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Regulate, Rinse, and Repeat
Via The Economist, most of sub-Saharan Africa has very little access to electricity, and what power is available is very expensive (if you omit South Africa, the number are even more depressing). The problem appears to be less a matter of energy production than one of distribution. Why you ask? In Tanzania, it’s because the state-owned and state-protected distribution monopoly can’t pay its bills:
Tanesco, which has a monopoly on distributing power in Tanzania, is severely cash-strapped. Its outgoings are inflated by the need to buy expensive emergency backup fuel to keep the lights on when the supply from dams falters. In practice, payments to independent power producers such as Symbion often come last on its list.
On December 2nd SonGas, a private-equity owned firm that runs another gas-powered plant in Dar es Salaam, and which contributes as much as 20% of Tanzania’s grid power, threatened to stop generating electricity unless it is paid money is it owed by Tanesco. SonGas, like other firms investing in power plants across Africa, has a guarantee from Tanzania’s government that it will be paid—something financial backers generally insist on before investing in private power producers. But this does not help its short-term cashflow. Tanesco’s arrears do not mean that SonGas can refuse to pay for the gas it buys.
And why isn’t the Tanzanian government rethinking the monopoly? Well, besides its bad score on corruption indexes, part of the answer seems to be that our government is too busy dangling a pile of money for a gas pipeline over neighboring Kenya than to push for market liberalization to its south.
That’s galling for two reasons. First, as the WSJ notes, it’s absurd for the US to help finance pipelines in Kenya while denying their construction at home. Second, you’d think that we’d have an interest in the matter considering that the company that runs the plant is American and that it’s where President Obama announced his Power Africa initiative.
But it’s really no surprise: to the government cronyist, the only imaginable solutions to any problem — especially one caused by government — is more government.
Published in Foreign Policy
Maybe we could have Sec. (swift boat)Kerry start an African Spring movement and really get things spooled up.
A professor of mine spun a vignette about Africa’s development woes that’s always stuck with me. It goes like this: the young scions of two soft dictatorships (one Asian, one African) matriculate at an Ivy League school. They strike up a friendship. Ten years after graduation, the African friend travels to visit his Asian friend. The Asian friend lives in an opulent home in the middle of a growing and bustling city. Marveling at his friend’s home, the African scion asks how his friend affords to live this way. The Asian friend smiles, points out the window, and says, “Ten percent.”
Another ten years pass, and the friends decide to meet again. This time the Asian friend visits Africa. He finds his friend living in an incredible palace that dwarfs his own back in Asia; it’s the most incredible home he’s ever seen. When he asks how his friend pays for such luxury, the African friend smiles, points out the window at bare pasture and forest land, and replies, “One hundred percent.”
I once spoke with a part owner of a similar plant in another Third World vacation spot. They carried through on their threat. The army showed up at the gate with guns and said start the plant back up or you will be arrested on charges of sabotaging the economy. They started the plant back up. They wrote off their investment.
It is not our job to remake the world in our own image (it might be nice if we could remake ourselves in our old image), but we could at least stop subsidizing the corruption.
How many times are going to change the map of Africa to include new countries carved out by some multinational corporation? Our good friends the Chinese thru proxy corporations are hard at work rounding up natural resources while encouraging and arming rebel groups to go after those governments resistant to them.
It is true that western corporations are disadvantaged because of their laws restricting certain activities such as overthrowing local governments, the Chinese are not under such restraints. They too are investing in power plants, mining and oil and gas exploration. I wonder what kind of deal they get. Is just not being America enough of an incentive?
If George Soros and Tom Steyer really gave a doo-doo about people, alternative energy, and improving the world, they would buy and donate solar systems to every village in Tanzania. Low power- but with low power LED lights, etc. it would be acceptable.