When one hears “Mission 300,” names like James Bond, Ethan Hunt, and Jason Bourne come to mind. However, what does Mission 300 have to do with giving hope to small businesses in Africa? Well, ‘Mission 300′ is an ambitious initiative by the World Bank in partnership with the African Development Bank (AfDB) that seeks to connect 300 million people to electricity in sub-Saharan Africa by 2030. Yes, 300 million people by 2030, six years from now. Ambitious right? So, how does it translate to hope for small businesses? Access to reliable and affordable electricity is a major challenge hindering small businesses’ growth across Africa. In Nigeria, for example, electricity is responsible for the highest cost to operations for small businesses. Since Micro, Small, and Medium-sized Enterprises (MSMEs) exist in various industries, including agriculture, the creative sector, technology, digital services, tourism, and food, this mission is a’ light’ of hope.
Electricity is a monstrous issue in sub-Saharan Africa, where approximately 600 million people still lack access to electricity. MSMEs are disproportionately affected by unreliable and expensive energy supplies and power shortages. 41% of firms in Africa cite electricity as a major constraint to their business operation, the highest of any region in the world. In countries such as Nigeria, Ghana, and Kenya, unreliable electricity is estimated to reduce the productivity of Small and Medium-sized Enterprises by up to 40%. Additionally, small businesses in rural and peri-urban areas are particularly affected, as energy infrastructure in these locations remains underdeveloped, and power outages are common. Furthermore, existing energy infrastructure is often outdated and unable to meet rising demand, leading to frequent disruptions in business operations. This situation underscores the urgent need for a more reliable, affordable, and sustainable electricity supply.
For Africa’s growing youth population seeking employment opportunities, entrepreneurship offers a solution to their job needs. However, the energy gap presents a significant challenge to entrepreneurial ventures, worsening poverty and hindering economic progress. When you consider that MSMEs constitute over 90% of businesses in Africa, providing about 80% of jobs and contributing up to 60% of the Gross Domestic Product (GDP), you understand the vast impact an initiative like ‘Mission 300’ could have.
About “Mission 300”
At the 2024 Springs Meeting in Washington D.C., the World Bank Group and the African Development Bank launched “Mission 300”. The initiative aims to accelerate access to modern energy for the millions of people (many small business owners) in Africa who are still without electricity. Despite ongoing efforts by governments and international organizations, the progress of expanding access to electricity in Africa needs a boost. Mission 300 could be the boost needed to increase access to electricity across the continent.
How does this Mission plan to achieve its goal? By aligning resources, expertise, and advocacy efforts to build and maintain momentum for the initiative. It will focus on expanding electricity access for productive uses in agriculture, healthcare facilities, schools, and the commercial and industrial sectors, all relevant sectors for small businesses.
This project is currently supported by a coalition of global organizations, including the Global Energy Alliance for People and Planet (GEAPP), Sustainable Energy for All (SEforALL), and The Rockefeller Foundation.
The Impact of Unreliable & Unaffordable Electricity on MSMEs Operations
Power outages, voltage fluctuations, and the high cost of alternative energy sources hinder the competitiveness of small businesses. Unreliable electricity creates several operational and financial challenges for these firms, who typically operate on tight budgets. As a result, they experience low productivity, increased operational costs, missed opportunities, and a slowdown in technology adoption.
1. Low productivity
The lack of reliable and affordable electricity can disrupt production, leading to increased downtime. Power outages can interrupt manufacturing or service operations and reduce business output. Retailers, restaurants, and other companies that depend on continuous power for lighting, refrigeration, and payment processing must pause operations during blackouts, resulting in lost time and customers. Unstable power supply can damage equipment, leading to costly repairs or replacements. The overall impact of these outages and disruptions can be significant. For instance, in Nigeria, the World Bank estimates that businesses lose around $29 billion each year due to unreliable electricity. For small businesses with limited resources, these losses can be devastating, hindering growth and reducing their ability to scale. Furthermore, many small businesses face challenges in meeting customer demand due to inconsistent operations, making it difficult to build long-term customer loyalty and expand their market presence.
2. Increased cost of operation from switching to diesel generators:
In addition to the indirect costs associated with a lack of electricity, there are direct costs like buying a generator to continue operations. Generators come with significant environmental and financial costs. For small businesses, the financial cost is enormous. For one, there is the initial cost to purchase the generator. Then, there is the cost of maintaining the generator and purchasing diesel to use the machine. The recurring and increasing expense of diesel fuel can be substantial, with some small businesses spending large amounts each month to keep their generators running, especially during frequent and prolonged power outages. In some African countries, businesses may allocate up to 40% of their operational costs to energy, largely due to reliance on these generators.
3. Lost Opportunities
Unreliable electricity significantly impacts small businesses, primarily by causing them to lose valuable growth opportunities. This includes potential profits and market chances due to their inability to operate fully. For instance, limited operational hours force many businesses, such as small retail shops, restaurants, and home-based enterprises, to close early or remain closed when power is unavailable. Businesses that rely on refrigeration or powered laptops also face reduced operating hours.
