World Bank criticised over Ethiopia-Kenya electricity grid plan

The World Bank has approved the first phase of loans for a $1.3bn Eastern Electricity Highway Project, which aims to transport Ethiopian power to Kenya and beyond. The project is part of a big plan to open up an eastern African power network, but has attracted plenty of controversy due to social and environmental worries over the knock on effects of hydro-power in Ethiopia.

The Bank’s International Development Association fund will provide $243m to the government of Ethiopia and $441 to Kenya to finance the construction of a 1,000km cross-border power line between the two countries that is due to come online in 2018. Kenya is currently seeking to import electricity to meet shortfalls, while Ethiopia hopes to its export electricity surplus from new hydro-electricity projects underway.

A spokesperson called it a “landmark transformational project [that] will change the fundamentals of the power sector in East Africa.” However, the loans have already generated criticism from human rights groups. Indeed, the World Bank itself previously declined to fund one of Ethiopia’s leading hydroelectric projects on the Omo River after concerns were raised over its social and environmental impact.

The New York-based non-governmental organisation Human Rights Watch today accused the World Bank of contradicting its principles by indirectly enabling the funding of the dams through the Highway Project, having earlier in the week urged bank president Jim Yong Kim to deny loans to the project.

Kenya has suffered from severe power shortages in recent times. In a country tipped by the World Bank to reach middle income status in the coming years, only 25 per cent of the population have access to electricity. In rural areas, only around 5 per cent of the population are connected to the grid. The expected expansion of the oil and gas industry in Kenya following a flurry of recent discoveries would place further pressures on the electricity system.

The Kenyan government’s Vision 2030 strategy for economic development has set some ambitious targets to remedy the situation. It plans to more than double power generation over the next six years, from the current installed capacity of 1,533 megawatts to 3,750MW in 2018. Their projection for the total new capacity to be added by 2030 is 18,920MW, of which 2,000MW would come from imports.

In contrast Ethiopia is seeking to become a major regional power exporter. The state-owned Ethiopian Electric Power Corporation, the country’s sole electricity provider, aims to increase its generation capacity to 37,000MW. It intends to do so primarily through a series of large hydro-electricity plants commissioned over the past three years.

The World Bank has celebrated the project as a step forward for regional development. Jamal Saghir, the Bank’s Director for Sustainable development for the Africa Region said: “The Eastern Electricity Highway Project will make a significant contribution to help meet the development needs of the people of Ethiopia, Kenya and the sub-region.

“Once built, this power line will be a symbol of Africa’s determination to solve its energy crisis through cooperation in energy trade. It will be a landmark in achieving more growth and less poverty in the region.”

However, the Ethiopian government’s new dams have aroused major international controversy over the past two years. In 2011 Unesco called for the construction of the Gibe III dam on the Omo River in southern Ethiopia, which will be the highest in Africa when finished, to be halted due to concerns over its impact on Kenya’s Lake Turkana, a World Heritage site. The previous year, the non-governmental organisation Survival International claimed that Gibe III could make up to 200,000 people dependent on food aid through its displacement impact and disruption to farming and fishing.

As reported in the FT last month, the World Bank, European Investment Bank and African Development Bank were dissuaded from funding the project, but the state-owned Industrial and Commercial bank of China provided a $500m loan.

The $4.8bn Grand Renaissance dam on the Blue Nile has also created controversy. With an expected capacity of 6000MW the Grand Renaissance is Africa’s largest hydro-electricity project, and the stakes are higher. Egyptian government officials have claimed that the dam would create serious water shortages for their farmers. With similar difficulties in gaining the support of the major international development financiers, in 2011 the Ethiopian government began seeking domestic support through an expansion in bond issuance.

A variety of NGOs are now accusing the World Bank of hypocrisy. In a statement released today, a spokesperson from Human Rights Watch said, “Indigenous communities in the Omo Valley are paying a terrible price for the Gibe III dam. The World Bank should be standing firmly behind its social and environmental policies rather than pretending that the dam is unconnected to this project.”

Responding to the criticisms, Sarwat Hussein of the World Bank told beyondbrics: “The big picture is that Ethiopia has 45,000MW of hydroelectricity potential, of which only 4 per cent has been tapped. Then next door you have fast growing Kenya which is energy strapped. “If you are looking for economic security for East Africa, you can’t do it without Ethiopia’s resources. Regional power sharing is essential given only one in three Africans have access to electricity.”

Further reading:

Nile dam: Water wars averted for now, FT
Chinese investment: The money is welcome but more controls are needed, FT
Tullow upgrades Kenyan discovery, FT

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