Lesotho, World Bank sign M824 million energy loan deal
FINANCE minister Moeketsi Majoro on Friday signed a M824 million (US$52.9 million) loan agreement with the World Bank to finance the Lesotho Renewable Energy and Energy Access Project.
The Lesotho Renewable Energy and Energy Access Project is meant to explore off-grid power system for diverse consumers including rural households and industrial parks in peri urban areas.
The funding is made up of concessional loan amounting to US$40 million; a US$8 million loan; and a US$4.9 million grant.
The loans are to be repaid over 20 years each with a five-year grace period and a 1, 25 percent interest rate and a 0, 7 percent commitment fee per annum.
The project intends to increase access to power in the remote areas by introducing mini grid systems using renewable energy sources such as solar and wind power, shifting focus from the national grid.
Lesotho generates about 72 megawatts (MW) at ‘Muela Hydropower Station. This is about half of Lesotho’s total power consumption with the remainder being imported from South Africa and Mozambique.
South Africa is estimated to supply 30 percent of Lesotho’s power needs with Mozambique contributing 20 percent of the consumption.
According to Dr Majoro, part of the project includes extension of the current grid to peri-urban areas to connect six large industrial sites around the country.
“The purpose of the funding is to support rural electrification as well as industrial access to electrification,” Dr Majoro said.
“This is to ensure that industrial parks such as Ha-Belo, Teyateyaneng, Mokhotlong and Qacha’s Nek have access to electricity so that enterprise development and entrepreneurship investment and growth can prosper and thrive in these areas.
“In addition, Lesotho has ample solar, wind power and hydropower energy potential, so we are going to use this funding to see how we can develop these power solutions and promote usage of off-grid solutions.”
He said implementation of the of- grid power systems would include possible collaboration with the private sector.
Dr Majoro further indicated that off-grid power is cheaper than the conventional grid power especially for rural areas which do not have a high consumption appetite.
“The number of households currently benefiting from the national grid is about 200 000 but we still have over 300 000 to reach. And so far, we have devoted our energies on grid extension but we need to move away from this expensive grid.
“For instance, it is more expensive to connect one household in the mountainous areas than in the urban areas, yet such rural households consume electricity very minimally only during certain times of the year.
“So the recovery of the investment takes many years, although they need electricity.”
For her part, World Bank country director Marie-Francois Marie-Nelly said energy is important to drive economic and social development.
“We are in an era of the fourth industrial revolution (4IR) and without electricity we have no chance to be part of it.”
She said universal access of electricity for Lesotho would be possible through the partnership of the World Bank and the Lesotho government.
“What I also like about this programme is that in addition to expanding the distribution network, we are also tackling economic zones development and behind these we are talking about job opportunities particularly for the youth.
“The minister mentioned that Lesotho is only at 48 percent for access to electricity. It is true that the conditions are not easy when you are in remote areas. And if we were to connect everybody to the grid, it would be extremely expensive and not sustainable.
“So, it is an excellent idea to have mini grids that are adapted to local communities and I am pleased that we are starting by exploring ways of designing public private partnership models which will attract the private sector because we can realise that the government cannot do it all alone.”
The final component will focus of assessing the barriers a graduate would face in reaching the labour market and aspects around recruiting, retaining and promoting women in the energy sector. It will address gaps in entrepreneurship in the mini grid sector through the completion of an assessment of the barriers and preparation of action plan to address these issues.
For his part, energy minister Ntoi Rapapa, said the project would reduce the pressure on him from communities who nag him for power connection.
“Whenever I meet communities, the first question they ask me is: ‘when are we getting connected to electricity?’ It is the same thing with the members of parliament when I meet them. So, this project will go a long way in reducing this kind of pressure on me,” Professor Rapapa said.