Rich in energy sources but poor in energy supply, African nations are looking at maximizing the potential of all sources of power production and pooling their resources to achieve this as effectively as possible. Rwanda’s reforms, for example, have enabled Rwanda Energy Group (REG), lauded as East Africa’s Most Impactful Energy Development Corporation, to “work better, faster and for better returns.” CEO Jean Bosco Mugiraneza explains how, and provides a real insight into the investment opportunities in the sector.
Rwanda is leading different regional integration projects, and Infrastructure Minister James Musoni told The Worldfolio in a recent interview, “We want a regional network where energy surplus can be sold from one nation to another.” What are the regional integration efforts from the energy sector’s perspective?
In Africa we have many energy sources but we are poor in energy supply. The solution to these problems is to share energy resources between countries. To make it happen we have to put in place basic infrastructure and common networking standards. We have currently five power plants in Africa that belong to the East African market. We currently have other common energy projects, projects that include Rwanda, Kenya, Uganda – from the construction of transmission lines to the installment of power plants.
From the Ugandan border to Kigali, we have already completed the construction of transmission lines. We think that in the space of one to two years, a 30MW trade will be possible between Rwanda and Kenya. Once that is done, we will further enhance our trading capacities depending on our mutual needs.
We are also developing transmission lines between Rwanda and DR Congo; and Rwanda, Burundi and Tanzania. The African leaders understand that there is no way of industrializing the region without common sources of energy. African countries are currently relying on agriculture or oil. However, few of us rely on industry creation. To develop this policy of industry orientation, we must invest in energy sources and we must share our production.
Power trade is also a key for security and stability. If we have common interests, we will be keener to help each other. These projects are key to developing diplomatic ties and uniting populations.
The government of Rwanda is determined to have a more conducive business environment. For example Claudien Habimana, Managing Director of Société Pétroliere, told us of the assistance the government gave them by building the necessary infrastructure to their depot, such as roads, electric and water supply, and even fiber optic. How would you assess the incentives brought about by the public sector?
Our business environment aims at attracting local and international investors. To shift investors’ focus, we must provide them with targeted incentives. We have reduced taxes and enhanced infrastructural development. If a company has a project in a remote location, the government will construct roads in order to connect the project to the main cities. Our leaders ensure that the basic needs to start a business are delivered.
Investors opening a project on our home turf create many employment opportunities. Foreign projects attract the youth’s attention and allow for knowledge transfer. The next challenge will be to lower electricity tariffs and increase water supply. However, in terms of laws and policies, everything has been put in place to guarantee investment security.
In addition to that, there is a zero-tolerance for corruption policy in Rwanda; this enhances our attractiveness.
Rwanda is one of the fastest growing economies in the continent, and with development comes energy demand. One of the main challenges the industrial sector finds is energy, together with transport, what makes of REG a key player in order to retain and attract new investors. What are the main strategies to tackle this issue?
We have various projects aimed at meeting national demand in energy supply. To achieve this goal, we have signed concession agreements with different key international players. For example, the recently commissioned KivuWatt plant of ContourGlobal produces 26MW, and the second phase of the project will add 75MW. We have another Power Purchase Agreement designed with Symbion Power, another American company, which will also develop methane gas production in Lake Kivu for energy generation. We are also finalizing a collaborative effort with a Turkish company called Hakan that will start a peat power plant with a production of 120MW in two phases. There are also 80MW to be added from the Rusumo HPP Project, a regional project between Rwanda, Tanzania and Burundi. Furthermore, Rusizi III, a common power plant project between Rwanda, DRC and Burundi, is in the pipeline with a production of 147MW. We are also currently working on the possibility to trade power with Ethiopia and Kenya. In addition to these projects, we are committed to enhance regional power trade to meet the demand. Our projections are showing that we will meet regional demand.
The KivuWatt plant is a pioneering project globally. How would you say this project embodies the forward-looking mind-set of Rwanda?
First, because it is a successful project. Given the nature of this pioneering under-water operating technology, we had to use innovative gas extraction systems. The delays we experienced at the beginning of the project were due to the fact that we imported all materials. However, the first phase is now finalized and the second phase will soon deliver its promises. The power produced by the KivuWatt plant now flows to national grids. The beauty of this innovative energy production system is that it delivers with reliability and consistency all year around.
Rwanda has potential in “non-traditional” energy sources such as methane and peat. How important is energy diversification for Rwanda?
We have worked hard to diversify our sources. The percentage of diesel generation in our energy mix has been reduced by half, which allowed us to save money, time and contributed to environment protection. We will therefore keep on reducing the contribution of diesel in our mix. We have to work on enhancing peat to power or methane to power sources and reducing subsidies from the government. This will allow us to have a healthy financial situation.
