Energy supplied by micro hydro enables Ester from Kenya to earn a steady living as a hairdresser. Photo credit: Practical Action
Our 3-part blog series on energy poverty examines the connections between energy, health, education and the economy. In this piece, we focus on the importance of energy access in the economy, business and employment.
With almost 200 million people ages 15 to 24, Africa has the youngest and most rapidly growing population globally. By 2045, its youth population is expected to double and exceed that of China and India. So, Africa has an unprecedented opportunity to strengthen its economy and combat poverty.
But this potential for growth, prosperity and development could be lost if African nations are unable to support the creation of enough jobs and business opportunities to absorb the rising demand for employment. Improving infrastructure, particularly access to electricity, is critical when looking at barriers to business opportunities and job growth in sub-Saharan Africa. In fact, nearly 7 out of 10 businesses cite lack of access to a reliable source of power as a main constraint to doing business, before access to finance and corruption.
Here’s four ways energy can jumpstart economic development – notice they’re all incredibly common-sense!
1. Access to power expands the number and variety of business and job opportunities available. Electricity means that businesses, such as hair salons, laundromats and welders, all of which rely on energy, can function. Energy also leads to the creation of new markets, businesses and job openings, which provide more opportunities for individuals to earn an income and lift themselves, their families and their communities out of poverty.
2. A lack of a consistent access to reliable power costs businesses and the economy as a whole. Even with access to energy, unreliable power makes operating a business even more challenging than usual. African manufacturing enterprises experience power outages 56 days a year on average. As a result, firms lose six percent of sales revenues in the informal sector. Where back-up generators are limited, losses can be as high as 20 percent. These losses have severe consequences for the health and growth of the wider economy, not to mention the dramatic impact in achieving other development objectives outlined by the Millennium Development Goals.
3. Power allows business owners and employees to increase working hours. This not only means that they can open their shop earlier and stay open later, but that business owners can complete other work related to owning and operating a business before and after daylight hours.
4. Electricity provides business owners with access to online information and resources. Power provides business owners with information that is critical to operating their business successfully, whether that information is about local or national markets, new economic policies or tax regulations. This allows small business owners in rural areas to engage with the wider business community and learn best practices from other individuals working in the same industry.
It is clear that by investing in energy infrastructure, governments can help both small and large firms simultaneously, while also helping to alleviate poverty.