In Debt and In The Dark: Unpacking the Economics of DRC’s Proposed Inga 3 Dam

Sunday, June 25, 2017

In Debt and In The Dark” is the first in-depth assessment of the economics of the proposed 4,800 MW Inga 3 Dam in the Democratic Republic of Congo (DRC). Authored by noted economist Tim Jones, the report scrutinizes the claims that project proponents have made to justify the project, namely that Inga 3 will generate revenues to fill government coffers through the sale of power to South Africa and mines in eastern DRC and will provide needed power to the country.

Using empirical evidence from similar hydropower projects in Africa and globally, Jones tested the stated assumptions of the project’s performance by examining factors such as the amount of power to be generated, the risk of cost overruns, the extent of transmission losses, likely electricity tariffs, and borrowing costs. Jones then forecasted the dam’s potential performance across a range of scenarios.

The analysis found that the project’s economic justification is based on dangerously optimistic and flawed assumptions. In the most likely scenarios, Inga 3 will plunge the DRC deeper into debt. Even with fairly conservative estimates of cost overruns and generous assumptions of power generated, electricity prices, and low interest rates, DRC would stand to lose $618 million per year on the project, or nearly $22 billion over the project’s 35-year lifespan. These financial losses could run as high as $1.5 billion to $2 billion per year under unfavorable conditions. Inga 3 risks ballooning the DRC’s debt burden and harming DRC’s long-term economic health.

The report also found claims that Inga 3’s electricity would benefit Congolese people to be grossly inflated. In the most likely scenario, 88% of Inga 3’s power would be exported to South Africa, leaving just 322 MW for mining companies and consumers in Kinshasa – only a fraction of the 2300 MW claimed. Under highly unfavorable conditions, the entirety of Inga 3’s power would be sold to South Africa, leaving nothing for Congolese citizens or industries.

The report then examines alternative ways that DRC, for the same financial outlay, could invest in energy options to serve the needs of the Congolese people. The report concludes that if DRC were to repurpose funds earmarked for Inga 3 toward small- and micro-hydro and solar power, it could reach far more users at lower cost and at significantly less risk.

Read the report here.