Chinese-Funded Electricity Generation in Sub-Saharan Africa and Implications for Public Debt and Transition to Renewable Energy

While China has been increasingly contributing to the recent growth in electricity generation in sub-Saharan Africa (SSA), the effects of China-funded investment on host countries’ debt burden and transition to renewable energy sources have not been sufficiently explored. Drawing on secondary data, combined with deep dive studies of Ethiopia and Uganda, this paper shows that despite significant liberalisation of the power sector in SSA, Chinese investments in the electricity industry continue to follow state-led project contract-based models. We show that this approach has failed to encourage Chinese firms to build compelling investment portfolios for competitive procurements within the region and, instead and inadvertently, it has exacerbated the debt burden of host country governments. Second, in spite of the global drive towards climate resilient energy generation, Chinese funding of electricity generation in SSA is not sufficiently channelled towards modern renewable energy sources such as wind and solar power that could reduce vulnerability to climate change. While recognising that the private sector-led competitive model of power generation is not without limitations, we argue that SSA’s electricity generation strategy that leads to less public debt and more climate resilience involves increased involvement of Chinese investment in the competitive model, with more diversification of such investment portfolios towards modern renewables such as wind and solar energy resources.

1 Some major Chinese-financed energy sector projects 20

Overview
Africa has rich but largely untapped energy resources. It has well over 10 terawatts (TW) of solar potential, 350 gigawatts (GW) of hydroelectric, 110GW of wind and an additional 15GW of geothermal (AfDB 2015). However, electricity consumption per capita in sub-Saharan Africa (SSA) stands at 483-kilowatt hour (kWh), which is very low compared to other regions. South Asia, for example, stands at 707 kWh and the Middle East and North Africa at 1,687 kWh (Blimpo and Cosgrove-Davies 2019). Although estimates vary, close to 600 million people in Africa (representing about 48 per cent of the continent's population of nearly 1.2bn) still have no access to power (IRENA 2019; IEA 2020).
Fuelled by economic growth (notably since the turn of the century) and population growth, demand for electricity is growing fast and it is estimated that it will increase by 100 per cent in the period 2018-30 (IRENA 2019). The African Development Bank (AfDB 2019) estimates that Africa needs approximately US$32-40bn annual investment in electricity between 2018 and 2030. Low levels of electricity generation and use have been impeding socio-economic development in the region, and SSA cannot run its homes and businesses unless it unlocks its huge renewable energy potential (AfDB 2015).
The low level of supply is linked to multiple factors, including a lack of generating capacity, and limited transmission and distribution infrastructure. Drought and climate change have also been increasingly threatening generation from hydropower (IEA 2014;World Bank 2018). Additionally, poor electricity supply reduces utility revenues, makes it more difficult to increase tariffs, and thereby constrains the availability of finance for investment (IEA 2014).
National and global commitments for transitioning energy to low carbon emission technologies to mitigate and combat the adverse impacts of climate change have recently increased (see for example, Carbis Bay G7 Summit Communiqué 2021). In recent years, the emphasis for the majority of foreign direct investments has been on renewable energy and endeavours to align development of electricity infrastructure to the United Nations Sustainable Development Goals. The Economic Commission of Africa actively supports the transition from carbon-intensive and unsustainable technologies to clean and renewable technologies (UNECA 2014;IEA 2020). Commitments include attainment of net zero emissions no later than 2050, halving collective emissions over the two decades by 2030, increasing climate finance, and reaffirming commitment to the Paris Agreement (Carbis Bay G7 Summit Communiqué 2021).
