By Victor Kgomoeswana – ESD Handbook
“It is your thinking that needs an upgrade, not your technology.” This wise reminder from a friend in the 1990s still holds true — especially when applied to how governments approach power generation and independent power producers (IPPs) in Africa.
Despite growing awareness of the benefits of liberalising energy markets, many governments in Africa remain stuck in outdated paradigms — clinging to underperforming state utilities and stifling private investment in the process. The logic of ownership — whether public or private — should never override the urgent need for accessible, reliable, and affordable energy.
Why IPPs Matter Now More Than Ever
The energy crisis across sub-Saharan Africa is stark. As of 2020, nearly 50% of the population lacked access to electricity. Without accelerated investment and reform, this figure could rise to over a billion people by 2030, according to UNCTAD. The consequences are dire — from weakened healthcare systems and stunted education to economic stagnation and missed sustainability targets.
While state-owned power utilities can be well-run (Ethiopian Airlines being a case in point), most African governments face significant financial constraints. With high debt levels and post-Covid recovery still underway, few have the fiscal space to expand energy infrastructure alone. This makes IPPs not just a good idea — but a necessity.
Policy Shifts Opening the Door
South Africa took a major step forward in January 2023 when it raised the generation licence threshold from 1 MW to 100 MW. This policy move, combined with supportive tax incentives, has unlocked new space for IPPs to flourish. It also sends a strong signal to small businesses: there’s room for you in the energy sector.
But more is needed.
Small businesses want policy certainty, clear processes, and fair pricing. They don’t expect government handouts — just a level playing field. Right now, hurdles such as unclear procurement rules, unresolved pricing disputes, and corruption still deter many from entering the market.
Unlocking Participation: What Needs to Change
To create a truly inclusive IPP environment, especially for SMEs, African governments must:
1. Ensure Regulatory Certainty – Build transparent, enforceable frameworks so IPPs can sell surplus energy to the national grid without hidden barriers or delays.
2. Set Fair Pricing Models – Encourage public-private power purchase agreements that are viable for small producers and fair to the utility.
3. Stamp Out Corruption – Deal decisively with officials who solicit bribes or delay permits for personal gain.
4. Innovate Energy Financing – Partner with banks, DFIs, and donor agencies to create blended finance tools, savings collectives, and accessible green energy funds.
5. Scale Local Manufacturing – Reduce costs by negotiating with global manufacturers to build solar panel and battery production capacity in Africa.
The Rooftop Revolution
South Africa enjoys over 2,500 hours of sunshine annually — yet much of this resource goes to waste. Every rooftop could be a small-scale power station. Powering light appliances, routers, and even streetlamps through rooftop solar would significantly ease pressure on the national grid.
Small businesses, cooperatives, and informal traders all have a role to play in this distributed energy future. With declining solar technology costs and innovative ownership models, access is no longer a pipe dream — it’s a policy shift away.
From Risk to Opportunity
Small businesses don’t need guarantees. They need a fair chance. And governments need to stop seeing IPPs as a threat and start viewing them as an engine for growth. With thoughtful reforms and the right incentives, IPPs can energise not just homes and factories — but entire economies.
Africa doesn’t lack energy potential — it lacks enabling environments. Let’s fix the thinking first. The rest will follow.
Victor Kgomoeswana is the Author of Africa is Open for Business & Africa Bounces Back; Executive Director – Marketing & Communication at the University of Limpopo. This article first appeared in ESD Handbook
