Chinese-Funded Electricity Generation in Sub-Saharan Africa and Implications for Public Debt and Transition to Renewable Energy

Abstract

While China has been increasingly contributing to the recent growth in electricity generation in sub-Saharan Africa (SSA), the effects of China-funded investment on host countries’ debt burden and transition to renewable energy sources have not been sufficiently explored. Drawing on secondary data, combined with deep dive studies of Ethiopia and Uganda, this paper shows that despite significant liberalisation of the power sector in SSA, Chinese investments in the electricity industry continue to follow state-led project contract-based models. We show that this approach has failed to encourage Chinese firms to build compelling investment portfolios for competitive procurements within the region and, instead and inadvertently, it has exacerbated the debt burden of host country governments. Second, in spite of the global drive towards climate resilient energy generation, Chinese funding of electricity generation in SSA is not sufficiently channelled towards modern renewable energy sources such as wind and solar power that could reduce vulnerability to climate change. While recognising that the private sector-led competitive model of power generation is not without limitations, we argue that SSA’s electricity generation strategy that leads to less public debt and more climate resilience involves increased involvement of Chinese investment in the competitive model, with more diversification of such investment portfolios towards modern renewables such as wind and solar energy resources.