Vera Songwe, under-secretary-general and executive secretary of the United Nations Economic Commission for Africa, on economic development and energy connectivity in Africa.
Africa is the last frontier. We are the investment frontier for energy and we hope that we can crowd in the financing that's needed for renewable energy because we have it. We have solar, we have wind. I think there's a lot that can be done.
Vera Songwe: My name is Vera Songwe and I am the UN under-secretary-general and executive secretary of the Economic Commission for Africa based in Addis Ababa, Ethiopia.
Robert Stoner: All right. Thank you and welcome, Vera, to the MITEI podcast. It's great to see you and hear your voice again, all the way from Addis Ababa. Which is not the easiest place to live in right now. I'd like to come back to that, but maybe you can tell us first a little bit about what you do with UNECA, or U-N-E-C-A, the agency that you run there.
VS: Thanks, Rob, thanks for having me. It's fun to have this conversation with you and good to talk to you again. The UNECA is what we like to consider Africa's premier think tank on global economic development issues. Our motto is ideas for a prosperous Africa. We work across a spectrum of things, starting, of course, with macro-economic policies, structural policy. We do a lot of capacity and technology building. We do a lot of work on innovative financing, which produced a report on how Africa can finance its growth and achieve the SDGs [Sustainable Development Goals].
We have, of course, as the United Nations, just launched the Decade of Action 2030. How can we get there quickly? One of the other things we do, and I think one of the things we're most known for, is our work on trade. Helping the continents to put in place, implement for us to ratify the African Continental Free Trade Area agreement, which we have done to a large extent, but now implementation, implementation, implementation. A lot of work is being done on that front.
Then a lot of what we do is advocacy on a number of things. We have a huge climate center. We work a lot on sustainability. What does it mean for Africa? We support African countries as they negotiate their national determined contributions. We helped define and accompany African countries, as we wrote the African position going into the COP [Conference of the Parties]. We work a lot and we have a Digital Centre of Excellence. We do that. We have five regional offices based in five parts of the continent in Rabat, in Yaounde, in Lusaka, in Niamey, and in, I'm forgetting one, in Dakar as well. Essentially, we also have these regional hubs that then work across the continent to ensure that the messages that we're trying to come across and bring together work.
We also do a lot of work on poverty and inequality. Really, it's a huge spectrum of things we do. We try to bring them all together in one big, broad atlas and see how we can get back again to ideas for an Africa that is prosperous in the decade.
RS: It's clearly the kind of role where you spend a lot of time with people, talking with people, meeting with people, at least on a normal year. How is Covid impacting your ability to do things and your priorities?
VS: That's a good question, because we define the three things that we do as we have a think tank function, then we have a convening function—a third of our work is really convening—and then operational, which means we go on the ground and we help implement. As you can see, two-thirds of our work needs the convening and the operational needs us to meet people and to see people. Covid, of course, has put a dent to a lot of that. In some respects it's good, because you are not flying across over 50 countries on the continent. It could mean a lot of travel. Covid has substantially reduced that. Then, of course, there is New York. From that perspective, maybe it's a good thing.
I think one of the things that we've done, and interestingly so, is Covid has brought us to these kinds of forums. We work on Zoom, we work on [Microsoft] Teams, and we work on these platforms. I think two things that have happened is one, maybe it has democratized conversations a little bit more. Because before, it was only those who can afford to fly to someplace that could participate in the conversation. With this new model of communication, many more people can do that.
Of course, when you talk about being on the African continent where half of the population does not have access to electricity, even less, 17.8% have access to the internet. Yes, it has maybe opened it up a little bit more, but I don't think it has succeeded in democratizing conversations as much on the African continent. Hence, a really big push now that we're doing at the ECA with our Digital Centre of Excellence to push for more energy connectivity and more internet connectivity. Because those two things, I think, if we don't have those two things, what Covid may have done for our continent is exacerbate inequalities. When we talk about schooling, for example, only those who have electricity and access to a computer can continue to go to school while the others cannot. The risk of also Covid having made some of the inequalities and poverty even worse in some parts of the continent is probably going to be quite hard.
RS: Right, of course, because everybody's gone to virtual school or a hybrid school.
RS: We're having real difficulties in rural areas where the internet doesn't go or where electricity access may not be completely reliable. Those sorts of challenges are far worse in Africa than they were before.
