[Column] Marlene Mutimawase: Power interruptions paralyze SMEs and Startups in Sub Saharan Africa

According to a report by McKinsey, about 48% of sub-Saharan Africa, which holds 13 percent of the world’s population, lacks proper access to electricity.

Some startups have already taken the first step towards energy transition using what are known as micro-grids and micro-utilities but still not enough to tacckle the issues and the loss caused by powercts.

In Sub-Saharan Africa, just one person in five has access to electricity. If current trends continue, fewer than 40 percent of African countries will reach universal access to electricity by 2050.

 Per capita consumption of electricity in Sub-Saharan Africa (excluding South Africa) averages only 124 kilowatt-hours a year and is falling. The rate of consumption is barely 1 percent of that in high-income countries. If entirely allocated to household lighting, it would hardly be enough to power one light bulb per person for six hours a day.

 According to African Development Bank,more than 30 African countries are experiencing power shortages and regular interruptions in service, leading many to rely on very costly leased generating plants as an emergency stopgap . Frequent power outages mean big losses in forgone sales and damaged equipment—6 percent of turnover on average for formal enterprises, and as much as 16 percent of turnover for informal enterprises unable to provide their own backstop generation.

 The economic cost of power shortages can amount to more than 2 percent of gross domestic product.For some countries, it has shaved as much as one-quarter of a percentage point off annual per capita GDP growth rates.Africa’s power supply crisis has many underlying cause:

Power shortages are common in many low- and middle-income countries. A United Nations report this fall found that 840 million people live without access to reliable electricity. Most of them are in Africa, and most live in rural areas, beyond the reach of the grid.

But the problem of power outages strikes cities as well — and can take an especially harsh toll on the economy, cutting off the productivity of businesses and government agencies alike, and forcing entrepreneurs like  to pour capital into backup generators instead of investing in staff or equipment.

In yaounde the capital city of Cameroon, the grid is so unreliable that most homes and businesses have a generator, and the city is constantly filled with the noise and pollution from millions of people creating their own power and this can happen at least two times a week. In rainy season people most of the time get surprised when the power still on.

Mohamad Elroby a student from Pan African University in Yaounde commented : ''Even the internet supply is no longer regular,It is horrible. I am on my machine almost 24 on 24 [every day], preparing my projects and responding to mails from my partners. [Now] we have to go to where there are generators to charge our machine or to charge your phone and the cost is hourly charged from the owners”

Power shortages are particularly a problem for sub saharan African countries' booming tech industry, according to a survey of 93 Nigerian tech startups released this month by the Center for Global Development. The survey found that 57% of startups, most with fewer than 10 employees, find electricity problems to be a "major" or "very severe" obstacle to their business, beating out other challenges such as corruption, taxes and government red tape. 

Jonathan Phillips, director of the Energy Access Project at Duke University, who was not involved in the survey, says Nigeria's power problems date back decades to the country's early days of independence, when the government set up a heavily subsidized electrical grid. The energy system was often a prime target for corruption, he says, and has never been able to generate enough profit to offset the massive cost needed to build enough new power plants and distribution lines to keep up with the country's rapidly growing population.

As a result, he says, Nigeria has one-fifth the total power supply of North Carolina, with a population of 200 million people, 20 times the state's and blows through up to $8 billion per year on diesel fuel for generators.

For Africa to give room to growth of small businesses and startups to prosper there is a need to stabilize the electricity supply. There is urgent for African countries to invest in  renewable energy for sustainability. Making power viable and affordable to all Africans should be prootize by all african goverments.

As the African continent recovers from COVID-19, now is the critical time to accelerate progress towards universal energy access to drive the region’s economic transformation, promote socio-economic inclusion, and unlock human capital growth.

Improving the performance of national utilities and greening their power generation mix is a prerequisite to lowering the costs of supply, thus expanding electricity access to those currently unelectrified, usually lower-income and often remote households. 

 Electrification efforts need to be open to private sector investments and innovations, such as solar energy and battery storage, which have made a tremendous impact in enabling access for millions of poor and underserved households.  Specifically, off-grid solar systems and mini-grids have become a proven reliable way to provide affordable modern electricity services, powering homes in rural communities, healthcare facilities, and schools.

Burkina Faso, which enjoys one of the best solar radiation conditions in the west region, is a successful example of leveraging the transformative impact of solar energy and battery storage. With support from the World Bank, the country is deploying solar energy to power its national grid, as well as mini-grids and individual household systems.

Solar power with battery storage is competitive in Burkina Faso compared to other technologies and its government was successful in attracting private sector investments to support this technology.

If Africa invest in renewable energy however some countries might struggle to get the fund,the market should be open even to private sector.Closing the funding gap will require mobilizing traditional and new partners, especially the private sector, which is willing to invest if enabling conditions are in place, as well as philanthropic capital, that can fill in the space in areas not yet commercially attractive. 

Marlene Mutimawase is an editor at Africa Business Communities.