Page 499 - 2016 - Vol. 40

limited .(15) Even when these loans are made available, they are
often offered with high interest rates. Also, poor international
credit ratings of most African countries limit the access of
private investors to international financial markets. Even
financial instruments (shares and bonds) of power projects are
generally not attractive to African institutional investors .(16)

Potential private investors in renewable energy projects
may also encounter many financial risks. First, the revenues
earned from operating renewable energy projects barely cover
its average operating costs in the short and medium terms.
Second, low per capita incomes in many African countries
make the consumers’ demand for renewable energy very elastic;
thus any increase in the prices of renewable energy services
may stop payments for these services and impel consumers
to increase their demand for fossil fuels .(17) Third, investors
often face exchange rate risk related to currency depreciation/
devaluation in many African countries; hence profits shrink
when they are converted from local currencies to foreign ones.
Fourth, high inflation rates in many African countries that can
affect negatively energy projects in their different stages .(18)

In 2006, many countries inAfrica started the implementation
of power sector reform laws, the corporatization of power state
owned enterprises, and the operation of IPPs(19). However,
various regulatory problems related to biddings, procurements
& hiring, tariffs, and contracts are still there. For example,
biddings are frequently cancelled, postponed or disputed;
this discourages interested private actors from spending time

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