For much of my professional life working on energy policy and power sector reform in Africa, one pattern has remained strikingly consistent: Electricity is treated as a social service rather than a foundational economic input. Policy debates, donor programmes and media narratives continue to revolve around access: How many households are connected? How many villages are electrified? How many solar home systems are deployed?
Household-level electrification efforts matter. Electricity access improves health outcomes, supports education and reduces vulnerability, among other positive impacts. But household access alone does not drive economic transformation or job creation: To accomplish those goals, industrial and commercial access is necessary.
Some analysts argue that Africa can advance both of these priorities at once — as Alba Topulli at CLASP and Todd Moss at the Energy for Growth Hub did in their recent NextBillion article cautioning against the “false trade-offs between ensuring initial residential access and powering business activities.” In practice, however, maintaining this dual focus may not be realistic, given the continent’s current grid limitations and constrained public resources.
This dynamic can be seen in electrification policies and programmes across Africa, which continue to use household electricity access as the primary metric for tracking progress toward Sustainable Development Goal (SDG) 7. As a result, less attention is often given to strengthening the transmission and distribution infrastructure needed to support large and reliable industrial loads.
If Africa is serious about industrialisation, export competitiveness and job creation, electricity policy must evolve to prioritise productive use, particularly in industrial and agro-processing hubs where economic value is created. Below, I’ll explore why this shift is necessary, and how the continent’s energy access plans and investment strategies could better enable access to productive and industrial electricity.
Why Access Alone Is Insufficient — Especially for Industrial Use
Africa’s energy access gap remains severe. Nearly 600 million people still lack access to electricity, representing the largest unelectrified population globally. This statistic understandably dominates development discourse. For governments, expanding access is politically visible and socially impactful. For donors, it offers a clear, measurable outcome. However, focusing on statistics around electricity access often obscures the arguably more important factors of the quality and usefulness of electricity once a connection exists.
In many African countries, households and businesses that are technically “connected” experience frequent outages, voltage instability and supply rationing. Electricity may be available for only a few hours a day or disappear entirely during peak demand periods, offering limited economic value. Indeed, around 71% of firms in sub-Saharan Africa report experiencing electricity outages, according to data from the World Bank Enterprise Surveys.
For countries attempting to ensure more reliable access, the distinction between households and businesses matters, because electricity for consumption and electricity for production are fundamentally different. A household light bulb, phone charger or fan requires minimal, intermittent power. An industrial production line requires continuous, high-capacity, stable electricity. Treating both needs as interchangeable leads to power systems that meet neither well.
For industrial and commercial users, unreliable electricity is not just a nuisance — it is a binding constraint on productivity. Across Africa, firms routinely cite power outages as one of the top obstacles to doing business. When power fails, factories halt production, raw materials spoil, machinery is damaged and delivery deadlines are missed. These disruptions raise operating costs and weaken competitiveness, particularly in export-oriented sectors where reliability and timing are critical.
Empirical evidence reinforces this reality. Studies show that electricity outages have a statistically significant negative impact on firm productivity and national output in sub-Saharan Africa. For instance, an analysis of power reliability across the region’s economies estimates that a 1% increase in the duration of power outages is associated with a roughly 2.86% reduction in gross domestic product (GDP), translating into an estimated loss of roughly US $28 billion in economic output across the continent.
Faced with unreliable grids, many firms invest in self-generation using diesel or heavy fuel oil. Data from the World Bank Enterprise Surveys show that even in countries with high access rates, African businesses still rely heavily on self-generation due to poor reliability and overloaded distribution networks. Although this ensures continuity, it comes at a steep cost. Self-generated power often costs almost four times more than grid electricity, and exposes firms to volatile fuel prices. The result is a vicious cycle: High energy costs reduce profitability, discourage reinvestment and limit expansion. Over time, this suppresses industrial growth, job creation and tax revenues, undermining the very development objectives that household electrification programmes seek to achieve.
Industrial Power as the Foundation of Structural Transformation
For countries to achieve large-scale industrialisation, they must first secure reliable power for production. A large body of empirical research shows that electricity provision plays a critical role in industrial development and economic transformation. For example, studies using historical data from India demonstrate that improvements in electricity infrastructure significantly increased industrial output and manufacturing growth, highlighting how reliable power supply is a key enabler of industrial activity.
Africa’s challenge is not a lack of energy resources. The continent is home to around 60% of the world’s best solar potential, alongside abundant hydro, gas and wind resources, yet it continues to generate only a small share of global electricity. Thus, the problem lies less in the availability of energy supplies, and more in how power systems are planned, financed and regulated.
This disconnect is visible across multiple African power systems. In South Africa, for example, decades of underinvestment in transmission and maintenance, combined with a tariff regime that steadily raised prices for industrial users, have resulted in chronic load-shedding — i.e., the deliberate and temporary shutdown of electricity supply to different areas of the grid when demand exceeds available generation capacity. These tactics have disproportionately harmed manufacturing and mining operations: Despite relatively high electrification rates, firms have faced rolling blackouts that have reduced output and discouraged investment. In 2023 alone, exceptionally high load shedding reduced South Africa’s economic growth by an estimated 1.5 percentage points, underscoring how access without reliability undermines productive growth.
