OBG talks to John Rice, Vice-Chairman, General Electric

Interview: John Rice

To what extent will liberalised electricity tariff regimes in Africa provide investment potential?

JOHN RICE: Sustained power generation is acquiring critical importance in the Middle East and Africa, where governments are focused on infrastructure development and in meeting the increasing demand for electricity from fast-growing populations. The watchword in sustaining the investment and growth potential of the region’s power sector is “efficiency”: is the investment making a tangible difference? Are generation, transmission and distribution losses being addressed? How can operational efficiencies be achieved? When efficiency is ensured, there is greater trust in partners, and it opens investment opportunities whereby governments are convinced of partners’ reliability and ability to meet requirements. The emphasis on a liberalised electricity tariff regime in Africa has therefore increased investment options. But what is really defining about the power generation sector in the Middle East and Africa is the adoption of renewables – this will have a huge bearing on future investments.

What role will renewable energy play in the development of the Middle East and Africa?

RICE: Renewable energy will play an increasingly crucial role in defining the energy mix of the region’s future. This is not an option; it is an imperative, despite the fact that the region has some of the world’s largest oil and gas reserves. Today, the region is witnessing massive infrastructure development that leads to the creation of “global cities”’. Already with one of the largest carbon footprints, the region’s developmental thrust needs to focus on achieving environmental sustainability. Turning to renewable energy and water sources is widely acknowledged as a key factor to achieving sustainability and one that the region is pursuing.

A key concern in tapping renewable energy sources is the substantial initial capital costs involved in set up and operation, and the unpredictability of the supply. This is true in the Middle East as well as in Africa, where the need for a shift to renewables is especially pronounced since the social cost of having no electricity is far greater than the economic cost of generating power through expensive schemes.

What might challenge successful implementation of public-private partnerships (PPPs) in the region?

RICE: Governments in the Middle East and Africa pursue and prefer PPP growth models. This is because PPPs allow for the sharing of risk involved in any endeavour, as well as the ability to expand the development mandate. In examining policy frameworks of most governments in the region today, there is a stronger focus on promoting private sector partnerships. As in any business environment, there are challenges, primarily because a PPP joins the hands of different stakeholders who may hold different priorities and organisational goals. The challenge is thus to ensure that a PPP is drawn out with clear roles for each partner, with room for continuous improvement. A partnership cannot be set in stone, especially when it comes to the development of an agenda. In Africa, navigating the complexity of government contracts is perceived as a challenge, particularly when price considerations take the upper hand. A PPP must not be defined entirely on the basis of price bidding; it must rest on the differential that the private sector participant brings to the equation.

How can foreign know-how and technology help develop Africa’s health care sector?

RICE: Global technology that is in tune with the needs and realities of African populations and health concerns would be a huge benefit to the sector. For example, solar-powered technology would be a tremendous boost to the quality and availability of treatment and equipment in rural health care facilities by helping to alleviate energy shortages. Another concern is affordability, and by developing technologies that address this obstacle, innovation and research can help make health care more accessible and reach more people at lower costs.