How Entrepreneurship in the Energy Sector Can Pave Way for Sustainable Development in Africa

Subject: Economics
Pages: 6
Words: 1724
Reading time:
7 min
Study level: PhD


It is pertinent to mention that adequate production of electric energy is a key sustainable development parameter that cannot be ignored at all. As a matter of fact, power production in the developed world such as European states and United States of America has been sufficient for a considerably lengthy period. This explains why these economies have experienced sustainable growth. In addition, there are several Independent Power Producers (IPPs) who contribute significant amount of electric energy in the national grid. Hence, these economies do not just rely on the power produced by their national governments.

On the other hand, power production in Africa has been on a downside trend for long. Most countries in Africa fully rely on national governments for power production. Even in cases where national governments are solely charged with the role of power production, there is still inadequate production of energy in most African economies. This has led to myriads of power outages and poor electrification program. It is against this backdrop that this research paper offers an incisive discussion on how entrepreneurship in the energy sector can pave way for sustainable development in Africa

Independent Power producers (IPPs) in Europe and USA

There are quite a number of investor-owned utilities (IOUs) that actively participate in wholesale electricity markets by being part and parcel of the popular independent power producers. For example, there are five major independent power producers in the state of California. Although these companies operate independently towards the process of supplementing power production, they are in fact subsidiaries of mother power generating companies.

These mother companies form part of the investor-owned utilities. Hence, parent companies that generate electricity have been well established to an extent that there are subsidiaries that are operating as independent power producers. A lot of the independent power producers in Europe and the United States are composed of divested power plants that are critical in adequate production of electric energy.

For example, it is worth to note that the independent power production takes different forms. While there are large and well established companies that sell the generated power to the national grid, there are small scale producers who mainly generate electric energy for individual home consumption or small scale enterprises. In other words, the energy sector has experienced rapid development in terms of entrepreneurs who seek to supplement the production of electricity using various sources. For instance, using wind and solar energies in power production is a common practice that has been put in place in most localities in Europe and the United States.

When sustainable development in industrialization is achieved in both the European countries and the United States, one outstanding and contributing factor that cannot be ignored is the issue of energy production and affordability. Due to the presence of the Independent Power Producers (IPPs) and the national governments in the production of electric energy, there is adequate supply of energy resources (Green 68).

As a result, the cost of power is highly subsided by the national governments thereby enabling investors to engage in production with minimal worry. The reduced cost of production in the manufacturing and processing sectors has been largely necessitated by the presence of cheap sources of energy. In addition, the rapid and extensive growth of industries has led to creation of employment for the large working populations in both the European nations and the United States. It is unfortunate to note that this is not the case in Africa.

Currently, there is a lot of competition in the US electric power industry. This has been mainly occasioned by the initiatives put forward by both the state and federal governments. On the same note, most European states have experienced rapid devolution of power generation courtesy of the national governments. Even though this level of development has not been uniform in the United States and European countries, there are electricity markets that deal with the purchasing of power products across these developed economies. In any case, generation facilities can easily be constructed by the independent power producers stationed in these well developed economies (Yumkella 89).

The case study of Africa and power generation

It is common knowledge that Africa lacks adequate supply of electric energy. This insufficiency in energy production is mainly attributed to two key factors: few number of independent power producers and low power generation by the national governments. This can hardly suffice the needs of the vast and growing human population in Africa. Economists across the world have unanimously agreed that Africa has a giant potential in providing for its energy needs without relying on external aid (Corkish 17).

In terms of opportunities, the structural change investment in Africa should be in a position to experience greater income due to the abundant natural resources that are available. How can Africa take advantage of the available opportunities in the manufacturing and processing sectors? In other words, is it possible for African states to create over ten million employment opportunities across the continent? These are interesting but serious questions that ought to be addressed by the African leadership and the people at large (Bovoer 1).