A clear illustration of this disconnect can also be seen in Nigeria, where over the past decade, electrification efforts have prioritised expanding customer connections while the transmission grid has remained weak and unable to reliably deliver electricity to users. Nigeria’s transmission infrastructure is widely considered one of the weakest links in its electricity value chain, with aging assets and persistent bottlenecks limiting the amount of power that can be delivered. Despite having over 13,000 MW of installed generation capacity, Nigeria typically delivers less than 5,000 MW due to transmission and distribution constraints, forcing industries to rely on self-generation.
Meanwhile in Kenya, electrification has expanded rapidly, but industrial users continue to cite high tariffs and unreliable supply as key constraints. Residential access has increased significantly over the past decade, yet transmission bottlenecks and broader system costs continue to affect the affordability and reliability of electricity for productive sectors. Although industrial tariffs in Kenya are not always higher than residential tariffs, manufacturers still face electricity prices that are high relative to those in competing economies. Industry groups such as the Kenya Association of Manufacturers note that electricity costs in Kenya are among the highest in the region, weakening the competitiveness of manufacturing and export industries.
Together, these cases demonstrate how electrification strategies that prioritise access without aligning power infrastructure and tariff design to industrial policy leave productive sectors underpowered despite widespread grid connections.
What a Productive-Use Electricity Strategy Requires
However, reorienting electricity systems toward productive growth does not mean abandoning household access goals. Instead, it means adopting a more deliberate, economically grounded approach, through measures that include:
Deliberate Powering of Industrial Hubs
Electrification should follow where economic activity is concentrated. Power infrastructure investments are most effective when coordinated with broader infrastructure systems and industrial development zones. Planning electricity infrastructure alongside transport corridors, ports, water systems, digital infrastructure and industrial clusters helps ensure integrated economic development and supports long-term industrial growth. This approach can improve system efficiency and maximise development impact per dollar invested.
Governments should ensure that industrial parks, special economic zones and agro-processing corridors receive dedicated, high-capacity power. This can come from embedded generation, captive power plants or reinforced grid connections supported by long-term supply agreements. Targeted industrial electrification reduces risk for investors and signals policy commitment to production and exports.
Regulatory Reform Focused on Reliability
For industrial users, predictability matters as much as price. Transparent tariff structures, credible cost-recovery mechanisms and clear grid access rules reduce uncertainty for investors and ensure utilities can recover the costs required to maintain and expand electricity infrastructure. This financial viability is essential for improving the reliability of electricity supply, not just increasing the number of grid connections.
Integration of Grid and Distributed Solutions
Distributed energy resources such as solar paired with battery storage can complement grid supply for industrial and commercial users. When properly integrated, these systems can reduce outages, lower long-term costs and improve resilience without undermining utilities.
Regional Power Integration
Regional power pools allow countries to share generation capacity, smooth supply variability and reduce costs through scale. With proper governance and investment, cross-border electricity trade can significantly improve reliability throughout the continent.
The Implications for Policymakers, Donors and Development Partners
For all actors interested in electrifying the region — policymakers, donors and development partners alike — success should be measured not only by access rates but by industrial output, firm productivity and job creation linked to reliable electricity. This will require coordination across actors and a recalibration of priorities. Household electrification often receives greater political attention, and electrification programmes often emphasise household connections because they are visible and measurable. But productive use of electricity delivers longer-term, self-sustaining development gains, and reliable electricity supply to industrial hubs can have a more transformative impact on economic growth.
Investments in industrial power infrastructure, transmission upgrades and market reforms can also crowd in private investment, strengthen public finances and make access expansion more affordable over time. For that reason, focusing on productive use does not undermine broader efforts toward household access. On the contrary, industrial growth creates the jobs and incomes that make universal access financially sustainable. Africa’s demographic trajectory makes this issue particularly pressing. Millions of young people are entering the labour force each year. Without industrial expansion, job creation will lag population growth, deepening economic vulnerability and migration pressures. Electricity alone will not solve this challenge, but without reliable industrial power, no credible solution exists.
Electricity policy in Africa must evolve. Lighting homes improves welfare, and powering industry builds prosperity — both are necessary for the continent’s ongoing development. But for policymakers, funders and other stakeholders looking to maximise the impact of their energy access efforts and address the continent’s most urgent needs, aligning electrification with industrial strategy should be the first priority. For donors, this means placing greater emphasis on productive and industrial electricity use when designing electrification programmes, rather than focusing primarily on expanding household connections. And for businesses, it means more actively engaging with policymakers and regulators to advocate for investments and regulatory reforms that improve electricity reliability for productive sectors.
If Africa is serious about economic transformation, electricity must be treated not only as a social service, but as what it truly is: the backbone of productive growth.
Taiwo Odugbemi is a power sector regulation specialist and economist with a Ph.D. in economics from the University of Abuja.
Photo: Jacob Wackerhausen
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