A very expensive white elephant

The Stiegler’s Gorge project is a 48-year-old folly that will not deliver the energy security that President John Magufuli seems convinced it will

Every aspirant dictator seems to want at least one Soviet-style mega-project to their name. It is almost as if the construction of a white elephant will validate the personality cult that they invariably build for themselves. The Stiegler’s Gorge hydropower project in Tanzania is President John Magufuli’s version, a project first conceived in 1972 and never implemented for reasons that I hope to make obvious in this piece. Colloquially known as “the bulldozer”, Magufuli has indicated that any vocalised objection to the project will land the objector in prison.

When I first travelled to Tanzania in early 2016, the nation was euphoric about Magufuli having come to power, despite serious problems with the previous year’s elections. His ruling party, the Chama Cha Mapinduzi (CCM) lost the Zanzibar element of the 2015 elections but then won the 2016 re-run. The party has been in power for 59 years now. According to the co-opted electoral commission, the CCM’s Magufuli won the 2020 elections with an outlandish 85% of the vote. There is zero evidence that the elections were credible, free or fair. The opposition, whose candidate Tundu Lissu received only 13% of the vote, had little to no chance of winning, largely because it’s extremely risky to be an opposition politician given the levels of violent repression to which the CCM has resorted to maintain power.  

Stiegler’s Gorge, Tanzania. Photo: Ross Harvey

Magufuli won the (mainland) 2015 elections on an anti-corruption ticket. In a nation racked by a history of extensive grand corruption, he represented a welcome reprieve. By 2014, Tanzania scored a dismal 31 (out of 100) on Transparency International’s Corruption Perception Index. Since coming to power, Magufuli has improved that score to 37. However, it is one thing to move the needle on petty corruption; it’s another entirely to put an end to grand corruption. There’s only so far that he can go before he clashes with his own loyalists within the CCM. In a de facto one-party state, internal divisions matter more than the official opposition for power retention calculus.   

Corruption is not only about embezzling money; sometimes it’s about making decisions that are corrupted by illusions of grandeur. Magufuli is bulldozing ahead on the Stiegler’s Gorge hydropower project in a way that actively suppresses information and transparency. I visited the site in 2017 and witnessed the remains of past attempts to build this dam – a physical expression of the lack of wisdom at attempting such a project. The gorge is spectacular; it sits in the heart of the photographic tourist concession of what is now the Nyerere National Park (previously the Selous Game Reserve), declared a World Heritage Site in 2014.   

Upon arrival at the site, I was chased down by what I initially thought were security police. They had been tipped off that my guide was taking me to see the gorge. Turns out they were actually part of the bid adjudication committee and had come to instruct me to appear at their offices if I was interested in winning the tender. Upon assuring them that I had no intention of bidding, a more relaxed conversation ensued. They confessed that most interested parties, upon seeing the sheer wildness of the setting and the logistical difficulties associated with dropping enough concrete to build a 134m-high wall, simply disappeared. Cause for hope? 

My optimism was misplaced. I returned to Nyerere National Park in September 2019 only to be met by trucks barrelling down the main road, kicking up dust and disturbing the wildlife. Perhaps nothing epitomised the contradiction more than the joy of watching young wild dog pups frolicking in a pool alongside this very main road – the conveyor belt of destruction. Beyond that, the country was palpably in the grip of fear. Every taxi driver, shop owner and interview respondent expressed their apprehension at voicing any concerns, especially about Stiegler’s.  

Magufuli had gone ahead despite all the academic literature and feasibility studies cautioning against damming the Rufiji River (again). There are already two dams upstream placing pressure on the hydrological flow into the gorge, compounded by increasingly less rainfall, a partial function of the ravages of climate change. Nonetheless, construction is expected to be complete by 2022.  

Not even the World Bank funds hydropower anymore, and most of the world has learned its lessons about the negative impacts of large dams. But Magufuli has bullishly declared that Tanzania, a country pretty much bankrupt and heavily donor-dependent, will self-fund the build. A government spokesperson has stated that the $309.6m required for the initial phase has already been provided.  

