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Project Appraisal
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A worm's eye view of energy project appraisals in Africa

Philip O'Keefe
a a

School of Geography and Environmental Sciences, Newcastle-upon-Tyne Polytechnic, Newcastle-upon-Tyne, NE1 8ST, England Published online: 17 Feb 2012.

To cite this article: Philip O'Keefe (1986): A worm's eye view of energy project appraisals in Africa, Project Appraisal, 1:1, 56-59 To link to this article: http://dx.doi.org/10.1080/02688867.1986.9726535

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Project Appraisal, March 1986, Volume 1, Number 1. Published by Beech Tree Publishing, 10 Wadord Close, Guildford, Surrey GUl ZEP, England

Viewpoint
A worms eye view of energy project appraisals in Africa
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Philip OKeefe on practical aspects of a Ministry of Energy trying to select worthwhile projects.
The major challenges facing the new Ministry of Energy in Kenya have included the need to develop an overall energy policy, the distractions of organising a major international conference, the need for a planning time-scale longer than in other sectors, and pressures from multi- and bi-lateral aid agencies. Effort has gone into energy developments more because such projects are text-book cost-benefit analysis candidates, than because they solve underlying problems. Within foresty, this has placed emphasis on conventional forest y projects rather than agroforesty. The realities of how local people live and work are often not addressed. The kind of projects that result are of little help to those they are designed to serve.

Keywords: economic development; Rural energy; biomass; project appraisal.

Philip OKeefe is now in the School of Geography and Environmental Sciences, Newcastle-upon-Tyne Polytechnic, Newcastle-upon-Tyne NE1 8ST, England. From 1980 to 1983, he was a Senior Advisor to the Kenyan Government. He is a Senior Research Fellow at the Beijer Institute, The Royal Swedish Academy of Sciences. This is an edited and revised version of a presentation given at an ESRC (Economic and Social Research Council) Workshop on Energy Planning in Developing Counties, University of Sussex, England, in November 1985.

SHUDDER t o think how many energy projects have been thought up over the last 15 years or so in the Third World. Kenya has produced its fair share of such projects amongst which are some that I have worked on. I start from the basis that such projects should be subjected to careful design and appraisal before implementation; and that design and appraisal requires some larger picture against which to set the project. That larger picture is part of what a policy should be about. The appraisal of energy projects in Kenya has suffered from a lack of clear, consistent energy policy. Kenya is not the only country to have been in this position. Indeed, until the late 1970s, Kenya had no official energy policy unit, let alone a Ministry of Energy. The oil price rises of the early 1970s had been compensated by the parallel rise in commodity prices, and it was only around the end of 1977 or early 1978 that the real problem (particularly in the balance of payments) was readily apparent. That demonstrates very clearly the existence of time lags in the whole energy business. The time frames of energy policy are longer than those used in other sectors. Ministries work on a whole series of time frames. Few administrative actions, (chiefly those focused on price) have an impact in less than five years. The single most important administrative action is price review, which takes time to filter through the market. But beyond such administrative actions are the planning horizons. The short term in energy is five t o 15 years. The medium term in energy is somewhere from 15 to 50 years, and the long term is 50 years plus. The first thing t o clearly identify is that, in energy planning, the time-scale fits no other government timescale. Other ministries regarded energy work as akin to trying to get a weather policy together. I t is difficult to talk in bureaucratic terms of a 15 year planning horizon when the crisis is reflected in the cash-flow situation of the government as a whole, and they are operating on a budget base of about six months. There is great tension between these differing time perspectives and, in many senses, the people to whom planners have to address the critical management decisions are not ensconsed in the Ministry of Energy, but are ensconsed in the Treasury. At the top of the formal policy-making and decisionmaking system, and far removed from the level of individual

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projects, is of course the Cabinet. They have a host of considerations t o handle, of greater or lesser relevance t o planning in general and energy in particular. There are two golden rules of thumb for presentation t o the Cabinet: Rule one: draw out the political implications of the policy and projects. Politicians, like planners, have their own self-interest at heart. Rule two: limit the presentation to a maximum of six points; no-one has time to assimilate more. is not easy to push successfully for long-term energy -. development in such a forum. I t is even more difficult t o do so if there is no formal Ministry of Energy with a senior Cabinet member arguing for energy planning.
A new ministry

