Book Extract | Electricity: the future is brighter

2020-02-28 15:01

‘Give us electricity,” says Peter Owyia, cobbler, “I will double my daily production.”

Peter’s calculation was common among the estimated 50 000 shoe, belt, and bag makers in Ariaria market in the city of Aba in southeast Nigeria’s Abia State. With each cobbler producing an average of 50 shoes per day, it’s a hive of industrial activity in the most unlikely place. Abia’s shoes, boots and sandals are famous throughout Nigeria and, increasingly, as the French labels on some products hint, now in parts of west Africa.

Underfoot is a sludge of mud, plastic and goodness knows what else. The road outside is a slippery track, temporarily worsened by a project to install a parallel concrete drain. Just inside the entrance is a man focused on fixing a large pile of paraffin cookers. To the left are food vendors. To the right is a team of women manually weaving leather straps for sandals, their hands a blur of twists, turns and flicks.

Industry is everywhere; the industriousness impressive.

The share of government financing has come from two sources: an increase in borrowing and thus the fiscal deficit to more than 3% of GDP, and a threefold real increase in the tax collection rate over the past 20 years.

Yet there is one thing mostly missing amid the sights, smells and sounds of the market – the hypnotic “grrrrrr” of small generators. The margins and money are so tight that the shoes are manually cut out and sewn on foot-powered treadle sewing machines.

The cost of electricity supplied by Nigeria’s grid is less than half that from generators. But the problem is that there is no grid supply. A failure of the consumer to pay has undermined the production of power, the investment in the equipment and systems required, and, in a vicious cycle, the supply of reliable power for which consumers are willing to pay. On paper, Nigeria should produce 7 100 megawatts based on installed generation capacity, but it only generates 4 600MW in practice. This is still a far cry from the 200 000MW of electricity Nigeria theoretically needs to meet the demand of its population.

It does not have to be like this.

A stone’s throw away from Ariaria market is the Apia power generation plant, a privately funded $500 million 141MW facility. It’s brand, spanking new – and, so far, unused.

The Apia power plant has its origins in a group of local entrepreneurs, led by Dr Bart Nnaji, a US university professor and, later, minister of power in Nigeria, who wanted to create a replicable model for sustainable power development in the country. Having obtained the concession for Aba from the federal government in 2005, the consortium built a state-of-the-art plant, rehabilitated the entire local distribution network, put up nearly 150km of overhead lines within the Aba metropolis, completed or refurbished 12 substations, and constructed a 27km gas pipeline from Imo River to supply the three General Electric turbines.

Then, with just 60 days work left on the project, the local Enugu Electricity Distribution Company was handed over to another party by the Bureau of Public Enterprises (BPE) without excising Aba from the sale. As Professor Nnaji notes: “The BPE, in effect, double-sold Aba metropolis. This is in spite of the very fact that the agreement we had clearly states that, whenever there is privatisation, our company has first right to purchase the facility in Aba.”

Aba now sits with a world-class electricity infrastructure that cannot be turned on, to the cost of both the investors and local industry, which is bound to turn off other investors.

In this way, Nigeria’s greatest high-energy development asset is also its greatest problem: Nigerians themselves.

Yet Nigeria’s population will more than double to 415 million in the next generation. The five states in the southeast will increase to 45 million people over this time.

To create the jobs their people crave, they will need an enabling environment for business, and the infrastructure to power industry and get goods to market, starting with electricity.

A large sign above one of Ariaria market’s alleyways reads: “This is Big Line, Where God Makes People Big.” Even so, government has a critical role to play in setting a competitiveness vision, and acting on its promises by delivering the policies and hardware that enable business to compete. And that starts, in Abia’s case, with turning on the electricity.

But it’s government, not God, in partnership with others, that is going to be responsible for progress in electricity, as across other infrastructure sectors, including transport, where Africa lags substantially.

Just 30 minutes of flying from Marrakesh over the High Atlas mountain range is the sweltering city of Ouazazate, which is known as Little Hollywood because of its role in the global film industry – films and series including Game of Thrones, Gladiator and The Living Daylights have been filmed there. It has become the centrepiece of Morocco’s drive for renewable energy.

The Concentrated Solar Power (CSP) tower and the 3 000 hectares of solar panels can be seen blinking from a long way out on the flight approach – this is hardly surprising as the Inconel-plated tower of the 150MW Noor I facility heats up to not less than 560°C. Noor I alone has 500 000 solar mirrors.

The cost of electricity supplied by Nigeria’s grid is less than half that from generators. But the problem is that there is no grid supply

Noor’s four stages will, when completed, produce 580MW of power from a combination of (mostly) CSP and about 70MW from photovoltaic cells. It’s expensive (at $2.2 billion) and faces long-term technological challenges, including the storage of heat for peak usage, but costs are coming down fast, to the point that at $0.08c per kilowatt hour, the plant currently makes money.

Like the high-speed train and Tangier Med I and II, Noor is a calculated gamble. Again, it is funded by a combination of government and concessional loans. But Morocco had little option given its dependency on imported coal for most of its energy. It aims to shift the energy mix to mostly renewables by 2030 to a combination of hydro, wind power and solar.

The lesson of Morocco’s contemporary success at delivering big infrastructure assets and then using them efficiently is down to a combination of leadership, vision and delivery – of the need, simply, for both software and hardware. Just providing infrastructure is not enough. You need skills and systems, as well as a supportive policy environment.

The share of government financing has come from two sources: an increase in borrowing and thus the fiscal deficit to more than 3% of GDP, and a threefold real increase in the tax collection rate over the past 20 years. As the spending catalyst for growth kicked in, so revenue expanded.

The positive cycle does not end there. The Renault plant has a government-funded training facility that has produced more than 10 000 graduates since the factory opened in 2012. With more growth has come greater demand for talent.

Likewise, the Aerospace Hub clustered around Casablanca employs 16 700 in 140 companies, now a $1.7 billion industry for Morocco, making everything from wings to wiring harnesses for the likes of Boeing, Airbus and Bombardier.

Workers are trained at a government-funded facility, Institut des Métiers de L’Aéronautique (IMA), inside the free zone, which has produced 7 000 graduates since 2011.

Firms are no doubt attracted by Morocco’s labour rates, which, at $350 per worker per month, are a fraction of European costs with virtually identical geography and, thus, logistics. But, as the IMA’s Hamid Benbrahim El Andaloussin explains, the “best incentives are those for long-term activity, not those which governments might provide”.

“In aerospace,” he says, “the critical drivers are innovation, cost and talent. We are not able to compete in the first area, but we can do so in the latter two respects. We say Morocco is the place to be if you want to be competitive in Europe.”

Morocco is increasingly the face that modern Africa needs.

The Asian Aspiration will be available next month

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March 29 2020