As we will show below, China has become a dominant force in the African electricity industry (Eberhard et al. 2016;Eberhard et al. 2017;Lema et al. 2021). But any investment in the sector, we argue, needs to address the perennial problems of lack of access to finance and the risk of utilities, and by extension SSA countries, becoming overly indebted. These have been major challenges and the subject of reform agendas in many SSA countries (World Bank 2018; Shendy, Kaplan and Mousley 2011). Consequently, many SSA governments have been addressing their investment needs through multiple mechanisms including their own resources, such as taxes and user charges, bilateral and multilateral donors, and development finance institutions (Eberhard et al. 2016). Yet many commentators have forcefully underlined the importance of private finance for investment -which comes via electricity procurement by independent power suppliers (Eberhard et al. 2016). Related to this, over the past decade, two models of financing have prevailed in SSA: Chinese investment following the so-called Engineering, Procurement and Construction (EPC) model, and investment by independent power producers (IPP) (Eberhard et al. 2016;Eberhard et al. 2017). While arguably IPPs encourage cost discovery and reduction (IRENA and CEM 2015;Eberhard et al, 2016), the EPC model has been favoured by Chinese investors (see, for example, Eberhard et al. 2016) leading Africa to make a significant addition to power generation in the region (Eberhard et al. 2016) -to a total of 7.5GW in installed capacity, most of which was added between 2009-14. While 63 per cent of this comprised of large hydropower projects, only 3 per cent came from wind power (Eberhard et al. 2017: 392). Due in part to this investment, the electricity access rate for SSA has improved from 23 per cent in 2000 to 32 per cent in 2012 (IEA 2014(IEA , 2020. Our analysis of the phenomenal increase in Chinese investment and contribution is situated within the 'China in Africa' debate which has documented the historical context of Chinese engagement in Africa, notably since the late 1970s, and the multiple features of China's investment in (or engagement with) Africa (see, for example, Kaplinsky and Morris 2009;Gu 2009;Mohan 2013;Chiyemura 2019). This paper, however, propels the debate to the present, looking at some less explored areas of Chinese involvement in African electricity generation -its effects on public debt and transition to more diverse renewable energy sources.
We refer to 'Chinese investment' to mean investment capital originating in China, often channelled through Chinese businesses -state or privately owned, or some combination of both -to implement projects in SSA. Such investment is often backed by the so-called 'Chinese policy banks' (Shen and Power 2017;Lema et al. 2021 term concessionary loans to host countries from Chinese policy banks such as EXIM Bank. The Chinese firms are thus not 'investors' in the classic sense, nor do they own project assets. Lema et al. (2021) is among recent studies on such investment in SSA and found that Chinese firms acting as main contractors accounted for 30 per cent of new capacity additions in sub-Saharan Africa. Of these projects, 56 per cent were in renewable energy, with the vast majority in hydropower, but increasingly also in wind and solar energy. Lema et al.'s in-depth analysis of economic cobenefits created when renewable-energy projects were developed by Chinese investors showed the rather limited outcomes of Chinese investment on local jobs and content use (Lema et al. 2021). Shen and Power (2017) and Tan Finally, Chiyemura (2019), based on his in-depth study of two wind farms in Ethiopia, showed that Chinese investors complete projects quickly and at low cost. He also showed the willingness of China to reschedule and/or cancel debt, offering loans at concessionary rates (Chiyemura 2019). He argues that Chinese investment improves infrastructure and increases revenue for Ethiopia, with huge socio-economic and developmental implications (Chiyemura 2019). As clearly highlighted by Chiyemura (2019), African partners are not passive recipients of Chinese investment either. Chiyemura articulates that Ethiopians, for example, through their policies, were the main drivers of the development of their rich resources (such as wind) and were tapping into a range of global renewable energy technologies.
While significant research has been conducted on electricity generation through Chinese investment, these studies have paid little attention to the effects of such investment on utilities and host government debts and building climate resilient energy systems. This paper therefore aims to fill this gap, and address the following overarching questions: what is the trend and structure of Chinese investments in the SSA power sectors, and how does this compare with financing by independent power producers in the region? What are the implications of such investment on utilities and host government debts, and building climate resilient energy systems in SSA?

