By Angela Moonga
South Africa’s energy analyst and EE Intelligence managing director Chris Yelland has urged other African countries to emulate Zambia after the country launched a sovereign finance transaction using a $600 million loan from the African Development Bank (AfDB), to buy back its $1.36 sovereign bonds
Writing in South Africa’s Daily Investor, Yelland stated that Zambia was using that Zambia was using $600 from AfDB, together with its own resources, to buy back its expensive $1.36 billion sovereign bonds.
He stated that in return, Zambia has committed up to $275 million over 15 years to a Grid Resilience Programme aimed at strengthening and modernising its electricity distribution network.
The Grid Resilience Programme will be coordinated by GreenCo Power Services, part of the Africa GreenCo Group.
He stated that his own country South Africa and other African countries could learn from the same.
“Other African countries now have a model to follow – a model built from within the continent rather than imported into it. This has significant implications for Zambia. Firstly, the country will have more money for the power sector. Instead of scarce government funds being used to service expensive debt, some of that fiscal pressure is relieved,” Yelland stated. “This creates room for investment in electricity infrastructure that would otherwise have to compete for a shrinking budget.”
He stated that Zambia would benefit from a stronger distribution network, as the focus was not on building power stations, but on strengthening the distribution system, the part of the network closest to the customer.
“That means fewer bottlenecks, lower technical losses, improved reliability, a greater ability to connect new customers, and easier integration of new renewable energy projects as they come online,” Yelland stated. “Thirdly, Zambia will experience better resilience against drought, with the country’s electricity system heavily dependent on hydropower and, therefore, highly vulnerable to drought.”
He stated that recent droughts had caused severe shortages, and a more resilient network helps Zambia manage imports, distributed generation, solar, batteries and regional trading during future supply crises.
“Lastly, Zambia will see an improved investment climate, as the transaction also signals that its restructuring is reaching a credible conclusion and that the country is becoming investable again. This should improve investor confidence in both the power sector and Zambia’s wider economy,” Yelland stated. “The transaction also presents a potential turning point for GreenCo, a leading renewable energy offtaker, electricity supplier, and trader across the Southern African Power Pool.”
He stated that GreenCo had been entrusted by the Zambia and the AfDB to coordinate a national infrastructure programme.
He described the same as a significant elevation in standing and credibility, and also validates a broader view that Africa needs independent energy-systems architects.
“The transaction shows that electricity traders and market intermediaries are themselves critical market enablers, for both generation, transmission, and distribution infrastructure investment and regional power-market integration,” Yelland stated. “By selecting GreenCo to coordinate this programme, the AfDB and the Zambian government are effectively endorsing it as a trusted partner in the design and coordination of power-system development, rather than merely a trader operating within it.”
He stated that the most important takeaway was that this was not simply a debt-restructuring deal.
“It is effectively a recognition that electricity market infrastructure is now being viewed as an economic enabler, worthy of sovereign and development-finance support. Zambia and the AfDB are treating electricity market institutions and grid infrastructure as strategically important to growth and the economy, and financing them through the very operation that manages the sovereign’s debt,” stated Yelland. “For the continent, the value is larger still. The transaction stands as proof that African capital and African institutions can lead in linking fiscal discipline to energy development. It also shows that the model can travel from Lusaka to other capitals carrying the same twin burden of heavy debt and inadequate power. … The bondholders will decide the immediate outcome, but the larger idea is noteworthy.”
