WASHINGTON, May 9, 2019 – While several Sub-Saharan African countries have made progress in expanding electricity access in recent years, the overall state of electrification in Africa is still far from its potential. A new World Bank report urges governments to rethink their electrification plans and incorporate important aspects that have often been neglected.
The report, Electricity Access in Sub-Saharan Africa: Uptake, Reliability and Complementary Factors for Economic Impact, notes that electrification is a long-term and foundational investment to achieve the development objectives faster.
The report identifies barriers to the region’s electricity access, such as low electrification uptake rates in several countries including Liberia, Malawi, Niger, Sierra Leone and Uganda. It notes the significance of demand-related factors which account for about two-fifths of the electricity access gap. The report highlights several reasons why uptake is not always feasible for consumers including affordability, household income irregularity, and foremost the ability of household to turn electricity access into greater income.
“The report shows that demand-related factors could account for nearly 40% of the electricity access gap in the region,” said Albert Zeufack, the World Bank’s Chief Economist for Africa. “It will be important for governments to understand these constraints and incorporate them in their thinking if the progress is going to be financially sustainable.”
On one hand, the report says faster access requires lower prices, since most households cannot afford to connect and pay tariffs that will allow utilities to recover their cost and to consume at meaningful levels. On the other hand, lower regulated tariffs which could make access more affordable will tend to exacerbate the financial stress on the utilities.
“The best way to simultaneously make electricity more affordable for households and firms and improve the financial viability of service providers is to focus on using electricity primarily for income generating activities,” said Moussa P. Blimpo, World Bank Senior Economist in the Office of the Chief Economist for the Africa Region and lead author of the report.
To achieve this goal, the report recommends prioritizing fixing energy reliability problems and notes that electrification efforts must be accompanied by complementary investments. This would require a more coordinated approach the report says, where electrification is complemented timely with other necessary infrastructures.
For example, the report highlights data from Rwanda that show that higher human capital and greater access to market will increase entrepreneurship and generate more productive non-farm jobs. Similarly, the report finds access to markets and financial services are the combination that is critical to raise household income irrespective of the level of human capital.
Electrification in Africa has been highly uneven between rural and urban areas even though it can unleash the untapped economic potential in many rural areas, the report says, such as off-season farming and value-added agro-processing, provided electricity is combined with the complementary investments to turn into productive economic activities. The report notes that addressing essential policy considerations can boost electricity access, increase uptake, improve reliability and raise impacts, including addressing the root causes of demand constraints, such as:
- Recognizing electrification as a necessary, long-term investment for economic transformation: Plans to increase electricity access should not be evaluated based only on short-term benefits, which are unlikely to cover its costs. It is important to finance the upfront costs as a time-consistent way.
- Address demand constraints at all stages of the electrification process: Addressing the root causes of demand constraints, such as affordability of fees and inadequate housing, will require focusing on enhancing economic impacts with the following considerations:
- Target and promote productive use so that electrification will raise household income, enhance household ability to pay, help the financial viability of utilities through higher consumption and feed back into the public finances through taxes for reinvestment
- Prioritize reliability, whenever access is provided, because reliability will be crucial if electricity provision is going to pay for itself.
- Coordinate with other sectors to take advantage of complementary investments, and the provision of appropriate inputs to productive economic activities.
- Take advantage of recent technological advances in off-grid solutions to strategically promote productive uses, especially in rural areas.