A month out from the important Energy Indaba 2026 in Cape Town and a week before the equally important Mining Indaba, the World Economic Forum (WEF) has been warning of the way in which a lack of power is holding back African development.
WEF warned: “Despite holding 60% of the world’s best solar resources, Africa attracts less than 3% of global clean-energy investment and more than 600 million people still lack reliable electricity. Most African countries run isolated national grids that are small, costly and unevenly supplied.”
“Regional energy interconnectivity is the key to unlocking efficiency, affordability and renewable growth.”
For insurers, this conversation is not just about opportunities to sell insurance in the power space but also in terms of development across the continent; the enabling of more communities to provide work and light their homes and ultimately leading to the greater take-up of insurance as the developing middle class looks to protect its assets.
Call for co-ordinated action
However, WEF report authors, Rakesh Bohra, project fellow, and Justine Roche, manager for emerging markets, say success in developing more power depends on co-ordinated action and investor confidence.
Pointing to the scale of the problem they say “National grids on the continent are often small, underfunded and poorly maintained. Brazil’s domestic transmission network is longer in total kilometres of line than the combined transmission grids of 38 African countries. While generation capacity across the continent is growing rapidly, the transmission and distribution networks needed to deliver that power are lagging.
“What’s more, most African countries operate isolated national power grids, each designed to serve domestic needs. Connections with neighbouring countries are rare, creating a fragmented energy landscape.”
WEF found that this fragmentation leads to several challenges:
- Uneven distribution of power: Some countries, such as Ethiopia and the Democratic Republic of Congo, generate more electricity than they can consume. Others, such as South Sudan and Liberia, suffer frequent blackouts.
- High electricity costs: Small national grids lack economies of scale, making electricity generation and distribution more expensive.
- Limited viability of large renewable projects: Without the ability to export surplus power, countries hesitate to invest in large-scale solar farms or hydropower dams.
The lack of power interconnectivity across Africa also means countries are missing out on the developmental and economic benefits that energy trade could bring.
Regional interconnectivity, a game-changer
The report goes on to say regional energy interconnectivity – linking national grids to create a continent-wide electricity network – offers transformative benefits for Africa.
By interconnecting national grids, African countries could trade electricity among themselves, just as they trade goods and services, allowing them to share electricity during peak demand or outages, enhancing energy security and reducing dependence on costly emergency solutions.
Access to broader markets also encourages investment in renewable energy projects, as surplus power from solar, wind or hydro sources can be traded across borders. This integration supports economic growth and industrialisation, providing reliable and affordable electricity to drive manufacturing, job creation and digital innovation.
Recent decades have seen substantial progress on this front, with the establishment of five power pools. The Southern African Power Pool, the West African Power Pool, the Eastern Africa Power Pool, the Central Africa Power Pool and the North African Power Pool have each improved cross-border electricity access and trade.
The African Union (AU) has articulated a vision for a continent-wide interconnected power system (the Africa Single Electricity Market) that will serve 1.3 billion people across 55 countries, making it the biggest electricity market in the world.
With demand expected to triple by 2040, translating this vision into reality will be essential to sustainably meet Africa’s energy needs. Africa stands at a pivotal moment. Investing in Africa means tapping into 60% of global renewable energy potential and a US$2.5 trillion infrastructure opportunity, driving sustainable global growth.
Examples of collaboration among banks, development finance institutions and multilateral institutions to reduce counterparty risks and improve lending conditions have been successful.
Role of insurance
Meanwhile, the United Nations Development Programme (UNDP) has produced its own report highlighting the importance of insurance in these conversations. The report, ‘Insurance for energy access: Unlocking economic resilience in rural communities’, concludes that access to modern, reliable and affordable energy is essential for development, particularly in rural and off-grid communities across sub-Saharan Africa.
The report found that distributed renewable energy (DRE) companies are helping to fill this gap, but they and the communities they serve face a range of financial and operational risks, which are exacerbated by the intensifying impacts of climate change.
However, it stressed: “To build resilience and sustainability, donors and climate finance institutions need to step up support to expand access to insurance and financial risk management tools.”
“Insurance can help stabilise incomes, reduce exposure to risks and build financial resilience for energy providers and end users. However, its use in the DRE sector is still fragmented and mostly confined to pilot programmes.”
The report proposes five core design principles for designing viable insurance products in the space: affordability, value, accessibility, scalability and alignment with national development goals.
Affordability and value are critical to driving adoption, while accessibility and scalability determine whether solutions can reach the required scale to be financially viable. Alignment with broader development goals, such as financial inclusion, energy access and climate resilience, ensures that insurance programmes generate lasting impact.
Index insurance for end users offers protection against climate and environmental shocks that disrupt agricultural production and income, with payouts triggered based on measurable weather data (such as rainfall levels).
In Zambia, a pilot bundled this insurance with PAYGo solar systems, helping farmers maintain access to energy during climate-related agricultural losses. Government-administered index insurance enables the pooling of systemic risks.
Subsidised insurance programmes, such as Uganda’s agricultural insurance scheme, reduce barriers to insurance uptake and protect against systemic shocks like droughts and floods. Although not currently integrated with energy access solutions, Uganda’s scheme illustrates how government support can expand insurance uptake and reduce vulnerability to systemic shocks.
Life and health insurance for households protects people from income shocks due to illness or death, which often lead to loan defaults. Bundling this with PAYGo energy products (as shown in schemes in Kenya and Nigeria) allows for small, regular premium payments and provides households with greater financial resilience, indirectly stabilising the customer base for DRE providers.
End user credit risk insurance for DRE companies protects energy providers from revenue losses due to customer defaults, especially in regions affected by climate risks. For example, energy company Vitalite in Zambia bundled agricultural index insurance into PAYGo contracts, reducing the likelihood of widespread customer default.
Finally, asset protection for solar home systems (SHSs), or other related equipment, covers theft or damage, reducing financial risks and operational disruptions. Many stakeholders have a part to play in supporting insurance integration into the DRE ecosystem. Governments can play a key role by subsidising premiums, creating supportive policies and investing in data systems and consumer education.
The report concluded: “Development partners can bridge affordability gaps through results-based financing and premium subsidies. Reinsurers can offer critical capacity and knowledge-sharing, while insurers can develop tailored, easy-to-understand products and build trust through timely payouts and clear communication.”
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