The artifact is about how PPP options in Namibia could help improve inefficiencies and provide additional power for the population. My targeted audience is the policy makers in Namibia. The objective is to explain how the power sector challenges could be solved by addressing political and markets risks in order to attract private sector through a PPP approach. This artifact could also be of benefit to many policy makers in Africa that are seeking to expand electricity access in their respective countries.

1. Namibia Power Sector: How Can Private Sector
Help Solve Their Power Crisis?
By Fatimata Gaba Ouedraogo

2. Namibia Country Background 1/3
• Low middle-income country in Sub Saharan Africa
• Population : 2.3 million (2011) with 62% of rural population
• GDP per capita: US$ 7300, (2011)
• GDP Growth rate: 3.4% pa
• Highly unequal wealth distribution: GINI Index 70.7 (2008)
• Population below Poverty Datum Line: 55%

3. Namibia Country Background 2/3
Electricity Power supplier:
Nampower, a vertically integrated
public utility
Access to electricity:
National average : 34%
• Rural: 25%
• Urban: 90%
Major economic activities:
– Mining (8%); Agriculture;
fisheries.

4. Namibia Country
Background 3/3
Although endowed
with significant
renewable and fossil
fuel energy resources,
Namibia will face
electricity shortages of
about 250MW in 2016,
300MW in 2017 and
350MW in 2018.

5. Challenges of Namibia Energy Sector
• Security of energy supply
• Outdated and inadequate policies
• Regulatory weaknesses
• Limited human and technical capacity
• Inadequate funding of electricity access programs
• Limited private sector participation

6. Challenges with the
Electricity Sector
• Market structure and
reform still
outstanding/incomplete.
• Inadequate monitoring and
enforcement of compliance
with technical regulation
• Poor security of supply
• High network losses
• High tariff levels but below
cost recovery
• Harmonisation of tariffs
• No Application of Lifeline
tariff?

7. Challenges with the current Power
Supplier Nampower
• Vertically integrated company
• Monopolistic position
• No incentive to improve power
services quality as there is no
competition in or for the market
• Strong ties with government
• NamPower acts as power supplier
and also as the entity that oversees
the PPA (Power purchase
agreement) with private entities
entering the market.
• Nampower constitutes a barrier and
prevents private sector entry in the
market as there is no incentive for
Nampower to lower the entry
barriers.

8. How Can Namibia Solve its Electricity Demand and Supply Gap
and Efficiency Issues?
• Create an attractive power market with proper risks allocation
that will attract private sector funding and expertise for power
generation under the build, own, operate and transfer (BOOT)
model.
• Force the current supplier, NAMPOWER, to improve efficiencies
because of the competition.
This approach will help increase the installed power generation
capacity but some actions need to be taken to make the PPP
framework less risky.

9. Market Risks Mitigation to Attract
Private Sector
• Develop dedicated sector
policies, strategies and laws as
the current ones are outdated
and time consuming
• Set up an independent sector
wide power sector regulator
that will oversee the
regulations
• Have proper technical
regulations enforcement
mechanism that will help
reduce the inefficiencies in the
current power supplier,
particularly the transmission
losses.
• Unbundle the vertically
integrated company
(Nampower) to have a separate
transmission company, which
will help limit market
manipulations and improve
transactions transparence.

10. Once the proper legal,
regulatory and technical
framework is in place, the
government can get deeper
into project preparation. The
followings should be
considered.

11. Steps to Help Guide the Process:
• Conduct detailed feasibility
study to first look at the
options to be able to choose
the one that is economically,
financially and technically
sound in term of power
generation services provision.
The risks associated with each
option need to be identified.
• Conduct a market sounding:
The most important way that
the government can ensure it
will only have credible bidders
that are capable of delivering
on their PPP procurement is to
conduct market sounding to
identify potentially interested
companies, create a
prequalification stage and set
the technical and financial
criteria to ensure a sufficient
number of qualified bidders.
.

12. Key Elements to Consider in the PPP Contract:
• Focus on service delivery—PPP should focus
on the service to be delivered without having
to consider other objectives or constraints
typical in the public sector
• Innovation—specifying outputs in a contract,
rather than prescribing inputs, provides wider
opportunity for innovation. Power producer
should be given the latitude to innovate in the
power generation taking into account any
adverse social impact like environment
pollution etc.
• Asset utilization—private parties are
motivated to use a single facility to support
multiple revenue streams, reducing the cost of
any particular service from the facility
• Accountability—government payments are
conditional on the private party providing the
specified output at the agreed quality, quantity
and time frame. If performance is not met,
payment to the private sector can be abated.

13. Additional measures to enhance likelihood of
success:
• Communication — to ensure adequate
information about project development,
benefits, and costs
• Stakeholder consultations — to ensure that
all potential parties involved in the project
are consulted and their inputs taken into
account while conducting the process, etc.
• Transparency and fairness—to provide
bidders with assurances that procurement
process is transparent and fair to ensure
maximum participation.
• Put in place a guarantee instrument
(through a multilateral financial institution
such as the World Bank or AfDB) — to give
comfort to investors and commercial banks
that the government will fulfill its obligations
under the contract and thus increase the
bankability of project.

14. Bibliography
• ECB. 2012. “ Statistical Bulletin”, Windhoek,
Namibia
• NamPower, 2012, “Update On Progress Of
Nampower Projects And Initiatives Aimed At
Addressing The Power Supply Situation In
Namibia”, Windhoek, Namibia
• Ioannis N. Kessides, 2012, “The Impacts of
Electricity Sector Reforms in Developing
Countries”, Working Paper, World Bank,
Washington DC
• KudakwasheNdhlukula, 2009, “Review Of
Electricity Policy Planning In Namibia”,
Namibia
• PPP course document
• Various websites