Electricity access has been identified as a significant problem across sub-Saharan Africa. A World Bank report notes that Africa has a 43 percent access rate to electricity, compared to a global access rate of 87 percent. The high cost and limited availability of power have increased the operating cost of small businesses, making operations expensive, and lowering these firms’ competitive ability.

Forty-one percent of firms in Africa identified electricity as a major constraint to business operations.  Electricity insecurity, caused by power outages and voltage fluctuation, contributes to small business energy constraints. The inadequate generation and distribution of electricity in most African countries is a setback for small firms in Africa, reducing their productivity level and making them less competitive.

Poor access to energy has led many small business owners to opt for non-renewable methods like diesel generators to remain productive. It is estimated that there are 6.5 million generators in sub-Saharan Africa. The use of diesel generators not only increases the operational cost of small enterprises, but it also poses a threat to the environment. An IFC (International Finance Corporation) report notes that generators are expensive to operate, contribute to global environmental emission and have a huge impact on local air quality. 

Renewable energy sources like the off grid solar system can help reduce the energy constraint faced by small firms in Africa and help the planet. “Solar technology and renewable energy are at the heart of the climate agenda,” says David Vilar, World Bank Senior Energy Specialist. Apart from the environmental benefits, renewable energy also benefits small businesses by providing affordable power supply. Reducing Africa’s energy deficit by promoting the use of renewable energy is imperative. 

Renewable power can help small businesses by providing a stable and affordable power supply and making small enterprises eco-friendly. 

Stable Energy Supply

Seventy-eight percent of firms in Africa experienced power outages in 2018. Unstable power supplies can affect business activities in many ways. It can impact a firm’s productivity by causing many inputs to be idle when there is a power outage. Areas in Africa that boast of electricity access still face shortages and blackouts.  Power outages result in loss of business income by impeding operational activities. 

Clean energy (30) is the most reliable source of energy. Wind and solar energy are either distributed or modular systems which can make it less prone to large-scale failure, making them more stable. 

Stable energy is needed to carry on production activities like manufacturing, refrigeration, and using machine tools. Stable power can significantly improve small businesses’ productivity and give them the competitive edge they need in Africa’s challenging business environment. 

Renewable energy can serve as a source of stable power supply for small businesses in Africa. The adequate sunlight when harnessed can increase power supply which would increase the efficiency of small businesses operations, making them more productive. 

Low Energy Cost 

The energy challenge in Africa also includes affordability. The high cost of generating electricity in Africa is mostly due to national power systems and geographical constraints. According to statista.com, the average retail electricity prices in Africa vary widely across the continent from U.S. dollars per megawatt-hour in Liberia to 24.4 U.S. dollars per megawatt-hour in Ethiopia.

 The pricey cost of energy slows down small companies that are operating on a limited budget. Energy for Growth notes that firms in Africa experience enormous costs due to unreliable electricity. These costs are experienced in lost opportunity, and the direct and indirect costs the enterprise encounters. 

Many African countries are trying to expand electricity output; however, even those countries with access to the national grid experience power blackouts due to a shortage of supply. In turn, more businesses are turning to back-up generators as reliability remains uncertain. However, these generators’ use in daily life tends to be much more expensive than for those who have a more reliable grid connection. According to All On, “fourteen billion is spent powering small generators each year in Nigeria alone.”

The cost of owning a solar system has dropped significantly in the past several years. There has been a decrease in the solar system’s price annually, indicating that renewable energy is getting cheaper and more affordable every year. Small businesses should consider acquiring a solar system because the reduced energy cost could cut down on their operational costs and increase productivity.

Eco-friendly enterprise

When a small business adopts renewable energy, it shows the public that the enterprise is doing its part to save the universe. Seven out of the 10 countries most vulnerable to climate change are in Africa although the continent has the lowest emission. Low emission does not excuse the continued use of non-sustainable means for electricity consumption, especially when those means are expensive, unstable, and damaging to our planet. The time to switch to renewable energy is now. 

For most businesses in Africa, diesel generators are on standby, just in case of a power blackout, which is a common occurrence on the continent. According to the World Bank, one out of every five  (2) liters of diesel and petrol is burned in a back-up generator. The environmental impact of diesel generators is the constant emission of CO2. So, while Africa’s emission might below, it is still emitting CO2. Switching to renewable energy will help curb CO2 emissions. 

Solar power, with its reliability and affordability, has no environmental fallouts. Experts have proven that using renewable energy like the off-grid solar system comes with zero health and environmental challenges.

A survey by the National Marketing Institute of 53,000 people found that 58 percent of respondents consider a company’s environmental impact before buying. Adopting renewable energy is sustainable and impactful for small businesses. Customers want businesses to care about society and the environment. By switching to renewable power, a business saves money, improve their image, and increase their productivity. 

Additionally, some small business owners usually complain of the loud noise and smoke the generators produces which makes their area of business unconducive for sitting. Small businesses can be guaranteed a noise-free business environment where customers and owners can interact in a less hazardous and quiet area. 

On-grid hydropower provides around a fifth of capacity. As governments work to improve the generation and distribution capacity of national grids across Africa, small business owners can get ahead by switching to an off-grid solar system for power supply. Though access to this renewable energy sources like the solar system comes with its challenges, governments and development institutions could increase small enterprise access to renewable energy by providing subsidy, and knowledge on clean energy to make the switch easier.

One example of an initiative to get homes and businesses connected to solar energy supply is Power Africa, an initiative to connect homes and businesses to cleaner energy. Power Africa’s off-grid program provides an option that includes deploying rooftop solar panel kits to small commercial customers in Nigeria, for example, on a lease-to-own business model. Replicate programs like these across the continent and ensure more small businesses take advantage.

African governments should also support the local manufacturing of essential renewable energy components, which could help to reduce the cost of equipment and increase the number of small enterprises using off-grid power. Access to affordable energy can help small companies by reducing the cost of doing business. 

The United Nations note that financial assistance to developing countries for renewable energy is increasing. These funds can be used to encourage and support small businesses to make the transition to renewable power supply.  

When more small enterprises begin using clean energy, it becomes a win-win situation for both the businesses and the environment. First, the small businesses because it would cut down operational electricity cost, and then the environment because it would help lower CO2 emissions, bringing Africa closer to achieving Sustainable Development Goals (SDG) number Seven – Ensuring Access to Affordable, Reliable, Sustainable and Modern Energy for All. When it comes to our planet, every little bit counts.