Power rationing to worsen poverty, crime and instability

UPDATE: 9 August 2009:

Kenya Power & Lighting Company has increased the number of days Kenyans will go without power from two days a week to three. The company is considering extending the rationing period to include Sundays, as power production continues to fall.

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The planned power rationing programme introduced in Kenya will lead to the collapse of an economy still ravaged by ethnic and political conflict. A decline in the economy will worsen rampant unemployment leading to intensified criminal activity.

A power generating station in Kenya. Rationing of electricity begins this week for the first time in a decade.

A power generating station in Kenya. Rationing of electricity begins this week for the first time in a decade.

As predicted by many but denied by the government until its subdued admission yesterday, Kenya is to be plunged into darkness by an electricity rationing programme.

Most parts of the country will be disconnected from power during the day in order to supply the capital city and manufacturing industry, according to Energy Minister Kiraitu Murungi.

The official line is that a severe drought has reduced the flow of rivers into hydroelectric power stations along the River Tana. In truth, years of neglect, mismanagement of the energy sector and corruption are to blame for the current mess.

Chronic incompetence by political appointees to the two state-owned electricity firms has largely contributed to the power cuts. The Kenya Electricity Generating Company (Kengen) is unable to satisfy rising demand from industry and homes. Meanwhile, the Kenya Power and Lighting Company spends more money on administration than it does on upgrading plant and machinery. Drought should not hinder power production as the current dry spell was predicted at least a year ago.

There are fears that power rationing will add to the already severe outages to make matters very difficult for Kenya’s fledgling industry. After the previous power rationing programme in the years 1999 -2000, the economy went through three successive years of negative growth which ended in 2003. It marked the first economic contraction in Kenya’s colonial and post colonial history. From the look of things, a similar scenario is about to replay itself.

Kenyan industry already faces very high energy prices compared to competitors in Egypt, South Africa, India and China. Power cuts will drive many out of business, if the experience a decade ago is anything to go by. Companies will simply not be able to fulfil their orders, resulting in closures and layoffs. In the year 2000, for example, giant biscuit maker House of Manji went bankrupt after it was unable to deliver on a multi-million pasta contract to an international aid agency. The company had taken a loan to fulfil the order but was unable to repay since it could not manufacture the product. Power rationing was largely to blame. The company has since been revived but it is unlikely to recapture its former glory.

In his announcement yesterday, Minister for Energy Kiraitu Murungi said that Nairobi’s Central Business District will be spared the power cuts. However, the government seems to be running on an outdated principle that the suburbs are sleeping quarters for people working in the city during the day. This may have been the case twenty years ago but, today, business worth billions of shillings is taking place in the suburbs. Without electricity, small and informal business will suffer massively with major social and economic effects on society.

Cybercafes, metal workshops, secretarial bureaus, hair and beauty shops, supermarkets, schools, motor vehicle garages, hospitals as well as offices need electricity to function. Without electricity, economic activity will cease. Though some enterprises can afford generators, it will be expensive to run oil-powered generators for upto 12 hours a day. Like the case of House of Manji ten years ago, entrepreneurs who are servicing bank loans will not keep up with payments and there will be increased bankruptcies in the next one year.

All in all, layoffs and bankruptcies can only mean millions of people on the streets without a livelihood. There will be more crime, more demonstrations, more hawking and more instability. Aware that power rationing will worsen already worrying crime levels, Kiraitu announced that there will be no power cuts at night.

He also said that police stations will be spared the power cuts but did not elaborate the technical and moral challenges of supplying electricity to the security services while everybody else is in darkness. How will such a directive be enforced in small rural towns that are supplied with power by a single line hundreds of kilometres from the national power grid? Will the government build a separate power grid for police stations?

Experience from last time indicates that power rationing usually lasts longer than advertised. Therefore, places that are supposed to be in the dark for 6 hours will suffer power cuts of 8 hours and more. Indeed, in the year 2000, the situation was so bad that 24 hour power rationing became the norm. Kenyans are hoping that, this time, they do not undergo similar suffering.

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Negative growth for Kenya’s economy in 2010

Thanks to political instability, water shortages, impending power rationing and now Swine Flu, Kenya’s economy will experience negative growth for the first time in almost a decade.

Apart from the ravages of drought, Kenyan dams suffer from massive siltation as seen in this picture of the waters behind Kiambere Dam.

Apart from the ravages of drought, Kenyan dams suffer from massive siltation as seen in this picture of waters behind Kiambere Dam.

A collapsing economy will further add to the woes of a shaky coalition government in a country where the redistribution of national resources has become a catchy slogan.

The closure of the Masinga Hydro Electric Dam last week highlighted the effects of a two-year drought on electricity production. The Kenya Electricity Generating Company (KenGen) has said that it will close a second dam by September if rains don’t fall soon. Unfortunately, the next rainy season in that particular part of Kenya is expected in October, meaning that more dams might close.

