DAVID MPARUTSA: Electrification offers big business for SMEs

The development of a stable, reliable and sustainable electricity grid is fundamental to the African growth story, but though large-scale infrastructure projects are critical we must not ignore the opportunities available to small and medium-sized enterprises.

According to the African Development Bank, 640-million Africans have no access to electricity, and if one looks at Sub-Saharan Africa excluding SA, per capita consumption is just 180kWh, compared with 13,000 kWh per capita in the US and 6,500 kWh in Europe.

While the problem is clear, it is difficult for a small business to see an opportunity unless the rest of the ecosystem is aligned. What is your motivation to invest if regulation, access to capital and a lack of political will are going to hold back investment in the sector?

In this regard I believe all SMEs currently operating or aspiring to operate in the energy sector should familiarise themselves with UN Sustainable Development Goal 7 (SDG7): ensuring access to affordable, reliable, sustainable and modern energy.

When the goal was announced the core issue was that 3-billion people rely on wood, coal, charcoal or animal waste for cooking and heating, while indoor air pollution was estimated to account for over 4-million deaths per year. The current energy mix accounts for about 60% of total greenhouse gas emissions, despite the adoption of renewable energy solutions across the globe.

The starting point for tackling this challenge is ensuring there is sufficient generation capacity for the grid, and this has seen a number of large infrastructure projects being commissioned. While generation is important, we must not lose sight of the two other elements in the electrification journey: distribution and transmission.

When looking at the African continent we need to remember that many countries operate a centralised parastatal-controlled power grid responsible for all three of these elements. These models are not fit-for-purpose in the changing energy ecosystem — particularly after the Covid-19 pandemic has put enormous financial pressure on state-owned entities.

Uganda has understood that its electrification challenges are multifaceted — what works in the city will not be as effective in rural communities. This has led to the establishment of the Rural Electrification Agency, whose mandate it is to find innovative ways to connect rural households to safe electricity solutions. A simple example here is that one of five Ugandan households can’t afford to wire their in-house electricity safely. Subsidised training and deployment of electricians to support this means that the cost of electrification for consumers drops while creating a safer electrification network.

If one considers that only 26% of rural Ugandan households are to be connected by 2022, this represents a clear market opportunity. In a similar vein, “smart-metering” solutions are becoming an increasingly popular tool for management of supply and demand as previously unconnected communities are being added to centralised grids. The installation and maintenance of these solutions are an ideal opportunity for small businesses to carve out their niche.

Off-grid solar and rooftop installations are other perfect examples of where SMEs have an opportunity to benefit. The SA rooftop solar market is expected to grow 9.5% per annum up until 2026, while UK-based consulting firm Kleos Advisory believes African off-grid solar could become a $24bn-per-year market.

Innovators such as Azuri Technologies are shaking up the African continent with “pay-as-you-go” solar solutions that allow you to create further off-grid solutions, which are now rolled out in over 12 countries on the continent.

“Micro-grids” and battery storage solutions are also becoming more popular as the technology advances. Founded in 2011, PowerGen is a Namibian-founded business with a growing presence in Africa. It has developed a variety of micro-grid solutions that connect over 120 communities daily with solutions that are “digitised, decentralised and decarbonised”.

Businesses that are able to deliver solutions of this nature will perfectly align with SDG7 and be a catalyst for small businesses, creating a win-win solution for the ecosystem.

• Mparutsa is head of enterprise & supplier development at Absa CIB, sponsor of the Absa-Business Day Supplier Development Awards.