As talk of Africa’s economic rise gains steam, power grid stability and electricity infrastructure security is in sharp focus. However, concern over local and national administrations’ ability to deliver reliable power places industries in a conundrum – how to capitalise on Africa’s economic potential and growth while power disruptions threaten daily operations.
Globally, businesses have turned to power generators to solve the challenge of unstable electricity supply. However, research shows that power consumers in Africa have explored this avenue to a far lesser extent than their counterparts in North America, Europe, and East, Southeast and South Asia.
In context, consider that the global market for power generators was valued at $28,639.7 million in 2020, but the Middle East and Africa market was valued at $2,966.4 million. This figure represents around 10% of the global market share, of which the six sparsely populated Gulf Cooperation Council (GCC) countries alone accounted for nearly half of the Middle East and Africa segment’s market share; i.e. $1,478.9 million.
The rather obvious argument made by energy and power market watchers for these figures is that Africa’s comparatively lower levels of development translate into lower power consumption, which explains the lower demand for power generators. This argument may be valid to an extent; North America alone accounts for a third of the power generator market’s value. However, this does not explain why the African market lags behind developing countries in Asia or Latin America. A further fact that defeats an argument over lack of power demand is that Africa is the second most populous continent, accounting for nearly 17% of the global population. The only logical explanation then left is that the power generators market has failed to leverage its potential in the continent.
Global and African market comparisons
Globally, the consumption of stationary power generators was $14,729.6 million in 2020, which was marginally higher than the consumption of portable power generators, which stood at $13,910.1 million. This is a trend that has been consistently observed in previous years as well. However, this trend is reversed for Africa. In the Middle East and Africa segment, the consumption of stationary power generators stood at $1,479.6 million in 2020, while portable power generators’ consumption was $1,486.8 million.
In terms of type, the Middle East and Africa segment consumed a slightly higher proportion of conventional diesel generators than the global average. The segment accounted for $2,027.1 million worth of diesel generators and $939.3 million worth of gas-powered generators in 2020. Simultaneously, diesel and gas generators’ global consumption stood at $20,492.3 million and $8,147.4 million, respectively.
While, in terms of capacity consumption patterns, Africa does not deviate much from the global market. Globally, the consumption of 0-100kVA, 100-350kVA, 350-1,000kVA and above 1,000kVA power generators in 2020 was valued at $1,078 million, $5,730.3 million, $9,665.7 million and $12,165.6 million respectively; for Middle East and Africa, the figures stood at $116.1 million, $536.8 million, $996.6 million and $1,316.8 million.
Similarly, the African market was also in sync with the global market in terms of end-use consumers. While industrial consumers of power generators account for approximately 30% of the worldwide market share, they accounted for a similar market share in Africa with an $865.3 million value in 2020. Commercial and residential consumers closely followed industrial consumers in Africa with values of $833.9 million and $734.7 million.
The intra-African market dynamic
After culling the GCC countries’ statistics out of the Middle East and Africa segment, the region accounts for around 5% of the global power generators market share. Of this 5%, the South African market alone was valued at $646.8 million in 2020, 45.5% of the Middle East and Africa’s (except GCC countries) total value of $1,487.5 million. The South African market was followed by Africa’s largest economy, Nigeria, which consumed $461.6 million worth of power generators in 2020; i.e. 31% of the Middle East and Africa (except GCC countries) segment’s value.
This value left less than a quarter of the regional segment’s market share ($379 million) to the other countries in the region. These countries included certain oil-rich countries in the Middle East and North Africa (MENA), several politically stable countries in East and Southern Africa, a few rapidly growing economies in West Africa, as well as at least half a dozen countries dotted across the continent that can boast of sound, industry-friendly fiscal policies.
What do the statistics tell us?
Given that consumption patterns in Africa do not deviate much from global patterns – except for a reversal of portable and stationary power generator trends – it can be surmised that African power consumers, and most notably industrial consumers, desire to be in a position to be able to shift their operational bases with relative ease. Going by the geopolitical scenario in Africa, this approach may be motivated by political instability, lack of continuity in individual countries’ fiscal policy, and safety concerns about industrial infrastructure.
This approach may change as more African countries achieve stability and pursue development-oriented policies. However, these continue to remain long-term prospects from an industry viewpoint. Their operational demands, including demand for portable power generators, are likely to be geared for the realities as perceived currently.
In examining the country-wise breakdown of the market, the fact that the power generator consumption in Africa’s second largest economy trumps the largest – and that too by a fair margin – may seem ironic to those who draw a direct link between relative sizes of economies and demand for power. However, this trend is most likely due to South Africa’s ongoing problems concerning grid stability. However, South Africa’s relatively higher development levels and a larger economy for almost the entire 20th century, has meant that industries have been established for far longer in South Africa than their counterparts in Nigeria or any other African county.
What is perhaps more ironic is that none of Africa’s other large economies come anywhere close to South Africa and Nigeria figures. While it is true that South Africa and Nigeria have much larger economies in relative terms (in the range of $350 billion), Egypt (at nearly $250 billion) and Algeria (at around $180 billion) too are strong economic powers in Africa.
Furthermore, Angola and Morocco have economies larger than $100 billion, while Ethiopia and Kenya hover around the $80 billion mark. Yet, the disparities in power generators purchasing patterns remains stark. Thus, it will be safe to say that much of the conventional wisdom that market watchers stand by does not hold for Africa.
Africa’s uniqueness and prospects are a game-changer
Availability of power has been at the crux of economic development throughout history and holding in the coming decades. Furthermore, some consumers may think of power generators as a stop-gap measure, but their dependency only increases over time. This factor is precisely why developed countries continue to lead consumption in the power generators market. Thus, a rising Africa is predicated on rising power consumption, including through generators. However, the power generators industry has so far failed to capitalise on this demand. The only reason for this is that the industry has been unable to understand Africa’s industrial and residential consumers’ specifics.
It is estimated that the global power generators market is set to grow at a CAGR of around 5% over the coming decade. This growth rate is expected to be led by the Asian segments and can be termed modest. Accurately tapping into the African market can improve the growth rate exponentially. In developing Africa, industries do not need large yet affordable power generators alone, but generators that are reliable and portable. This is just one of several nuances that manufacturers of power generators operating in Africa have to keep in mind. If accurately tapped, the market offers a win-win situation for power generator manufacturers and African end-users alike.
About the author
Shubham Patidar is an experienced Research Consultant at Fact. MR, a leading research and consulting firm headquartered in Dublin, and with offices in UAE and India. The insights presented here are from a report on the Generator Market by Fact.MR.