Kenya’s industrial and domestic electricity users, face two unpalatable choices: either continue paying for electricity at current rates but experience rationing, or: pay higher prices for oil-fired generators in order to have a steady electricity supply. Neither choice appeals to an economy still suffering the effects of post election violence.

Kengen and the Kenya Power & Lighting Company (KPLC) have been criticized for poor planning in national electricity production. The current drought was predicted months ago and both companies should have taken contingency measures. Instead, Kenya will be forced to rely on so-called “emergency generators,” some of which have been in “emergency use” for the past 10 years! Needless to say, there is lots of money to be made by oil suppliers at the expense of impoverished Kenyans.

Kengen and KPLC do not have a monopoly in poor planning, though. The country’s water providers have literally been caught napping by the ongoing drought. The city of Nairobi is likely to experience a disease outbreak as water supplies become scarcer. The main dam at Ndakaini will dry up in the next few months unless a miracle brings forth torrential rains. The city’s second dam at Sasumua collapsed in 2002 and is only now getting repaired.

Water supplies in other cities are in a sorry state. Kisumu, which lies on Lake Victoria, has not had a fresh water supply for decades and cholera outbreaks are common. The water crisis in Kisumu is so bad that most industries left the lakeside city long ago. Mombasa still relies on the colonial-era Mzima Springs project for much of its supply. Meanwhile, deforestation and land degradation have squeezed the life out of the country’s rivers, with most reduced to seasonal streams.

And just when the tourism industry thought that it had weathered the effects of post election violence, along comes SWINE FLU! Truly, the job of marketing Kenya to overseas tourists must be a terribly frustrating experience! The post election violence of 2008 brought the tourism industry to its knees, as travellers fled a near civil war. Today, tourist numbers are nowhere close to pre-2007 levels and the Swine Flu outbreak will further discourage visitors.

Back in the year 2000, massive power rationing and water shortages resulted in two consecutive years of negative economic growth. Industries closed and the ensuing retrenchments reduced overall consumer spending. The shrinking economy of the closing years of Daniel arap Moi’s presidency contributed a lot to the loss of KANU in the 2002 General Elections. Incidentally, the tourism industry was also depressed in the year 2000 due to political violence surrounding the 1997 elections. (Do you see a recurring trend here …?)

This time, the economic situation will be worsened by the highest government expenditure in Kenya’s history. President Mwai Kibaki has created hundreds of districts for political reasons, each requiring administrators, offices and staff. The gigantic cabinet of 42 is straining the economy, what with astronomic salaries, bodyguards and fuel guzzling SUVs.

As political temperatures rise towards the 2012 elections, Kibaki will be under pressure to embark on massive development spending to boost economic growth. Nobody knows where the money will come from. The only source of funds currently open to the government is taxation but any increases in taxes will alienate industrialists and the professional classes.

A shrinking economy will cause greater hardships for the average Kenyan. It will spark political instability as elements of the ruling elite fight it out for diminishing national resources needed to buy support. Industries will relocate from Kenya or close all-together. Job losses are inevitable, and the stability of the country will be tested once more.

Third national power blackout

There’s concern over the state of Kenya’s electricity system after the country today experienced its third national blackout this year.

Kenya’s cities and struggling industry came to a standstill at 8:40am today. According to the Daily Nation website, the Kenya Power and Lighting Company blames the outage on a faulty generation machine along Tana River.

The country is experiencing daily power cuts as the transmission system sags from overloading caused by decades of under-investment. Poor maintenance of generation and distribution equipment is also to blame.

The Kenya Power and Lighting Company (KPLC) is a state owned monopoly which buys most of its electricity from KenGen – another state player. Private power generators were first allowed in the mid 1990s but are widely thought to be controlled by the ruling elite.

Inspite of the poor quality of electricity supply, Kenyans are paying among the highest electricity tariffs in the world as both KPLC and KenGen grapple with bloated workforces and entrenched corruption. It is said that KPLC spends more money buying vehicles than it does on the proper maintenance of transmission lines.

In 2007, the Ministry of Energy criticized KPLC for failing to use billions of shillings meant to connect rural customers. As thousands of customers were put on a waiting list, the power company returned the funds to the treasury instead of buying poles, wires and electricity meters.

KPLC is undergoing dire financial straits and its continued survival is largely because of government pressure on KenGen to keep down the prices at which it supplies power to KPLC. However, the decision has starved KenGen of the money it needs to build new generation capacity as demand is constantly increasing.

In the year 2000, Kenya had its worst experience of power rationing. 12 hour power cuts led to the economy shrinking for two consecutive years. A return to power rationing will spell doom for the Kenyan economy, still struggling to recover from political violence that killed over 1,000 people this year.

Another national power blackout

Kenya was plunged into a power blackout Sunday morning barely six months after the previous national outage highlighted the derelict state of electricity supply.

