Empowering off-grid entrepreneurs in Sub-Saharan Africa

The World Bank has acknowledged that economic growth does not always lead to development, and are now focusing on providing 'inclusive growth', which will ensure that aid is broad based and will benefit a wider demographic.

If the World Bank wants to be successful in this strategy it will need to rethink current policies on energy investments.

Billions of dollars have been invested in Africa over many years in the form of aid, foreign direct investment and private investments. In spite of that 70% of people in Sub-Saharan Africa still do not have access to modern energy. In many areas of rural Sub-Saharan Africa, this number exceeds 90%.

And the trend is getting worse with the International Energy Agency warning that if policies by the World Bank, Governments and multilateral organisations don't change, more then 1.6 billion people will be without access to modern energy by 2030.

With the World Bank moving away from funding coal power projects in developing countries, the focus has now been on exploiting Africa's renewable resources in an effort to provide safe and clean energy to more people.

The World Bank's goal is to provide universal electricity for all by 2030. However, funding has been focused on large-scale centralised projects aimed at extending the grid. Recent funding initiatives such as the US's Power Africa initiative and the European Unions have also been heavily skewed towards funding large centralised projects.

The problem with this is that it may take decades for the grid to be extended reach rural populations. The IEA warned that over investment in centralised projects, together with a rapidly increasing rural population, will mean that 1.6 billion people will still be without access to electricity by 2030. And, if "sustainable energy for all" targets are to be achieved, at least 55% of connections need to be off-grid.

Decentralised off-grid technology using solar power, such as stand-alone photovoltaics (PV), is an appropriate option for rural communities because it can be used in almost any location, and is easy to install, maintain and upscale. It can also be connected to micro-grids which can be run and maintained by the local rural communities. Currently the main challenge to the diffusion of stand-alone PV is the initial affordability, as low-income consumers are unable to pay the upfront cost of installing and owning the PV system.

M-KOPA, a social enterprise based in Kenya, has found a home-grown solution to this problem. It uses a pay-as-you go solar payment solution to remove the initial investment barrier that low income households face. Customers pay a 15-20% down payment to take the solar panels home and are allowed up to a year to pay it off. They purchase "energy credit" from top up shops, just as you would buy mobile credit. This allows customers to pay from remote locations, and gives M-KOPA the leverage to deduct payments from their sim card. This highlights the importance of finding community based solutions to development problems.

According to the UN, the solar market is expected to grow from $750 million in 2004 to $57 billion by 2020. Many African Entrepreneurs have decided to fill this market gap, and have been laying the groundwork for Africa to leap frog impractical or cost-prohibitive centralized grids in favour of distributed off-grid low carbon technologies. And it is doing this in the same way technology advances in the 90s allowed millions of people to skip to decentralised mobile technology instead of waiting for landline connections.

Hundreds of companies have now been trying to grab a piece of this market and, as a result of increased competition and technological improvements,thecost curve in solar has fallen dramatically, with costs decreasing by 500 per centover the past 10 years, making it more affordable for low-income households.

Entrepreneurs are the driving force of long-term development and increased GDP in Africa. They create jobs and provide government tax revenues that fund infrastructure and public services. The future of Africa lies in the entrepreneurs and small to medium enterprises SME and a strong public sector.

Furthermore, local entrepreneurs tend to focus on better ways of providing basic energy services and productive services and consider the diverse needs of the poor. This is essential because access alone doesn't solve socio-economic problems, and what people demand is not energy per say, but rather energy services that help them through their day-to-day life. The top down "one size fits all" approach to providing energy does not address diverse needs of the rural population, and the ability to understand the socio-cultural complexities is essential in creating successful projects.

With many of the people suffering from poverty living in rural areas, if MDG goals are to be reached, energy services need to be available, appropriate and affordable.

The World Bank and AusAID need to put stronger focus on building the capacity of these local entrepreneurs, and to help assist with building sustainable business by providing the financial capital to help distribute off-grid renewable energy to rural populations.

Australian minerals and resource companies have more projects in Africa than in any other region outside Australia with 200 companies currently working around the continent

Right now, AusAID's strategy in Africa is focused on health and infrastructure. And although this is essential, aid can be made more effective by creating strong public private partnerships with Australian companies to draw from their expertise and knowledge.

Australian investments also need to monitor how they impact the lower income households. Companies investing in renewable energy in particular need to have a well-structured plan on how they will provide energy access to rural areas as well as make it affordable to low income households. They need to engage with local communities, NGOs, entrepreneurs, SMEs and the African Diaspora to help build projects that combine international models with African realities.

In 2012, AusAID took a step forward by creating the AusAID- Africa Roundtable with business.

AusAID should ensure that priority areas for this engagement include promoting the viability of the off-grid market in rural sub-Saharan Africa and promoting investment. It should also discuss the most effective ways to draw knowledge and expertise of the resources sector to and provide trainings in the operation, management and maintenance of off-grid technologies to entrepreneurs and SMEs.

Using a market-based approach that focuses on communities as both consumers and producers, taking into account the diversity of needs, is more sustainable and ensures that demand is met and market prices for off-grid products are kept competitive.

Ultimately, the end goal should be to strengthen Africa's private sector, build human capital and technical expertise for more sustainable, African-led Development. The World Bank needs to change its current energy investment policies if it does not want to serve as a barrier to achieving this goal.