How Power Africa’s Data Can Help You Choose Which African Countries Offer Potential Power Sector Investments

With so much data floating around about country-specific enabling environments, it can be daunting for those of us who are not monitoring and evaluation (M&E) specialists to understand what that data means. To that end, Power Africa has created the Tool for Enabling Environment Data (TEED), to help diverse parties — including civil society, policymakers, and development professionals — quickly and easily compare and contrast sub-Saharan African countries on the basis of handpicked data.

Power Africa has two primary targets to expand access to electricity across sub-Saharan Africa: 30,000 megawatts (MW) of new installed power capacity and 60 million new household and business connections by 2030. Underpinning Power Africa’s ability to achieve these ambitious targets is the creation of a strong enabling environment- the regulations, policies, and institutions that govern a country’s power sector, which can either make or break the market’s ability to attract investment and be sustainable.

Our Enabling Environment Principles lay out the primary elements of building an investment-friendly enabling environment. As outlined in our Roadmap, Power Africa works with African governments to develop well-defined and transparent power sector laws, policies, and regulations that level the playing field for commercial investment, and that enable countries to attract and sustain future investment without continued donor assistance. We also work to ensure that governments have the capacity to execute projects and procurements in line with international best practice, manage the sector to optimize efficiency and sustainability, enhance transparency, integrate stakeholders, and deter corruption in the long-term.

Ultimately, our goal is to transition countries away from assistance and into a scenario where the private sector is able to operate in a fully functional and well governed market — the journey to self-reliance. However, each country has its own challenges and priorities, requiring policy approaches adapted specifically to its unique context. To better understand the diverse set of factors that must be considered along this path to self-sufficiency and to track progress over time, we have developed a new data tool that visualizes the enabling environment landscape in the African power sector.

The current enabling environment landscape

Comparatively, sub-Saharan Africa lags behind the rest of the world in most surveys regarding business climate, governance, and overall market stability. For example, sub-Saharan Africa has the lowest average score in the World Bank’s 2018 Doing Business Index (50.43 out of 100) as compared to every other region (OECD high income countries have an average score of 77.46 out of 100). A strong enabling environment for investment is usually marked by high degrees of transparency, predictability, and pro-market policies, all of which increase the private sector’s confidence to make investments. By contrast, a weak enabling environment can include lengthy delays in project development, unpredictable and opaque policy decisions, and a lack of business protections, all of which increase investment risk and reduce the attractiveness of that market.

A new tool for examining these issues

Despite the clear rationale for enabling environment reform, progress can be difficult to assess in a quantitative and comparative manner. Success is often seen through small, incremental changes over time. Some data sets, such as the Operating Environment Index by RMB Global Markets, are not energy specific, but speak to the broader business climate in a specific country. Others, such as the Regulatory Indicators for Sustainable Energy Index (RISE), focus solely on energy access, clean energy, or other specific facets of the overall enabling environment, providing numerical scores in each category based on key indicators.

Power Africa’s new tool brings together all this information in collaboration with the U.S. Agency for International Development’s (USAID) Economic Analysis and Data Services (EADS). Power Africa handpicked a selection of relevant external data sets that consider various critical elements of the enabling environment, and combined them into one visualization. This tool allows you to compare at a broad, macro level the strength of a country’s enabling environment across critical categories, comparative to its peers in sub-Saharan Africa. This tool aims to be an informational data resource that can supplement, not replace, qualitative information, as well as simplify enabling environment trend analysis for a broad range of stakeholders.

The visualization shows some expected trends, for example that Kenya ranks in the top tier for enabling environment across every category, while the Democratic Republic of Congo (DRC) ranks consistently in the bottom tier. Other countries have mixed results, such as Côte d’Ivoire, which has seen rapid progress towards an attractive investment environment in recent years, but still faces significant challenges.

However, what explains the lonely blue box in Nigeria’s column of red? Nigeria has a challenging operating environment, stemming from a lack of clear electrification policies, high losses in the distribution companies, opaque procurement processes, and inconsistent sector governance. The clean energy market index however, which measures the country’s ability to attract investment for clean energy companies and projects, identifies Nigeria as a top regional performer mainly due to the number of value chains available (biofuels, biomass, geothermal, small hydro, solar, and wind). This discrepancy speaks to the broader story we have seen on the ground in Nigeria- namely that massive resource and demographic opportunities have consistently fueled private sector interest, despite a relatively difficult business climate and historical track record.

Other stories like this appear throughout the data. Rwanda for example, consistently ranks in the top tier for enabling environment, with the exception of an underperforming national utility and consumer affordability issues, which brings down its RISE energy access score significantly. Uganda, on the other hand, ranks very highly on energy access with a perfect score on consumer affordability, but ranks low on Ease of Getting Electricity due to the prohibitively high cost of being connected to the grid itself.

As you can see, the high-level trends reflected here must be furthered explored to uncover contributing factors and reach more detailed conclusions. Data, especially data on more intangible economic factors, never tells the whole story. While this tool helps us compare and contrast the current landscape, it also helps to visualize a path towards stronger enabling environments across the continent. Power Africa is continually working to improve the way we track, measure, and analyze enabling environment progress and to support this critical objective.