VS: Again, our households are much larger. Even when you have internet connectivity in the United States, you have a working mom, working dad, and two kids, and everybody can be connected to the internet and the internet is still working. Because of the slowness—and this is the importance of bandwidth and speed—in Africa, even when you have it, the 17.8% that have access to the internet. Only one person in the house, maybe, can have access most of the time and it's the breadwinner. The kids still are left out of school.
RS: Smartphones have made a real inroads in Africa over the last decade or so. Inexpensive ones, oftentimes, Android phones. I notice, even in this country, young people in high school and college who live in rural areas are having to use smartphones. Is that something you've seen done? Is that an important part of the story?
VS: Yes and no because, unfortunately, there has been, and rightly so, a lot of celebration of the phone penetration on the continent. We have just launched, as the Economic Commission for Africa, a program called the African Communications and Informations Platform. When we started that program, and I'll explain it to you in a minute, it actually came from the idea of seeing whether we could reduce those inequalities because a lot of Africa is informal: 70% of our working populations work in the informal sector.
With Covid, a lot of the service sector getting shut down, we thought, "How do we find those people? How do we catch them? Is there some way of ensuring that there is some communication lines that are open?" We got together for the first time ever. We brought together the largest seven—and now I think it's 10—telco companies on the continent. They all came together and said, "Yes, we want to work together. We'll create some short codes that we could reach out to these people to talk to them on."
We have a database today of about 700-714 phones. To my dismay and to my surprise, only about a hundred and something—20% or even less, 14%—are Androids. Of the huge cell phone penetration on the continent, less than 20% are Android phones where you can connect to the internet and get a Zoom call. It's still a very small portion of the population that's actually is living on that process.
RS: I see. Really, really difficult then?
RS: Kids are going to lose a year, it sounds like.
VS: Kids are going to lose a year or parents are going to have to risk and send kids back to school. In Ethiopia, for example, schools have just reopened and we're testing the process. In many countries, I think in Kenya, schools have reopened. The African Union has gotten together to try to see whether they can be an African approach to how one does this. In some countries where Covid—in Morocco for example, in North Africa in general—where it has been a little bit more severe, I think there was still some hesitance for sending kids back to school. Kids may lose a year if we're not careful. Some kids will lose a year.
RS: Thinking about the UN, it's a huge organization. You've got people all over the place. You're in Addis Ababa. IRENA, the International Renewable Energy Agency, is in Abu Dhabi. Not that far away from you, but not on the same place and with an interest in Africa, but really a focus on renewable energy. How do you synchronize your energy work or do you bother? Are you traveling alone or is there an overall UN energy focus that you're part of?
VS: That's a very good question. Actually, just 10 days ago, the reason of course, as you say, it's a huge institution. If we don't have some coordinating mechanisms, then we will be not getting the value out of the energy and the effort that each one of our institutions is putting, so there are coordinating mechanisms. Right now, the two coordinators of this energy conversation within the United Nations are UNDP, the United Nations Development Program, and our Sustainable Energy for All initiative with Damilola, who is running it, who just came from running, of course, the...
RS: The REA [Rural Electrification Agency] in Nigeria.
VS: ... the REA in Nigeria and so understands a lot of the challenges of the continent.
RS: This is our friend Damilola Ogunbiyi.
VS: Exactly, this is Damilola that we all know and sitting on the commission together with. Then the meeting that we had 10 days ago brings together the whole house. All of the UN and the different parts of it that work in energy, IRENA, ourselves, and say, “What do we do?”
I think that we, as the Economic Commission for Africa, of course, the difference that you see with us is that we have as our core constituency, Africa. Our job is then to be the ambassadors and the portrayers or carriers of the Africa message. The Africa message in energy is an Africa message that I think is very sophisticated. We are, as Africa, coming out of a period where we used a lot of fossil fuels, where we were using heavy fuel oil, where our energy sector was strapped in very expensive energy or no energy at all. I think in the last 10-15 years, we've seen a huge improvement. We've seen tons of countries begin to launch IPPs [independent power producers]. In many countries now, over 70%-80% of the generation is in the private sector hands. There is a big conversation now around transmission and distribution.
