By Bakary Traoré, Economist, Sébastien Markley, Statistician, and Ines Zebdi, Research Assistant, OECD Development Centre
For decades, access to electricity has been a serious challenge in Africa. It still is. 600 million Africans are not connected to an electrical network. African businesses cite electricity amongst the two most severe constraints on their operations (Enterprise Surveys, 2016). Twenty-five of the 54 countries in Africa, including Nigeria, South Africa, Ghana and Senegal, deal with frequent power crises characterised by outages, irregular supply and surging electricity costs. These are symptoms of insufficient generation capacity and a lack of infrastructure.
Despite these sobering facts, a number of recent initiatives signal that major improvements may be underway. The impetus to act is driven by the benefits Africa can reap by investing in electrification. Such benefits go far beyond direct job creation in energy infrastructure, as important as that is. Several pieces of evidence (Jimenez , Torero , van de Walle et al. ) suggest that household electrification also increases job opportunities by carving out more time for work and enabling rural micro-entrepreneurship. We see three reasons for hope that Africa is on the path to greater electrification – provided certain conditions are met.
First, solid investment fundamentals are encouraging the building of new electrical production capacity.
Growing demand for electricity across Africa, along with a more conducive environment for public-private partnerships (PPPs), are raising developers’ interest. Electricity demand is currently growing at 6% per year, and will likely exceed GDP growth until 2040. This has spurred private investment, leading to project financing that is increasingly diversified (Crishna Morgado and Lasfargues, 2017). Power generation in Sub-Saharan Africa increased by 21% to reach 115 GW between 2010 and 2015. Chinese contractors accounted for 30% of this growth (IEA, 2016).
Since 2011, more and more projects in the alternative/renewable energy sector are being developed in Africa (Figure 1). Out of 38 sectors reported in the fDi markets database, it was the third most attractive for companies that invested in Africa in 2015-16, with USD 21 billion in new projects announced. Morocco is at the forefront of recent developments: in February 2016, it launched the world’s biggest solar power station in Ouarzazate. This PPP model between MASEN (Morocco’s agency for solar energy) and a consortium of private and international organisations may be a promising way to engage key players and can serve as an example for future projects in other countries. Tools such as the OECD Policy Guidance for Investment in Clean Energy Infrastructure can also help governments address barriers to private investment in renewable energy generation.
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