Magufuli’s justification for the project – when he still bothered to provide one – was that access to electricity is woefully low in Tanzania. He has a point. According to the World Bank, only 35.6% of the total population had access, while only 18.8% of the rural population (still a majority) had access. The country’s total power generation capacity currently sits at 1,500MW. Magufuli (and pretty much no one else) believes that Stiegler’s would generate a further 2,100MW on its own. While this white elephant will be the most expensive investment in Tanzania’s history, its opportunity costs are where the real expense lies. 

A recent policy briefing on the project indicated that if environmental and social costs were considered, but excluding cost overruns and delays, the total cost of the build would amount to roughly $4.95bn, whereas the global average for a 2,100MW project would be roughly $3,74bn. Environmental economists are particularly interested in negative externalities (the divergence between private returns and social costs). In this case, it is near impossible to determine the long-term costs of the downstream environmental devastation that will almost certainly materialise.  

For instance, oxbow lakes near the coast will likely lose connections that sustain unique fish species. That kind of biodiversity loss is irreversible and therefore cannot be easily costed. Moreover, natural flooding will not be easily replicated or controlled, which will result in nutrients required for downstream agriculture not reaching their natural destination. The risk of food insecurity will arise. Worst, though, is that the delicate ecological equilibrium supporting abundant wildlife will be severely distorted.  

One of Tanzania’s unique selling points is that the Nyerere National Park is the largest reserve in Africa, roughly the size of Switzerland. It is one of the last wildernesses on earth with an extraordinary array of animal and plant heterogeneity. I had the privilege of spending a night at one of the reserve’s six extraordinary lakes in 2019 – one of the six lakes upstream of Stiegler’s Gorge that comprise the primary tourism offering. It is hard to imagine what this area will look like when the dam is built. The sheer increase in traffic volume during the build process is a nightmare in itself, independent of the long-term impacts and resultant opportunity costs. Tanzania would be well advised to do everything possible to avoid foregoing tourism revenue given that it is one of the country’s only serious economic propositions (currently accounting for at least 14% of the country’s GDP, the impact of COVID-19 notwithstanding).  

But what about electricity access for Tanzania’s citizens? There are two things to consider in closing. First, the Stiegler’s Gorge dam will not deliver as promised. Upstream abstraction and reduced rainfall upstream will affect the flow of water into the dam and hence the volume of power that can be generated.

Moreover, global average cost overruns on mega-projects like these are substantial, with one recent study estimating cost overruns of 96% and average delays of 43 months. Hydropower costs alone have risen by 31% in the past decade.

The Stiegler’s build is expected to take nine years for stage one and three years for stage two. Even if this deadline is met (highly unlikely), the total cost (assuming an annual escalation rate of 3.4%) by 2027 would be $7.58bn. If Tanzania was lucky and only incurred an overrun of 30%, its 2027 cost would sit at $9.85bn. In a word, this is unaffordable for a highly indebted state, especially considering that this is the third year of the project and it’s barely started.  

The proposed Stiegler’s Gorge hydropower project will not only harm livelihoods in the area, but also damage one of Tanzania’s top tourist attractions. Photo: Ross Harvey

Second, there are far more cost-effective options available for securing greater access to electricity that do not rely on the expansion of expensive centralised grid transmission infrastructure (yet to be built). Hydropower is simply no longer a competitive source of electricity generation, especially when the opportunity costs are considered. Moreover, Solar PV farms can be implemented within a year (as opposed to nine years) and deliver electricity at a far lower levelised cost per kilowatt hour. In 2017 alone, China installed 53GW of solar power.  

There’s no reason Tanzania cannot pursue a strategic combination of wind and solar power to generate the 2,100MW that it needs. To quote Dr Joerg Hartmann, an independent consultant specialising in assessing hydropower feasibility, “In combination with existing gas and hydropower resources, solar in particular can provide reliable baseload power, much less exposed to hydrological uncertainty.”  

But the “bulldozer” seems unlikely to be persuaded by reason and his legacy will not be one of grandeur. To the contrary, Magufuli’s Stiegler’s Gorge project will be a white elephant, one that jeopardises the country’s tourism offering, kills its wildlife and does not deliver electricity as promised to a citizenry that really deserves better.  

