The European Investment Bank is lending EUR 35 million to Namibia's state-owned electricity provider - NamPower - for the development of a 350kV transmission line linking the Namibian and Zambian electricity networks. The Caprivi interconnector will also benefit from a EUR 15 million interest rate subsidy from the EU-Africa Infrastructure Trust Fund.
The Caprivi project is of strategic importance for the development of electricity interconnections between countries in the Southern African Power Pool (SAPP). Namibia will enjoy more reliable electricity supply than is currently the case and the country will be able diversify its power sources. Moreover, the link will support the emergence of a competitive power market in Southern Africa.
Plutarchos Sakellaris, EIB Vice President responsible for lending operations in the Africa, Caribbean and Pacific regions said, "As a major importer of electricity, Namibia depends on the development of strong links between national power networks in the region. The Caprivi interconnector opens Namibia's access to the hydro capacities of Zambia, Mozambique and others in the Southern African Power Pool to ensure secure, sustainable and clean energy supply for the country's future."
The Caprivi interconnector consists of a 970km transmission line which starts from Katima Mulilo in north-east Namibia, runs along the Caprivi strip between Zambia and Botswana and ends at Gerus in central Namibia. The construction phase will create 1000 person-years of employment and the transmission line should be completed by the end of 2009.
A flagship regional project
The project is:
- of significant economic importance for Namibia and the surrounding region;
- the recipient of the largest EU-Africa Infrastructure Trust Fund contribution to-date;
- an example of strengthened relations between international financial institutions in Africa.
Constant and reliable power supply is a prerequisite for developing economies. Namibia suffers regular interruptions in imported electricity which is sourced principally from South Africa. As well as diversifying the country's potential energy sources, the proposed transmission line between Namibia and Zambia reduces distances over which the electricity must travel. This will result in lower transmission losses to benefit the Namibian economy. The other economies of southern Africa will also see the advantages of a more competitive regional energy sector as a result of the stabilisation and completion of the SAPP.
The EUR 15 million interest rate subsidy which the project is receiving from the Trust Fund is also designed to make the project more affordable to Namibian electricity customers. At EUR 15 million, the interest rate subsidy is the largest assistance provided to a cross-border infrastructure in Africa since the Trust Fund was established in 2007. Should the project generate a higher return than expected, the subsidy will be injected into a development account to finance electricity for poorer segments of Namibian society.
The Caprivi project is also a prime example of the Trust Fund's objective to encourage increased coordination and co-financing opportunities between European development banks. For the first time, the EIB, Agence Française de Développement (AFD) and Kreditanstalt für Wiederaufbau (KfW) jointly appraised the project and the three financing institutions will each lend 12% of the total project cost. The EIB, AfD and KfW jointly applied for the interest rate subsidy from the Trust Fund and it will be divided equally between them.
EIB Activity in Africa, Caribbean and Pacific
The European Investment Bank (EIB) is instrumental in implementing the EU's development and economic cooperation policy in countries outside the Union. The EIB has been a development partner in many African, Caribbean and Pacific (ACP) countries since 1963 through a series of lending mandates from the European Council. The current mandate is based on the Cotonou Agreement of June 2000.
EIB loans in the ACP regions support the alleviation of poverty and the development of sustainable economic growth. The Bank lends from two sources - EIB own resources and the Investment Facility, a revolving fund financed by the EU Member States through the European Development Fund. In 2007, the EIB invested EUR 869m in the ACP region.
The EIB has been active in Namibia since 1992. The Bank has lent over EUR 177 million to support infrastructure, industry and small and medium sized enterprises in the country.
EU-Africa Infrastructure Trust Fund
The EU-Africa Infrastructure Trust Fund was established within the framework of the EU's response to the 2005 Gleneagles Declaration on Africa to support infrastructure projects with a cross-border or regional impact in sub-Saharan Africa.
The Trust Fund blends grants from the European Commission and EU Member States with the lending and technical capacities of the EIB and other EU development financiers. The Trust Fund supports energy, transport, water and telecommunications projects through interest rate subsidies, technical assistance, grants for social or environmental components of projects and grants covering early-stage premiums on risk mitigation insurance.
The Fund became operational in April 2007 and is managed by the European Investment Bank. It now boasts 11 members and total contributions to the fund stand at EUR 89 million with 6 grants already approved.