The Millennium Development Goals announced by the United Nations in 2000 were an ambitious list of eight key challenges that needed to be met by 2015, in the areas of poverty, education, sexual equality, health and the environment.
The seventh objective concerned developing a sustainable living environment and made particular mention of access to drinking water. On the contrary, access to electricity was not brought up as energy is considered solely in terms of energy intensity (energy consumption to produce $1 of GDP)…
However, while the objective to reduce by half the number of people without access to drinking water was met in 2010, access to electricity is still a major obstacle to development in several regions of the world. In 2009, 1.4 billion people had no access to electricity and 586 million of them lived in Sub-Saharan Africa [i].
Electricity for the African consumer: a rare, expensive and low quality product.
Electricity is, in fact, a rarity in Africa: the rate of electrification is limited to 42% continent-wide and represents the lowest rate of electrification across all developing regions. Furthermore, this average rate masks not only great regional disparities (99% in the Maghreb but only 31% in Sub-Saharan Africa), but also a very clear rural/urban divide (69% in urban areas to 25% in rural zones) [i].
Less than 10% of rural populations in Sub-Saharan Africa have access to electricity and traditional biomass (wood that is either coal or not) is their almost exclusive source of energy.
The rate of electrification and populations with no access to electricity in Africa [i]
Available for less than half of the population, electricity remains an expensive resource for African consumers. In zones that are served by electricity networks, the average residential rate is $12c/kWh[ii] which is almost the same as OECD countries (€12c/kWh in France for example) for a country with a standard of living that is 15 times lower. Ten African countries charge rates that are higher than the OECD average.
Out with the network, in the vast rural zones that have no electricity, supply solutions are even more costly and prices are as high as $30c to 50c/kWh for an electrical generator, or even as high as $70c/kWh with a photovoltaic kit.
A comparison of residential electricity rates in the world’s main developing regions [ii]
Finally, the high cost of electricity doesn’t always equate to quality for the end user. In the same electrified zones, supply isn’t reliable. Power outages, that are the result of badly maintained systems and power cuts, considered the only real solution to managing an electrical network when production isn’t sufficient, happen almost 10 days a month and, on average, for 6 hours at a time (see graph 3).
These frequent interruptions have a huge impact on daily life but also seriously cut into economic activity (tools that are unusable, production losses, broken equipment, ruptures in the cold chain and communication interruptions). One in every two African companies with more than 250 employees needs to have a generator to deal with this situation. The bad quality of electricity also brings with it a considerable shortfall for Sub-Saharan African countries that the World Bank has evaluated at more than two percentage points of GDP [iii].
Affordable prices, bill recovery and cost provisions: the wide disparity between electricity companies in Africa.
For Sub-Saharan African electricity companies, the economic equation is a difficult one to balance out.
On one side, these operators have to adapt to local economics. With 70% of the population living on less than $2 a day, access to electricity is limited. In electrified zones, an average consumption of 40kWh per month (compared to 600 in France) represents a cost of $5. In rural un-served areas, a much reduced average consumption of only 5kWh per month still costs $2 because of the use of generators.
In addition to this already limited accessibility, producers have to face the problem of bill recovery. About 40% of final clients do not pay their bills: this rate climbs to 55% for the poorer categories and is always around 20% for more wealthier clients [iv], suggesting a state of affairs that is rooted in local practices, but which can also be explained by the inability of operators efficiently to collect their payments, revealing an inefficient organisation and total absence of a structured banking sector.
On the other hand, electricity companies have to use a cumbersome electrical infrastructure, which is centralised and covers vast areas. In part inherited from the colonial era, these infrastructures generate huge exploitation costs of on average $14c /kWh, which are hardly even covered by meter prices. As they make losses on electricity for individual households, their delicate financial balance depends on sales to companies.
Only seven Sub-Saharan African countries cover their historical production costs, the others have an average coverage rate of only 61% [iv]. Over and above the question of accessibility, this situation is often a result of political choices made on subsidised electricity prices.
Comparison of domestic electricity prices and coverage rates for production costs [iv]
This non coverage of production costs, combined with difficult access and inefficient bill recovery penalises massively the ability of African operators to maintain the existing electrical systems thereby reducing their performance: nearly 25% of electricity produced is lost during transport and distribution because of losses throughout the networks as well as fraud [iv].
Aurélien Boiteau, Senior Manager