Research methodology
Chinese investment in electricity generation is unevenly spread across sub-Saharan Africa (IEA 2014: 24) but, as noted above, in many countries it has made major impacts, particularly in countries where such investment has been actively taken up. We use data from secondary sources generated from international organisations such as the International Energy Agency (IEA) and the International Renewable Energy Agency (IRENA) at SSA level, coupled with deep dive case studies of Ethiopia and Uganda -two countries that have attracted significant Chinese investment. Over the past 10 or so years, Ethiopia has implemented several Chinese-financed projects, including the first early wind farms in Africa (Chiyemura 2019). But despite plenty of opportunities, Chinese investment has shied away from being involved in Ethiopia's recently developing IPPs. On the other hand, Uganda was among the first SSA countries to undertake energy reform (Godinho and Eberhard 2019) and hosts the second largest number of IPPs in SSA after South Africa (Eberhard et al. 2016). Uganda also has significant Chinese-financed projects in the electricity sector, with two large hydropower plants developed by the Chinese. Ethiopia and Uganda therefore constitute rich cases for exploring the effects of Chinese investments in the region.

Organisation of the paper
The paper is organised as follows. Section 2 presents and analyses data on electricity generation in SSA, specifically looking at the contribution of Chinese finance. Sections 3 and 4 present the energy sector power reforms and the status of power generation capacities in Ethiopia and Uganda, respectively. It discusses Chinese financed projects in both countries and implications for national debt and climate change. Finally, section 5 comprises the discussion and conclusion, along with policy implications and recommendations of the study.  (Wamukonya 2005). SSA governments struggled to mobilise financing -as Eberhard et al. (2016) show, investment in electricity generation was not only low but narrowly focused on South Africa. Between 1990-2013, only 24.85GW of new generation capacity was added across SSA, of which 9.2GW or 37 per cent was accounted for by South Africa. Over the same period, investments in new power generation capacity reached approximately US$45.6bn, of which US$14.3bn (or 31 per cent) was accounted for by South Africa. Eberhard et al. (2016) also show that, of the total investment of US$31.3bn over 1990-2013, IPPs and Chinese investment accounted for 22 per cent and 16 per cent respectively, while the remainder was contributed by national governments and utilities (51 per cent) and international financial institutions (11 per cent).
Insufficient public funds, coupled with poor performance of state utilities, forced many governments in SSA to change their financing approach (Meyer et al. 2018). Consequently, many countries undertook structural and policy reforms, including the unbundling of vertically integrated state corporations, liberalisation of the sector and establishment of independent regulatory bodies, in order to encourage private sector participation (Eberhard et al. 2016;Meyer et al. 2018). Eberhard et al. (2016) underlines that by 2014, more than half of SSA countries had established a regulatory agency. As we will show below, Uganda and Ethiopia were among those countries that implemented such policy reforms.
In many SSA countries, the energy sector reform aimed to attract private sector investments -which require an enabling environment offering long-term investment certainty. This meant implementing policies that guaranteed the full recovery of costs through end-user tariffs (Meyer et al. 2018). Cost reflective tariff reforms became central to attracting private investment, but present stiff challenges as they can overburden the majority of household consumers who are poor and less able to pay for their electricity bills (Blimpo and Cosgrove-Davies 2019). Over the past two decades, power sector reforms in SSA have been primarily driven by the need to attract private financing for investments in energy infrastructure to boost the limited generation capacity and enhance electrification rates, amidst insufficient public funds and historical underperformance by state owned utilities (Meyer et al. 2018;Wamukonya 2005). However, despite the optimistic outlook on reform, privatisation has not been successful at attracting affordable private capital in many SSA power sectors (Eberhard et al. 2016). Infrastructure development requires large upfront financing -with investment repayment spread over a larger base and longer periods, which is difficult for SSA. Consequently, many countries in SSA developed a negative perception towards private sector participation and investment (Wamukonya 2005). In order to address power generation financing requirements, and at the same time ensure low retail electricity tariffs, many SSA governments looked to Chinese financed EPC projects (Eberhard et al. 2016). Moreover, as Africa attracted private investment to develop generation capacity, China did not participate in the IPP programmes (Power Futures Lab 2020). As shown in Eberhard et al (2016), as most African countries were unable to finance their power needs, the financing of electricity generation capacity increasingly shifted to Chinese financed EPC models. Eberhard et al. (2016) state that while many SSA countries had previously procured generation capacity through competitive procurement and its attendant benefits, when it came to China, many SSA countries preferred direct negotiations.