In 1979, there were a whole series of new institutions created in Kenya. One was the Ministry of Energy. It is possible to parody the creation of a new Ministry. When you establish a new ministry, all hell breaks loose. At a senior level, people are dumped into the new ministry very rapidly. These are generally political, not technical, appointments. To give the new ministry some credence, good technical people are employed at the level of project officer - and neer the twain shall meet. The bright young technicians are mostly trained in one technology - just one, be it bio-gas, solar, wind, electricity or whatever. The measure of their own success is how much bio-gas, how much solar, how much wind energy, gets put in place. So every desk officer has a plan for the country where all the energy requirements are met by their own one technology. Taken in isolation, each one of their individual projects may seem sensible and worthwhile, but cumulatively such projects, prepared in isolation, spell disaster. Let me continue the parody: in Kenya, there was a proposed national project for bio-gas built upon assumptions of the number of cattle available in the country. Part of the problem, of course, was that most of the cattle were not in an orderly queue, and when you start calculating the energy cost of collecting the excrement, you end up with some rather funny energy conclusions. Energy ministries have planning and administrative responsibilities, but little executive responsibility. This does not help them resolve the conflicts between the different time-frames, between competing projects and policy objectives. In short, energy ministries have responsibility without power. Additional pressure came from multilateral institutions wanting to relate to the new ministry. Such multilateral institutions, with their big bureaucracies, have an inbuilt expansionist vision of themselves. Thus the World Bank and other such agencies sought to establish an international profile, but such a profile was only established at a cost to the new third world energy ministries.

It was the Ministries who had to service the international teams of experts. Bilateral agencies were the most destructive in relating t o the new Ministries. When one is dealing with bilateral aid agencies at the receiving end, in the Ministry, one is dealing with competition: one is dealing with the Italians versus the French, versus the Germans, versus the Swedes, as competition. This competition has big prizes. The projects and project officers operate as if in the private sector. T o individual project officers, success is measured by getting their projects, and their bilateral sponsor, accepted. Officers, usually unwittingly, get tied to one technology, one company, one foreign government. There is conflicting advice from the bilateral aid community, and this helps create confusion within the Ministry. Because they are dealing with aid projects, the bilateral agencies by and large require project appraisal, not a policy framework within which to locate project appraisal. So everybody is doing cost-benefit analysis until they are blue in the face. And if one objects to it, then they will throw in a little environmental impact analysis and a little social impact analysis. But where that project fits into the overall view of things, who knows? This is a complicated area. The policy framework must come first, and only then can one see how to fit projects into it. But, despite having undertaken a thorough review of the literature, I still do not fully understand how to move successfully from a policy framework to a set of relevant, priority projects. It is encouraging to see that, largely thanks to moves by the European Community, aid agencies are beginning t o talk of looking at strategic assemblages of technology. This may be the phrase in energy analysis for the next five years. In Kenya, the establishment of the Ministry took place against a backcloth of the Conference on New and Renewable Energies. The conference not only tied up the Energy Ministry, but tied up the whole government for 18 months. I t was a large international conference which put energy on the international agenda - but deliberately left out oil and nuclear power. Everybody who was in new and renewable technologies came along and emphasised the importance of enduse demand analysis - a valid emphasis. But then they immediately turned round the whole presentation, and became supply analysts - that this supply technology was better than that technology, let alone that other one. Energy planning has not yet recovered from that position when new and renewables simply became another supply option. Although Canadas IDRC took a very positive and helpful lead in trying to assess the comparative merits of these technologies, there is still not a clear identification of the overall contribution of new and renewable energies. Problems in energy planning What did emerge clearly from the conference was the distinct problems in the modern and traditional energy sectors in the third world. For ministries and energy analysts, concerned with broad policy or specific project appraisals, planning problems were increased with the recognition of two distinct energy systems: the modern sector and the traditional sector. Like everyone else, planners in Kenya wanted to get a handle on this duality of energy systems, first of all by back-of-the-envelope calculations, but eventually by working on a detailed national energy accounting sy stem . Third World energy consumption is essentially biomass,

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The career prospects of the bilateral aid officers require them to sell some projects to Ministry officers - with similar career needs. Formal appraisals may be undertaken. But who knows how those projects fit into an overall scheme?
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E n e w projects in Africa
so the energy accounting system was based on land assess-

