Aliko Dangote and Cyril Ramaphosa, two of Africa's most influential leaders, recently weighed in on the continent's power conundrum, highlighting the challenges of funding power projects despite available money.
Money Available, But Projects Must be Structured
Aliko Dangote, Africa's richest man, said money is available in African local markets but projects must be structured to attract funding. This is a sentiment echoed by South African President Cyril Ramaphosa, who argued that high interest rates and unstable currencies make power investments risky. Ramaphosa claimed that investors prefer using local currency first to reduce foreign exchange risks.
Bankability of Projects is Key
Ramaphosa added that local banks had funds available but needed properly structured and bankable projects to invest in. "It really revolves around the bankability of the project. The project is innovatively well-structured, and it's bankable. Banks in the local market can fund it. There is always money there," he said. However, Dangote countered that while local banks may have money available, high interest rates remain a major barrier for businesses trying to finance large-scale projects.
High Interest Rates and Currency Risks Hinder Energy Investments
Dangote highlighted how high interest rates and unstable currencies had made energy investments more difficult across African countries. "Yes, there is money in the local banks. But if you really look at it, the interest rates are high," Dangote said. "Also, if you go and borrow money out there, you know, really, in Africa, in some countries, we don't have a stable currency. It is very dangerous for you to go and borrow money in dollars while your own generating machine is in Kwacha."
Governments Must Create Better Conditions for Power Investments
Ramaphosa explained that governments need to create better conditions for power investments because improved electricity supply has a wider economic impact. "What they need to do is to make sure that they make the foreign exchange available. But it is much better if I'm going to invest in Nigeria, I would like to put my Naira first and then buy dollars so that I have to risk that currency exchange rate," he said.
Solving Africa's Power Challenges Requires Collaboration
Dangote emphasized that solving Africa's power challenges requires governments, financial institutions, and investors to work together because increased electricity supply can boost businesses, create jobs, and increase government revenue. "Wherever you go and double your power, even your internally generated funds, that's government revenue, will increase, because you will now put a lot of people at work," he added.
Africa's Power Challenges Persist
The debate highlights one of Africa's biggest development challenges: while many countries have significant energy needs and investment opportunities, issues such as currency risks, high borrowing costs, and project financing remain major obstacles. Africa continues to face a huge electricity gap, with millions of people still lacking reliable access to power, making energy investment one of the continent's biggest economic priorities.
Source: Pulse.ng
