Humanity has never before had such resources, knowledge, and technology at its disposal — yet it is a long way from translating those advances into decent lives for all the world’s people. We believe that innovation by businesses large and small can play a central role in closing that gap and solving the world’s challenges. Africa’s shortage of electric power is one of the greatest such challenges, and the push to electrify the continent provides inspiring examples of entrepreneurial solutions.
A few numbers show just how far Africa has to go in power generation. Electricity consumption per person in large African countries such as Ethiopia, Kenya, and Nigeria is less than one-tenth that of Brazil or China. In poorer countries such as Mali, a typical household uses less electricity in a year than a Londoner uses to boil a kettle each day. And nearly 600 million people in sub-Saharan Africa lack access to electricity altogether — with the result that whole communities literally live half their lives in the dark.
The power gap imposes high economic costs, too. As Dr. Akinwumi Adesina, president of the African Development Bank, put it to us: “Energy is like blood in the life of an economy — it is the key to getting businesses to work, whether you’re in the banking sector, the agricultural sector, or mining sector.” When we surveyed executives running businesses in Africa, one-third said their companies generate their own electrical power or have backup generators on-site. Generator-based power costs three to six times what grid consumers pay across the world.
Some businesspeople might see these challenges as reason to avoid Africa. But many are doing the opposite, shaping bold innovations to help close the power gap. A case in point: the “company to country” agreements between GE and several African governments. These represent a new frontier in the company’s approach to public-sector clients. For example, GE’s agreement with Nigeria supports the financing, design, and building of vital infrastructure, with projects including the development of 10,000 megawatts of power generation capacity, as well as upgrades to airports and the construction of public hospitals and diagnostic centers.
Jay Ireland, the recently retired president and CEO of GE Africa, describes the approach as “an umbrella agreement matching our capabilities as a company with the issues the country was facing, including putting more power on the grid.” Besides supplying turbines and other equipment to help build the electrical grid in Africa, GE has also built a large-scale distributed power business, in which companies are able to generate their own power at the point of use.
Tidjane Thiam, CEO of Credit Suisse — and one-time chair of the G20 High Level Panel for Infrastructure Investment — believes such private-sector investments and innovations could be catalytic for the development of power and other infrastructure in Africa. Companies investing in infrastructure in Africa must be ready to be “pioneers at the frontier of development,” Thiam told us; if those pioneers are smart about managing risk, they will reap rich rewards down the line. “In infrastructure development, most of the risk is in the early stages. Once you’ve built an asset such as a power plant, the risk goes down by multiples.”
Several government-backed initiatives are broadening opportunities for private-sector investors to help electrify Africa. One is the Power Africa program launched by US president Barack Obama in 2013. As of 2017, it had leveraged more than $40 billion in commitments from the private sector to add nearly seven thousand megawatts in generating capacity across the continent. The African Development Bank is driving a campaign to “light up and power Africa”. It has committed $12 billion to energy projects between 2017 and 2022, and aims to attract a further $50 billion in private sector investment.
Although expanding Africa’s power grid is essential, it’s not the only part of the solution. A new breed of African innovators is harnessing mobile money, along with advances in solar power and battery storage, to leapfrog the continent’s gaps in electric power generation. One example is Kenya-based M-Kopa, which provides solar-powered electricity generation and storage solutions to households that lack access to the grid — and finances payment over a twelve-month period via mobile money accounts. Since its founding, in 2011, M-KOPA has sold more than 600,000 household kits and garnered investments from multinationals including Japan’s Mitsui.
Another example is Uganda-based Fenix, which has sold 140,000 solar power kits, also enabled by mobile money. In late 2017 Fenix was acquired by Engie, a major global energy company based in France, as part of a drive to use digital technologies to provide 20 million people around the world with decarbonized, decentralized energy by 2020. Yet another pioneer is UK-based BBOXX, which distributes its solar kits through agents in ten African countries — and uses remote monitoring technology to improve battery life and users’ experience.
These companies have struck upon a business model that enables even households with low incomes to get electricity for the first time. That matters, as around 70% of African households earn less than $5,000 a year. As M-Kopa’s CEO, Jesse Moore, told us, “Ours is a displacement proposition. African households already spend a lot of money on crappy energy sources like kerosene and batteries. We enable them to stop that wasteful expenditure and switch to something cheaper and better. It turns out that solar energy is a secret freer of cash.”
If you drive around parts of rural Africa today, you’ll see business-led energy innovations changing lives, one homestead at a time. One of them, in the foothills of Mount Kilimanjaro in Kenya’s Kajiado County, belongs to Duncan Manga and his family. Lacking a connection to the grid, Manga signed up with M-Kopa in 2015. When we visited him, he told us that electricity had changed his family’s life. “My children can study at night, we can light up our kitchen, and I can charge my phone. Our lives have gotten much better. We used to travel far to buy kerosene for our lamp, and when it ran out, we were in darkness. Now we have light.”
BY: Acha, Leke, Mutsa Chironga and Georges Desvaux
CULLED FROM: https://hbr.org/2019/01/the-innovations-closing-africas-electric-power-gap