Dr Ross Harvey is Director of Research and Programmes at GGA. Ross is a natural resource economist and policy analyst, and he has been dealing with governance issues in various forms across this sector since 2007. He has a PhD in economics from the University of Cape Town, and his thesis research focused on the political economy of oil and institutional development in Angola and Nigeria.

Rocky ride for Nigeria’s power sector

West Africa’s powerhouse – bedevilled by infrastructural decay, corruption, inefficiency and lack of capacity

 

Nigeria, sub-Saharan Africa’s largest economy in GDP terms, is one of the most underpowered countries in the world. With a population of nearly 200 million people, years of dysfunction in the power sector means that Nigeria has one of the lowest electricity per capita rates in the world at 150 KW per hour.

In the second-largest economy, South Africa, the per capita consumption is nearly 4,500 KW per hour. About 47% of Nigerians do not have access to grid power, and those who do have access have regular power cuts, according to World Bank (2020).

A combination of infrastructural decay, corruption, inefficiency and a lack of capacity have undermined reform efforts over decades. It is estimated that the Nigerian economy loses $28bn annually due to its power deficit, according to the World Bank.  


Vendors sell meat at the Oshodi night market in Lagos, late on June 6, 2015, lighting their stall with a fuel lamp in absence of electricity. Corruption, conflicting interests, mismanagement and labour unrest have for years plagued Nigeria’s power sector. Photo: Pius Utomi Ekpei/AFP

Just over 4,000 MW is available for distribution to the national grid, against installed capacity of 13,400 MW. This is due to infrastructure challenges and supply constraints of gas, which provides 80% of power to the grid. The system also suffers from heavy technical and non-technical losses through the chain. By contrast, South Africa, despite having its own power woes, has installed capacity of just over 44,000 MW for a third of the population. 

In addition to gas, Nigeria’s power comes from its large hydropower resources and generation from biomass and waste. Renewable energy is starting to attract private sector investment and is benefiting from the government’s roll out of solar power to boost rural electrification efforts. National independent power projects also contribute power to the grid.  

But for now, the reality is that most Nigerians still rely on fuel-powered generators, which, collectively, provide eight times more power than the national grid. Nigerians spend an estimated $14bn a year to buy and run them, according to the country’s Rural Electricity Agency (REA) and other experts, money that could be more usefully spent on clean energy options or paying for reliable grid power. 

A much-heralded plan to privatise the generation and distribution arms of the national utility has fallen short of expectations that the process would be a silver bullet for Nigeria’s longstanding power woes. Despite the billions spent on the sector, consumers are, in effect, no better off now than they have been for the past few decades. 

When the privatisation option was first put on the table in 2005, the national electricity provider, Nigeria Electric Power Authority (NEPA), was suffering from the effects of years of under investment. Its poor service had become the butt of jokes, with many saying the acronym stood for Never Expect Power Again.  

In 2005, legislation was put in place to kick-start a privatisation process. NEPA was unbundled into 11 distribution companies (known as Discos) and six generation companies (Gencos), with the government retaining ownership of the transmission infrastructure, responsible for linking the generation companies to the distributors. The authority was renamed the Power Holding Company of Nigeria.   

Political elites with international partners and local conglomerates were the main buyers of the assets, which raised about $2.5bn. The process, which was only completed in 2013, was expected to generate significant investment into the sector, end decades of debilitating power shortages and turbo-charge the economy. But the expectations were overly optimistic. Seven years later, the power system is still on life support. 

A man holds a placard during a demonstration to protest against the 45 percent raise of electricity prices on February 8, 2016 in Lagos. Photo: Pius Utomi Ekpei

It has become apparent that the privatisation model was flawed, says Precious Akanonu of energy think tank, Energy for Growth. A range of factors, including the non-payment of electricity bills by users (including government institutions) and unrealistically low tariffs, made it impossible for the companies to recover costs and get a return on investment. The bidders, some with no experience of the sector, took a leap of faith, buying decrepit assets and entering a sector with embedded structural problems, including the vulnerability of the gas infrastructure to vandalism and attacks in Nigeria’s oil and gas hub, the Niger Delta.  

