Tuesday, March 9, 2021

Why Morupule B Power project is failing

There would be every reason to frown upon the levels of administrative and technical incompetence so bountifully lavished on the Morupule B Power Generation and Transmission Project but a report produced on behalf of esteemed panel says that mismanaging mega projects is a uniquely African phenomenon.

“The underlying problem is one of systemic failure. The preparation stage of project development is open-ended and may lead nowhere, as indicated by the lack of success in African electricity projects. The transition from initial planning to project completion can take many years.

Institutions with risk capital, such as investment banks, do not have the appetite for ventures entailing unquantifiable and uncontrollable risks, especially when they come with long periods of preparation. Governments lack the resources and, in many cases, the expertise needed to fill the gap,” says the Africa Progress Report which is produced on behalf of the Africa Progress Panel and draws on the best research and analysis available on Africa.

The executive summary of the African Development Bank’s Environmental and Social Impact Assessment describes Morupule B as “a large-scale coal power project for Botswana, which has no prior experience in financing and managing such a project, especially in a time of crisis.” Some Botswana Power Corporation sources have identified project management as Morupule B’s main undoing.

All too often, institutions that can help don’t. The Africa Progress Report says that while the World Bank’s International Finance Corporation has a high level of expertise in complex project development, the Bank has invested far too little in project development capacity in Africa.

“The same charge might be levelled at the wider donor community, much of which continues to demonstrate a preference for “home country” technical expertise and consultancy firms. The weak capacity of African governments and institutions is also evident at many levels,” it adds.

The private sector has not been too helpful either because given the uncertainties, costs, risks and long-time horizons involved, it typically plays a marginal role in developing, assessing and preparing projects.

This results in governments, donors and regional development banks being heavily involved but neglecting to pay adequate attention to crucial initial stages. While the report says that the continental planning environment is improving with 67 project preparation facilities now operating in Africa, “only 12 of these have even the most basic technical capabilities. Moreover, most focus on later stages of the project cycle, whereas the biggest gaps are in the early stages. To make matters worse, financing of project development has stagnated.”

As the report notes, bringing a large-scale infrastructure project to the market is a complex exercise, especially when the project spans several countries. It adds that “regulatory complexity and political factors can represent barriers to projects with potentially very large rates of return” and in that regard cites the multi-million pula Kazungula Bridge project. Often called the “missing link” between Southern Africa and the rest of the continent, this bridge is expected to significantly increase trade volume and traffic through Kazungula between Botswana and Zambia as well as yield a 23 percent rate of return when operational. However, this project literally spans three countries – Botswana, Zambia and Zimbabwe and has been experiencing political problems for the past two decades.

“The current patchwork of fragmented national, regional and multilateral initiatives is failing to mobilise the critical mass of financing needed for infrastructural transformation. There is a growing danger, captured in economic assessments across the region that infrastructure constraints will act as an increasingly powerful brake on growth,” the report says.

The Africa Progress Report is the flagship publication of the Africa Progress Panel which Bank of Botswana Governor, Linah Mohohlo, is a member of. The Panel is chaired by former United Nations secretary General, Kofi Annan.

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