Working Paper 43 - Energy Sector Development in Africa

The important and wide-ranging role of energy in the development process is well known andit needs no retelling here. However, suffice it to state that there is a strong feedback relationshipbetween the energy sector and the national economy. Energy demand, supply and pricing haveenormous impact on social and economic development and the living standards and overall qualityof life of the population. On the other hand the economic structure and the changes in that structureas well as the prevailing macroeconomic conditions are key determinants of energy demand andsupply. Furthermore, energy affects environmental quality through deforestation associated withunsustainable biomass energy dependence and greenhouse gas emission from fossil fuel use resultingin global warming.Prior to 1973, the rate at which energy consumption increased closely followed the rate atwhich the economy expanded. Rapid economic growth and steadily rising income and higher livingstandards combined with the long term declining trend in energy prices to produce rapidly risingglobal energy demand. Until the emergence of the high cost energy era in the post 1973 era,relatively cheap and abundant energy was a key feature of rapid industrialization and economicprogress. Indeed, commercial energy use remains a key factor in human development. This is despitethe global de-coupling of energy demand-economic growth relationship in the post – 1970 period,triggered by the onset of a new era of more expensive energy associated with the quadrupling of oilprice increases between 1973 and 1974, and further price escalation in 1979 and 1980.Beyond the low level of energy consumption per capita, and unsustainable over-dependenceon bio-mass (wood-fuel), Africa is faced with enormous problems in the quest for sustainableenergy development. For the purpose of addressing these problems effectively, we can summarizethe fundamental energy question facing Africa as: providing and maintaining widespread access ofthe population to reliable and affordable supplies of environmentally cleaner energy to meet therequirements of rapid economic growth and improved living standards. Two sets of factors complicatethe solutions to this critical question. First is the difficult initial energy and economic conditions inmuch of the region. These are broadly defined by the significant deterioration in energy infrastructure,inadequate and unreliable supply of commercial energy to end users despite the enormous untappedenergy resources in the region, and significant inefficiency in energy use. The energy constraints havebeen exacerbated by difficult domestic economic and social conditions. These are defined broadly by, low per capita income, high incidence of poverty, weak economic growth and growth collapsein several cases, stagnating or declining investment (energy inclusive) and weak though improvingdomestic macroeconomic conditions, social conflict and weak governance in public enterprises incharge of energy. Second, there is the global pressure driven by sustainable human development totackle the increasingly significant adverse local, regional and global environmental impact of energysector development. This will accelerate the demand for cleaner energy and the associated energyresource development. The search for a sustainable energy sector development will therefore remainan important issue in Africa as well as in the rest of the world. The paper presents a broad butsystematic discussion of the main issues concerning sustainable energy development in Africa.The structure of the paper is as follows. In section 2 the socio-economic context of theproblem is discussed. In section 3 we present an overview of the developments in the energy sectorin the post 1970 period with emphasis on the sub-regional perspective. This is followed by ananalysis of the constraints to energy sector development in section 4. The paper explores some ofthe key issues and strategies for achieving the goal of sustainable energy development in Africa insection 5. The conclusions are presented in section 6.