The Impact of Energy Access on Entrepreneurship Development in Cameroon

Introduction

Access to energy plays a crucial role in economic development, particularly by fostering entrepreneurship in developing countries like Cameroon. In this Central African country, entrepreneurship is a potential driver of economic growth and job creation, but it faces structural challenges, especially limited access to reliable and affordable energy (Brice, 2023). While electricity access rates reach 87.4% in urban areas, they are only 28.4% in rural areas (Invest in Cameroon, 2024). Many businesses struggle with frequent power outages and high costs, which directly impact productivity, innovation, and competitiveness in both local and international markets. This policy brief explores the impact of energy access on entrepreneurship in Cameroon.

1. Adequate Energy Access Boosts Industrialization

Cameroon’s industry heavily depends on electricity for manufacturing processes, storage, and transportation of goods. Reliable and accessible energy is essential, particularly for small and medium-sized enterprises (SMEs), which make up 99% of businesses in the country. According to the World Bank (2015), Cameroon has a hydro-electric power potential of nearly 20,000 MW, but only about 3,000 MW is currently being utilized. Additionally, the country holds significant untapped potential in renewable energy, particularly in solar and wind energy (Africa & Science, 2022). This underutilization represents a missed opportunity for industrial development. By improving access to reliable energy, Cameroon can attract foreign and local investments, reduce business costs, and create jobs.

Energy access is fundamental to industrial development. A study by Ongono Patrice (2010) indicates that for continuous industrial production over a long period, energy must be supplied in sufficient quantities. Otherwise, rationed companies will inevitably reduce their production, slowing economic activity across nearly all sectors. This highlights that the performance of Cameroonian industrial businesses is closely linked to energy access, as it allows for increased production of goods at a higher pace and greater volume.

Frequent power shortages and insufficient electricity supply contribute to the economic difficulties of many SMEs (Nyemb & Novikova, 2019), limiting their production, raising costs, and hindering their competitiveness and growth. Although some industrial companies have adapted by using generators (Fotsing et al., 2019), this does not stimulate industrial activity effectively. Improving access to electricity, especially through renewable energy sources, remains critical to supporting entrepreneurship and economic growth in Cameroon.

2. Energy Fuels Innovation

Energy is essential for technological innovation and economic growth. Research centers, tech start-ups, and large companies all rely on energy to carry out their activities. However, in Cameroon, energy access remains a significant challenge. According to the World Bank, only 65.4% of the population had access to electricity in 2021, with significant disparities between urban areas (40%) and rural areas (24.8%) (Energie Média, 2023). This situation negatively impacts Cameroonian businesses and forces many entrepreneurs, especially those in rural areas, to rely on expensive and unreliable alternatives like gasoline generators (Fotsing et al., 2019). This limits businesses’ ability to develop innovative solutions. For example, using computers, digital management systems, and the internet for business transactions and research becomes problematic without a stable energy supply. Frequent power outages not only disrupt daily activities but also stifle innovation and growth for tech start-ups, a sector crucial to the country’s economic future (Josée St-Pierre et al., 2015). Without reliable energy, entrepreneurs are limited in their ability to fully leverage modern technologies necessary to remain competitive in a globalized market.

Cameroon’s considerable renewable energy potential offers entrepreneurs the opportunity to take full advantage of modern technologies. Substantial improvements in energy infrastructure are therefore essential to stimulate innovation, enhance business competitiveness, and ultimately promote sustainable economic development in Cameroon.

3. Challenges in Energy Access and Business Competitiveness

Access to energy plays a critical role in business competitiveness. Reliable and affordable energy supplies allow businesses to reduce operational costs, maintain uninterrupted operations, and become more competitive in the market. As Mathieu Bordigoni (2013) notes, “a low energy cost is clearly a favorable factor for competitiveness.” This idea aligns with the fact that access to low-cost energy would enable companies to be more competitive. However, in Cameroon, high tariffs often prevent businesses from achieving a return on investment and from competing with their counterparts (Investir au Cameroun, 2024).

At the beginning of 2024, Cameroon faced frequent electricity outages. This rationing and instability in energy access severely hampered the economic activities of energy-dependent businesses. In addition to the insufficient power supply, SMEs face the high cost of energy, which impacts their production costs (INS, 2024). Furthermore, the recent increase in fuel prices by the Cameroonian government has negatively affected the productivity of Cameroonian businesses (INS, 2024). This creates an unstable environment that hinders businesses’ growth and their ability to compete with foreign companies.

Recommendations

Strengthen Capabilities

• Partner with American companies like SimpliPhi Power to conduct feasibility studies and pilot solar mini-grid projects aimed at connecting over 100,000 rural households by seamlessly integrating solar energy, wind energy, generators, or any other source of power generation.
• Leverage Cameroon’s significant biomass energy potential, which spans about 21 million hectares—ranking third in sub-Saharan Africa—and develop the country’s vast hydropower potential of around 115,000 GWh/year, of which only 4% has been utilized so far.

Improve the Reliability of the Power Grid

Invest in modernizing aging electrical infrastructure to reduce frequent outages and explore quick energy solutions and convert natural gas into electricity to boost supply.

Strengthen the Regulatory Environment

• Develop proactive, long-term renewable energy policies and laws to promote private investment.
• Place greater emphasis on training, research, and financing mechanisms in the renewable energy sector.