Akanonu says that the inability to recover costs meant the Gencos and Discos were unable to repay the $780m borrowed from Nigerian banks for the initial purchase, deterring the banks from providing further loans for investment into infrastructure improvements. The Discos have also battled to get consumers to pay, with collection rates only about 30% of debts owing. A culture of non-payment for services has developed over time as people battle with unreliable electricity, which has forced them to spend money on alternatives, mostly costly generators. 

Millions of Nigerians do not have meters and are charged on estimated, rather than actual, electricity usage, which they say often bears no relation to how often they get power.

To generate more power requires more investment, but investors are unlikely to invest in a business that is not paid for its services. It is a real conundrum. 

The government set up the Nigerian Bulk Electricity Trading Company (NBET) in 2010 as a middleman between the Gencos and Discos in an attempt to get the system working optimally. NBET guaranteed it would buy power from the Gencos and supply the Discos, who would repay it from collections. But it has become a victim of the same culture of non-payment and its resources were quickly depleted. It, too, now owes the privatised companies millions of dollars, further threatening the viability of the system.  

The transmission utility, which runs the national grid, is another sticking point. Retained by government in the privatisation process, it suffers from the same bureaucratic inefficiency and under-investment that once plagued the entire system.  

So what to do? In 2020, the country’s senate, among others, called for the privatisation process to be reversed, citing a lack of progress under the reform programme. But the calls have met resistance. The Association of Power Generation Companies says the government, which still owns 40% of the privatised assets, should rather address the deep-seated structural issues.  

The Director General of the Bureau of Public Enterprises (BPE), Alex Okoh, says re-nationalising the power assets would be a serious mistake.  “I think the Discos have become a topical and very emotive issue. We forgot that the electricity sector was almost dead before it was privatised. We must be extremely careful about these key national utilities.”  Fixing the problem, he says, requires analysing the entire value chain. 

Power expert Sonny Iroche, a former executive with the transmission utility, says reversing the process would be a blow to Nigeria’s reputation as a business destination. “The non-adherence to the sanctity of agreements is not wise. People have committed resources to this process because of the sanctity of agreements.” He says the Covid-19 crisis gives Nigeria an opportunity to reposition the sector and let it realise its potential. “Nigerians aren’t interested in who executes the services. They just want it done. We need to all join hands and look at the problems.”  Nigeria, Iroche says, does not exist in a vacuum and it should be able to execute these functions optimally as countries do around the world. “There is no Nigerian way of doing things, there is only the proper way.” 

Writing on Nigerian website Stears Business, financial journalist Osato Guobadia says, “The worst-case scenario is that lenders who granted loans to the owners of the Gencos would liquidate their assets and sell the power plants to repay the loans taken. Realistically, given the strategic importance of the power plants, the government is highly unlikely to allow that to happen.”

The best-case scenario is that the discos can improve revenue collection. As the worst offenders are state-owned enterprises, Guobadia suggests the government could take money from their annual budgets and pay it directly to the Discos to clear the debt. But, he says, there is unlikely to be political will for this. There is a third way, he says. “The default scenario is that Nigerians could keep picking up the slack. We could keep granting loans to NBET to pay the Gencos and give newer ones to pay off existing debts. This would potentially evolve into a debt crisis, but at least it would keep our lights on. At least, for now.” 

Hopes are now pinned on the Presidential Power Initiative to address the problems. This is a deal with German energy giant Siemens to rehabilitate and expand the grid. It includes upgrading 105 power substations, constructing 70 new ones, distributing up to 35 new transformers as well as installing distribution lines. The target is 25,000 MW of electricity by 2025 – a tall order, given the deep-seated challenges.   

The government is also pushing for greater efficiency in the commercial uses of its enormous gas reserves. Olabode Sowunmi, Senior Legislative Aide to the Senate President and founder of the Energy Hub, says the process is being driven by the Gas Master Plan. “This is essentially an aggregation of policies targeting investments and the development of infrastructure to support the investments,” he says. 

