Electricity Sectors in Angola and Mozambique are Ripe for Investment, Says Frost & Sullivan

CAPE TOWN, South Africa - The majority of the infrastructure in Angola and Mozambique was severely devastated during their respective civil wars. Efforts to rapidly improve these economies have revealed the fragility of their infrastructure, and it is therefore of crucial importance to allocate adequate resources to accelerate the reconstruction of their electricity backbones.

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The provision of electricity is a fundamental element for the development of other sectors of the economy. These two countries have therefore been upgrading and rehabilitating their electricity infrastructure as result of influx of foreign direct investment (FDI), mainly from China Exim Bank and the World Bank.

“The current regional economic growth, estimated at 6.0 per cent per annum over the next ten years, and environmental concerns are the major drivers for the changes and transformation in the electricity industries in these countries,” says Frost & Sullivan (www.energy.frost.com) energy industry manager Cornelis Van der Waal. “The Angolan and Mozambican electricity industries have been under a process of reformation aimed at re-shaping them to address the current reality.”

Although Mozambique is one of the largest electricity producers in the Southern Africa region, its population’s access to electricity is only approximately 10%. The country’s electricity demand is forecast to grow by 11% per annum until 2015 as a result of the boom in the agricultural sector, robust manufacturing output, as well as the increasing focus on rural electrification.

The Angolan electricity industry seems to be at a similar stage of its development, with tremendous potential for growth. Despite the global financial meltdown, the current growth demand for electricity is estimated at 12% per annum until 2015.

“The national reconstruction programme is expected to remain a significant driving factor behind this continued surge,” explains Van der Waal. “The commencement of the Capanda dam operation in 2004, which almost doubled the country’s electricity capacity, began a new era for the Angolan electricity industry.”

The investment environment in both countries is characterised by bureaucratic procedures in the majority of the government institutions, with high levels of corruption. As a result, international investors have shown some reluctance to invest in these markets.

“Efforts to create an atmosphere conducive for business can however be seen in the reduction of time to open a business and the opening of the electricity industry for private participation,” Van der Waal asserts. “The recent implementation of effective macro economic policies, in conjunction with prudent fiscal policies, has resulted in a significant increase in foreign direct investment in these countries, which is expected to triple over the next ten years.”

Frost & Sullivan expects the current electricity industry reformation to reduce investment barriers significantly. Both countries’ investment laws give foreign and domestic investors equal access to investment incentives and enable the participation of private investor in public infrastructure projects. Given the abundant feedstocks available in these countries, there are clear opportunities for investment.

“The hydro potential of both countries has been estimated at approximately 28 500MW,” Van der Waal says. “A large part of this potential can be developed at a relatively low cost. Angola, which is the largest exporter of oil in Africa, can also explore its vast oil and gas reserves for gas powered generation. At the same time Mozambique has estimated gas reserves of five trillion cubic feet and hence significant opportunities for gas powered electricity generation exist.”

If you are interested in more information on Frost & Sullivan’s analysis of the electricity markets in Angola and Mozambique, then send an e-mail to Patrick Cairns, Corporate Communications, at patrick.cairns@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website and country.

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Contact: Patrick Cairns Corporate Communications - Africa P: +27-18-468-2315 E: patrick.cairns@frost.com

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Source: Frost & Sullivan

Patrick Cairns, Corporate Communications - Africa of Frost & Sullivan, +27-18-468-2315, patrick.cairns at frost.com / Logo: https://www.newscom.com/cgi-bin/prnh/20081117/FSLOGO