Private Sector Participation in the Energy Sector

Context. Private sector investment in the Sub-Saharan African electricity sector started in the early 90’s. Back then, with the support of international development institutions, some African countries started to restructure their electrical systems, unbundling generation, transmission and distribution, and providing incentives for private investment in the sector. According to the World Bank, between 1990 e 2013 more than 150 projects reached financial closure in Sub-Saharan Africa.

Value chain. Similarly to what happens at a global scale, generation was the segment with more private investment in the region, totaling 147 projects which included a generation component, 128 of which were exclusively generation projects. Distribution was the second segment with most projects: of the 26 projects contemplating distribution, 5 were exclusively distribution projects. Finally, transmission was the sector that received the least private investment, having had 19 projects, of which only one was exclusively dedicated to transmission.

Participation models. Current practice in Sub-Saharan Africa is not much different from what happens worldwide. The BOO (Build, Own, Operate) model was also the most used, totaling 63 projects, all of them generation projects. The second most used Public-Private Partnerships (PPP) model was BOT (Build, Operate, Transfer), with 27 projects, almost all in the generation sector. Additionally, rental or operational leasing is also common in generation projects. The next Table provides the number of projects where each type of contract was used.


In Distribution, the lease or “affermage” model seems to be the most used - also common in water and sanitation. In the water sector in recent years in West Africa, a hybrid affermage/concession arrangement has been adopted successfully in Cote d’Ivoire, Senegal, Cameroon and other countries.