Electrification: A Gateway to Employment in Africa

Three questions to Aminata Kone

Director of Research, Environmental Africa

Energy is inextricably related to the employment sector, be it through the provision of energy-related jobs, or simply by ensuring that electricity shortages do not cut production processes short. In Africa, important questions arise around who has access to energy jobs. The continent’s demographic and energy transitions directly play into that equation. With 45% of the population being electricity-deprived and the urban-rural divide directly dictating the employment landscape, understanding the impact and solutions around electrification and jobs is key to Africa’s recovery. Energy and environmental policy expert, Aminata Kone, weighs in on how electrification policies affect the African labour market.

Which part of the employment sector is directly impacted by energy and how? What is the importance of electrification for employment in Africa specifically?

It is no exaggeration to say that all sectors are impacted by energy in one way or another. The most direct link is, of course, with "energy jobs" - that is, jobs that are inherent to any energy industry. Historically, many energy jobs are found in the fossil fuel industry. In countries such as Nigeria, Angola and Algeria, for example, the oil industry accounts for 80-90% of exports and 10-50% of GDP, making it an important driver of employment. That said, a disproportionate share of fossil fuel jobs in Africa are held by foreign nationals working at oil majors (Shell, Total…). In fact, according to some estimates, fossil fuel industries employ less than 1% of the African workforce directly. Indirect energy jobs tied to oil, natural gas and coal - local suppliers, downstream distributors, etc. - are difficult to estimate, but there is a general sense that the fossil fuel industry in Africa is largely dissociated from African communities.

More interesting is the ongoing deployment of renewables, which has the potential to benefit a much larger portion of the African workforce. Renewables tend to be more decentralized in nature and more labor intensive, including for local and relatively low-skilled construction, installation and maintenance workers. So while the energy transition is already leading to a decline in fossil fuel jobs, Sub-Saharan Africa is actually projected to see the highest growth in total energy jobs out of any region - from about 2 million in 2020 to 12 million in 2050, of which a higher share is likely to be held by Africans themselves.

But the links with employment go beyond energy jobs: electricity access and the stability of its supply are crucial for labor markets across the economy.

The links with employment go beyond energy jobs: electricity access and the stability of its supply are crucial for labor markets across the economy.

There is a correlation between electricity access and the productivity, competitiveness and scaling potential of companies, which, by extension, impacts labor demand as well as entrepreneurship more generally. Countries like Nigeria and South Africa are notorious for their power outages, but electricity shortages affect employment in the majority of African countries. The World Bank estimates that frequent power problems reduce the likelihood of an individual being employed by as much as 35-41%. Conversely, increased access to electricity is associated with increased labor market participation.

The link between (reliable) electricity access and productivity is most obvious in manufacturing and industry, but it truly cuts across sectors. In agriculture, a lack of electricity is an obstacle to the adoption of sophisticated machinery and irrigation systems and can lead to avoidable losses. In the fishing industry, the absence of cooling installations can be limiting at best and detrimental at worst. Services are also concerned, from healthcare and sanitation to telecoms, hospitality and even, say, a hairdresser that cannot guarantee the hairdryer will work consistently.

In all cases, the lower productivity, yields and income that result from unreliable or non-existent electric power negatively impact labor demand and entrepreneurship.

What is the current social and development context in Africa in which electrification is taking (or not taking) place?

Electrification is a priority in Africa, where progress toward sustainable development goal 7 - ensuring access to affordable, reliable and sustainable energy for all - is slow. Three out of four people in the world who lack access to electricity live in Sub-Saharan Africa. Between 2014 and 2019, a record 20 million Africans obtained access to electricity each year. Unfortunately, the economic impacts of the Covid-19 crisis have reversed this trend: in 2020 and 2021, the number of people without electricity actually increased in Sub-Saharan Africa, as households lost the ability to afford power. In total, almost 600 million Africans - a stunning 45% of the continent’s population - are deprived of electricity today. If the pandemic persists or if economic recovery is slow, this figure is likely to keep increasing.

