By Mansoor Hamayun, CEO and Co-Founder of Bboxx
As COVID-19 continues to make its way through Africa, this global pandemic poses a huge threat to the off-grid energy sector and the millions of customers it serves. UN Sustainable Development Goal (SDG) 7 – energy for all – unlocks the potential of people, businesses, communities and whole countries at scale. Access to energy is the trigger for economic growth as it powers sustainable development by providing opportunities not previously possible.
Yet governments are faced with an almost impossible task: the competing duality of putting health of citizens first while also ensuring economies do not collapse, which itself would lead to irretrievable damage to health, education and livelihood opportunities for all.
While 840 million people still live without electricity and a further 1 billion live without a reliable electrical supply, significant progress has been made in recent years on expanding energy access globally. But without urgent action, off-grid energy could essentially be wiped out – a major step back for universal energy access and economic development.
Research by GOGLA, the global association for the off-grid solar energy sector, recently found that 50% of off-grid companies could be in serious financial trouble if the COVID-19 crisis lasts for more than three to four months. This would plunge millions of people back into energy poverty, once again cut off from the opportunities provided by clean, reliable and affordable electricity.
At this pivotal juncture for the sector, a global coordinated approach is needed to tackle this head on, ensuring continuity of energy provision and that we are there for the communities we power. The sector must build self-reliance, and quickly, to ensure that essential energy does not fall through the cracks. We cannot do it all so we need to focus on what we can influence alongside key partners, so that this important sector acts as part of the solution. This will ensure that energy access continues so that economic opportunities are sustained, and damage is mitigated where possible.
We all need to recognise the role we can play, and we stand ready to work with and collaborate further across the off-grid energy industry, governments, Development Finance Institutions (DFIs), investors, and the donor community to overcome these mounting challenges.
So how can off-grid energy companies form part of the solution?
- Harnessing technology and distribution infrastructure: The off-grid pay-as-you-go sector benefits from remote management of services via technology, so is well placed to operate in these unprecedented times. Through established distribution networks and infrastructure, supply chains, call centres and workforces, off-grid companies have the potential to reach large parts of previously unreachable rural populations in Africa. Looking ahead, there is potential to partner with local governments and health organisations to ensure critical infrastructure remains electrified. Off-grid energy companies also have the capabilities to harness data analytics to provide critical insights in understanding the potential economic impacts of COVID-19 on a rural population where there has previously been a complete lack of data.
- Necessity of speed of response and bringing partners together: The virus has changed the world in just a few weeks. As such, investors, DFIs and donors will need to establish solutions to match this speed. Those with the funds operating in the impact space need to step in and provide blanket payment holidays to off-grid companies’ debt while also delaying any exit conversations. This will provide a buffer to companies providing such vital services. Alongside this, access to capital must remain strong and fast. We need to partner across the globe to accelerate subsidies to customers even quicker. We need this not only survive this crisis but to help combat and fight the inevitable increase in poverty as a result of this pandemic.
- Bringing relief funds to the sector and its customers: We are encouraged to see that the sector’s leading investors and donors have banded together and shown deep understanding during this time of crisis. They have recognised that a looming liquidity shortfall that – if not remedied quickly – would leave many off-grid energy companies with no resort but to plunge their customers back into darkness. Such widespread insolvency would set the entire sector back and prevent us from reaching our shared goal of universal energy access. Now going a step further, additional discussion is needed on how to fund offering ‘Crisis Energy’ to existing customers. This would involve reimbursing the aggregate spend by off-grid companies in providing a minimum service for customers, even in the event of non-payment, to essentially ‘keep the lights on’ at such a crucial time.
The potential long-term impact of COVID-19 in countries across the African continent will vary due to strengths and weaknesses in healthcare provision, government cash positions, among a range of other factors. We recognise that while we are all in the fog of war against this pandemic, we still need to look to the horizon and to the ensuing peace. The off-grid sector has a role to play in ensuring that energy access does not fall off a cliff, to be there for communities when they need it most, while doing what we can with key partners during these uncertain times.
If we act now and ensure energy provision remains front of mind, we can contribute to triggering a return to economic growth and development in the long term, with widespread benefits for many citizens who had only recently been lifted out of energy poverty. We can then continue our shared mission of transforming lives and unlocking potential through access to energy.