9 economies of scale. Generally, good electrification planning will identify rural communities and parts of urban areas in which sufficient revenues can be generated from new connections if most of the households within reach of the new line are connected to the network. But if high initial charges suppress demand for electricity, the assumptions of such plans will not be realized. Ways must be found to enable potential new customers to connect to the grid—for their own benefit and also to secure revenues so that the utility can recover its investment in service expansion.

**Table 3. Relationship between Connection Charges and Electrification Rates**

||Statistic|All countries|Africa only|
|---|---|---|---|
|_Descriptive statistics_||||
|Countries/cases|Number|22|15|
|% with electricity (dependent variable)|Mean|44|28|
|Connection charge fee (independent<br>variable)|Mean|128|172|
|GDPper capita(independent variable)|Mean|1,424|1,080|
|_Regression statistics_||||
|Connection charge fee|Coefficient(T statistic)|-0.11(-3.32)|-0.05(-1.99)|
|GDPper capita|Coefficient(T statistic)|0.02(5.03)|0.03(6.61)|
|Constant|Coefficient(T statistic)|34.29(3.98)|14.47(1.98)|
|R square|R square|0.777|0.849|

_Source_ : Data compiled from World Bank statistics, the International Energy Agency, and statistical analysis from this report. _Notes:_ GDP rates are for 2010. Connection charge rates are for 2010–13. Connection rates are for 2010.

# **Financing Electricity Access in Africa: Several Emerging Programs**

Many electricity companies in Sub-Saharan Africa are well aware of the benefits of making connection charges affordable to their customers, and some have initiated programs to lower those charges through subsidies or credit schemes. In many countries, isolated, fully subsidized connection programs have been supported by donors.<sup>7</sup> However, given the scale of the effort required to achieve universal access in Sub-Saharan Africa, and the financial challenges already faced by the region’s utilities, subsidies should be carefully engineered to improve poor households’ access to electricity without distorting energy markets. Subsidy policies must be carefully assessed for efficacy, efficiency, and cost-effectiveness. _Efficacy_ is ensuring that the subsidy reaches those for whom it is intended—the poor, who would not have access to electricity without the subsidy—rather than allowing it to reach wealthier households who would connect to the grid without a subsidy. _Efficiency_ is structuring the subsidy so that it encourages service provision at the least cost, which is an issue that needs to be addressed more thoroughly in efforts to restructure the energy sector, which often do not give adequate attention to increasing access, particularly in remote rural areas. _Cost-_

> 7 Full connection subsidies, like overly broad consumption subsidies, may actually distort the markets for electricity and, because they are limited in scope, may not be well targeted to the right populations. Political interference in selecting the villages that benefit from subsidies may foment dissent among villages that are passed over. Even within a given village, distinctions between consumers (those labeled “poor” and therefore eligible for a subsidy versus those excluded from the subsidy) can create dissension.