The government is also fast-tracking the rollout of meters, offering a one-year waiver of import levies on equipment to bring down the costs for consumers. It is also, under pressure from multilateral organisations, moving towards implementing cost-reflective tariffs in the sector and introduced a tariff hike in September 2020 towards this end. Part of the privatisation challenge has been the fact that tariffs have not reflected the real cost of power, which has effectively been subsidised for years. 

While the grid is already powered by gas, the government wants to use the resource to build resilience in other parts of the economy. It has directed 9,000 filling stations to reconfigure their infrastructure to use gas, and the Association for Local Distributors of Gas has been established to drive downstream gas distribution to commercial and industrial end users.  This has come at a bad time for Nigerians, suffering financial hardships resulting from the pandemic, but many believe it is also a good opportunity for Nigeria to “bite the bullet” and take the tough decisions to make the economy more resilient.

DIANNA GAMES is the chief executive of business consultancy Africa @ Work and a regular columnist on African issues for Business Day newspaper. She is a fellow of the GIBS Centre for Dynamic Markets in Johannesburg.

#ZimbabweanLivesMatter: Can South Africa get it right this time?

Zimbabwe President Emmerson Mnangagwa announced during a press briefing, that his government has postponed independence day celebrations and discouraged locals from travelling to all affected countries, even though the country has no detected cases so far of the COVID-19 coronavirus, in Harare on March 17, 2020. (Photo by Jekesai NJIKIZANA / AFP)

 

Amid a spiralling economic and political crisis, President Emmerson Mnangagwa addressed the people of Zimbabwe on Tuesday 4 August. His speech, although sudden – four days after his government’s violent  clampdown on the July 31 citizen protests – was highly anticipated. There may have been a desperate hope in some sections of the bruised citizenry that the president would, perhaps in the remotest of ways, acknowledge their suffering and hint at atoning for the state’s brutality. However, the ‘crocodile’ neither acknowledged the legitimacy of the widespread grievances against his leadership nor took any responsibility for bringing the country to this precipice. Instead, President Mnangagwa argued that his administration “has been undermined by the divisive politics of the opposition, sanctions, cyclones, droughts and now COVID19”, and blamed widespread protests on “a few rogue Zimbabweans acting in league with foreign detractors.” The President’s speech exposed a tone deaf and intransigent government at war with its long-suffering citizens.

For the past two decades Zimbabwean citizens have engaged in diverse, valiant efforts to use every legally available avenue to expedite democratic reform. Many Zimbabwean citizens have made heroic efforts to shed light on the gross corruption and mismanagement that has characterised ZANU-PF’s rule and created a staggering man-made disaster. They are currently caught between a regime willing to go to any lengths to crackdown on dissent, the need to navigate the day-to-day difficulties of securing precarious livelihoods, and the fear of contracting COVID-19. In the face of an unrelenting regime and rising from the crushed hopes of 31 July 2020 protests, Zimbabwean citizens have grafted the #ZimbabweanLivesMatter campaign onto ‘the energy and anger of the global’ outcry that #BlackLivesMatter. Can the South African government, whose President has taken  an unequivocal stance on #BlackLivesMatter continue on an indeterminate posture on the plight of its neighbour’s black lives? Their economic and political fate, as aptly observed by SAIIA CEO Elizabeth Sidiropoulos, is intertwined with its own and that of the region.

South Africa is ideally placed to push for change in Zimbabwe, with the two countries sharing many social, political, and economic ties. South Africa remains one of the country’s most important trading partners. Zimbabwe imports 40 percent of its total imports and exports 75 percent of its total exports to South Africa. However, despite the countries’ growing stake in each other’s fates, South Africa’s response to the deepening crisis across the Limpopo leaves much to be desired. Zimbabwe is now considered one of the four most food-insecure countries in the world, alongside Yemen, Somalia and South Sudan. More than 60 percent of Zimbabwe’s 15.6 million people are considered food insecure. Around one in three children under 5 years old suffer from stunted growth as a result of chronic malnutrition. The country has the highest inflation rate in the world at around 800 percent, and the International Monetary Fund (IMF) projects economic contraction of 10.4 percent in 2020, following a 12.8 percent contraction in 2019.

