The Economic Burden of Unreliable Electricity Supply in Africa: Evidence from Businesses in Benin

Businesses in African countries face challenges not only with accessing electricity, but also with the high costs and unreliability of the power supply. To cope with frequent power outages and voltage fluctuations, many businesses often invest extra funds in power generators, alternative energy sources, and voltage stabilizers. These additional costs can represent a financial burden for businesses but are often overlooked when considering total electricity expenses. We explore the economic and electricity burden implications of unreliable power supply for businesses in Benin using national survey data on the power sector. We found that these extra costs make up a large part of businesses’ electricity expenses, with the main contributor being the expenses associated with running power generators. This places a heavy burden on many businesses, especially those operating in the informal sector and non-service businesses. Our findings imply that ignoring the additional electricity costs associated with defensive strategies results in underestimating the true financial burden of electricity expenditure for grid-connected businesses, which may lead to ineffective strategies for addressing electricity affordability in developing countries. Based on our results and since power outages and voltage fluctuations persist in most African countries, it is crucial to identify both the drivers and businesses experiencing electricity burden to implement targeted and evidence-informed alleviation measures.