Furthermore, unreliable electricity hampers the expansion of small businesses. For example, a small clothing manufacturer may struggle to increase production due to frequent power outages that disrupt production lines. Similarly, service providers, such as tech startups, cannot efficiently scale their operations if they continuously encounter connectivity issues caused by power disruptions.
4. Slows digital technology adoption–
The lack of reliable electricity can discourage small business owners and youth entrepreneurs from adopting useful digital tools. It is a documented fact that digital technologies can significantly enhance businesses’ bottom line. Research indicates that the use of more advanced technology can account for up to 30 percent of the differences in productivity among firms. However, unreliable electricity supply often discourages small business owners from adopting advanced technologies, such as point-of-sale (POS) systems, automated customer relationship management (CRM) software, and e-commerce platforms, all requiring a consistent and affordable power supply. This technological stagnation makes it more challenging for small businesses to stay competitive in an increasingly digital global market. According to research from the International Finance Corporation (IFC), 35% of MSME respondents reported that technology was too expensive, mainly due to the costs associated with purchasing technology and the related electricity expenses.
These are some of the direct and indirect costs that lack of access to electricity has on MSMEs’ operations. As operational costs rise, small businesses struggle to compete with larger enterprises that may have the resources to invest in more efficient energy solutions, such as solar power. Consequently, small businesses often find themselves trapped in a cycle of dependency on expensive energy sources, hindering their ability to reinvest in growth. ‘Mission 300’ success is critical for these small firms.
What factors could contribute to the success of ‘Mission 300’?
Commitment from Governments: For this initiative to succeed, African governments must implement necessary reforms and show strong commitment. Leadership across the region needs to be fully engaged in this project. While stakeholders can provide financing and technical support, the ultimate responsibility lies with the governments for the successful implementation and ongoing maintenance of various electrification projects.
Partnership: Partnerships between the private sector and philanthropic organizations are essential for the success of an ambitious initiative like ‘Mission 300’. This initiative requires comprehensive support for effective implementation, including financing and technical expertise. Engaging various stakeholders, such as the private sector, philanthropic partners, and development banks, will be critical to enhance investments and mobilize funding for the project. As World Bank President Ajay Banga stated, “We need action from governments, financing from multilateral development banks, and investment from the private sector.” The project is off to a good start with partners that include The Rockefeller Foundation, the Global Energy Alliance for People and Planet, and the United Nations’ Sustainable Energy for All initiative. Still, it will need to build on these and add more partners.
Financing for Sustainable Energy Solutions: Achieving Mission 300 requires significant financing. The African Development Bank (AfDB) estimates that Africa faces an annual financing gap of between $35 billion and $50 billion for energy and power projects. Research from the International Energy Agency (IEA) indicates that energy investments in Africa have been declining. Additionally, the ongoing debt crisis in many regions of the continent has led to limited public capital. Private capital will be crucial, and investors will need to focus increasingly on the impact of ‘Mission 300’ rather than solely on Africa’s perceived and actual risks.
Financing for Sustainable Energy Solutions: Achieving Mission 300 requires significant funding. Estimates show that Africa faces an annual financing gap of between $35 billion and $50 billion for energy and power projects. Additionally, research from the International Energy Agency (IEA) shows that energy investments in Africa have been declining. Furthermore, the ongoing debt crisis in many regions of the continent has resulted in limited public capital. Private capital will be essential to address funding needs. Investors will need to increasingly focus on the impact of ‘Mission 300’ rather than solely on perceived and actual risks in Africa.
Conclusion
Lack of access to reliable and affordable electricity impacts small businesses’ operations by increasing operational costs, inhibiting them from taking advantage of growth opportunities, reducing productivity, and slowing their adoption of digital technology. Addressing Africa’s electricity challenge is crucial to fully leveraging the region’s entrepreneurial spirit and promoting inclusive growth. ‘Mission 300’ provides a glimmer of hope.
Access to reliable and affordable electricity is crucial for job creation, reducing extreme poverty, and promoting shared prosperity. Without electricity, small businesses struggle to innovate and expand into new markets. Women entrepreneurs face challenges in starting and sustaining their businesses, while young entrepreneurs find it difficult to fully adopt digital technology. As AFDB president Akinwumi Adesina stated, “We cannot industrialize in the dark.”
Small businesses represent 90% of all businesses in Africa and are the backbone of the continent’s economy. Micro, Small, and Medium-sized Enterprises are vital for job creation and Africa’s prosperity. However, their potential remains untapped, with insufficient electricity supply playing a pivotal role. ‘Mission 300‘s goal to connect 300 million Africans provides hope for small businesses, and these firms should feel optimistic about this initiative, as it can benefit them significantly.
About Author:
Elfreda K. Sheriff is the Managing Director of KilSah Consulting, a development firm that provides research, policy advisory, training, and mentoring services to empower Micro, Small & Medium-sized Enterprises.
