of the majority of players.

A national champion can only expand beyond its borders if local needs are met

The question remains of how to catch up, given that needs are only increasing. In this race, the continent does of course have the means of production and significant resources, whether in gas or renewable energies – hydraulic, solar, wind, biomass or geothermal – but it has to be said that implementation is long and slow. It can take four or five years from the moment you sign up for a project to the actual start of construction.

What causes these delays?

First of all, there’s the time spent on negotiations, because all those involved are trying to obtain the lowest possible rates, which is normal. There are also multilateral donors who have requirements relating to governance, tendering rules and environmental studies covering areas such as the impact on biodiversity, populations affected, compensation, etc.

Added to this, there is a lack of resources in the ministries responsible for the energy sector. In addition, electricity transmission networks are often not large enough to absorb major new production infrastructure. Hence the need for massive investment in transmission and distribution infrastructure.

In this race, Africa is not entirely sovereign: the energy sector is still dominated by international companies. Can the continent now produce regional champions capable of competing with them?

It’s true that, compared with the telecoms sector for example, there aren’t enough pan-African champions. But since energy is first and foremost a national business, a national champion can only expand beyond its borders if local needs are met, which is not the case in most countries on the continent. Because of this challenge, international development is not a priority [for African companies].

Certainly, the absence of national champions cannot be explained by a lack of skills. Moreover, when they operate in a country, international groups also support and train national players. EDF is committed to training local partners before phasing out.

Many projects carried out by independent electricity producers have been put on hold because of the increase in tariffs, which were negotiated long before the pandemic and the war in Ukraine. What is the situation for EDF?

Africa is no exception. This is a complex problem that we’ve seen just about everywhere in the world with the soaring prices of raw materials and transport. Some developers had taken steps to absorb these shocks, while others were not sufficiently cautious on this issue, which made the situation more difficult for them. A group operating in Africa always needs to have some room for manoeuvre to deal with certain difficulties.

As for gas, it still has its place, because the solution lies in the mix

Some countries have passed on tariff increases to consumers, while others prefer to keep prices unchanged. Is there an emerging trend in tariff policy?

It’s very diverse. What is a shame is that electricity is subsidised for everyone, including those who don’t need it. Governments can do without the heavy financial burden of subsidies for customers who can afford to pay more for electricity, at rates that reflect the fair cost.

Are you talking about industry?

Manufacturers are the engine of the economy and if tariffs rise, they can threaten not to continue production. It’s a difficult art, but it’s not doing the economy any favours to subsidise electricity for everyone.

We support the public-private partnership model, because there is real visibility over the cost. The country knows how much the energy will cost over a period of up to 30 years. And the operator can also anticipate its revenues.

Are renewable energies sufficiently competitive in Africa today? And what role should gas play in the energy transition?

If we take the example of South Africa, we can see that prices have only gone down. Over the long term, renewable energy can be very competitive. But, of course, there has to be a mix, because some countries have hydro, others have wind and others have solar. As for gas, it still has its place, because the solution lies in the mix. That said, the continent’s renewable potential remains largely under-exploited.

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