There is that conversation around, what is the right energy transition for Africa? How do we do it? How do we do it well? We are a continent that is fortunately endowed with a lot of renewable energy resources, but that has not had the wherewithal to, I think, strengthen our utilities enough. To ensure that the way you said it is can afford to move to more private sector generation, transmission, and distributions of energy. Of course, some of our countries are quite huge and distribution is very expensive, so we need to begin to look at what new models we need to adopt.
Then, of course, Japan just announced what two months ago that they were going to stop coal after having resisted, persisted for a long time on the coal conversation. Africa has just developed and discovered a lot of gas. There is a conversation about, what does Africa do with its gas? Should Africa continue to use some of this gas? We've seen the problems in California. California has moved to a lot of solar energy, but you do need some gas to power some of that solar energy and I think we cannot talk about one without the other.
My sense is that we need, and this is where ECA [Energy Communities Alliance] becomes important, we need a core technical advocacy around some of this conversation. So that when we talk about them, it's not to say that Africa is not on the climate change trajectory, but that we need a transition period. A “just transition” period that allows us to go from where we are today to where we would like to be at zero emissions in 2050. Today, I think about 18 to 19 countries have already signed up to zero emissions.
The rest are working through that process, but we need to work with them. We need to inform them. We need to educate them. We need to do the analytics so that they can believe in the science enough to adopt zero-carbon emissions by 2050, using the assets that they have today. One of those is, of course, seeing how we can pool our resources and share and ensure that we have different assets at different parts of the year and at different times of the year, different geographies of the continent. Can we bring those together in a way that works for all of us? Is I think what we're doing and focusing our attention on now.
RS: You're really at this very interesting fulcrum, economic development colliding with renewable energy interest. They don't always align, these two things, or at least certainly not in the minds of many of the leaders who you're working with, I'm sure. How are leaders looking at this real need to advance economically, and at the same time, be part of the energy transition around the world and reducing carbon emissions. Are they resisting it or are they wanting to do it and struggling to find a way?
VS: I think around maybe five, six years ago, or maybe eight years ago, we would've had a different conversation because many more countries at the time were heavily fossil-fuel dependent. When you do an analysis today of the countries that are growing quite fast, you would see actually that over 70% of them are more skewed towards renewable energy. I think there is beginning to become a clear demonstration. If you look at Kenya, if you look at East Africa, if you look at Senegal, you look at Mauritania, you begin to see. Then, of course, you compare that with South Africa which is still a little bit of a coal economy, even though they've pushed forward a lot on the renewable energy side, they struggle a little bit. I think there is very clear proof in the pudding.
When you look around you and many countries look around to their neighbors. They see that those who are adopting renewable energy strategies are growing faster for three reasons. One, because as you adapt renewable energy strategies, you’re also crowding in the private sector, which means that your subsidies to the energy sector are reducing. Your utilities are becoming much better. Your private sector is coming in because the energy stability ensures that you can get business going, you can create jobs.
I think that virtual circle, and the conversation around the virtual circle, has become almost a given in many of the countries. I think now the question is, how do we de-link a little bit the conversation around the old heavy utility models which were also employment enterprises into more professionally good business run utilities? Then, secondly, what is the right and what is the “just transition” process out of heavy fuel, oil, and gas eventually into more sustainable clean energy like solar and wind and the rest. Geothermal, as in Kenya.
RS: You and I are part of the Global Commission to End the Energy Poverty along with Damilola Ogunbiyi, and many others, Fatih Birol, Ernest Moniz, a long list of really interesting people. We've gone through a phase over the last year of talking about electricity and expanding access to electricity. Which involves utilities, which you just mentioned, improving their performance, making them more investible, making it more feasible for them to expand and bringing electricity to more people. Africa is still very unelectrified, surprisingly unelectrified, maybe really the last big frontier.
We've got this report done where we really focused on distribution as the challenge, and we're going into a new year. The new year is all about finding leaders who are enthusiastic about challenging reforms in their utility industries, passing new laws that may not be terribly popular, trying to get concessional money out of the World Bank and other development finance institutions. We really need leaders that we can engage with who are enthusiastic about doing this, who have the courage and the wherewithal, and you've had to engage them throughout your career. Where do we look and what kind of advice do you have for us as we think about that path?
