By Mancha Johannes Sekgololo and Adunimay Anslem Wongibeh
Africa’s regional integration has long been crucial to the continent’s economic development and prosperity. However, one of the significant challenges to this integration is the inadequate access to electricity in many African countries, including South Africa and Nigeria.
According to the World Bank, as of 2020, the electrification of the population was 84.4% in South Africa and 55% in Nigeria. Several reasons make unreliable and low electrification rates a significant impediment to Africa’s regional integration.
First, electricity is a critical input for industrial production and economic growth. Without access to reliable electricity, businesses cannot operate at full capacity, which curtails productivity and competitiveness. Energy-intensive industries such as manufacturing, mining, and agriculture are the hardest hit without electricity or energy.
The two of the largest economies in Africa, South Africa and Nigeria, have the potential to lead the way in regional economic integration. The lack of access to reliable electricity has significantly hindered economic growth in Nigeria. According to a World Bank report, power outages and shortages annually cost the Nigerian economy an estimated $28 billion, or 2% of GDP. This has negatively impacted energy-intensive industries such as manufacturing, which have struggled to operate at full capacity due to unreliable electricity supply.
In South Africa, the energy crisis has led to frequent power outages, which have disrupted industrial production and economic activity. In 2019, South Africa experienced its worst power crisis in a decade, with widespread blackouts that lasted for several weeks. South Africa’s mining and manufacturing industries were impacted severely, forcing companies to reduce production. The low levels of electricity access pose a significant hindrance to this goal.
Secondly, inadequate access to electricity also limits the potential for cross-border trade and investment. The lack of reliable and affordable energy infrastructure hinders the development of regional value chains, which are essential for economic integration. With limited electricity access, it is difficult for African countries to compete with other regions to attract investment and trade.
Inadequate access to electricity has also hindered cross-border trade and investment in Africa. For example, the lack of reliable electricity supply has made it difficult for African countries to develop regional value chains essential for economic integration. One study found that, on average, it takes 50% longer for goods to cross borders in Africa than in other regions.
The unreliable energy infrastructure partially contributes to difficulties in establishing cross-border supply chains and transporting goods.
In contrast, countries with high levels of electricity access have been able to attract significant investment and drive economic growth. For example, Rwanda has made tremendous progress in expanding access to electricity from 9.6% in 2010 to 46% in 2020. The goal of Rwanda’s National Strategy for Transformation, itemised in Section 52, is to achieve universal access to dependable electricity by 2024.
The above-mentioned development has facilitated investment in the country’s energy sector and enticed foreign investment in the manufacturing and services industries. As a result, Rwanda is the fastest-growing economy in Africa in recent years. According to the World Bank, Ethiopia has recently made significant progress in expanding access to electricity, with electricity access increasing from 30.1% in 2013 to 51.1% in 2020.
The manufacturing sector has experienced considerable investment from domestic and foreign firms, contributing to overall economic growth. For example, the Chinese shoe manufacturer Huajian Group opened a shoe factory in Ethiopia in 2012. Part of the attraction was the relatively low labour costs and improved infrastructure, including electricity access. The factory, which employs over 6 000 people, has become one of Ethiopia’s largest employers and has helped to boost the country’s exports. Ghana has also made significant progress in expanding access to electricity, with electricity access increasing from 64.2% in 2010 to 85.9% in 2020.
Helped to drive investment in the country’s energy sector, including in renewable energy, Ghana has the potential to become a net exporter of electricity in the region. For example, the United States-based company, Bui Power Authority, developed a 400MW hydro-power project in Ghana, which has helped to boost the country’s electricity supply and reduce its reliance on imported fuel. The project has also helped to create jobs and stimulate economic growth in the region.
The inadequate access to electricity in many African countries poses a significant challenge to successfully implementing the African Continental Free Trade Agreement (AfCFTA). The AfCFTA aspires to forge a singular market for commodities and amenities in Africa, the success of which is hinged on efficient and steadfast energy infrastructure to buttress cross-border trade and investment.
Without adequate access to electricity, it will be difficult for African countries to take full advantage of the trade opportunities provided by AfCFTA. Therefore, expanding access to electricity is crucial for the successful implementation of the AfCFTA and the continent’s overall economic development and prosperity. Prioritising the expansion of electricity infrastructure will position countries to better benefit from the trade opportunities created by the AfCFTA and drive economic growth and integration in the region. South Africa and Nigeria’s unreliable and low electricity access levels impede Africa’s regional integration.
African governments must prioritise the development of energy infrastructure and increase access to electricity to unlock the continent’s economic potential and improve the lives of millions of Africans. The inadequate access to electricity in many African countries is not only a hindrance to their economic growth and regional integration but also poses a significant challenge to the successful implementation of the AfCFTA. The lack of reliable and affordable energy infrastructure hinders the development of regional value chains, which are essential for economic integration. Moreover, it limits the potential for cross-border trade and investment.
In contrast, countries such as Rwanda, Ethiopia, and Ghana that have made significant progress in expanding access to electricity have been able to attract substantial investment and drive economic growth. However, the African electrification rate dichotomy between member states is a contradiction that needs urgent remedy.
Therefore, increasing access to reliable electricity must be a priority for African countries to achieve sustainable economic development and regional integration.
* Mancha Johannes Sekgololo and Adunimay Anslem Wongibeh are Research Associates at the 4IR and Digital Policy Research Unit in the Department of Politics and International Relations at the University of Johannesburg.
** The views expressed do not necessarily reflect the views of Independent Media or IOL.