2015. Green Energy for the Poor in Africa

By Ngozi Okonjo-Iweala, The New York Times, September 9, 2015

An innovative business model combining solar power and cellphones is electrifying parts of rural Africa that are far from the grid.

It’s called M-KOPA. The “M” stands for “mobile,” and “kopa” means “to borrow.” The company’s customers make an initial deposit, roughly $30, toward a solar panel, a few ceiling lights, and charging outlets for cellphones — a system that would cost about $200. Then they pay the balance owed in installments through a widely used mobile banking service, based on how much energy they use. The solar units are cheaper and cleaner than kerosene, the typical lighting source, and once they’re fully paid for after about a year the electricity is completely free. More than 200,000 homes in Kenya, Tanzania and Uganda use M-KOPA’s solar systems.

Creative, bottom-up solutions like M-KOPA are emerging across Africa and the developing world. Scaling them, and quickly, is the challenge. Around 1.3 billion people worldwide still lack access to electricity, including two out of three sub-Saharan Africans. An enormous divide exists between the global rich and the global poor, from energy access and technology to wealth and infrastructure. But the divide is not immutable, and momentum for solutions to bridge it are emerging from all over the world.

Later this month, the United Nations will aim to take another important step to close that gap by agreeing on Sustainable Development Goals, including goals on ending extreme poverty and ensuring adequate access to energy. It is important that the word “sustainable” has been given a prominent place in the agenda, because while many global trends are going in the right direction, one is certainly not: the climate. Without acting on climate change, we risk undermining the development gains that we have achieved so far and widening the gap between the rich and the poor. The economic growth we have seen to date will be unsustainable in the face of increasing climate disasters.

Climate change hits the poorest people the hardest. The poor are more likely than the rich to live in places vulnerable to climate-related weather events and more frequently suffer from diseases that can be exacerbated by climate change. The World Health Organization predicted last year that in 2030 climate change will lead to 48,000 additional deaths due to diarrhea, 60,000 from malaria, and 95,000 from childhood undernutrition. The vast majority of these will take place in sub-Saharan Africa and South Asia.

It is clear that we cannot tackle poverty successfully without also tackling climate change. That’s why enterprises like M-KOPA are so important: They help to bridge the divide between the global rich and global poor in a low-carbon way. Small-scale solar is only a start. Africa attracted $8 billion of investment in renewables last year, and the International Renewable Energy Agency estimates that its potential for wind and solar power amounts to more than 1.5 trillion gigawatt hours per year. There’s plenty of room for both bottom-up innovation and top-down support for green energy.

In addition to energy access, better land use can make a real difference as well. For example, farmers in Niger are using new agroforestry techniques to produce more grain than ever before. By interplanting trees on cropland and allowing extra shrubs to grow, the farmers restore degraded land, lower greenhouse gas emissions and increase agricultural productivity. And they are directly reaping economic benefits, with gross annual incomes going up for over a million households by an average of $1,000, more than doubling real incomes.

Today this is in Niger; tomorrow, if this were global, restoring just 12 percent of degraded lands to production could raise farmers’ incomes by $40 billion per year and feed another 200 million people.

Investing in sustainable infrastructure in areas like energy, land use and cities is a no-brainer. But the biggest obstacle is coming up with the initial financing for these investments, even though we know that they will pay for themselves in the long run.

Much of the financing needs can be met through more effective mobilization of private investment. For example, a renewable energy procurement program in South Africa has mobilized $14 billion in domestic and international private financing for sustainable infrastructure. When the market fails in providing private finance, development banks can step in by providing technical assistance and guarantees. Better mobilization of countries’ own domestic resources is also critically important.

Low-carbon investment is gathering momentum around the world, and the founders of M-KOPA aren’t the only ones being creative. Investors are increasingly turning to new, more efficient forms of finance. “Green bonds” that support low-carbon and climate resilient infrastructure more than tripled in 2014 to reach $37 billion.

The global divide between the rich and the poor is far from closed. But with smarter anti-poverty and energy-access measures and a focus on sustainable finance, the future for Africa and the rest of the developing world can be bright, in more ways than one.

Ngozi Okonjo-Iweala is a former finance minister of Nigeria and was a managing director at the World Bank from 2007 to 2011.