Africa’s push to extend reliable electricity to last-mile communities continues to confront a fundamental commercial constraint: many of these areas do not generate enough near-term revenue to attract purely private investment. The central argument of the piece is that market forces alone will not close the electrification gap because low population density, modest household incomes and limited industrial demand make cost-recovery tariffs difficult to sustain.
For private developers, the economics of rural and peri-urban electrification are typically weak. Capital expenditure per connection is high, distribution infrastructure is costly to build and maintain, and revenue collection can be unreliable where metering and billing systems are underdeveloped. Long payback periods and regulatory uncertainty add further risk, pushing commercial capital toward higher-return urban and industrial projects.
This is where public policy becomes central. Governments can deploy direct budget support, viability gap funding, concessional finance and targeted subsidies to reduce the cost of capital and lower the effective price for end users. Fiscal instruments such as import duty waivers on generation and distribution equipment, tax incentives for mini-grid operators and transparent subsidy disbursement mechanisms can make projects bankable without abandoning market discipline entirely.
The case is not for state provision to replace private participation, but for a blended approach. Development finance institutions, public utilities and private operators each have roles in procurement, construction, operation and revenue collection. Effective regulation is equally important: tariff frameworks must balance affordability with the need for operators to recover prudent costs, while licensing and grid-connection rules should be clear enough to reduce investment risk.
The fiscal and economic stakes are significant. Reliable electricity supports small businesses, cold storage, agro-processing, health facilities and schools, all of which contribute to economic activity and, over time, to a broader tax base. Those benefits are real but long-dated and uncertain, which is precisely why private markets tend to under-supply last-mile connections. Without public co-investment and predictable policy, the gap between urban supply and rural access will persist.
A practical response therefore requires treating last-mile electrification as an infrastructure challenge with market elements rather than a purely commercial market. Transparent subsidy allocation, credible metering and payment systems, and alignment between energy policy and fiscal planning would help convert public spending into durable connections.
