Electrifying Africa’s Economic Transformation : What Reforms Should Governments Pursue?

This paper examines the challenges that African governments are grappling with as part of a renewed international effort to expand electricity access. It shows how the crux of the challenge is twofold: one, to enable poor people to make productive use of electricity to raise their incomes and grow out of poverty; and two, to build the legitimacy of tariffs and taxes as incomes rise, to finance electricity infrastructure sustainably. Africa needs to transition from a situation where incomes are too low to cover the costs of accessing electricity to one where electricity is universally and reliably available to fuel modern economic activities. This means that Africa needs to borrow from future growth in incomes to cover the costs of investing in electricity today. Concomitantly, investments in electricity today need to raise incomes and the willingness to pay tariffs and taxes in the future as incomes rise. The paper offers ideas for a mix of reforms that may strategically complement one another to accomplish this transition. Evaluating these ideas, through a “learning by doing” approach, would help address the fundamental fiscal and institutional challenges to electrifying Africa.