It is a worrying trend to note that over fifty percent of the African population is still surviving with less than two dollars per day while the continent can generate myriads of employment opportunities for its growing population. If energy production can be doubled from the current standards, it can indeed be critical in the creation of jobs through the development of industries from both the local and foreign investors. As it stands now, it is not easy to attract investors in economies that are either charging exorbitantly for power tariffs do not have adequate supply of power.

The millennium development goals as set out by the United Nations were largely concerned with transforming the weak growing economies in most African countries. It is evident that a lot of progress has been attained even as we approach the finish line for these goals (Eduardo 67). However, the objectives that are yet to be met are quite a lot. For instance, there is urgent call by all the major stakeholders in the African agenda to works towards poverty eradication. The large African population is being faced by hunger and nagging poverty. These are two key indicators which show that sustainable development in Africa is far from being achieved.

Decent and productive jobs have to be created for the youthful, urbanized and rapidly growing number of people (Jun 77). In order to create a wide employment portfolio that can absorb the entire population, it implies that the yearly growth in Gross Domestic Product (GDP) should be above 7 % in most African economies (Jon and Morenoff 392). Unless entrepreneurs take up the mantle in energy sector, the economically weak national governments in Africa will continue to experience growing challenges on how to support their apparently devastated economies.

As the world is preparing itself for the new global initiatives while wrapping up the Millennium Development Goals in 2015, it will be interesting to take stock of what Africa will have achieved since the MGDs were conceived. Nonetheless, even as post 2015 agenda is being created, it will be up to the African continent and its leadership to take up the opportunity of advancing the needs of its population (Faruqui and Sergici 194). If Africa fails to capture the benefits that will arise from both the Millennium Development and post 2015 global objectives, then even the rest of the world will have its own loss in terms of the missed economic opportunities in the African continent.

For example, the continent is a rich source marketing opportunities both for itself and the rest of the world. If the population will remain extremely poor and not empowered, then even the global marketing opportunities and the consumption rates will be overly affected (Rassenti 2999). The next steps of sustainable development and especially in the energy sector should be put into serious thought by all policy makers in Africa. In addition, it is necessary for the new agenda to incorporate creation of employment opportunities and harnessing of private sector wealth. If the private sector can be fully engaged especially in terms of entrepreneurship in the energy sector, then electrification in the most remote villages in Africa will be a possibility (Sweeting 656).

If sustainable development will be attained through entrepreneurship in the energy sector, then a paradigm shift is required. International cooperation and new policies that will be adopted after the expiry of millennium development goals should be realistic and attainable within specific timelines. Africa must embrace structural change. As it stands now, the continent is extremely depending on the use of raw materials as compared to finished and processed products from industries.

The cause of the setback is quite self explanatory (Goetzberger 25). The continent does not have affordable energy needed for production. Even the available amount of electric energy is still being charged exorbitantly at the detriment of investors. On the same note, there is overreliance on mining activities across quite a number of African states. These minerals are not processed into high quality and finished products. They are instead sold cheaply in the international markets. If indeed Africa wants to benefit from sustainable development created by sufficient energy production, then value addition to raw materials such as minerals should be encouraged.

If massive access to energy is made a reality in Africa, entrepreneurs in the energy sector will be in a position to enjoy the structural changes. It is not surprising that there are millions of African people who have no access to contemporary sources of energy. The worst hit is the Sub-Saharan Africa. For example, slightly over 80% of the sub-Saharan population relies on charcoal and raw firewood as the main sources of energy. This is a worrying g trend in a continent where we expect to attract investors in the manufacturing, processing and services sectors (Vaheesan 936).

In summing up, Africa cannot attract industries because of the energy shortage. On the other hand, there are plenty of energy sources (small hydro, biomass, solar and wind projects) that can be developed by SMEs just as in Europe and United States. Unless a paradigm shift is adopted by African governments, the much needed structural change that can uplift the living standards of people will hardly be achieved.

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