Electricity in a pre-Industrial Revolution Continent

Electricity in a pre-Industrial Revolution Continent

Michael Gera.  March 14, 2017

First, some facts

  • In Sub-Saharan Africa, on average, industry generates $700 of GDP per capita, less than a third of Latin America’s output ($2,500 per capita) and barely a fifth of East Asia’s ($3,400 per capita).[1]
  • In the EU, only 30% of electricity produced is used by households[2]. In the US, it’s currently 21%[3] vs. c. 15% in 1949. Only 25% of these households are rural i.e. only 5.25% of electricity generated is consumed by rural households. In China in 2014,12% of electricity produced was used by households.
  • 62% of Sub-Saharan Africans are rural – c. 500 million people. By contrast, 25% of EU citizens, 18% of Americans, 7% of Japanese and 44% of Chinese live in rural areas.[4]

What can we say about this?

  1. Well quite clearly electrification did not occur to power our homes – it was a side effect of a massive investment in energy for industrial needs.
  2. As far as homes are concerned: it’s a lot easier to supply them with electricity in developed economies (and increasingly, China too) as large majorities of the population live in cities.
  3. Africa is seeing urbanisation, but this is not being accompanied by a concomitant increase industrialisation. Thus, new city dwellers don’t have the increased spending power that comes with manufacturing.

The first point to make is that for African governments to provide grid power to all is asking them to deliver more than the governments of developed economies. The latter have a highly urbanised household base, the former have a hugely dispersed population. With only a few exceptions, this is the state of Africa’s urbanisation today and will remain so unless African countries embark on a determined execution of industrialisation policy and ruthlessly sustain that effort over several decades (there is no point in driving urbanisation if people have no well-paying manufacturing jobs to go to).

Looks bleak?  Well, it isn’t!

The increasing viability and availability of off-grid – mainly solar – electricity will mean that a pre-Industrial Revolution Africa in the 21stcentury will not be the same as pre-Industrial Revolution Europe in the 18th Century or China in the early 20th. For households, Solar Home Systems are now reliable and affordable. These systems are no substitute for the grid, but they are a great improvement over a flickering candle or kerosene lamp.

In addition to the gains in the domestic market, key developments such as the decreased cost of renewable energy, the  decreased cost of energy storage, digitisation (IoT) and  energy efficiency– bring the potential for something far more valuable and impactful: the potential to create islands where productive or commercial use is made of electricity.  It is now feasible to have even a small cluster or even a single manufacturing business that runs entirely on locally generated electricity. Whilst no substitute for the next Shenzhen, these ‘islands’ of industry will be creators of employment and wealth via productivity gains in ways that agriculture and extractive industries simply cannot match.

Thus, ‘Energy Access’ – currently perceived as a ‘pro-poor’ and ‘ pre-grid electrification fix’, might be a key driver of African industrialisation.

References:

[1] IndustraliseAfrica.  AfDB report May 2016. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/Brochure_Industrialiser_l_Afrique-En.pdf

[2] http://shrinkthatfootprint.com/how-do-we-use-electricity

[3] http://www.eia.gov/energyexplained/index.cfm/data/index.cfm?page=us_energy_use

[4] http://data.worldbank.org/indicator/SP.RUR.TOTL.ZS

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Michael Gera
Michael Gera