VS: That's a hard question but also an easy one. I think, first of all, the report is great and I think we should all read it and look at the framework as proposed in the report, because it's spot on.
I think three things. One of the things which the report is proposing to do, with Kandeh Yumkella and the rest, is the whole. As I said, one of the things that ECA does is capacity building. I really like the idea of creating a school, professionals where we can actually get coal energy professionals, management professionals.
Because as you said, one of the problems as identified in the report, is on the continent today, only two utilities can actually be profitable. If you can't run and manage the utility in a way that allows for it to be profitable, it's very difficult to see how you grow your access. Because as we all know, the more you go out into the rural areas, the more expensive it is for you to achieve connectivity.
My sense is two things that we need to do. One is, many leaders are beginning to become seized with the importance of energy and the need. Here I want to stop and just say, when we talk about energy, it is not about putting a light bulb in a home. It is about providing enough energy for industry and services to take off. This is more than the light, more than the home, this is really about lighting the economy and lighting activity across the industrial and the service sector. I think when you stop and think that we as a continent have to produce 16 million jobs a year, it becomes almost evident that we need to create and produce and provide a lot more energy for the continent.
I don't think you would find many leaders that would not be takers from east to west, north to south. Africa has some good examples. Egypt has 400 megawatts of an energy park. Cape Verde has a wind park. Kenya has a geothermal. Uganda has very good running distribution systems. West Africa has a power pool that's working. Again, if the question is where to look, South Africa, maybe there is some challenges there, but they pushed really hard and quickly on energy privatization, solar energy.
My sense is the problem is not about convincing them to do energy reform. The problem is about finding the resources, the finances. I think that is the issue is, where do we get the capital that is commensurate with the energy development we need? A lot of the capital that comes onto the continent is not long-term enough. If you're going to develop any energy project, maybe except solar, you need to at least capital that is five, six, seven years before you can start paying it back the investment is done and you can begin to see a return. We don't yet have capital on the continent, enough of it that is aligned to the investment cycles. I think that's one important issue that we need to begin to consider and see how we do it differently.
That's why ECA, we've also thought about working with local energy developers. Because a lot of the energy developers on the continent today are foreign. They come and you have to borrow in foreign currency, the cost of borrowing in foreign currency, whereas we consume the energy in local currency creates that mismatch as well. Which makes it even more expensive.
I think there's a couple of regulatory issues that our governments need to ensure that they are cost-reflective tariffs. Even when they are sold and seized to the idea of the need for energy, there is always the political dimension of, can you increase energy prices that fast to ensure that they're cost reflective? I think those are some of the areas where we need to work, but we have fantastic examples. Countries like Rwanda that have decided they're going to have full access by 2024. We're all working with them and to see how that can happen.
We hope that by 2024, 2025, there should be more African countries that have full access. Again, I say, it's not just about access to the populations. It's about enough energy to power industries, it's about enough energy to power services. Like you said, Africa is the last frontier. We are the investment frontier for energy and we hope that we can crowd in the financing that's needed for renewable energy because we have it. We have solar, we have wind. I think there's a lot that can be done.
RS: I really like the way Rwanda is thinking about it as a problem. It's a nice round, small country with a capital in the middle, so they can think about things in a top down way. They've really looked at the country as a problem to be solved. These are people who have no access and we want to get them access. These are areas where we want to develop industry. These are big power plants that we need to get built on our borders to bring in power and transmission lines we need to build. How can we tackle that whole thing, making use of big energy generation, renewable energy, building transmission lines, building distribution, but also reaching people in very rural areas with off grid technologies? They've put this all together in a nice package that they're trying to execute on all at once, and as you say, very quickly. I'm really excited about the prospect that by 2024, they really might've pulled it off or almost pulled it off.
VS: My sense is they could pull it off. They're almost fine with generation. We were talking with them the other day. The donors have come to do the transmission line. It really is now about distribution and ensuring that distribution is cost-effective. I think that institutions like the World Bank and the IFC [International Finance Corporation] and the African Development Bank have all these models that show how you can design. As you said, Rwanda is a nice bite size country that one can do this in an organized fashion compared to DRC [Democratic Republic of the Congo] and next door which needs a lot more. If you're going to do transmission lines in DRC, you're going to be there for quite a while working on it. I think that's the benefit of some of those countries. Juxtapose Rwanda with Kenya or Senegal or Morocco or Egypt. I think we begin to get some models that could work in different size countries. In the Morocco case, for example, they have a whole different institution out of government that manages a little bit the renewable energy transition and that's working well.
