A Reason to Smile for African Rural Communities

In a region where 510 million people have no access to electricity and are unlikely to get grid access in the foreseeable future, The AECF and the Swedish International Development Agency (Sida) are determined to enable greater access to clean energy. With current power generation trends showing a clear failure to keep pace with both rural and urban demands in Africa, it is evident that the population without electricity will increase steadily until at least 2025. To worsen the scenario is the high cost of grid extension to the remote areas of the continent.

Annually, African households and small businesses spend upwards of US $17 billion on lighting, mainly kerosene. Many households spend up to 30 percent of their disposable income purchasing fuel. The technology is inefficient and expensive, provides limited and poor quality light, and exposes users to health and fire hazards.

Wood and charcoal make up about 90 percent of the primary energy supply in sub Saharan Africa (SSA), presenting environmental and livelihood challenges as nearly 4 million hectares of forest are lost each year, adding to the degradation of water catchments and soil erosion. Moreover, household emissions from unsustainable biomass burning in Africa are five times those of fossil fuels.

Energy is a binding constraint on growth in many African countries, especially in rural areas. The Renewable Energy, Adaptation and Climate Change Technology sub-Saharan African (REACT SSA) funding from Sweden International Development Cooperation Agency (Sida), valued at SEK 400 million (approximately US $48 million) is a five-year programme in support of Africa’s renewable energy sector to be implemented in Burkina Faso, Ethiopia, Kenya, Liberia, Mali, Mozambique and Zimbabwe. The fund is complemented by a strong regional component to support technical assistance and learning activities in the seven countries.

In addition to the existing portfolio of the AECF funded renewable energy enterprises, the programme will support over 50 private sector companies to reach the market with various off-grid power products and clean cooking solutions for poor rural families. The programme targets scalable renewable energy technologies in hydro-power, solar energy, biomass and wind generation.

Although the private sector has had some success in developing business models and technologies to address these issues, they still face high risk and market failures that limit innovation and slow down the scale-up of proven business models and technologies. Innovation to improve market access for the poor in SSA is hampered by a wide range of challenges amongst them: a poor investment climate, lack of competitive pressure for businesses to innovate; pervasive market failures and a lack of information on the needs of the poor; and uncertainty over the commercial returns to pro-poor innovation. The AECF and Sida will work with private sector companies to improve market systems and facilitate the impactful exchange of quality renewable energy products in rural areas within the target countries. Endorsements, financial and technical support to innovative business ideas by a credible intermediary like the AECF, largely contribute to offsetting cycling business risk associated with rural markets.

Overall, REACT SSA funding is expected to stimulate impactful benefits to over 300,000 households in Burkina Faso, Ethiopia, Kenya, Liberia, Mali, Mozambique and Zimbabwe. All the country specific funding competitions are planned to commence in June 2018.