These figures hide a certain number of social and developmental disparities. Rural areas are most affected: only 28% of people in remote areas enjoyed electricity access before the pandemic, compared to 78% in urban settings. In addition, some groups are more vulnerable than others to the negative impacts of low electrification rates on employment. This is especially the case for women, youth, low-skilled workers and workers in the informal sector, all of whom already struggle to access the labor market generally.

The issue of electrification cannot be dissociated from demographic trends. Sub-Saharan Africa’s population is growing faster than in any other region and is set to double by 2050. This means that when it comes to energy and employment, we need to focus on youth in particular. Each year, 12 million young Africans enter the job market - but on average, only 3 million find a job. Given the links between electricity and work, slow progress in electrification can only hinder efforts to reduce ever-rising youth unemployment.

Given the links between electricity and work, slow progress in electrification can only hinder efforts to reduce ever-rising youth unemployment.

Finally, we need to consider electrification in light of climate change. In Europe, the main driver of the energy transition is emissions reduction; Africa, on the other hand, is responsible for only about 2% of global energy-related CO₂emissions. Yet Sub-Saharan Africa is known to be particularly vulnerable to climate change, and indeed its effects have been felt across vast swathes of the continent for at least two decades already, with devastating consequences on livelihoods. In this context, Africa’s abundant natural resources provide the potential to hit two birds with one stone. With zero marginal production costs, small-scale renewable power installations are a clean and low-cost alternative to diesel generators as the dominant pathway to energy access in remote areas. In other words, the African energy transition is not only part of shared global efforts to counter climate change; from a development perspective, it also represents a real opportunity to create green jobs and to save or reinforce sustainable livelihoods for at-risk workers across sectors and regions.

What policies/solutions/interventions are needed to bridge the gaps between electrification and employment? Are there any concrete examples of what has/has not worked?

Electrification efforts do not only need to be intensified; they need to be smarter.

Currently, two parallel electrification levers operate largely independently from each other. On the one hand, there is the centralized, top-down electricity grid, which is generally managed by national utilities and supplied by large-scale power plants. Economically, however, it is rarely profitable for a utility company to extend its network to remote areas, and it is expensive for a consumer to connect to it - especially in Africa. In addition, certain large-scale power generation sources are becoming less reliable due to climate change: think of the impacts of erratic rainfall on hydroelectricity or the phase-out of fossil fuels.

In response to these problems, a fast-growing number of off-grid projects are seeing the light of day in Africa’s rural regions. These most commonly take the form of small-scale solar PV and battery installations on rooftops, which may provide a few hours of electricity a day. The downside, from a macro perspective, is that the landscape of off-grid solutions has become extremely fragmented and oversight on deployment and durability is limited.

With regards to employment specifically, it is also worth noting that most off-grid actors focus almost exclusively on residential consumers and that this approach does not always correspond to the highest possible impact. On Kenya’s Wasini Island, for example, which is not connected to the national grid, only about 30 of 2,000 homes have been fitted with rooftop solar since 2019. Jobs in fishing, by far the island’s most important economic activity, are increasingly less profitable due to climate change and a complete lack of cooling facilities. A shared, collectively-funded cooling facility could optimize the local fishing industry and provide higher, more secure incomes for many residents. Other small businesses on the island would benefit indirectly from the increased purchasing power.

As with any intervention, it is crucial to involve local communities, in the expression of needs, in implementation and as a target for skills development.

In short, more targeted and long-term policy planning is needed to find a better balance on several fronts: between the diversity of available energy sources, between residential and commercial segments and between centralized and off-grid connections. Utilities and local actors must come together with the aim of identifying the optimal mix of technologies, financing solutions and deployment strategies, including through public-private partnerships. (Notably, such an integrated approach is about to be tested in Uganda by the organization Power for All.)

Closer policy coordination is needed between national, regional and local governments to ensure adaptation to different geographical, labor and energy contexts. Relatedly, there is a need for better data, which is lacking when it comes to granular insight into the geographical and sector-specific distribution of electricity access in rural areas.

Finally, as with any intervention, it is crucial to involve local communities, in the expression of needs, in implementation and as a target for skills development. Electrification is a straight-forward opportunity to create energy jobs fast. Training needs to be provided to create local employment, especially for youth in the communities that are being electrified.

Copyright: EYLLOU / AFP