The healthcare system has collapsed, and every day Zimbabwean citizens face persistent fuel shortages and rolling blackouts. The number of Zimbabweans using illegal entry points along the Limpopo River to access medical services and basic commodities has dramatically increased in recent weeks,  heightening the chances of cross-border transmission of COVID-19 in both directions. As many desperate Zimbabweans will make the dangerous journey south, the South African government is poorly prepared to deal with an escalating migrant crisis. The country is wrestling with its own record unemployment levels. Increasingly, regional integration and the flow of people, commodities, knowledge and information means that insecurity anywhere is a threat to security everywhere, challenging the principle of non-interference which has guided foreign relations between southern African states and become institutionalized in the Southern African Development Community (SADC). Decades of  non-interference, liberation politics, and ‘quiet diplomacy’ on behalf of the ANC has simply allowed a political and military elite in Zimbabwe to plunder the country’s resources, undermine democracy, and create an economic crisis with implications for the wider Southern African region.

A more urgent and concrete stance is imperative. It is befitting therefore that after what had seemed like another bout of silence, the Government of South Africa, through the Department of International Relations and Cooperation (DIRCO) ‘noted with concern the reports related to human rights violations in the Republic of #Zimbabwe’. However, from the Mbeki to Zuma administrations, this political gesturing is well-worn. Building on #ZimbabweanLivesMatter, a campaign that has attracted resounding regional and international intervention calls from ordinary citizens, celebrities, politicians, diplomats and multi-lateral institutions alike, it is now ‘easier for SA and the SADC to begin a meaningful engagement with all stakeholders’. But will they? South Africa in particular has an opportunity as a strategic arbiter to harness all these voices across multiple platforms that can begin the work of persuading stakeholders to come to the negotiating table. It is time for the South African government to boldly break out of the ‘liberation war-pact’ cocoon and stand with the citizens of Zimbabwe.

DIRCO’s emphasis on government to government engagement, reported to have been initiated through a telephonic call between Dr. Naledi Pandor and her Zimbabwean counterpart Dr. Sibusiso Moyo, seems to thwart any hopes for including citizen voices. Dr. Pandor’s non-committal reference to ‘South Africa’s readiness to assist if requested’ does not imbue confidence of a radical departure from previous administrations. President Mnangagwa’s 4 August speech and Government Spokesperson Nick Mangwana’s press release (two days later) declaring reports of human rights violations as ‘false’ are not a request for assistance. South Africa now needs to build the diplomatic muscle required to crack through Harare’s hardball defence. Through the #ZimbabweanLivesMatter campaign, the Zimbabwean citizens’ request for assistance has been unambiguously echoed and clearly endorsed regionally and globally. As well noted by the Executive Director of Good Governance Africa, Chris Maroleng, ‘…it is incumbent on…especially…government… in South Africa to stand up and basically call on the government of Zimbabwe to cease and desist from such anti-democratic behaviour.’ South Africa has a unique opportunity to get it right this time. Many are ready to assist.

This article originally appeared in Business Day.

 

Sikhululekile Mashingaidze currently serves as Senior Researcher in the Human Security and Climate Change (HSCC) project at Good Governance Africa. Being engaged as a part-time enumerator for Mass Public Opinion Institute’s diversity of research projects during her undergraduate years ushered her into and nurtured her passion for the governance field. She has worked with Habakkuk Trust, Centre for Conflict Resolution(CCR-Kenya), Mercy Corps Zimbabwe and Action Aid International Zimbabwe, respectively. This has, over the years, enriched her grassroots and national level governance projects’ implementation and management experience. Her academic research interests are in the field of genocide studies with a commitment to deepen her understanding of girls and women’s experiences, their agency in reconstituting everyday life and their inclusion in peace-building and transitional justice processes. Socially she has a keen commitment in supporting girls education, women’s economic empowerment and the fulfilment of their equitable and sustainable development in Africa’s underserved, often hard to reach communities. She enjoys writing and telling the stories of navigating everyday life.
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