Statistics are limited and varied, but in recent years China has clearly emerged as the leader in Africa's power sector developments, accounting for 60 per cent of investments in SSA power projects (Lema et al. 2021). Lema et al. (2021) reported Chinese investments in Africa of US$30bn, including North Africa and all sources of energy (of this amount, US$13bn was deployed for renewable projects in 37 countries) 1 . Power Futures Lab (2020) reports that the value of Chinese investments in power generation in SSA is now more than investments by typical IPPs. Chinese financing has increased from US$0 (zero) in 1997 to almost US$6bn in 2018, compared to US$4bn by IPPs during the same period (Power Futures Lab 2020).
According to Acker, Brautigam and Huang (2021) World Bank and other multilaterals are responsible for 20 per cent of African debt. Estimates also show that one-third of countries in SSA were either in or at risk of debt distress even before the onset of the Covid-19 pandemic, which has since worsened (Coulibaly 2021).
International financial institutions such the International Monetary Fund (IMF) estimate that SSA will need an additional $345bn through 2023. Accordingly, 38 countries in SSA are eligible for relief under the G20's debt service suspension initiative. Growing debt, therefore, suggests that the bilateral country to country approach used by China to finance power projects in SSA may not be sustainable in the medium to long term (Acker, Brautigam and Huang 2021;Coulibaly 2021).
The growth of Chinese finance in the power sector needs to be seen in context and as a continuation of growth in overall trade and investment in SSA.    (Baker et al. 2021, forthcoming). In the same vein, in 2017, a public private partnership (PPP) mechanism was put in place to promote private sector investment in the power sector and facilitate the implementation of privately financed infrastructure projects, including procuring renewable energy from independent power producers (RE-IPP) (MoFEC 2017). Finally, many allied reforms have been undertaken, including quality service improvement in revenue ids.ac.uk collection, electricity tariff reforms, and capacity building programmes (MoWIE 2019).
The above reforms were precipitated by a range of drivers (World Bank 2018; MoWIE 2019): • Increased demand for investment -utility companies were dependent on public finances with a high level of indebtedness.
• Limited ability to switch to non-hydropower renewable sources and meet ambitious targets in GTPs.
• Unreformed tariff rates which failed to reflect production costs and demand.
• Droughts and climate change threatening generation from hydropower sources.
• A growing need to transition towards a cleaner energy system, as nearly 80 per cent of the population were dependent on unsustainable traditional biomass energy sources.

Chinese investment in Ethiopian electricity sector
Ethiopia has abundant and diverse renewable energy resources in hydropower, solar, geothermal, and wind energy (MoWIE 2019), but it has not sufficiently exploited its resource advantage. For example, it has 45,000MW exploitable hydropower, but use remains below 10 per cent of potential (MoWIE 2019). Exploitation of the huge potential of solar, geothermal, and wind sources is negligible. Consequently, Ethiopia's energy supply is highly dependent on biomass resources -firewood and agricultural waste (MoWIE 2018).  Spearheaded by EEP, several electricity generation projects have been completed, and many more are in the pipeline. Table 3.1 above shows partial data where Chinese finance has had some effects. Table 3.1 indicates that: • Power generation has picked up over the past two decades, with Chinese businesses involved in the generation of at least 975MW (out of 4,413MW recent generation capacity).
