Electricity Powers Growth for Liberia’s Small Businesses


A tailor using an electric sewing machine at Daniel Kumeh’s shop in downtown Monrovia. © LEC

Daniel Kumeh’s small tailor shop in downtown Monrovia had what every shop owner longs for: customers. But the unreliable supply of power posed a serious threat to his business.

“We were using manual machines for production but could not meet the demand from customers,” says 40-year-old Kumeh. “Later, we acquired five electric machines to boost production, but the challenge we had was lack of stable electricity.”

Outside Monrovia, the power situation was even worse. Businesses and individuals with access to the national grid paid 43 cents per kilowatt hour—one of the highest rates in Sub-Saharan Africa. But for the vast majority of Liberians, electricity was simply unavailable. Some businesses relied on expensive diesel generators, at a cost of up to $4 per kWh.

Things started to change a few years ago, when a public-private partnership (PPP) structured by IFC and the Government of Liberia resulted in over 33,000 new electricity connections, helping the government jump-start efforts to rebuild the country’s electricity infrastructure.

 

Bringing Back Electricity

Liberia’s energy problems peaked in 2003, when the country’s long civil conflict left its energy sector— including its power distribution system and the 60-megawatt Mt. Coffee hydropower plant—completely destroyed. The national power utility, Liberia Electricity Corporation (LEC), ceased operations after its headquarters and distribution infrastructure were looted. To launch efforts to rebuild, the Government of Liberia began working with a group of donors in 2006.  They established the Emergency Power Program, and within a year, the public network had 2 MW of diesel-powered generators in operation.  However, this supported only 500 electricity connections.

Eyeing a long-term solution, the government hired IFC in 2007 to structure a five-year, incentive-based management contract between the Government of Liberia and a private-sector partner, with support from an international group of donors led by Norway that included the United States’ Agency for International Development (USAID) and the World Bank’s Global Partnership on Output-Based Aid (GPOBA). Designed as a trilateral framework agreement, the management contract aimed at improving LEC’s operational and financial performance, rebuilding the electricity system in Monrovia, and significantly expanding Liberians’ access to power.

Canada’s Manitoba Hydro International (MHI) was awarded the five-year management contract in July 2010. DevCo, a multi-donor facility affiliated with the Private Infrastructure Development Group, provided critical financial support to structure the management contract with other donors financing the investments needed to rebuild the system, as well as LEC’s operational costs. Incentives were also put in place to encourage MHI to balance the rapid expansion of services with strengthening LEC’s financial viability.

The improved performance of LEC had an effect on the entire sector, with the Government of Norway, German Development Bank KFW, and the European Investment Bank extending grants and concessional finance to rebuild the Mt. Coffee hydro plant. The Government of Liberia, the World Bank, and the Japan International Cooperation Agency also helped fund additional generation capacity.

 

Powering Change

Through this PPP and the efforts of MHI, about 165,000 people are now connected to a steady supply of affordable electricity that is powering their homes and businesses for the first time in 20 years.

Kumeh, who owns the tailor shop, now spends about $250 per month on electricity—down from the $1,200 he used to spend monthly on gasoline for generators, and the impact on the productivity of his tailor shop has been dramatic.

With new lights and more machines running on electricity, Kumeh’s customer base has expanded beyond the capital, increasing profits for him and income for the tailors he employs.  He has also hired 18 additional tailors.  Now, the only thing that interferes with the whirr of his sewing machines is the steady stream of customers through the door.

To learn more about IFC’s work in Public-Private Partnerships, visit www.ifc.org/ppp.

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Published in January 2017

 

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