Why powering business is the real lightbulb moment for Africa

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In a changing world, one thing has remained numbingly constant. The answer to the question how many people in Africa lack access to electricity is always the same: 600mn.

That was true 15 years ago, and it is true today. It reflects a population that, in running up-the-down-escalator fashion, appears to be increasing as fast as providers can electrify. Which is not much consolation if you’re sitting in the dark.

In 2010, according to the International Energy Agency, of those people without electricity, more than one-third were Africans. Today, as poorer countries in Asia and Latin America have illuminated, 80 per cent of the 740mn people without electricity are in Africa.

The World Bank and the African Development Bank are doing something about it. Last year they launched, in collaboration with other organisations, a $90bn scheme to connect 300mn people to electricity in Sub-Saharan Africa by 2030. That is a laudable aim if only because it galvanises effort.

The fact that it is a plan dreamt up by multilateral institutions should give pause, though of course many countries have electrification targets of their own. Some 30 states have signed “energy compacts” under the Mission 300 initiative, securing funds in return for regulatory and other pledges.

Of more concern than the provenance of the scheme may be the underlying assumptions. Moussa Blimpo, assistant professor of economics at the University of Toronto and an expert on electrification, argues that Mission 300 is putting the cart before the horse. Its aim, he says, is to bring electricity to poor people whether they can afford it or not. To him that is a recipe for unsustainable subsidies, financially stressed electricity providers and government debt. The aim, he suggests, should be the reverse. Electricity should be a development tool to create jobs and economic growth so that people can afford electricity at commercial rates — if they want it.

This may seem like an argument about angels dancing on the head of an electric filament. But Blimpo’s theory goes to the heart of how development works. If people have money, they will send their kids to school, purchase electricity or put a roof on their house. “When we think about development in terms of solving the 25 problems people have in their life, we end up spreading ourselves thin,” he told the Afronomics podcast. He would prefer to create an enabling environment, particularly for businesses, in this case by making the existing power supply cheaper and more reliable.

Take a concrete example. Until recently, South Africans were subjected to rolling blackouts, the result of ageing generators, poor maintenance and mismanagement at state electricity provider Eskom. Economists calculated that sporadic electricity — which meant factory shutdowns, unrefrigerated food and transport delays — cost the economy $235mn a day.

South Africa has made power cuts far less frequent. That was a much better use of the government’s time and money than it would have been to, say, extend the failing electricity grid to people living in isolated rural communities.

The recommendation to improve electricity supply for those who can already afford it sounds heartless. But, as Angus Deaton, a Nobel economist, writes in The Great Escape, when economies take off, some people benefit first. Deng Xiaoping, the father of China’s economic miracle, made the idea that some people get rich first the core of reforms that upended the egalitarian assumptions of the Chinese Communist party under Mao Zedong.

Mission 300, with its focus on off-grid electricity and renewable energy — itself a stretch in a continent with a laughably low carbon footprint — takes the opposite approach. It is essentially a levelling-up exercise. If it has a broader development goal it is based on the idea that, by bringing electricity to very poor people, some will become micro-entrepreneurs.

This has a nugget of truth. But electricity will have a bigger impact when formal businesses — the motors of successful economies — use it to create jobs, economic growth and tax revenue. As Ken Opalo of Georgetown university, writes: “The hoped-for blooming of micro-entrepreneurship won’t cut it.”

The idea that millions of individuals using a tiny number of kilowatts can budge an economy up to the next level is symptomatic of a flawed “small is beautiful” ideology. As countries that have successfully moved out of poverty have demonstrated, thinking big and creating life-shifting growth is a better bet. Once people have real economic prospects, few will choose to sit in the dark.

david.pilling@ft.com