The Kenya Power and Lighting Company (KPLC) blamed the national blackout on a breakdown at major transmission substation at Juja Road, east of the capital.

The Sunday outage caught many by surprise, as Christians were preparing to attend church services.

Frequent power blackouts are a hallmark of the state of Kenya’s power generation and distribution facilities, most of which were constructed in the 1970s and 80s. Increasing demand for power from a growing population has placed a strain on Kenya’s aging infrastructure.

Daily power outages are a common occurrence that have frustrated economic development in Kenya. A typical enterprise will experience at least two outages per day with high probability of blown computers and other equipment, resulting in heavy losses.

Inspite of the poor quality of supply, Kenyans are paying possibly the highest electricity tariffs in the world. In June this year, KPLC announced a price increase of 20% but consumers put the increase at more than 50% based on the bills they receive. KPLC says the higher-than-expected increase in electricity tariffs is due to high oil prices emanating from the use of oil-powered generators.

As a consequence of threats from manufacturers to relocate their operations from Kenya, Acting Finance Minister John Michuki last week announced a reduction in taxes for oil products. This, according to Michuki, should help reduce electricity costs and thereby save thousands of jobs.

Read about the May 2008 national blackout >>

Power cuts add to Kenya’s woes

Erratic power supplies in Kenya will curtail economic growth, battering a population struggling through a political crisis and rising inflation fueled by high oil prices.

Power cuts are becoming a daily routine in Nairobi and the rest of the country. Businesses are incurring losses due to many hours of lost productivity. Those opting to supplement power supplies with oil-fired generators are having to deal with rising fuel costs averaging Kshs97 (US$1.6) a litre for petrol. Power spikes, surges and low-voltage have ruined electrical equipment across the country necessitating extra costs in purchase of power stabilization systems.

Informal businesses located in the city’s residential areas and which cannot afford the use of generators are most affected. Owners of cybercafes, secretarial bureaus, salons, barbershops, welding workshops and motor vehicle garages watch helplessly as employees idle for hours due to lack of electricity.

There are fears that erratic power supply is likely to grow into full fledged power rationing very soon as demand for electricity outstrips the supply. Fears of power rationing are credible given a slow pace in developing new power stations inspite of a supply reserve of less than 10% of national demand (the global standard is 15%). The last period of power rationing in Kenya was between 1999 and 2001 which resulted in two consecutive years of negative economic growth.

Unsatisfactory electricity supply is attributed to rising demand recorded in the past five years. The suburbs of Nairobi have witnessed rapid construction of high rise flats in Umoja, Mathare North, Donholm, Kileleshwa, Kilimani, Ongata Rongai among other areas. An ambitious street lighting program in all of Kenya’s towns has increased the demand for power. For instance, the town of Garissa has street lights for the first time in its history. Meanwhile, industries that had hibernated during the Nyayo era gained a fresh lease of life thanks to a booming economy, putting further strain on the electricity supply system.

Kenya’s power producer has allayed fears of an electricity crisis. The Kenya Electricity Generating Company (KenGen) says that the commissioning of the Sondu Miriu Hydro Electric power station in Western Kenya late last year should alleviate the possibility of supply shortfalls. KenGen is sourcing funds to expand geothermal power generation at Olkaria.

Its worth noting that until Sondu Miriu last year, no major hydroelectric dam had been built since the 1980s. That was when the Seven Forks Scheme on Tana River and the Turkwell Gorge project were completed. Whereas Sondu Miriu is expected to produce less than 100 Megawatts after a decade of construction, the Seven Forks and Turkwell mega projects still produce over 500 Megawatts in total.

The Kenya Power & Lighting Company (KPLC) which distributes power from KenGen to consumers is on a multi-billion shilling programme to expand its distribution network. KPLC is putting up additional transformers as well as installing thicker conductors to transmit more electricity. KPLC is importing electricity poles after its local suppliers were unable to meet its requirements.

Nevertheless, Kenya’s business community cannot be blamed for viewing both KenGen and KPLC with skepticism. The state has a large controlling stake in both corporations, making them susceptible to political pressure. For instance, the tenures for KPLC’s Canadian expatriate managers are about to expire with little indication that the Ministry of Energy will renew the contracts. If anything, there is speculation that management of KPLC could be used as a reward to political operatives.

In 2006, the Ministry of Energy accused the KPLC of failing to utilize billions of shillings meant for rural electrification yet there were thousands of potential customers lining up to be connected. KPLC is also criticized for spending more money on administration than it spends on plant and machinery. The company buys new fleets of maintenance trucks every few years with little tangible results.

KPLC emergency crews are notorious for inefficient and corrupt practices. A woman in Nairobi told the Nairobi Chronicle how KPLC personnel demanded bribes to fix her electricity meter despite the fact that it was on fire!