How can we harness business to close the energy gap in Africa?

Power is routinely cited by large and small businesses as the most significant barrier to their success, adding huge costs to them and their customers. Poor infrastructure slows foreign direct investment and limits countries in their attempts to diversify their economies away from primary commodity export.
 
Unreliable or inaccessible power has a cost that goes beyond GDP figures and business growth, impacting on healthcare and education outcomes, which in turn have long-term implications for the future prosperity of individuals and societies.

The International Energy Agency estimates that more than 620 million people in sub-Saharan Africa live without electricity.  While 950 million people will gain access to electricity in Africa between 2014 and 2040, demographic expansion will mean that 75 per cent of the population will still be without power.

A step-change in investment into electricity generation, distribution and efficiency is needed over the next quarter-century to unlock the potential of Africa’s demographic boom.  This was the focus of a report published recently by Business Fights Poverty and the Initiative for Global Development (Click here to find out more and to download the report here)

Join our panel to discuss the following questions:

1. What is the real, day-to-day impact of Africa’s energy gap?  What are some practical examples of the impacts on the ground?

 

2. What are the opportunities for business to be part of the solution to closing the energy gap?

 

3. What building blocks need to be put in place by governments and other development partners to harness the potential contribution that business can make to closing this gap, and by doing so helping unlock the Continent’s potential?

 

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It’s hard to over-state the impact on day-to-day life in many countries. Anecdotally, you talk to entrepreneurs, or would-be entrepreneurs, who tell you the extent to which their ambitions are curtailed by the cost, the shortages and the unreliable supply. That touches pretty much every sector, from mom-and-pop shops without light or refrigeration through to manufacturing businesses.

The lack of affordable, reliable connections hits strategic sectors – agriculture, which is still the majority employer – suffers from weak cold chains and processing. Manufacturing and natural resource processing can become uncompetitive, meaning that productive job growth is slower. Healthcare suffers, education suffers.

This is a timely discussion! This is a newspaper excerpt from today - "Zambia has started rationing power supply to mines, an industry source said on Tuesday, as Africa’s second-biggest copper producer struggles to meet electricity demand."

South Africa is also currently plagued by load shedding due to insufficient generation capability.

Central , Zambia commercial farmers can not use the center pivot irrigation systems due to insufficient power. 

I am sorry...I did not intorduce myself. I am Chirstian Spano, socio-economic development (SED) manager working for Anglo American based in London. I look after the SED group strategy and support BUs to implement their activities at the site level. Access to energy is a very relevent area in the strategy.

I think the energy ‘gap’ has several dimensions.

Lack of access to clean fuels imposes a physical and health burden on women and girls, for fuel collection, and unimproved biomass stoves are the cause of disease and premature deaths.

The 620 million Africans who lack access to electricity are disadvantaged in a number of ways. The absence of electricity limits their opportunities to improve productivity and earn higher incomes. It limits their education and their access to good quality health services. Without electricity, opportunities to obtain information and knowledge from the radio or television are more limited, and the absence of street lighting reduces people’s sense of personal security. 

Lack of electricity also disadvantages people by requiring them to spend a higher proportion of their income on less-efficient lighting and communications than can be provided by electricity.

Rodger's comment about lack of power to run machinery highlights another element of the 'gap', namely the unreliability of electricity supplies in many African countries.

The impact of Africa’s energy gap varies, depending on whether you’re speaking with an individual or a business; somebody in a city or the countryside. On the whole though the impact tends to be detrimental.

 

The IEA estimates that each year lower income users spend a fraction under $40billion on low quality energy for cooking and light. About a third at the base of the pyramid rely on wood, charcoal and animal waste for energy needs.

 

This has a tremendous effect on health, education and ability to earn a living. Added to this, WHO estimates that 4.3mln people die prematurely due to illnesses attributed to household air pollution from cooking with solid fuels. This often falls disproportionately on women and children.

 

On the healthcare side, storage of medicine is made difficult, as is running of health centres and maternity wards.

 

From a business perspective, it’s detrimental whether you run a SME, or work in agribusiness, manufacturing or extractives.

Thanks for sharing that example, Rodger.  How do farmers overcome that - if they do, that is.  Or does it simply mean they lose their harvest all together?

Rodger Chali said:

Eastern Zambia cotton unable to be harvested due to lack of sufficient power to run the ginnery machinery.

Very important point Zahid...having strong institutional infrastructure (PPAs, market design, marked operators) is as important as the physical infrastructure i.e. transmission lines, generation capacity, reserve capacity, etc.

Interesting article, David.  Can you share any examples from your business?

David Grant said:

This is a timely discussion! This is a newspaper excerpt from today - "Zambia has started rationing power supply to mines, an industry source said on Tuesday, as Africa’s second-biggest copper producer struggles to meet electricity demand."

South Africa is also currently plagued by load shedding due to insufficient generation capability.

Hello all, i am Robert Laporte, founder and CEO of Neutopia ecoSOLUTIONS inc, the world's first Social Impact Sustainable Community company. We have eliminated most obstacles to affordable energy for Africa and have created a most unique business model that has attracted unlimited investment for global change. We are now simply seeking project locations. Our system can identify business cases within 10 minutes for any GPS Coordinate on the planet. I look forward to collaboration via Business Fights Poverty as our page will be up in the near future and forums such as this will stimulate ideas and immediate action plans.

....and Zahid, you mentioned you wanted some practical examples. It's hard to pick out just one, as access to reliable power stifles most in many parts of Africa. A couple weeks ago I was visiting a large rice farm in Tanzania we have funded, to convert waste rice husks to usable power. The lack of consistent power from the grid was causing them to rely heavily on diesel back-up, pushing energy costs up x4 and making their business - and the livelihoods of almost 6,000 farmers that supply them - in jeopardy. 

Many of the factories we work with in East Africa are regularly out of power. That leaves them slower on meeting orders. As a result their overseas competition win the orders. Also, they cope with the lack of power by having a chunk of their capital tied up in generators that produce very expensive power. All making them less competitive.

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