# **1 Context**

Electricity sectors in Sub-Saharan Africa (SSA) lag behind all other regions of the world. Installed capacity of power generation for the entire continent is less than that of Spain, over 600 million people lack access to electricity, and power consumption of 375 kilowatt-hours (kWh) per capita per year is low by any standard. The results are frequent load-shedding, expensive short-term rental of emergency power generation, and, in nearly all cases, high reliance on costly diesel for off-grid captive power generation even in large cities.

Progress toward universal access is slow. According to the SE4ALL Global Tracking Framework (SE4ALL 2015a), access to electricity in the region in 2012 was only 35 percent, having increased from 26 percent in 2000. With per capita gross domestic product (GDP) of US$3,274 in the same year measured in current dollars at purchasing power parity (World Bank 2016a), this low access rate in part reflects the inability of many households to pay for electricity. That said, by contrast, when South Asia was at the same level of this measure of GDP per capita in 2005–2006, its rate of access was already double that in SSA. The rural/urban population divide in the two regions are comparable, with the rural population making up 68 percent of the total in South Asia and 64 percent in SSA in 2012 (although population density is likely to be lower in SSA). The largest difference was in the rural access rates: a mere 15 percent in SSA in 2012, against more than triple that in South Asia in 2005–2006.

The low access rates in many countries in SSA mean that electricity customers today are relatively welloff, and yet in 2013 less than 20 percent of utilities reported a net profit. As noted in Dobozi (2016), the main cause of the slow progress in access expansion in SSA is the poor financial viability of electricity utilities. The sector needs substantial capital infusion. The annual cost of addressing SSA’s power sector needs has been estimated at US$41 billion, including US$14 billion for new power generation additions (Eberhard et al. 2011). Other estimates have suggested US$17 billion of investments a year are needed just to achieve universal access targets (SE4ALL 2015a). Whether US$14 billion or US$17 billion, these investment requirements contrast with an estimated US$3 billion’s worth of new capacity coming on stream in 2013 found in this study. Although there are many reasons for this gap, poor sector fundamentals—policy, regulatory, and contractual framework meeting international benchmarks; enforcement of regulations and policies in place; the payment discipline of all parties; and the financial viability of utility operation—are largely responsible. And despite large financial gaps between the cost of service and cash collected, electricity consumers in SSA do not necessarily enjoy low tariffs. If anything, tariffs in the region are relatively high for a variety of reasons: small economies of scale, low concentrations of high-volume consumers with good payment discipline, continuing reliance on oilbased generation, and high operational inefficiencies.

Due to continuing financial shortfalls, not only is the power sector in most SSA countries unable to expand supply to new consumers at the desired pace, it cannot deliver reliable electricity to the existing ones. Acute power shortages act as a brake on economic growth. In surveys of firms in the region, 38 percent identified electricity as a major constraint to doing business and 50 percent reported owning or sharing a back-up generator. On average, firms reported losing 8.6 percent of the total annual sales due to power outages (Enterprise Surveys 2016). A new index ranging from 0 to 8 for supply reliability and tariff transparency tabulated by _Doing Business_ found SSA to have the lowest index, 0.9, against 1.9 in South Asia, 3.6 in East Asia and the Pacific, and an average of 7.2 among the high-income member countries of the Organisation for Economic Co-operation and Development (Doing Business 2016). The 7