The Covid-19 crisis is reversing progress on energy access in Africa
The Covid-19 pandemic has been dismantling steady progress made in recent years to increase access to affordable, reliable, sustainable and modern energy – an objective enshrined in the UN Sustainable Development Goal 7 (SDG 7). Sub-saharan Africa – home to three-quarters of the almost 800 million people around the world who don’t have access to electricity – is bearing the brunt of this reversal.
According to the report of the International Energy Agency (Iea)since 2013, the number of people without access to electricity had been steadily decreasing on the African continent. This was thanks to the progress made in countries – such as Kenya, Senegal, Rwanda and Ghana – that adopted strong electricity access policies and supported off-grid initiatives.
The pandemic has put this progress into reverse, with the number of those lacking electricity in Africa rising to more than 590 million people in 2020, an increase of 13 million people, or 2 percent, from last year, according to analysis in the World Energy Outlook 2020.
There are several underlying reasons for this mainly stemming from a lack of available financial resources for governments, the private sector and individual households. The health crisis has forced governments to shift their immediate priorities to purely emergency measures, resulting in a lack of financing available for expanding and improving electricity infrastructure. In Uganda, for instance, public subsidies for the electricity access programme have been put on hold, while in South Africa, authorities had to redirect funds to health and welfare programmes and facilities at the expense of expanding rural electrification.
Furthermore, private companies deploying decentralised energy solutions like solar home systems and mini-grids have faced operational and financial challenges because of the pandemic. In large countries like Ethiopia, lockdown measures have affected distribution chains and reduced sales by 20% in the first half of 2020 compared with the same period last year, according to the latest data gathered by the Global Off-grid Lighting Association. In other markets, such as Zambia and Uganda, disruptions in upstream supply chains have hindered imports. Although a few markets like Kenya, Rwanda and Togo have remained dynamic, the total number of solar products sold in Africa has dropped by more than 10 percent in the first half of this year. While this decline is not large enough to undermine the overall expansion of solar PV capacity worldwide, it does means that hundreds of thousands of households do not have access to basic electricity services.
The cost of borrowing has also increased dramatically, limiting the ability of governments to expand energy access. This is particularly true for the Democratic Republic of the Congo, Nigeria, Ethiopia, Tanzania and Uganda. Together, those countries were home to more than one-third of all people without electricity access globally in 2019.
“Our analysis finds that in the first half of 2020, sovereign risks perceived by investors (i.e. the premium on top of the long-term cost of borrowing) rose by two percentage points compared with the end of 2019, reaching 7 percent. This increase happened even as borrowing costs fell in other parts of the world”, the re[port said.
These rising financing costs have been felt the most in the countries where progress on expanding access is most needed. In the Democratic Republic of the Congo, the country with the largest number of people without electricity, sovereign risk rose to over 9%. In Nigeria and Ethiopia, with 75 and 60 million people without access respectively, the risk rates rose to 6.5%. Other risks, such as deteriorating exchange rates, could worsen access to finance further by discouraging international investors. Unless action is taken, this will result in a slowdown in new annual electricity connections in subSaharan Africa.