Standard Chartered Bank, in partnership with the US government, through the United States Agency for International Development (USAID), has signed a deal to deliver a term loan of about $60 million to Zambia’s Electricity Supply Corporation (ZESCO), in order to boost the country’s power grid. This deal is one of the largest facilities delivered by the USAID within President Obama’s Power Africa initiative. ZESCO is expected to use the loan to finance capital expenditure for its Lusaka Transmission and Distribution Rehabilitation Project (LTDRP) as well as provide bridge financing to facilitate new connections to the grid. This is the Bank’s second Power Africa partnership to benefit Zambia, with the first being Standard Chartered’s Private Equity investment in the Zambian Energy Corporation.

“This facility is Standard Chartered Zambia’s longest tenor and largest facility provided to a Zambian parastatal entity to date,” said Andrew Okai, CEO of Standard Chartered Zambia.

Power Africa Initiative

Many African experts have written on the subject of receiving aid from western countries, individuals and agencies. Dambisa Moyo, a Zambian economist and author, addressed this issue in her book published in 2009 titled Dead Aid, where she succinctly stated; “Development aid simply doesn’t work. It was supposed to lead to sustainable economic growth and a reduction of poverty. Name one African country where this has happened.” The argument follows that economic policy in Africa should be determined by Africans not by foreigners in the name of aid.

However, should there be an instance where Africa need not be resistant to aid? It appears the ‘Electrify Africa’ Act which was recently signed into law by the United States’ President Barack Obama may be the kind of aid Africa cannot afford to ignore but should welcome with both hands. This is especially so considering how much the continent battles power cuts while some locations have no access to electricity at all.

“Power Africa is a broad partnership which aims to boost economic development, by providing access to electricity to homes and businesses across Africa.  This is one of our largest commitments in Africa to date and will enable us to meet a critical need for a quarter of a million Zambians and the economy as a whole,” said  Michael Yates, USAID/Zambia Mission Director.

State of Electricity in Zambia

The energy deficit in Zambia has affected its economic growth as it faces a critical energy shortage that has crippled both the formal and informal sector of its economy. Load Shedding, unannounced power-cuts and fuel shortages have become the order of the day across the country.

Several large and small scale businesses have slowed down on production as they have to work only when there is electricity. Many homes are now ‘living in darkness’ as most areas stay for an average of eight hours without electricity. Residents now use alternative energy sources such as charcoal, solar, gas stoves, generators and candles to provide electricity for their homes.

The country now depends on the importation of power to cushion its electricity shortages as its power deficit is estimated at 560MW. The government now imports electricity from a ship docked in Mozambique at the cost of over US$18 million.

Due to the power situation in Zambia, ZESCO has been able to sign several partnerships to help boost power distribution across the country. Prior to this partnership with USAID and StanChart, ZESCO signed a $4.95 agreement with the Global Partnership on Output-Based Aid (GPOBA) to connect low-income households and micro-and-small enterprises (MSE) to the national electricity grid.

“USAID and Standard Chartered’s support has already delivered more than 15,000 new power connections,” said ZESCO’s Managing Director, Victor Mundende.

Victor further stated that some of the funds provided will be used for other scheduled power system upgrades, contributing to new and existing connections to homes and businesses across the country. ZESCO remains committed to meeting its aspirations of electrifying 60 percent of Zambia by 2030.