BY TSI TEAM
The residents of Mogadishu, Somalia, will soon receive cheaper electricity, according to Benadir Electrical Company (BECO). The company is the largest power producer, transmitter and distributor in Mogadishu. There are ambitious plans being laid out to further reduce the price of electricity by June 2015. The high cost and unreliable supply of power in Somalia has been seen as a major hindrance to business growth in the country. Hence, the business fraternity, and in particular those in the manufacturing and hospitality sectors, see the renewed efforts to reduce the cost of power as a huge relief. Analysts agree it is a welcomed move in a country trying to rebuild its basic infrastructure. Somalia currently relies on diesel generated power, exposing it dangerously to the fluctuating global oil prices. Diesel generated power is expensive, and the cost is always shifted to the consumer.
“We are shifting to Heavy Fuel Oil (HFO), which is closer to crude oil. The prices are falling globally, and therefore, this is a cheaper option. We can now reduce the price of electricity, which is currently among the highest in the world,” says Abdullahi Hussein Kahie, the General Manager of BECO. BECO has a capacity of 14 megawatts generation, which is barely enough to meet demand in Mogadishu. The capital city needs about 100-150 megawatts. BECO is currently targeting a production of 50 megawatts, which will cover residential and small businesses around Mogadishu. BECO was formed as an umbrella body of small power generation companies that decided to pool resources and operate under one institution. Somalia does not have functional state-run power company like most countries in the region. This makes the industry largely privatedriven.
“Our goal is to make electricity cheaper for people. Many residents have complained that the rate is too high. The supply also does not meet demand but we are determined to address this situation by the middle of this year,” Kahie affirms. Presently, most investors in Mogadishu have resorted to installing their own generators for power supply. For instance, the Jazeera Palace Hotel Manager, Justus Kisaulu, says that they spend thousands of US dollars in power costs in a month to run a 24-hour generator. If a cost-effective power is made available, they will save a lot.
Mogadishu currently has few light industries, but the demand for power is expected to tremendously increase once the manufacturing and other high power consuming sectors expand. This amplifies the need for investment in more, as well as efficient and reliable power generation to fuel the Somali economy. Local businesses want to see the government diversify power generation sources to include the much cheaper and environmental friendly like wind and hydro. They argue that energy cost is a major source of inflation, as almost every consumed product and service has some element of energy input.
The country also has abundance of wind and solar that can be taped to generate power. If the prerequisite investment is channelled and there is regulatory framework in place, such power generation source would be viable. Kahie warns, however, that these sources require huge investments and expertise, which might take time to mobilise. Currently, the power company, BECO, operates 30 power generating stations within Mogadishu. This has tended to increase production costs due to the high cost of managing small plants across the city. Moreover, the arrangement is not environmentally friendly. The plan, therefore, is to reduce the number to only two plants one near Jazeera and the other in Kahie sees lack of proper town planning as a major hindrance to supply of electricity in Mogadishu. The poor planning of the city, which has led to erratic setting up of buildings and lack of spaces for construction of public utilities like power lines, is a major concern for BECO. “We have to almost start afresh in-terms of city planning so that utility companies are able to lay their infrastructure easily.
This is a challenge but it has to be done to improve power and other utilities supply in Mogadishu,” he says. In fact, BECO sees the current power generation infrastructure as temporary measures as the country rebuilds most of its economic infrastructure. The old power system was destroyed during the two decades of conflict and most of its facilities vandalised. Most of the surviving infrastructure belonged to Ente Nazionale Energia Elettrica, known as ENEE. This company was responsible for electricity generation and supply in Somalia before the civil war. Lack of qualified technical staff is the other challenge. Most of the experienced staff are old and there is no sufficient production of fresh manpower due lack of technical institutions that offer engineering and related courses.
This is not unique to the energy sector alone. All other sectors experience the same challenge of human capacity. The company, however, is grappling with a high default rate, especially from government institutions and individuals, besides dealing with frequent cuts of electricity lines. Isse Abdi Mohamed, the operations manager at BECO, says the challenges are surmountable, as the overall security and investment environment in Mogadishu is improving with time.
“We want to assure investors that we are committed to addressing their power needs, and they should not fear investing in the country because of the current challenges,” he says. Just like other key infrastructures, fixing the power systems in Somalia is a matter of priority. No economy can realise economic growth without a proper energy system in place. New investments are needed in this area and the government’s involvement is critical. Currently, Somalia is slowly breathing a new life and powering the county with affordable and reliable power supply is important in creating optimism that the change is real.