• Chinese business involvement was mainly in hydro projects, with some in wind plants.
• Two wind farms: Adama I (51MW), Adama II (153MW) • The share of Chinese investment in total project varied but, except for the Genale-Dawa transmission project where it was over 60 per cent. In all three wind plants, Chinese finance accounted for 85 per cent.
• For the above projects, Chinese investment exceeded $US2bn.
• EEP (and by extension the Government of Ethiopia) is liable for the loan. This is because EEP (the Government) own the dams and wind plants.
Chinese companies, as per EPC agreement, only design, construct, and deliver the projects to EEP.
The foregoing clearly indicates the significance of the contribution made by Chinese businesses to electricity generation in Ethiopia. It also indicates how Chinese investments have added to the debt burden of the utility company and the government. When the privatisation agenda was pushed but garnered little interest from private sector finance, China stepped in and eased the financial pressure, but inadvertently added to the debt burden. Debt has become unsustainable and there have been high level debt rescheduling discussions between Ethiopian and Chinese governments officials. Fox (2019)  responded well -through increased engagement in the Ethiopian energy market -its investment was limited to undertaking EPC contracts. In doing so, it exacerbated the debt burden of the treasury and offtaker. Second, although Chinese businesses have entered the wind farm sector, thus far they have shied away from utility level energy generation from solar and geothermal resources. The Uganda electricity sector faced an energy crisis in the 1990s, in the aftermath of the challenges of the 1971-86 emergency period and declining water levels in Lake Victoria (Meyer et al. 2018). The government initiated a reform programme in the late 1990s seeking to address the pressing issues faced by the electricity supply industry. Before this reform process began, the industry predominantly consisted of the Uganda Electricity Board (UEB) which had been the publicly owned vertically integrated utility since 1948 and had a monopoly in providing generation, transmission, and distribution of electric power. It also had export agreements with some neighbouring countries, as well as a regulatory role. The performance of UEB was perceived to be inadequate, resulting in an industry that was underfinanced and delivering poor service.
Uganda became the first country in SSA to unbundle generation, transmission and distribution of electricity (Eberhard et al. 2016). The reforms came with the backdrop of slow growth in investments in the Electricity Supply Industry (ESI)mainly the generation infrastructure and the associated transmission and distribution infrastructure, and the need to improve the financial sustainability and operational efficiency of the ESI. The main drivers justifying the need for reform have been described as (MEMD 2002;Meyer et al. 2018): • Low electricity sector efficiency, characterised by (a) high level of system losses (up to 38 per cent), and (b) unreliable and poor quality of power supply constraining business development.
• Very low coverage and poor access to the grid.
• The UEB's inability to service its debts. • The need for private sector-led economic growth, resulting in the desire to minimise monopoly power.
• The need to attract private capital.
The core reform and restructuring process initiated by the 1999 Electricity Act took some six years to implement. In 2000, the Electricity Regulatory Authority (ERA) was established, and in 2001, the formal unbundling of UEB commenced. In 2002, the Energy Policy described above was published to support the 1999 Electricity Act and facilitate private investment (MEMD 2002). The state-owned corporation, UEB, was unbundled into three distinct corporations to oversee the generation, transmission, and distribution of electricity on behalf of government. The distribution and generation assets were respectively privatised to Umeme Limited in 2005 and Eskom Uganda limited in 2003, marking the entry of independent power producers in Uganda's ESI (Meyer et al. 2018). Even as the reforms took root and inefficiencies were tackled through privatisation, there was some inertia in investments in generation capacity. In order to address generation capacity shortages, Uganda competitively procured Bujagali Hydropower Plant. When Bujagali Hydropower Plant was commissioned in August 2012, it helped avert loading shedding and provided replacement generation from the expensive thermal plants. The commissioning of Bujagali Hydropower Plant, the eventual reduction of direct electricity subsidies, as well as restructuring of the investment framework with the review of Feed-In-Tariffs (FiTs), created the impetus to attract investment in renewable energy production (Meyer et al. 2018;Eberhard et al. 2016).
