WHITE PAPER

Sub-Saharan Africa (SSA) has a lower supply of electricity than any other region in the world, as shown by satellite images depicting the region’s relative lack of nighttime lights. Several studies have quantified this lack of electricity. For example, almost one billion people currently live without electricity, worldwide, of which approximately 600 million reside in SSA.Surveys of households in 22 SSA countries show that just one -third of the population uses electricity. Income levels and geographic location seem to be key determinants of electricity use, as electricity consumers tend to be urban and comparatively better off.

The World Bank states that low levels of electricity supply have harmed the region’s economy.Three-quarters of SSA firms experience power outages, reportedly losing an average of 8.3 percent of their annual sales as a result. Due to the unreliability of electricity supply across the region, half of SSA firms own a backup generator. Generators typically supply one-quarter of these firms’ total electricity, despite an operating cost that can be up to 10 times higher than that of on-grid electricity supplied by a utility.The World Bank estimates it may take up to $60 billion in annual investments to address this rising electricity demand and aging infrastructure.

This paper outlines the steps SSA governments have taken to increase domestic electricity supply, either through new public and private investments in generation or, to a lesser extent, through cross -border imports of electricity. The paper then addresses the institutional factors dampen private investment incentives. Electricity prices (or tariffs) —while high by global standards —are below production costs in all but two SSA countries. As a result, utilities remain unreliable guarantors of private investment, thereby perpetuating the electricity shortage. Although many countries encounter political opposition to higher tariffs, analysts argue that regulators need to raise tariffs so that utilities can collect enough revenue to cover their costs. This would help to attract new investment while offsetting financial losses in the system due to theft or waste.