I think a lot of distributed energy crowding and blended finance to ensure that in the rural communities that distribution is happening—even though it's happening inside estate or entity that is outside of the government—is one model which is working on and we should look at it, as well, as we look at the Rwanda model which is interstate=driven and ensuring that the private sector comes in on the distribution side.
RS: Morocco is a real success story that took things into its own hands and just got it done. We reflected on them as one of the countries that we studied in the course of putting together the Global Commission’s report, along with a number of other countries as well. Colombia, where they're currently trying to wrap up rural access in areas where there was a lot of disruption in earlier years. In India, where there's a lot of reform going on in the utility sector in some of the less affluent states, but little progress. Even Nigeria, big country with terrible access problems. A lot of really creative programs going on that, I think, if we look at all of these countries and take the best examples, we have an opportunity to place those in front of leaders in other countries and provide them with really practical pathways.
We were also looking at the finances the other day, and you mentioned blended finance, and how much money it will really take, and it's a lot. It's going to have to come largely from the private sector, because there just isn't enough public sector money around for it. The World Bank doesn't have enough money to get it all done. They're doing their part.
It's interesting to think about what level of funding would be needed to really end energy poverty now. We've been trying to calculate this. It looks to me like there's a step function increase needed in the amount of concessionary money coming in from the development banks. Maybe even a step change in the way they use that money to de-risk investments and enable the private sector to come in, pension funds from around the world, and so on. With low-risk, low-return funds that are more typically invested in utilities in the electricity sector globally, but really don't have a place in Africa if the risks are perceived to be high and actually are high.
What's your sense of whether the world is really ready to go there? Can we increase concessionary finance as a part of the global program of investing in renewables and building a clean global energy sector? In other words, can climate finance be a big part of that?
VS: Rob, the shorter answer is yes. The long answer—and maybe this is one of the benefits that could come out of Covid—is really why are we not doing it quicker, sooner, and faster. As you said, the World Bank and the African Development Bank and everybody else has sufficient concessional financing. What we need. Then we have the private sector, $11 trillion we always hear and $13 trillion or $15 trillion of a private sector out there. The secretary general has launched and brought together this community of private sector businesses that want to invest in sustainability and altogether talking in the $13 trillion. But they want to invest in sustainability, they don't want to do charity.
What we need to do is find some way of de-risking their investments. Providing them with the assurances and the guarantee that their investments will provide them with the return, which is satisfactory, of course, to their shareholders, but allows for development to happen. I think this is where the World Bank, and the IMF [International Monetary Fund], and then the African Development Bank can play an important role, and just seeing the Rockefeller Foundation, and congratulations and kudos to them because they're putting their money where their mouth is. Have just launched this $500 million de-risking blended finance fund, which is essentially going to provide additional concessional money for investments in energy, in particular Africa and Southeast Asia.
What the World Bank needs to do, and a lot of the concessional institutions, is really to see whether they can use their resources, rather than to fund the whole project, is to buy down the cost of the private sector funding the whole project. Their resources will actually go a much longer way if they did that, as opposed to having them fund the whole project. If all they did was get the private sector to do the project, then say, "How much de-risking can we do by providing X percent of concessional resources?" You will get one, a well-designed private sector interested project. Two, you will get a cost of capital that that's affordable for the developing countries. I think that conversation needs to start happening.
The private sector, I think is beginning to become more interested. There is a role for the government, I must say. This is not just about the concessional funding and the private sector. The governments must create an environment where anybody wants to put their resources in. I think there is increasingly more countries on the continent that are creating the right private sector. Some regulation is still needed, but really my sense is that if we can find ways of creating more local currency financing that's available, getting concessional money to de-risk market capital, we will get these projects much faster and much quicker.
The push, as the secretary general has said, is we need to break down the door on sustainability. With a lot of the private sector, we're seeing what's happening in Total and many of these places, really moving decidedly towards more sustainable investment. My sense is that we will begin to get those two talking much faster and much quicker together.
