'Enabling environment' for private sector to tap Africa's energy potential

How can the private sector be brought on board to help Africa meet its energy needs? By creating the right “enabling environment” for robust private sector investment. That is, according to EuropeAid Deputy Director-General for Policy and Thematic Coordination Klaus Rudischhauser who spoke with Devex after the Second High-Level Meeting of the Africa-EU Energy Partnership held last week in Addis Ababa, Ethiopia. READ: How to ‘power’ Africa: A trillion dollar question? That would include wide-ranging reforms on policy and regulatory frameworks, he explained, which Brussels would support by making a case for development through energy. “Energy allows businesses to grow. If businesses want to expand, they will need energy,” Rudischhauser said. “But fostering businesses is not a goal just by itself … The real challenge will be to provide the necessary growth in order to absorb the increase in population that Africa will face in the coming decades.” And not only that — unlocking the country’s energy potential would include renewables and thus reduce dependency on fossil fuels in the long-term, altering the mix and perhaps even leaving enough to export to Europe in the future, the EuropeAid official added. Here are more highlights from our conversation: How has the Second High Level Meeting of the AEEP helped shape a forward-looking vision for energy cooperation between Africa and Europe? This … meeting has been crucial in terms of bringing together partners to see how best we can achieve our goal of sustainable energy for all. Throughout the meeting, participants have stressed that energy is key for growth and development. People and countries are eager to share experiences and even more eager to learn. The AEEP provides the perfect platform to do just this. It can help to address bottlenecks through shared experience, both African and European, and can draw on expertise from a variety of partners — it’s really unique in the development sector. So what is your main takeaway from the meeting? I’d say that in future we may have to be more focused in our discussions and concentrate on concrete topics, such as how to include the private sector in rural electrification, or on the necessary regulatory framework that can foster an active energy sector. I’m convinced that this should help countries and companies to develop concrete projects that can then be proposed for financing from the appropriate financing instrument — whether it’s a European one, or one from another donor. And how will you foster an enabling environment for the private sector? The private sector — especially the local African private sector — has an essential role to play and there’s a clear need for an enabling environment. One of the recommendations of the communiqué adopted during the meeting highlights the need to continue the implementation of reforms on policy and regulatory frameworks in Africa, creating an enabling environment for private investments. It’s clear that the private sector will be essential in contributing to the achievement of the AEEP targets. But how will this vision be translated into a workable roadmap towards the achievement of concrete results? In terms of next steps, in less than two months’ time, leaders from Europe and Africa will come together in Brussels for the Fourth Africa-EU Summit. This will be our opportunity to take stock of our achievements and agree on our shared priorities for the next stage in our partnership. European Commissioner for Development Andris Piebalgs stated at the meeting that “no energy means no development.” Can we therefore expect energy security to be a cross-cutting theme and/or a funding priority in the next programming period? Commissioner Piebalgs has always had a strong commitment to improving access to sustainable energy for all and has been instrumental in the [United Nations’] Sustainable Energy for All initiative. Just last week, for example, he announced a further €5 million for the renewable energy cooperation program, in support of the 2020 objectives agreed in Vienna [at the First High Level Meeting in 2010], namely to provide energy access to an additional 100 million people across Africa, to double cross-border electricity capacity, to significantly increase the use of renewable energy and to improve energy efficiency. Look, the Commission has played a precursory role in stressing the need for energy in development — this was made clear during the First High Level Meeting in Vienna in 2010, and was reconfirmed in the Agenda for Change in 2011. Then in 2012, we hosted the EU Energy for All Summit in Brussels, where [Commission] President Barroso set the EU the ambitious target of helping developing countries to provide 500 million people with access to sustainable energy services by 2030. We’re now putting all these recommendations into concrete actions, mobilizing more than half a billion euros for energy over the past two years. And this effort will substantially increase in the coming programming period, where more than 25 countries have indicated a desire to focus on energy in our bilateral cooperation. And of course, energy is a prominent sector in our future regional and thematic programs. And will the issue be prioritized at the post-2015 framework talks later this year? Yes, energy is likely to be