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ment. The critical long-term issue, related to land, is food, not biomass for fuel. N o planner would wish to suggest a whole series of mono-culture forest plantations to meet energy demand if it was at the expense of food production. As we built the energy analysis with reference to land use, two further points emerged. First, you cannot use an accounting system across modes of production: in a traditional society, you have simultaneous end-users, unlike a modem society where, for example, specific fuels and technologies are related to one end-use. Fire is used simultaneously for cooking, lighting, and space heating in traditional societies. This makes it extremely difficult to put an accurate mathematical value on that fuel/technology combination for one end-use. Similarly, it is difficult to allocate land-use to one category when there is multiple cropping. Positivist accounting systems d o not accomodate such a reality. The second point is the difficulty of dealing with the non-commercial, traditional energy sector, where data is limited. In particular, when does biomass cease to be a free good and instead become traded as a commodity? Such a transition is of great importance to project appraisal, not least because commodities can be costed. The transition to a real commodity exchange seems to take place when markets move from volume measurements to weight measurements. But conclusive evidence for this movement does not exist. It is still very difficult to define exactly where that traditional sector ends, not least because social and economic linkages, across class, gender and ethnic group, makes any boundary somewhat fuzzy. When dealing with biomass fuel, a couple of things become readily apparent. First, in the African context, wood clearly dominates all energy budgets, and will continue to do so in the medium term, (25 years or so). The second thing is that, having focused on wood, the real problem is that the relevant trees are not those in the forests; trees for energy have little to d o with forests per se. Most people obtain their wood from trees outside the forest. One consequence of the rush to provide a wood energy project is the strengthening, of another multilateral organisation, the UNs Food and Agricultural Organisation (FAO), particularly the Forestry Division, which has been rescued from obscurity by the discovery of the other energy crisis, the wood crisis. But is this a sensible development? Skills versus needs Being against foresters, in the present climate, is like being against motherhood; its not allowed. But foresters know vktually nothing about agriculture, although it is from agricultural land that this wood comes. Foresters are trained a s engineers; they think mono-cropping; their preference is the bulldozer over the spade. The kind of projects set up by foresters, dedicated to one end-use, are easily analyzable by benefit-cost analysis: the land, labour costs, capital requirements, revenues, and all the other elements are known; then you can discount everything like the textbooks say. But the same neat analysis on trees outside the forests is difficult (no matter how high the social discount rate). And the push for Village Wood-lots, where only the scale of operation is changed, not the relationships in wood-growing does not address the needs of the majority of people who gather wood outside the forest. Energy accounts are used to project a future. But obtaining a future in any energy sector is difficult: there

Forests are amenable to textbook costbenefit analysis. The fact that they are not solving the problem need not be noticed
are as many projections as there are projectionists. From history, planners must conclude that they have to cast caution to the wind when making any kind of future projections. In Kenya, the planning team decided to make the most outrageous suggestion possible: business as usual. Clearly, business-as-usual could not happen. Everybody can at least accept that. But that future can be used to test the strengths and weaknesses of a series of strategic options. Actually coming up with that future, and trying to avoid the pitfalls associated with gap analysis, is a very difficult job indeed. This general area, looking ahead, probably places the most demands upon the policy planner. People Having looked at wood, in some detail, and seeing that the situation was unlikely to alter substantially, the planning team was very struck by another part of the demand picture: the effects of a significant demographic shift from rural to urban areas. The rate of urbanisation in subSaharan Africa is going to take off so rapidly that it will leave the Asian and Latin-American experience way behind. What is very apparent in the African context is that rural demand for wood is not usually responsible for deforestation (rural demand for land causes deforestation). Rural people d o not cut down trees for themselves, they cut down branches and collect wood litter. Deforestation, the cutting of whole trees, is to produce charcoal for urban areas. It is the charcoal demand that produces whole-tree destruction. This raises all kinds of issues, not least the issue of another rural subsidy to the urban area. Our calculations, on current technology efficiencies, suggest that wood consumed as charcoal for household demand in the urban areas uses three times the amount, on a per capita basis, than that required in rural areas. This is a very heavy subsidy from the rural areas. Before people ask, why not move town dwellers away from charcoal, it is worth trying to understand how peasant households survive. Peasant households survive, peasant systems survive, by having access to off-farm income as well as on-farm income. If we have learnt anything in the past 50 years about peasants, it is that off-farm income is absolutely critical to the peasant The major source of off-farm income is wage migration. Wage migration removes people from the village - particularly younger men, able to do part of the farm work. This considerably increases the burden on the women who remain behind in the rural areas. Most men in the towns d o not gain sufficiently large salaries to allow a high level of remittance. Because there is not a high level of remittance, other sources of income have to be found, classically by using the so-called free goods of common land. And the most important of those is trees to produce charcoal. Project Appraisal March 1986