Improve Financial Accessibility

Implement measures to make renewable energy technologies more affordable for SMEs by setting price caps for manufacturers based on consumption and outages. Additionally, 15% of the revenue from the Electricity Sector Development Fund should be used to enhance grid capacity and support decentralized solutions for special industrial zones and economic centers outside of Douala. The Electricity Fund—estimated at 15 billion in 2024—can be used to make electricity more affordable.

Conclusion

Reliable, stable, and high-quality energy access remains one of Cameroon’s major concerns for economic development. Energy is undoubtedly a crucial factor in optimizing a country’s development. Optimal access to diverse energy sources can significantly boost a country’s industrial potential. Faced with the pressing challenge of meeting its energy needs, Cameroon has decided to invest heavily in the energy sector. While hydropower and fossil fuels are major pillars of this development, innovative green energy projects are also emerging. However, these initiatives alone are not enough to meet the growing energy demand of businesses. This shortfall places companies in a difficult situation, as they lack access to sufficient and adequate energy resources essential to their growth. As a result, these companies may struggle to remain competitive in an environment where their competitors are finding creative solutions to overcome challenges, or in some cases, have the resources to mitigate the inefficiencies of public services like energy.

List of References

1. Nyemb, N. B. & Novikova, O. (2019). The impact of small and medium-sized businesses in Cameroon on the development of the energy system. E3S Web of Conferences 140, 03003, https://doi.org/10.1051/e3sconf/201914003003
2. Mbonteh, r. (2024). access to electricity: local, regional authorities wadding in to reduce energy deficit. cameroon business today. https://cameroonbusinesstoday.cm/articles/3657/fr/access-to-electricity-local-regional-authorities-wadding-in-to-reduce-energy-deficit
3. Fotsing, M. I. F., Njomo, D., Tchinda, R., & Hamandjoda, O. (2019). Impact of Sustainable Electricity for Cameroonian Population through Energy Efficiency and Renewable Energies. Journal of Power and Energy Engineering, 07(09), 11-51. 10.4236/jpee.2019.79002
4. Investir au Cameroun, 2024. Le taux d‘accès à l’électricité en ville est trois fois supérieur à celui des zones rurales. https://www.investiraucameroun.com/energie/3004-20771-au-cameroun-le-taux-d-acces-a-lelectricite-en-ville-est-trois-fois-superieur-a-celui-des-zones-rurales-ins
5. Brice, 2023. Développement du secteur énergétique au Cameroun : défis et opportunités. https://agencecamerounpresse.com/developpement-du-secteur-energetique-au-cameroun-opportunites-et-defis/
6. Energie Media, 2023. Cameroun/Electrification : Le Perace ambitionne d’accroitre le taux d’accès à l’électricité de 5% d’ici 2025. https://energies-media.com/cmr-electrification-rurale-perace-ambitionne-accroitre-taux-acces-electricite-de-5-dici-2025/
7. Josée St-Pierre, Luc Foleu, Georges Abdul-Nour, Serge Nomo, 2015. Les freins au développement des PME camerounaises : qu’en pensent les entrepreneurs ? 6th Africa Business and Entrepreneurship Conference, New York. https://hal.science/hal-01703201/documeent
8. Mathieu Bordigoni, Énergie et industrie. Le rôle de l’énergie dans la compétitivité, Paris : Presses des MINES, collection Économie et gestion, 2014. https://www.unitheque.com/UploadFile/DocumentPDF/E/N/VMII-9782356710765.pdf
9. Ongono Partice (2010). Energy consumption and economic performance in Cameroon. https://mpra.ub.uni-muenchen.de/23525/
10. Investir au Cameroun, 2024. Électricité : jusqu’en 2026, les prix vont augmenter au Cameroun de 5% et 10% par an pour les clients industriels. https://www.investiraucameroun.com/energie/0602-20282-electricite-jusqu-en-2026-les-prix-vont-augmenter-au-cameroun-de-5-et-10-par-an-pour-les-clients-industriels
11. INS, 2024. Evolution de l’inflation au premier semestre et perspectives pour 2024. https://ins-cameroun.cm/statistique/evolution-de-linflation-au-premier-semestre-et-perspectives-pour-2024/
12. Africa & Science, 2022. Analyse de l’environnement politique et institutionnel du secteur des énergies renouvelables au Cameroun. https://www.google.com/url?q=https://africa-and-science.com/wp-content/uploads/2022/06/Article-Analyse-secteur-des-energies-renouvelables-Cameroun-28juin2022-2.pdf&sa=U&ved=2ahUKEwiAu4CimsOIAxWLK1kFHfW0GEMQFnoECAAQAg&usg=AOvVaw0UwhpeO24RwP4LMX01gmvZ
13. Banque mondiale (2015), The Lom pangar hydropower is set to power Cameroon. https://www.banquemondiale.org/fr/news/video/2015/12/04/the-lom-pangar-hydropower-dam-is-set-to-power-cameroon

                                                                                          AUTHORS

      Haiwang Djamo Ferdinang                          Tchoupe Fossi                                           Henri Kouam

             Research Analyst                                   Research Analyst                       Founder & Executive Director

To Cite: Fossi, T., Djamo, H. F., & Kouam, H. (2024). The Impact of Energy Access on Entrepreneurship Development in Cameroon, Cameroon Economic Policy Institute (CEPI), Henri Kouam Foundation

Download the Full Article Here (English)

Download the Full Article Here (French)