Africa’s shortage of electric power is one of the world’s great challenges, and the push to electrify the continent provides inspiring examples of entrepreneurial solutions.
Some see these challenges as reason to avoid Africa. But many are doing the opposite. 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.
Several government-backed initiatives are broadening opportunities for private-sector investors. One is the Power Africa program launched by President Barack Obama in 2013. As of 2017, it had leveraged more than $40 billion in commitments from the private sector to add nearly 7,000 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 12-month period via mobile money accounts.
Such 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.”
Written by Acha Leke,chair of McKinsey & Company’s Africa practice. Mutsa Chironga, an executive at Nedbank, a South African banking group. Georges Desvaux,a senior partner at McKinsey & Company
