High-energy costs continue to be a major impediment to the expansion of the manufacturing sector in Africa and the situation has resulted in huge losses in production. Due to the key role provision of energy plays, the cost of the products from a manufacturing process will be related to the cost of energy, all other factors such as efficiency of production, cost of labour and raw materials notwithstanding. The higher the cost of energy is, the higher the price of the products will be.
The cost per unit of electricity in Kenya is high and volatile depending on the amount of thermal energy in the system which is susceptible to changes in international oil prices. In 2011, for instance, industry witnessed an increase in prices up to 60 percent from January to December. While a lot has been done by the current government to increase and stabilise the energy supply, the country is still not energy secure and capacity expansion is not keeping up with demand nor is it priced to enhance Kenya's competitiveness yet.
Over 60 percent of generated energy is used in manufacturing enterprises and mining industries in Africa. It is prudent therefore that any energy policies that are proposed must be aligned to the industrialisation policies as well as Africa's vision, if ever Africa is to unlock our overdependence on imported goods.
Weak transmission and distribution network, low countrywide electricity access and over-reliance on hydro-power are some of the critical challenges facing the continent's electricity sector.
This calls for the African leaders to formulate long-lasting plans whose main goals are to rapidly expand installed electricity capacity, expand and upgrade the transmission and distribution networks, and develop renewable sources of energy such as geothermal, solar, wind, biomass and small hydro-power. In keeping with the spirit long-term African goals, the continent should be committed to reducing by almost half the cost of energy. Access to affordable and reliable energy is an essential prerequisite to achieving economic growth and poverty reduction in Africa.
We must, as a continent, prioritise energy security. It must be among the highest priorities for the next governments as large chunks of our energy infrastructure urgently need replacing and Kenya faces a serious energy shortfall. The continent needs to urgently pursue policies to deliver a balanced energy mix. Governments need to prioritise provision of affordable and sufficient, clean and reliable energy to power industry and ensure energy security, quality and affordability.
Africa cannot deliver competitively-priced manufactured goods and services without adequate and reasonably priced energy.
When decisions are made, execution on additional capacity delivery for energy and roads should be expedited. Delays cost the economy more.
With the continent's narrow supply options, businesses have been left at the mercy of weather-prone hydro-power and expensive thermal power. The climatic conditions of 1998 to 2000 and 2008 to 2009 curtailed hydro-power generation and led to severe energy shortages which culminated into power rationing and increased presence of expensive thermal power in the supply mix.
Other priorities such as health and farming have also been severely affected by power shortages in Africa and without a proactive power supply regime, Africa will remain a dependent of the West and East on many products, yet those things come with strings attached.
This fluctuation in hydro-power generation must have been a lesson to the country to appreciate the linkages between energy, environment and the continent's socio-economic development. As one measure of mitigation and adaptation to climate change, the governments should spearhead promotion of development and use of alternative sources of energy.
A strong policy framework will guide this new shift. Indeed, currently Africa is pursuing an energy mix that greatly emphasises on carbon-neutral energy sources such as geothermal, wind, solar and renewable biomass.
The continent's building codes are also being reviewed to incorporate measures that will encourage climate-proofing and the construction of energy-efficient buildings. In view of the foregoing, concerted action bringing together industrialists and government stakeholders in the energy sector to agree on how to deliver required capacity at reasonable prices that can support industrialisation is required. There is also a need to increase public investment in electricity generation.
It is imperative to expedite investment in transmission and distribution to ensure utilisation of capacity.
Failure to invest in transmission and distribution means that existing capacity is not fully utilised even though consumers pay for it.
African governments should also incentivise private sector investment in least cost energy sector, geothermal and other renewable energy sources.
Today the private sector accounts for 15 percent of the power supply. The continent should enhance exploitation of geothermal, solar, wind and biomass resources to supply at least 35 200 MW for domestic and institutional energy requirements.
Providing support and incentives for industries as well as businesses to reduce energy wastage. Some businesses have made the required investments and saved on energy, others might require support and incentives to do the same.
Dr Mudzike Kunde is a Tanzanian engineer and energy consultant.