Dr Ivan Twagirashema, Chairman of Energy Private Developers, told us mini and micro grids are other attractive solutions for rural electrification in Rwanda, to move from the current 25% coverage in housing electrification to 75% within the next two years. What is your point of view and what are the benefits for interested investors?
In our strategy to accelerate electricity access, we target 48% from on-grid solutions, while 22% from off-grid solutions, with an emphasis on solar power. Using solar home systems allows us to serve even the most remote places. To this end, the Mobisol project currently under implementation has a target of to serve 49,000 households. We have recently signed off three additional agreements with companies to accelerate rural access to electricity awareness campaigns to be launched very soon. Combining these on and off-grid strategies g will drive electrification like never before.
Rwanda Energy Group won this year’s “East Africa’s Most Impactful Energy Development Corporation” award. What have been the major factors to achieve this great success?
The vision we have is a collaborative one between the Government of Rwanda and the Rwanda Energy Group. At REG, we proudly implement the policies and strategies set by the government. We directly work with the Ministry of Finance to secure low-cost funds and optimize budget allocations. The success over the last two years has been driven by the government’s effort in reforming the sector, from one entity combining energy and water operations to two separate energy and water companies. This allowed Rwanda Energy Group to concentrate and post clear improvements with respect to project management and service delivery. We now work better, faster and for better returns. While REG receives credit for its achievements, the Government’s reform strategy has clearly worked as a catalyst for success. REG has also benefited from an enabling policy environment from the Ministry of Infrastructure.
Following the 2014 US-Africa Leaders Summit, the United States engaged to invest over $37 billion in Africa. What do you think is driving this great momentum towards Africa?
Africa has abundant natural resources; however, our raw materials need significant investment in infrastructure for value-added processing and delivery to global markets at competitive prices. This need for infrastructure represents a great opportunity for international companies. In order to have access to these resources, foreign organizations have understood that they must invest Africa.
Having adequate, reliable and cheap energy is a key ingredient in enlarging local markets and driving the export strategy. Communication and ICT are crucial to engage in business dialogue and to attract stakeholders. Sea and land transportation is also necessary in order to make these products circulate efficiently. In short, the rest of the world is attracted by our natural potential.
Apart from our natural resources, Africa is also attractive in terms of human resources. We are a rejuvenating the continent and our expanding workforce will soon be needed by other countries. Skills like engineers, doctors and managers etc. from Africa are of increasing importance to other parts of the world. Africa will soon become the cradle of human capital to the rest of the world.
Being member of the International Association of Computer Science and Information Technology, what is your assessment of Rwanda’s push to become the ICT hub of the region?
We need to further invest in ICT infrastructure. This will not only allow for the enlargement of the labor market, but it will also enhance our connectivity. As a landlocked country, this connectivity is primordial. Investing in ICT infrastructure will open great national and individual opportunities. Once these infrastructures are in place, the difference between a developing country and a developed country will substantially shrink. Information will flow across continents. Having access to information sources is a goldmine.
Mobile telephony has transformed communities in Africa. In Rwanda, about 78% of the population has access to a mobile phone, hence, enhancing the availability of news-gathering. Information is an asset, but it is an asset that has a great transformative power, both socially and professionally. Information provides opportunities. If energy is the driving force of the country, ICT infrastructure is its backbone. When speaking about money transfers, e-payments help to save time; this time can be invested in other more productive activities. Intercontinental connectivity and thus realizing a global village becomes palpable. ICT will also allow local populations to become educated faster than before as access to information builds confidence and education.
Upon her visit to Rwanda earlier this year, the US Secretary of Commerce announced that Rwanda was to become a “strategic ally” of America to enhance trade in the region. However, US investment here in Rwanda remains low in comparison to some of your peers in the region. What investment opportunities would you like to highlight to our high-profile audience?
US investments usually don’t come from the US government; their strategy is fueled by and targeted at the private sector. The two biggest independent power producers we have are Symbion Power and ContourGlobal, both American. They have been attracted to Africa by President Obama’s Power Africa initiative, which aims at doubling energy access in the region. Investors know that there is no place for trade if there is no infrastructure.
If the US, China and other countries are investing in our continent it is because they see an immense trading opportunity; and to access this opportunity, they must support our development. We have many companies coming in from all over the world. From Israeli engineers to German businessmen, there is no room for exclusion here in Rwanda. Our leadership is inclusive and enforces international collaboration. My message is that Rwanda welcomes everybody and that Rwanda is open for business.
As CEO of Rwanda Energy Group, what is the goal you would like to see achieved by 2020?
My goal is to see Rwanda having sufficient power production and supply at affordable prices. My goal is to see the most rural areas electrified, to see electricity changing the lives of local populations. My goal is to see electricity become the driver of all industries and associated economic activities.