A system dynamics approach to managing project risks in the electricity industry in sub Saharan Africa

Abstract

In Africa, major projects are presently in progress to upgrade and expand energy sector infrastructure. Many such projects have run into delays, quality problems and cost overruns. To overcome these challenges, Governments in the region have devoted effort and resources in seeking to improve the management of energy sector projects in many countries in the continent. The objective of this research was to develop a means and method by which risk can be better managed in projects in the electricity energy sector in Kenya and the Sub Saharan Africa region. The research focused on risks prevalent in the electricity sector projects in the region from which a System Dynamics model that mirrors the prevailing dynamics in the sector was developed. Views from key stakeholders in the industry in Kenya such as contractors, utility companies and the Ministry of Energy officials were solicited through an exploratory study that gave rise to the conceptual System Dynamics model developed in this research. The primary motivation of the research was to expand the understanding of the dynamic interaction of risks in the electricity energy sub-sector by focusing on the dynamics of projects in the electricity power industry in Sub Saharan Africa. System Dynamics was chosen as the modeling and simulation tool based on insights from literature that revealed that projects in the electricity industry can be framed as complex dynamic systems since they comprise multiple interdependent and dynamic components, and include multiple feedback processes and non-linear relationships. A qualitative research approach was used in the research study, designed as a guided participative cooperative enquiry based on active interviewing as well as use of archival data from previous projects. The new basic model developed in this research was presented to a workshop comprising experts in the power industry in Kenya, where the model structure and the simulation results were shared with the participants in a discussion forum. The results from the workshop indicated that the simulation results from the model mirrored the reality of project dynamics in the industry in Kenya, and by extension, the wider Sub Saharan Africa region. The results indicated that the forces that cause project delays and quality challenges in the electricity sector in Kenya include a shortage of testing / commissioning engineers that lead to multitasking and late discovery of tasks that require rework. Political risk, unforeseen technical difficulties as well as below average project management skills also featured prominently during the workshop discussions. Various policy scenarios arising from experimentation on the new model were explored and analyzed in the research. The results of the policy scenario analysis show that by employing more competent project managers and engaging of skilled testing and commissioning engineers in adequate numbers, projects in the sector will likely finish on time and with improved quality. The study also reveals that inclusion of an insurance component in the procurement process for the project contractors can be used to mitigate the effects of political risk, and that spreading the workforce, rather than having a skeleton workforce at the beginning of the project, would be more desirable as it would help eliminate effects associated with multitasking that contribute to project delays. This research contributes to new knowledge by expanding and extending the previous model by Richardson (2013) through the inclusion of political risk, project management competence, unforeseen technical difficulties and an insurance index to derive scenarios that can be used to reduce project delays and improve on quality of the completed project.