Powering into position

Drive to light up East Africa creates lucrative opportunities for Chinese power solutions firms

Chinese power solutions companies are eying lucrative opportunities in East Africa, where driving energy development has become a key priority.

The demand for electricity in the region is expected to grow at 5.3 percent a year until 2020.

This means nations will need to significantly increase their generation capacities: Uganda by 37.7 percent; Kenya by 96.4 percent; Rwanda by 115 percent; and Tanzania by 75.3 percent; according to EnergyNet, an events organizer focused on power and industrial sectors.

A report by Frost & Sullivan says the region is a hotbed for energy-related investment opportunities thanks to its economic growth and its potential to become one of the world's largest producers and exporters of oil and natural gas.

More than 80 percent of the potential gas reserves in East Africa are concentrated around Mozambique and Tanzania, the report says, adding that while liquefied natural gas exports from these countries are expected to start in 2020, rapid development of gas power projects would be a short-term answer to the growing local demand for electricity.

"The region will provide immense opportunities for companies specializing in oil and natural gas exploration and production, power generation and associated infrastructure as well as renewable energy technology commercialization," it adds.

The potential did not escape the attention of Chinese exhibitors at the East African Power Industry Convention in Nairobi, the Kenyan capital, on Sept 21 to 22.

Among them was Zhang Congwei, general manager of Gold Cup Cables Kenya Co Ltd, who sees enormous opportunities for energy and power solutions companies.

"We're planning to open stores in all major towns in Kenya as well as expand to Tanzania and Uganda in January," he says.

The company, a subsidiary of Gold Cup Electric Apparatus Co Ltd, based in the central Chinese province of Hunan, entered the Kenyan market four years ago and has a turnover of $1.2 million. It aims to double that figure next year and is planning to build a local factory in an effort to cut costs.

"The import cost is high and the cost of labor in Kenya is cheap compared with China," Zhang says. "We hope production costs will go down, which will reduce the prices of our products and in turn attract more customers."

Gold Cup Apparatus, which is listed on the Shenzhen Stock Exchange, has more than 60 years of experience in manufacturing, research and development and marketing electric cables and electromagnetic wires. It employs more than 1,600 people and its consolidated sales in 2012 were $500 million.

The company has bought land for the factory and is awaiting building permits, with the plant scheduled to be operational by 2018.

Also eying the East African market is Shenzhen Power-Solution Ind Co Ltd, a company in Guangdong province that manufactures solar home lighting solutions.

"Many parts of East Africa, especially rural areas, lack access to electricity," says Tom Tong, the company's sales representative in Kenya. "We're offering an alternative to candles and kerosene lamps, which are not environmentally friendly."

Four out of five people in East Africa have no access to electricity, according to data from EnergyNet Ltd.

Tong says the solar home lighting system is his company's most popular product, which retails at about $64. The system has an in-built FM radio and MP3 player and can light up to five rooms.

In the next two years, Power-Solution Ind aims to double its current turnover of $10 million, he adds.

Dongfang Electronics Co Ltd, also in Guangdong, is a major supplier of China's energy management solutions. It has set up a regional office in East Africa and is looking for local partners.

"We want to help utility companies to increase power quality. We totally understand the business and so are confident of making a breakthrough here," says Yan Lingfei, chief representative with the company's Africa business unit.

He says the company is in talks with two state-owned partners: Kenya Power and Kenya Electricity Transmission Co Ltd.

Alick Lee at Spintelligent Events, which organized the East African Power Industry Convention, says he is also confident Chinese companies can penetrate the promising East African power and energy market because their products are "of high quality and the price is competitive".

He advises companies to look for local partners as part of their market entry strategy. "Local companies understand the market better, so you will be assured of penetrating easily," he adds.

The convention saw 74 energy solution providers, including 15 from China, showcase their products and services to more than 800 visitors.

edithmutethya@chinadaily.com.cn

(China Daily Africa Weekly 09/30/2016 page26)