RS: You keep opening up these really interesting areas that I'd like to explore more. One is, just to continue on this idea of concessional finance. We're 30 days away from a transition in this country where we're going to have a government that's probably a lot more likely to engage in big international initiatives than the present government. They haven't been inactive, but I think there's an opportunity maybe to change course and do new things, additional things, especially under the Development Finance Corporation. Our newly reorganized warehouse for OPIC [Overseas Private Investment Corporation] and USAID [U.S. Agency for International Development]. Whose chief development officer, I would remind you, Andy Herscowitz, is also on our commission. A great guy, and like you known as a creative thinker. Have you got a message or is there a message in there for the Biden administration as to how DFC could deploy funds and programs in the coming four years?
VS: First of all, I must say that as one of the people who commented on the new DFC strategy, I want to congratulate them for daring, and of course Andy was part of it. But really focusing on some of the issues that we also focus on at the Global Commission. Looking at this integrated distribution framework, it's no surprise, Andy goes from day-to-day, and so the messages follow each other. We do have this conversation on how can we work on that.
Three messages for the Biden administration. One will be about, can we have a conversation that says that we're going to recapitalize very quickly? Multilateral development agencies so that there's more concessional financing available. I think this is really important. Today, we see the World Bank trying to lean forward but not being able to lean forward enough because they are not sure that they will be recapitalized in time for their third cycle.
The second one is, of course, the special rights. A lot of the private sector today on the continent needs working capital, including in the energy sector. To invest, we need foreign currency to be able to import the resources that are going to be needed to build a new power plant. There's not enough foreign currency available for the private sector, be it foreign and or local. I think we're all calling for $500 billion in additional SDRs [swap data repositories] to be released to middle-income and low-income countries. This is the next message, is more liquidity into low and middle-income countries. We see, the United States is about to approve yet another $900 billion stimulus to keep the economy going. I think at least for Africa, we're asking for $100 billion. This is a drop in the bucket compared to everything else that has been given. It's really about, can we provide more liquidity, but can we support even American, the U.S. investors, that they actually today. Andy will know this very well. Quite a number of U.S. investors investing in renewable energy on the continent that need to be supported, that need to be provided with more blended finance.
I think $60 billion in the DFC can go a long way to get us to where we need to get to on our energy ambitions. My sense is, first of all, recapitalize the multilateral development banks. Second, provide some more liquidity into these developing countries. One through SDRs, and secondly, through finding ways of de-risking or paying down the cost of capital so that we can get uncrowded more foreign investments into the continent. Giving the DFC a little bit more room to dare and to take risks—$60 billion, we believe it can actually be a huge, huge boost for a lot of both African and South Asian economies. The DFC is already investing a lot in energy in South Asia. I hope they can do a little bit more in Africa as well.
RS: Let's hope Andy is listening. We'll send him a link to this podcast when we finally put it together. I have one more question before I lose you. It's well known that I would like to be the secretary general of the United Nations. I think I have all the gifts.
VS: You do.
RS: I like to travel, I like to talk in front of large groups, I'd look good in a suit, I'm nice. What am I doing wrong? How did you get to be the head of a UN agency like UNECA, or any of them? I'd take any of them.
VS: You have to go to the Arctic Pole and stick your legs in cold ice. It's well known that I want to be a professor at MIT. I think maybe we should have a private conversation and see how we're going to switch roles or something and see how we do that. That will be fun.
I think we are all needed where we are seated. Really, it's not so much about where you're seated, but it's really about the collaborations that we can form. I think this is the strength and the power of the Global Commission to End [Energy] Poverty, is really that it brings together... just in this conversation, we've called so many different people. It's a collection of all these ideas. The fact that leaders that we're talking to listen to all these ideas. When I go and talk about the integrated distribution framework, maybe one president would say, "Okay, that was a good idea, but I don't know." If Rob comes behind and Andy Herscowitz and Ernie Moniz comes behind, then it begins to gather some more steam. I think that's what's needed for us to be able to get to where we want to get to on it. I think it's a powerful coalition that's forming against ending energy poverty on the continent. We hope we can actually make it happen.
RS: Me too. Vera, it's been fun talking, it's been fun working with you over the last year. I look forward to working with you again in the years to come.
VS: Thank you. This was fun.
RS: Yes, it was. Thank you.