The Sierra Leone Telegraph: 5 July 2013
The headline – “Sierra Leone Begs for $3.5 billion for energy sector” published last week in the international press – Petroleum Africa, makes for very grim reading, though not surprising.
Three years ago, the American energy corporation – Joule, estimated the cost of redeveloping the country’s main source of electricity – the Bumbuna Hydro-dam in the north of the country, including transmission lines at $800 million.
This investment by Joule Corporation could increase the supply of electricity to more than one gigawatt by 2015 – enough to meet the country’s needs, if the agreement with the government had materialised.
But Sierra Leone’s deputy minister for energy is now saying that $800 million is insufficient, and is seeking a massive $3.5 billion from cash-strapped international investors. Will he get it?
According to press report, the country’s Deputy Energy Minister – Martin Bash-Kamara said that this $3.5 billion is the government’s projected costs of developing the sector, so it can generate 1 gigawatt of electricity by 2017.
He is said to have told Reuters that: “Significant progress has been made with many private investors already involved in the country’s energy sector, including; Hydro-China, renewable energy company – New Generation Energy, Joule Africa, and many more. However, Sierra Leone is losing between 30% and 38% of power because of problems with its transmission lines.”
The minister also said that the government’s call for investors will help make a more attractive investment, especially as Sierra Leone is hoping to become a power exporter to the West African Power Pool Transmission Line.
But this call for $3 billion investment for the development of Sierra Leone’s electricity generation and supply has sparked a debate, questioning the realism of the government’s projected costs.
It would appear the government is once again making the same mistake as it did with the commissioning of the dilapidated and uneconomic Bumbuna, which had been mothballed for several decades, costing over $400 million.
The government’s failure to carry out a proper study of the country’s energy needs, including the feasibility and cost-benefit of the various options, has resulted in the catastrophic misuse of public funds.
Investors are looking at the long-term recouping of their investments. And the only collateral Sierra Leone can currently show investors is the likelihood of oil exploration and the billions of dollars the government could rake in, if properly managed. But even this prospect is uncertain.
So the question is: assuming the government can convince foreign investors to take on this challenge, how will they recoup their $3 billion?
Certainly, it is not expected that such investment can be recouped from the meagre revenue, collected by the national Power Authority (NPA) from the less than 20% of households and businesses that are actually paying their energy bills.
But some analysts believe that assuming the government’s projected estimated $3 billion cost of rehabilitating the country’s electricity generating and transmission sector is correct, a possible business model could revolve around a private sector led financing, largely underpinned by a foreign government backed finance guarantee scheme.
The next question is: which foreign government is likely to consider such risky and costly investment in Sierra Leone?
There are many unanswered economic, social and political uncertainties that lie ahead, as the country says goodbye to president Koroma’s leadership in 2017, and the prospect of a new government taking power after the 2018 elections.
The Koroma led government has recently been making a lot of political goodwill overtures to the Chinese, culminating in president Koroma’s state visit to China last month.
The Chinese government is on record to have promised to invest over $10 billion in Sierra Leone in the next three years.
Will the Chinese investment portfolio include the $3 billion now needed by president Koroma to increase the country’s electricity supply by almost a thousand percent in 2017?
Does the government have the capacity to manage a $3 billion investment in the country’s ailing electricity sector, or should it be seriously considering the privatisation of the sector?
Sierra Leone’s energy and water ministry is regarded as the government’s poisoned chalice.
It has had one of the highest turnovers of ministers since president Koroma took office in 2007, with each minister leaving office under dubious circumstances, accused of either poor performance, or the mismanagement and abuse of public office.
In five years, no fewer than three minsters have failed to eradicate Sierra Leone’s electricity supply demon, which is costing the nation billions of dollars in lost productivity and revenue.
In 2008 the World Bank funded a government signed deal with a Nigerian energy contractor – Incomes Electrix, for the supply of electricity in the capital Freetown.
This was a highly costly venture, which although achieved president Koroma’s political objective of lighting up the city within three months of being elected president.
But investigations by the Anti-Corruption Commission showed that the scheme was infested with corruption and poorly managed by the minister in charge.
The stark reality facing the government is that the country needs at least 500 megawatts of electricity to power the capital – Freetown, alone. Previous and present government have at best managed to generate 3% of this requirement, albeit at a huge cost.
The cost of fuelling the two very old gas-guzzling power generators at Kingtom and Blackhall Road respectively is estimated at over $5 million a week to the public purse.
And when the $400 million cost of rehabilitating the derelict and uneconomic Bumbuna Hydro-electricity dam is factored in, questions must be asked about the efficacy of the policy decision making process that informs such investment.
Bumbuna is expected to produce 80 megawatts of electricity, but only 30 megawatts is generated at the best of times, which is significantly less than the 500 megawatts needed to power the country’s capital.
Many believe that the government’s error of judgement in spending hundreds of millions of dollars on some of its major infrastructure projects, such as the installation of hundreds of miles of fibre-optic cable across the country instead of electricity transmission lines, is a huge mistake that has also pushed up the country’s debt to over $1 billion compared to almost zero in 2001.
What good is fibre-optic technology to the economy, if the population and businesses lack reliable electricity supply?
The country’s main opposition politicians cannot shout too much about the government’s electricity faux pas. They are keeping very quiet, as they too have travelled this very treacherous road taken by president Koroma, with similar disastrous consequences.
They would like to forget the era of ‘Kabbah Tiger’, with most homes powered by a fuel-hungry and environmentally unfriendly portable generator.
But the international community are in sympathy with the Koroma government and its electricity problem, and the misery it causes millions of people.
Early this year, the World Bank and the British government’s department for international development – DFID, have given president Koroma $12 million to improve the management of the failing National Power Authority (NPA) and to overhaul its power transmission network.
Laudable as this gesture is, it cannot be the solution to the structural problems and huge investment required to transform Sierra Leone’s energy sector to a viable enterprise that meets the country’s needs, a senior official at the ministry of energy told the Sierra Leone Telegraph.
What is needed is an electricity supply enterprise that is wholly financed by the private sector and managed by the private sector, at each provincial level, rather than a centralised national provider.
But which investor is going to make such a huge and risky longterm commitment? Perhaps Sierra Leone’s hope of becoming an oil producer cannot come too soon.
With just four more years remaining before president Koroma says goodbye to the office of the presidency, many believe that getting rid of the country’s electricity demon, ought to be his number one priority.
But with far too many balls in the air to catch, president Koroma risks dropping all of them, as he tries to make a success of his incoherent Agenda for Prosperity, where his Agenda for Change had failed to lever the necessary investments.
