Major Africa mobile phone operators spend about 60 percent of their operating cost to power their towers and other telecommunication equipment to be efficient and effective in given out services to their customers, according to Mckinsey &co, a global management consulting firm.
The mobile operators face challenges to power their existing networks, both off-grid and on-grid, because of unreliable power supply and heavy reliance on expensive diesel power to power up their existing networks.
The region’s power sector is significantly underdeveloped from energy access, installed capacity, and overall consumption. Residential and industrial sectors suffer electricity shortages which makes countries in the region struggle to sustain GDP growth.
“As a result, businesses that do operate in sub-Saharan Africa have much higher relative energy expenses than their counterparts in other countries,” the report stated.
“Many enterprises that do business in other parts of the world never take off in sub-Saharan Africa, because local energy costs make them uncompetitive,” the report added.
According to GSMA analysis and estimates, Sub-Saharan Africa has a total of over 240,000 towers across countries, providing mobile coverage to 70 percent of the region’s population. The size of the tower portfolio is expected to grow to over 325,000 towers by 2020.
With more than 600 million people – about 56 percent of the continents population – owning a mobile phone, with some researchers estimating penetration of mobile phone operators could reach 80 percent at the end of 2014.
According to Mckinsey, nearly three-quarters of electricity demand in Africa will come from industrial and commercial users’ by 2040. The report also stated that “In the continent, South Africa and Nigeria remains the largest commercial and industrial consumers of electricity, with both countries together accounting for more than 50 percent of 2040 demand.”
Energy costs constitute a major chunk of network operating expense (OPEX) for mobile operators in Africa. For a typical tower site in Africa, the share of energy costs is as high as 40 percent of the overall network OPEX. An off-grid site consumes nearly 13,000 litres of diesel every year, at an average annual energy OPEX of over US$21,000 and adds nearly 35 metric tons of CO2 emissions to the environment.
An unreliable-grid site consumes around 6,700 litres of diesel and produces 18 metric tons of CO2 emissions to the environment. Further to the above costs of diesel power, there is an additional 10 to 15 percent cost due to diesel pilferage which is very common practice in many countries across Africa. According to the report, Countries with electrification rates of less than 80 percent of the population consistently suffer from reduced GDP per capita.
“The only countries that have electrification rates of less than 80 percent with GDP per capita greater than $3,500 are those with significant wealth in natural resources, such as Angola, Botswana, and Gabon. But even they fall well short of economic prosperity.”
Despite Nigeria’s privatised power sector not yet yielding desired result, the program has forced other countries in the continent to look at that direction by allowing private sector involvement in power generation.
“China is investing significantly in the continent. Direct investment from China has risen dramatically over the past 20 years,” the report stated.
JOSEPHINE OKOJIE
