Unlocking Firms’ Productivity in Central Africa Through the Energy Transition

By Dr. Salim Ahmed Vessah

Executive Summary

Central Africa faces a significant energy paradox. Despite its potential in hydroelectricity, solar power, and biomass, the region remains one of the least electrified in the world. In several countries within the Economic Community of Central African States (ECCAS), less than 50% of the population has access to electricity, with rural areas below 25%. This energy deficit constrains business productivity. Frequent power cuts undermine production capacity, increase operating costs, and limit the adoption of modern technologies. Therefore, this policy brief argues that the energy transition should be viewed as a strategy for productive transformation and industrial competitiveness. Drawing on success stories from Africa, including Rwanda, Morocco, and Kenya, the study demonstrates that reliable and affordable access to energy can enhance business productivity and industrialization while creating formal jobs. Finally, this brief offers recommendations regarding infrastructure, financing, regional coordination, and the integration of energy and industrial policy.

Key Messages

• Energy shortages significantly reduce firms’ productivity and competitiveness in Central Africa.
• Reliable electricity is essential for industrialization, digitalization, and technological adoption.
• The energy transition can drive job creation, industrial growth, and economic diversification.
• Stronger coordination between energy and industrial policies is needed to unlock productivity gains.
• Regional cooperation and investment are critical for sustainable energy and economic transformation.

Introduction: Energy as a Structural Constraint on Corporate Productivity

Low corporate productivity is a major obstacle to economic development in Central Africa. Despite abundant natural resources, the region has an underdeveloped industrial base, limited economic diversification, and heavy reliance on raw material exports. This situation highlights the presence of deep-rooted structural constraints, with deficiencies in energy systems playing a significant role. In several countries, access to electricity remains well below the global average, often under 50%. Rural areas are typically the most affected, with coverage sometimes falling below 25%. For example, in the Democratic Republic of the Congo, a country rich in hydroelectric potential, the national access rate is estimated to be between 20% and 25%.

This energy shortage significantly undermines business performance. Frequent power cuts lead to substantial production losses, decrease the utilization of installed capacity, and hinder the adoption of modern technologies. World Bank Enterprise Surveys indicate that businesses in sub-Saharan Africa lose, on average, between 6% and 10% of their annual turnover due to power cuts. To compensate for these shortages, many businesses rely on diesel generators, which increase energy costs by two to three times compared to grid tariffs. This dependence severely reduces the competitiveness of industrial and agri-food SMEs, limiting their capacity to invest, modernize, and integrate into regional and global value chains. As a result, manufacturing value added remains below 15% of GDP in most Central African economies.

However, while the energy deficit poses a significant constraint on the productive capabilities of companies in the region, it also presents a strategic opportunity. The Congo Basin, in particular, has immense hydroelectric potential that remains largely untapped, along with significant solar resources. In this context, the energy transition should be viewed not only as a response to climate change but also as a strategy for economic transformation that can enhance business productivity, support industrialization, and strengthen regional competitiveness. This policy brief aims to demonstrate that reliable, affordable, and sustainable energy can be a major driver of productivity, competitiveness, and industrial transformation in Central Africa. Additionally, it provides concrete and actionable recommendations for governments and regional stakeholders to maximize the economic benefits of the energy transition.

Evidence on Energy Disruptions and Firm Performance

Numerous studies suggest that the quality of energy supply is positively correlated with business productivity, making it a key determinant. Energy acts not only as an essential factor of production but also as a prerequisite for innovation, digitalization, and industrial upgrading. Firstly, access to a reliable electricity supply enhances the utilization of production capacity. A business facing constant power cuts cannot operate at full capacity; outages lead to machine downtime, raw material losses, and delivery delays, all of which increase final production costs. Conversely, a stable energy supply promotes extended production hours and improves operational efficiency.

Secondly, energy availability encourages the adoption of modern technologies. Automated industrial equipment, digital platforms, and cold-chain systems all depend on a stable energy supply. Without a reliable and readily available energy source, businesses must rely on low-productivity technologies, significantly hindering their production capacity. In Rwanda, for example, substantial investments in electrification and solar mini-grids have improved the business environment and stimulated the development of SMEs. Between 2010 and 2022, the rate of access to electricity increased from around 10% to over 70%, fueling the growth of digital services and the agri-food processing sector.

Kenya serves as a notable example of successful energy transition. Through investments in geothermal and renewable energy, the country has decreased its reliance on fossil fuels while enhancing energy security. Currently, over 80% of Kenya’s electricity is generated from renewable sources. This shift has also bolstered the growth of the technology and manufacturing sectors. Similarly, Morocco has leveraged its energy transition to drive industrial development. Investments in solar complexes like Noor Ouarzazate have not only diversified the energy mix but also fostered the creation of local value chains in energy infrastructure. These examples demonstrate that a well-planned energy transition can lead to significant productivity gains, lower production costs, and increased industrial competitiveness.