Like many SSA countries, since 2007 has Uganda implemented REFIT to attract private investment in renewable energy. It also procured solar plants under a competitive tendering programme. Eberhard et al. (2016) states that whereas critics argued that the Uganda electricity supply industry was too small to reap the benefits of the reforms, they are now bearing fruit (Figure 4.1). The number of IPPs in Uganda increased from three in 1999 to 47 in 2020. Uganda has attracted IPPs on account of its stable regulatory framework that ensures cost reflective tariffs, and a streamlining of the licensing process. Godinho and Eberhard (2019) noted that Uganda is one of the few SSA countries with close to cost reflective tariffs. In Uganda, before 2012, the electricity retail tariff was heavily subsidised, with the government paying 56 per cent of the costs. According to Eberhard et al. (2016), the establishment of a regulator is an enabling factor for boosting IPP investments.

Chinese investment in Uganda energy sector
Following the commissioning of Bujagali Hydropower Plant in 2012 and subsequently other IPPs, Uganda noted that the generation tariffs for IPPs, and by extension the resultant retail tariffs, were not supporting the country's industrialisation aspirations. Despite government's efforts, the private sector attached high risk to investment in the sector and demanded high generation tariffs, contrary to government expectation. However, without reversing its policy to attract private investment, Uganda turned to China to finance development of the 183MW Isimba hydropower project (commissioned in March 2019), and the 600MW Karuma hydropower project (to be commissioned in June 2022). Unlike the 250MW Bujagali Hydropower Plant, the Isimba and Karuma plants were contracted through bilateral direct negotiations between Uganda and China 4 . As part of the project structure, the EPC contractor was from China, the loans were from China Exim Bank, and Uganda was required to make a 15 per cent upfront contribution to the EPC costs (Meyer et al. 2018).  Source: Authors' own. Created using data from Meyer et al. (2018) and Eberhard et al. (2016) Clearly reforms helped the Ugandan electricity sector to attract investments and increase generation capacity. Table 4.1 shows the projects with direct Chinese involvement and financing in power generation in Uganda. The electricity sector has a good mix of typical IPP projects and Chinese funded generation projects, but the latter are focused on hydro projects. By mid-2022, China is expected to have invested over US$1.917bn in Ugandan power generation and will be contributing 39 per cent of the country's power installed capacity. China also participated in Ugandan power generation as an EPC contractor and equipment manufacturer for power plants not directly financed by China. Whereas it is uncontested that China has made a significant contribution to the Ugandan power sector, it has also contributed to the Ugandan debt burden, as in many other SSA countries. According to the IMF, the Ugandan debt to GDP ratio was 44.81 per cent in 2020, largely due to borrowing from China for infrastructure development. As far as Chinese finance in the energy sector is concerned, the Ugandan government is the borrower and carries the obligation of repaying the loan, supplemented by revenue from the projects. In order to ensure loan repayment, the government is required to allocate funds every fiscal year through the National Budget for debt service.

