Uche Cecil Izuora
Commercial bankability has been identified as one of the biggest barriers to financing regional power projects in the past as lenders were more comfortable with stable, long-duration contracts than with exposure to market-based pricing.
The remarks was made by Co- Head of Power at RMB, a leading African Corporate and Investment Bank, Pranisha Sahadeo, which underscored a broader change in how lenders and developers are viewing the regional power market.
Historically, project financing in Africa’s power sector has depended heavily on long-term power purchase agreements, or PPAs, often stretching over 20 years and providing predictable tariff escalation linked to inflation.
Those contracts have typically formed the bedrock of bankability for commercial lenders.
But Sahadeo said RMB recently backed a project based on a different model, one that departs from the traditional long-term contracted structure and instead takes a view on day-ahead market pricing within the Southern African Power Pool.
In effect, that means electricity can be sold into a competitive regional market where prices may vary daily, rather than only through fixed bilateral offtake arrangements.
For commercial banks, that marks a notable evolution in risk appetite.
However, RMB’s assessment of the region’s underlying supply-demand imbalance appears to have changed that equation.
“I think in essence, it’s essentially the commercial bankability and how commercial banks have historically looked at projects of this nature,” she said. “As a bank, we’ve taken a broader view in terms of what is the regional deficit. Is it going to disappear over the next five to 10 years? And the answer is quite clearly that it’s not.”
That enduring power deficit is central to the investment case. With electricity shortages expected to persist across multiple Southern African countries, financiers are increasingly willing to support generation assets that can dispatch power into the regional pool, particularly where power can move from lower-cost producing countries to those with tighter supply.
Pointing to South Africa, she said the Southern African power market is entering a new phase of development, with growing private-sector interest in financing power generation and transmission projects that can sell electricity across borders through the Southern African Power Pool.
Speaking to CNBC Africa, Sahadeo said the region’s power-trading framework, which has existed since 1995, is now seeing renewed activity as utilities and member states increasingly participate in the market.
That shift, she said, is helping electricity move more freely across national borders at a time when Southern Africa continues to grapple with persistent power shortages.
“The Southern African Power Pool is a very exciting development for us,” Sahadeo said. “More recently we really have seen more activity pick up, more utilities, more member states into the SAPP, which means that electrons are able to travel more freely amongst countries, and we’re not necessarily constrained by those national boundaries.”
Sahadeo gave the example of transmitting cheaper electricity from Botswana into Zambia, arguing that regional trade can help optimize supply across borders rather than forcing countries to solve shortages entirely within their own systems.
Still, the promise of freer electricity flows depends heavily on the physical network that carries that power.
Sahadeo flagged interconnector and substation capacity as a critical due diligence issue for lenders. Even if a project can generate competitively priced electricity, its ability to serve regional buyers depends on whether transmission infrastructure between countries is strong enough to carry those electrons.
“In terms of interconnector capacity, it is a key concern for us,” she said. “Your ability to transmit power from say Botswana to a different jurisdiction will be constrained by your interconnector, substation capacity between those particular countries.”
That means regional energy integration cannot rely on generation investment alone. According to Sahadeo, there is also an urgent need to strengthen domestic transmission networks and expand cross-border interconnection capacity so power can move efficiently between member states.
The comments come as interest grows in a wider pipeline of regional projects. Sahadeo said RMB is seeing significant inquiry flow linked to new generation capacity aimed at the Southern African Power Pool, with opportunities under review in Zambia, Namibia and Botswana.
“It is really quite an exciting time for us,” she said, adding that the bank is not only focused on generation projects but is also actively evaluating financing for interconnector upgrades and other transmission-related investments.
That is potentially significant because transmission infrastructure has historically been more closely associated with development finance institutions than commercial lenders. If private banks begin financing more of those assets, it could broaden the capital pool available to accelerate regional electricity trade.
Sahadeo also addressed the long-standing vision of tapping power from the Democratic Republic of Congo, particularly the Inga hydropower complex, to supply Southern Africa. She said that concept remains valid within the Southern African Power Pool framework, which is designed to allow countries with excess generation capacity to export electricity across borders where transmission pathways exist.
At the same time, she pushed back on the idea that regional power trading is still a future prospect. According to Sahadeo, cross-border trading has been in place for years, but activity has remained relatively muted due to infrastructure bottlenecks and the tendency of governments and utilities to prioritize domestic supply challenges first.
That mindset may now be changing as policymakers, utilities and financiers increasingly recognize the value of treating electricity shortages as a regional rather than purely national problem.
Another major implication of deeper market integration is pricing. Sahadeo said power sold through the regional market would be priced by supply and demand, rather than by direct state intervention.
“The price is definitely set by the market,” she said. “The idea is that when you have more buyers and more sellers in the market, the market inherently becomes more competitive from a tariff point of view.”
She contrasted that with emergency procurement by some national utilities, which can reach extremely high prices. A more integrated regional market, she argued, should enable cheaper access to power and ultimately benefit households and businesses across the region.
For Southern Africa, the stakes are high. The region’s chronic power shortages have weighed on industrial output, investment and economic growth for years. If commercial banks, utilities and governments can align around a more connected power system, the Southern African Power Pool could become a more effective platform for unlocking new generation, mobilizing private capital and lowering the cost of electricity over time.
While major challenges remain, particularly around transmission capacity and project bankability, Sahadeo’s remarks suggest the market may be approaching an important turning point: one where regional power trade moves from an underutilized mechanism to a more central part of Southern Africa’s energy future