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If one intervenes and stops charcoal production, the impact on the survival of peasants would be very serious. One is caught in a real problem that goes beyond the scope of energy issues. What options does that leave? Still focusing on the wood energy sector, one can pursue a conservation option by focusing on end-use technologies. This raises the issue of stove experts. I have come across three groups in stove development strategies. There are the tinkers - millions of them, who, immediately you say you need an improved stove, will go out and try and build one, with no reference to its testing or its level of efficiency. But that is still a wonderful tradition to have. Then there are the thinkers, who argue very strongly that we need t o approach these issues with third world technology (they often resist the word appropriate) with the same level of R&D and design as would be applied to anything in the industrialised world. The third group is the stinkers, who believe that the first and second groups have achieved little so far, and that the stove programme should be halted, as it is a dead-end. That about summarises the stove conservation programme. Two different strategies which have enjoyed marginal success, and a third strategy built o n rubbishing the work of the first two. This is hardly a constructive way to procede with energy planning. Forests On the wood supply side, there are several strategies available. Firstly, there can be enhanced management for natural forests - but then we are back to foresters again, trained not simply as a kind of engineer, but as a particular kind of policemen too, The function of a forester is to keep people out of forests, all over the third world. Because their forests are normally associated with tourist areas (game parks and so forth), the pressure of keeping peopie out - or at least tightly controlling their access - is very critical. The most interesting programme for the enhanced management of natural forests has actually been offered by Shell, and, if multinational oil companies think they can handle forestry in a very effective way, then the rest of us should have another look at it. A second level of strategy is conventional reforestation. This is extremely expensive. Short of whole tree-felling and a very sophisticated charcoal process, it is difficult to provide wood for household use in this way, not least because forests tend to be on marginal land, whereas people tend not to be on marginal land. So there is a large transport cost. The third element, in which the World Bank is now taking a lead, is the issue of peri-urban forestry, that is, growing wood to be consumed either as wood or charcoal around the large major cities. (For those who like historical references, von Thunens land-use system described in nineteenth century Germany is a classic case study.) A personal view The strategy most experts are talking about is agroforestry, putting trees into the current land-use systems so that people can obtain wood on their own farms. With all this talk, somebody, somewhere, is going to appoint a professor of agroforestry. 1 hope they know what he or she is going to do because, out there, the peasants have practiced agroforestry for the best part of 3,000 years or more - and

Development sociologists have realised the poverty of extensive questionnaire analysis for much LDC work. Do economists and engineers have parallel realisations awaiting them about much of benefit-cost analysis?
very few of us have taken any notice of them. Very few of us can describe the three-dimensional nature of the system, the off-take, how it relates to the rest of the land-use and to the household economy, how it relates to off-farm income. We have no idea, and yet everybody, every report, says, look into agroforestry. Kakemega is the district with the highest population in Kenya, and, therefore, possibly the one under most threat of continued deforestation. When we designed an energy project in 1981,there was few nurseries in the place. By 1985, we could not move for nurseries. Spontaneous eruption of nurseries - what a wonderful success. Is this not what development is all about? Unfortunately, no. Those nurseries are dedicated to species for growing wood on farms, by men, for the commercial market. Pressure on wood is so great that they have run out of building wood. Building wood is a male responsibility. The problem is that wood for fuel in Africa is a womans problem. Women cannot access those male trees on farms, or even make decisions aver land-use. They are having to move further and further away to collect the fuel wood in Kakemega. The only female group that has control over its land use is the widows. You do not get very far with aid agencies when you go and tell them that you have got a wood energy programme for widows. But, the serious point is that, ultimately, what you are dealing with is the issue of basic needs, and the acquisition of basic needs in rural areas which revolves around gender. Unless there is some resolution of this problem, there will be little progress in wood production in Kakemega. Without such a detailed understanding of social issues, there is no sensible basis for appraising the countless projects that are identified. It is possible to think of ways around the problem. For example, women have access to all biomass beneath the lower leaves of banana plants. If woody biomass was grown so that it did not exceed this height, the women could control it. Why grow trees when what people need is fuel sticks? But it is difficult to convince project planners that such lateral thinking can be the basis of useful development. There is a serious point to all this critique. You cannot develop policy on projects unless you understand the social and ecological context of development. In many underdeveloped countries, this complexity means that it is impossible to apply blanket techniques from modern industrial capitalist societies to the pre-capitalist agricultural situations. Development sociologists quickly realised the poverty of extensive questionnaire analysis for development appraisal. Why cant economists and engineers have a similar realisation and abandon their technical and benefit-cost analysis until they understand the peoples problems?

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