Discussion and conclusion
The evidence we generated at SSA level and from Ethiopia and Uganda show that Chinese finance has provided the much-needed investments to bridge the financing gaps in the SSA power infrastructure, and significantly contributed to the expansion of the region's power generation capacity. However, Chinese finance has also, inadvertently, exacerbated the fragile external public debt situation of SSA. Ethiopia and Uganda each owe at least US$2bn to their Chinese financiers. Second, despite China's unparalleled financial and technological capabilities in renewables such solar and wind technologies (Lema et al. 2021;Ayele et al. 2021), Chinese finance predominantly went to hydropower generation, which is vulnerable to climate change (and, at worst, coal-based electricity generation -which is the single biggest contributor to environmental pollution and climate change). At the heart of our conclusion was that the EPC model was pursued by Chinese businesses, China predominantly invests in hydropower projects, and does not participate in competitive procurement as it prefers country bilateral negotiations. But why do Chinese business prefer EPC projects that lead to debt for host governments? Based on the evidence we analysed, and complemented by other studies (such as Lema et al. 2021;Ayele et al. 2021), we offer the following explanations and conclusions: Lower transaction costs and bureaucracy: Electricity generation though IPPs is subject to a long, and transparent, process of auctions, but EPC projects appear to be quick to start moving. Moreover, under the IPP model, project finance relies on project generated finance which creates incentives for host countries to reform the power supply value chain before the investment is signed up (to ensure financial sustainability), hence this model may have the effect of delaying project implementation. However, Chinese businesses engaged in renewables appear to be on a learning curve and, despite having unprecedented technological capabilities, they have not previously engaged in the competitive (IPP) power generation model. The facts suggest that many projects in SSA (whether financed through IPPs or EPC finance) have experienced cost overruns and project delays. This is notwithstanding the fact that the interest rates for Chinesefinanced power plants are much lower than the interest rates for traditional project finance IPPs. In deciding financing of power projects, SSA policy makers should consider the costing of Chinese-financed projects beyond the interest rates provided in the loan agreements and consider the fiscal impact of the financing and national debt sustainability.
Local level development and capacity building: Studies (see, for example, Lema et al. 2021) show rather limited stakeholder engagement, limited consultation between local actors and Chinese businesses, and limited capacity building. The resources (labour and machinery/equipment) used for constructing the Chinese-funded infrastructure projects in SSA are mainly imported from China with very little support to local manufacturing and limited capacity building. During negotiations with SSA governments, China ensures that it retains the flexibility to import project inputs from China. The approach of pegging financing to Chinese funding, to Chinese equipment and contractors, is part of the holistic approach by China to support Chinese manufacturers and expand its technology and influence.
Perverse arguments: Related to the above, here critics effectively argue that the Chinese government and Chinese businesses pursue their own selfinterests. Pairault (2020) argues that the Chinese strategy or model of 'infrastructure-led growth' seems to be showing its limits in Africa, where China has largely been instrumental in promoting it. Pairault argues that, whether or not Chinese investment is redundant in the host country, the ultimate beneficiary is China. China maintains the supply of the goods and services that EPC projects require and keeps its GDP growing. For China, EPC projects procure suppliers from home -effectively 'tying' projects to arrangements in which recipients have no say. Fox (2019) agrees -although not an explicit (or deliberate) policy, China contributes to mounting debt in Africa.
While the explanation for Chinese businesses' preference for EPC models over IPPs is still emerging 5 , it is clear that the perceived convenience of the Chinese financing model may not necessarily guarantee transition to renewable energy sources and promote sustainable development in SSA power sectors. SSA implementation of IPPs was meant, in part, to reduce national burden and sustainable transition to renewable energy sources. Despite making significant contributions to energy generation, China-financed investment in the region has not made major impacts on either of the stated goals of governments in SSA. Policy makers in SSA appear to believe that Chinese-financed power generation investments are convenient, and even cheaper, compared to those by IPPs, but this needs a (re)evaluation as there are higher fiscal impacts on government cash flows, debt repayment, etc. By implementing the Chinese EPC model that requires national budget appropriation for debt repayment of Chinese-funded projects, SSA could indirectly implement policy reversals by provision of subsidies where revenue from the Chinese-funded projects is not sufficient for debt repayment. While recognising that the competitive model of power generation is not without limitations, the paper recommends increased involvement of Chinese investment in this model, with more diversification of Chinese investment portfolios towards modern renewables such wind and solar energy resources. 5 It is also not yet clear whether it is the underlying limitations of many SSA counties such as inadequate policy signalling that has led Chinese businesses to opt for EPC projects. In some countries, for example, Ethiopia depended on hydropower for its power generation, and diversification to other renewables such as wind, solar, and geothermal is a relatively recent development.