The African energy mafia: rigged contracts and overbilling

In Africa, load shedding and high electricity prices are not just the result of tired turbines. They are also the result of an opaque political economy in which consulting firms, dealmakers and shell companies interpose themselves between the state and the kilowatt-hour. Sheltered by obscure clauses and fast-track procedures, these intermediaries capture rents at the expense of useful investment. The result is well known: poorly negotiated contracts, overcharging, ill-adapted technological choices, growing public debt - and a final bill passed on to the user.

The mechanism is recurrent. In the name of urgency, public purchasers resort to over-the-counter contracts and independent production agreements with take-or-pay clauses: they pay for capacity they don't always use. Added to this are intermediation chains: consultants backed by political interests, dedicated vehicles, success-fees indexed to the award. In the absence of genuine competition, full publication of contract documents and independent audits, rents proliferate, and economic discipline disappears.

South Africa offers the most systemic version of the phenomenon. At Eskom, the Zondo Commission documented the capture of public contracts: coalitions of interests, pressure on suppliers and biased contracts. Multinationals were also implicated. Hitachi settled a dispute in the United States after payments linked to the Medupi and Kusile boilers; ABB admitted irregularities at Kusile; and, in 2024, McKinsey agreed to pay over $120 million to close a corruption case linked to contracts with public enterprises. In addition to the personal cost, contract engineering was also very expensive: the OECD estimates cost overruns of around +185% for Kusile and +66% for Medupi, symptoms of weak governance and poor project control.

In Senegal, the "energy mafia" takes on other faces. The Senelec-Akilee case (a performance contract for efficiency and measurement) was formally pinpointed by the national anti-corruption body for alleged violations of the procurement code, accounting irregularities and tax fraud. At the same time, the country has resorted to Karpowership's barges in Dakar, up to 335 MW, initially fueled by fuel oil, then with a transition to LNG thanks to a floating regasification unit. Technically, these barges stabilize supply; economically, they require impeccable contracts on fuel, indexation and duration. When these parameters remain opaque, the temptation to overcharge for operation or lock in excessive margins becomes real, and the taxpayer ends up absorbing the risk.

Ghana is a case in point. To get out of the "dumsor" (2013-2016), the state signed emergency take-or-pay contracts with independent producers. When demand declined and transmission remained insufficient, the country continued to pay capacity charges for electricity that was not dispatched. The IMF points out that these agreements, combined with under-cost tariffs and technical and commercial losses, have led to persistent deficits. In 2024-2025, World Bank documents still showed sectoral arrears of around two billion dollars. The government has launched a turnaround plan to renegotiate power purchase contracts, tidy up the way money is paid out and reduce excess capacity, decisions which show that a bad contract continues to be expensive long after the emergency is over.

In Kenya, the Lake Turkana Wind Power episode illustrates another hidden cost: not the price of the asset, but the penalization of a state that has not kept its network commitments. The delay of the transmission line triggered penalties ("deemed energy") of several billion shillings, passed on to users. This experience is a reminder that a generation contract that is not synchronized with transmission investments mechanically transfers the risk to the consumer. At the same time, Kenya Power has seen the opening of proceedings for rigged contracts targeting former executives, a sign of persistent governance flaws in the procurement chain. In both cases, poor contract engineering translates into an invisible tax on growth.

Finally, Nigeria demonstrates the pitfalls of poorly framed sovereign guarantees. Azura-Edo's IPP, backed by multilateral instruments, imposes significant monthly payments even when the grid cannot absorb production. By 2024, the press was reporting $30-33 million a month in guaranteed capacity payments, a combination of a take-or-pay clause and dispatch constraints. Without a coordinated ramp-up of transmission and dispatch, the promise of available capacity becomes a "pay-not-take", and the State becomes the insurer of last resort for a risk it has neither technical nor financial control over.

The consequences are the same everywhere. These arrangements socialize private risks and transform commercial assumptions into quasi-budgetary obligations, thereby raising the cost of public capital. They shift investment away from priorities - metering, loss reduction, flexibility - towards rigid contractual rents, and undermine investor confidence. The remedies are well known: full transparency of PPAs and regulatory decisions; competitive tendering; enforceable network and supply plans prior to any new capacity; cash-flow discipline (cash-waterfall, elimination of arrears); whistleblower protection and sanctions - restitution, fines, bans on tendering. Regional integration (WAPP, SAPP) and multi-country auctions can reduce the appeal of emergency solutions and break the brokers' rent. In 2025, the South African courts annulled Karpowership's licenses: a reminder that the rule of law can close the loopholes opened by urgency.

Glossary of acronyms and abbreviations

Eskom - Electricity Supply Commission (South Africa): South African public electricity production and distribution company.

Senelec - Société nationale d'électricité du Sénégal (Senegal's national electricity company): state-owned company responsible for electricity generation, transmission and distribution in Senegal.

OFNAC - Office national de lutte contre la fraude et la corruption (Senegal): authority responsible for preventing and investigating corruption in the public sector.

KPLC - Kenya Power and Lighting Company: Kenyan public utility responsible for electricity distribution.

IPP - Independent Power Producer: independent electricity producer selling its output to the state or a public company under a long-term contract.

PPA - Power Purchase Agreement: long-term contract between a buyer (often public) and an independent power producer.

LNG - Liquefied Natural Gas: gas cooled to a liquid state to facilitate transport, then regasified before use.

FSRU - Floating Storage and Regasification Unit: floating unit used to store and regasify LNG for injection into the grid.

ESRP - Energy Sector Recovery Program (Ghana): Ghanaian energy sector recovery program aimed at renegotiating costly contracts and restoring financial equilibrium.

WAPP - West African Power Pool: West African power interconnection network promoting regional energy exchanges.

SAPP - Southern African Power Pool: common electricity market in Southern Africa, facilitating regional integration and energy stability.