Energy Transition as a Productivity Strategy

The energy transition is often discussed in the context of climate change. However, in Central Africa, it should primarily be regarded as an economic and industrial strategy. By decreasing reliance on diesel generators, renewable energy can significantly lower production costs for businesses. Hybrid solar-diesel systems are already helping several African SMEs reduce their energy expenditures by 20% to 40%. This reduction directly enhances companies’ profit margins and their ability to invest. Additionally, investment in energy infrastructure stimulates economic activity. Hydropower, solar, and electricity transmission projects create both direct and indirect jobs in construction, maintenance, and technical services.

The energy transition can drive structural transformation in economies. By securing energy supplies for industrial zones, governments can attract more investment into the manufacturing and processing sectors. The agri-food, textile, mining, and pharmaceutical industries also depend on a reliable energy supply to enhance their competitiveness. Moreover, the emergence of green technologies is creating new industrial opportunities. Markets for batteries, solar equipment, digital infrastructure, and smart systems are rapidly growing. Central Africa can capitalize on this momentum by developing local production and maintenance capabilities. However, the success of this transition requires a coherent strategy that combines energy policy, industrial policy, and training policy.

Policy Alignment: Energy and Industrial Transformation

One of the main challenges in Central Africa is the lack of coordination between energy and industrial policies. Energy investments are often made without considering the productive needs of businesses. However, international experience demonstrates that energy becomes truly transformative when it is directly linked to industrial strategies. For instance, China, Vietnam, and Morocco have leveraged energy investments to support targeted industrial zones and enhance manufacturing capacity.

In Central Africa, this approach could be implemented by establishing priority industrial zones with a secure energy supply. Agro-industrial corridors, mining areas, and local processing hubs should be prioritized for connection to new energy infrastructure. The energy transition must also facilitate the digitalization of businesses. Digital technologies, electronic payments, digital commerce, and industrial automation require a stable power supply; without it, African businesses risk being marginalized in global value chains. Additionally, developing green skills presents a key challenge. The demand for solar technicians, energy engineers, smart grid specialists, and maintenance experts will rise sharply in the coming years. Therefore, education systems must be adapted to meet the needs of the labor market.

Financing and Regional Coordination

The ECCAS energy transition requires significant investment. International estimates indicate that Sub-Saharan Africa’s energy financing needs reach tens of billions of dollars annually. National public resources are insufficient to meet these demands, making it essential to mobilize innovative financing. Public-private partnerships (PPPs), green bonds, and blended finance mechanisms can play crucial roles in this effort. Development banks, including the African Development Bank, the World Bank, and the Development Bank of Central African States, can help mitigate investment risks through guarantees and concessional mechanisms. Regional coordination is a key factor in addressing the region’s significant hydroelectric potential, which is currently impeded by fragmented electricity markets. Developing regional interconnections would optimize generation capacity and reduce costs. Strengthening the Central African Energy Pool could facilitate cross-border electricity trade and enhance regional energy stability. Furthermore, increased energy integration would bolster economic integration within ECCAS.

Implementation Roadmap

Short Term (1-2 Years)

• Install dedicated power lines for industrial and agri-food zones.
• Deploy hybrid solar mini-grids for SMEs and off-grid areas.
• Reduce technical and commercial losses in electricity networks.

Medium Term (3-5 Years)

• Reform regulatory frameworks to attract private investment in renewable energy.
• Simplify administrative procedures and introduce incentive-based tariff mechanisms.
• Develop training programs for careers in the energy transition and industrial maintenance.

Long Term (5-10 Years)

• Build an integrated regional electricity market in Central Africa.
• Strengthen energy interconnections and coordinate regional investment.
• Develop green industrial value chains based on reliable and competitive energy.

Conclusion: From Energy Reform to Productivity-Led Growth

In Central Africa, the energy transition signifies much more than an environmental goal; it offers a historic opportunity for productive transformation and industrialization. Reliable, affordable, and sustainable energy can greatly enhance business productivity, stimulate innovation, and bolster regional competitiveness. However, these benefits will only be realized if the energy transition is woven into a broader vision of economic transformation. Without coordination among energy, industry, finance, and governance, productivity deficits are likely to persist. Conversely, a coherent strategy can empower Central Africa to convert its vast energy potential into a sustainable driver of inclusive growth and regional prosperity.