one of the key themes at the post-2015 framework talks. Without energy there can be no development, so it’s fundamental that the appropriate linkages between energy and other areas — poverty eradication, food and water security, health, gender equality and human rights — should be given proper consideration in the post-2015 agenda. Europe stands ready to support Africa in its quest to achieve inclusive and sustainable growth for the benefit of its growing population. Energy is key to growth, so I’m convinced that our partnership in energy will become even more important in the coming years. Back in 2010, at the First High-Level Meeting of the Energy Partnership, African and EU ministers set ambitious targets in the areas of energy access, energy security, renewable energy and energy efficiency to be reached by 2020. Despite solar energy capacity being likely to exceed its original target, what progress is being made to ensure that targets for other energy sources remain on track? The status report that was presented during the High-Level Meeting seemed to indicate that the target on energy access may also be within reach, but obviously more needs to be done in order to achieve real growth and development. The meeting also showed that countries that put in place sound policies and opened up their markets are able to show impressive results. Depending on the resources of the country, of course, this can even lead to an increase in electrification of 70 percent in 25 years. Such results may not be achievable everywhere, but the EU stands ready to assist our partners and, where possible, to help them find solutions to the gaps, wherever they arise. The EU aims to play a supporting role to enhance regulatory and investment frameworks. How are you stating the business case for development through energy? Energy allows businesses to grow. If businesses want to expand, they will need energy. Farmers need energy for processing and cooling for preservation, craftsmen need energy to drive their tools, training centers need energy for computers and so on. In its report on Financing Access for the Poor, the International Energy Agency indicated that an investment of $48 billion a year is needed in order to achieve universal access by 2030. So it’s clear that official development assistance alone will not do it — we also need massive support from the private sector. If we look at the mobile telecom revolution that Africa has gone through in the past decade, there’s no reason why it should not be possible in the energy sector too. But fostering businesses is not a goal just by itself. This energy will be greatly needed in order to create jobs for young people. The real challenge will be to provide the necessary growth in order to absorb the increase in population that Africa will face in the coming decades. These jobs can be developed only through the development of small and medium enterprises at local level, fostering grass root development and creating sustainable long-term growth. And giving rise to independent power producers? Yes, the energy sector in itself generates business, such as IPPs at local level that need to rely on a stable enabling environment for their investments to grow. In addition, investments in renewable and energy efficiency solutions in turn generate higher qualified jobs, developing the capacity and technical skills required at local level. In order to foster the boost for private investment, governments — from their side — will have to provide an enabling regulatory framework for operational and cost-effective utilities, while international donors have put into action risk-mitigation instruments to close the investment gap. With its vast and largely untapped natural resources, Africa is an ideal place to develop innovative technologies and renewable energy solutions. If it can fulfil its potential, does the continent represent an energy security solution for the EU? I’m convinced that realizing the full potential of renewable energy in Africa is truly a win-win solution. When 70 percent of Africans rely on traditional biomass for their basic energy needs, we should not only think in terms of energy security, but also in terms of climate change, basic health for women and children, and the preservation of the natural habitat. I have already pointed toward the fact that energy also needs to provide the necessary growth for future generations. If we don’t, it is difficult to foresee the consequences. Renewable energy — and energy in general — can also bring countries together by integrating markets and harmonizing standards and procedures, therefore creating stability and an environment conducive to peace. But unlocking the vast potential of renewable energy will also reduce the need for fossil fuels, and thus alleviate pressure on the international markets, which is not only beneficial for Europe, but for the entire world. If additionally there would be room for export to Europe, this can only be beneficial in the context of the current fuel and energy mix. But do you fear that engagement today may lead to a conflict of interests tomorrow? No, we don’t see a conflict of interest here. Africa is a young continent open to technology and innovation, so investing in innovative solutions in renewable energy can only be beneficial for both continents. Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.