In Sub-Saharan Africa, the OGS market is characterized by a diverse landscape, where both large companies and small domestic firms coexist. While large OGS companies have a broad reach, their products are often distributed through local partners. This means that in many countries with active OGS markets, large company products are present, either directly or through local distributors. Among the 34 countries where products from large OGS companies are available, these companies have a direct, vertically integrated presence in only 15. This indicates that a significant portion of products are channeled through local distributors.
The reach of these vertically integrated large companies is generally confined to more densely populated urban areas, especially in countries with relatively nascent markets. Consequently, small domestic companies often fill the gap by providing last-mile distribution in rural and remote areas. In some countries, only one or two large companies operate, and their sales volumes are relatively low—often below 10,000 units annually.
The availability of OGS is particularly notable in markets with large unelectrified populations and in FCV contexts. For instance, OGS products have established a solid presence in countries like Ethiopia, Nigeria, and the Democratic Republic of Congo (DRC), where each market hosts at least eight last-mile distributors. In 2023, large affiliate companies sold over 100,000 OGS products in both Ethiopia and Nigeria. While data limitations prevent us from confirming whether these distributors operate in conflict zones, their presence suggests that OGS products are relatively accessible.
Despite the dominant market share of large global companies, the role of smaller domestic OGS companies is crucial for achieving universal Tier 1 electricity access.
These smaller firms are instrumental in providing firsttime electricity access, particularly in remote areas where large global companies may not operate. Their ability to maintain low operational costs and leverage their local presence allows them to keep product prices affordable. Additionally, their streamlined business models often enable them to use their funding more effectively, achieving a higher sales volume per dollar of capital raised compared to their larger counterparts. These dynamics underscore the importance of both large and small players in driving progress towards universal electrification.
Three core trends have emerged in the OGS market over the past two years: growing market consolidation, a wide diversification of business models, and a generalized lack of skilled labor.
First, mergers and acquisitions have increased in the market. These strategic mergers and acquisitions indicate a trend toward consolidation within the OGS sector, where companies are leveraging acquisitions to enhance their market positions and extend their reach into new regions. It also reflects the severe challenges smaller companies face when seeking to access finance, sometimes leaving them with no choice but to allow themselves to be acquired by companies with larger or more robust balance sheets. Through consolidation, larger companies can strengthen their competitive edge, streamline operations, cut operating costs, and ultimately increase profitability.
OGS company costs can be divided into four categories— manufacturing, operational, bad debt, and financing costs—each of which is affected differently by the scale of operations (Figure 20). While manufacturing costs do not decrease significantly with scale, financing and operational costs are more closely linked to the size of the operations. The scale of large, global OGS companies allows them to negotiate better terms with financial institutions and secure larger funding amounts at lower interest rates, which significantly reduces their overall cost of capital. On the operational side, costs are influenced by population density and proximity of customers to distribution centers. Companies operating in densely populated areas benefit from lower operational costs since they are able to serve a larger customer base with fewer distribution points. Customer density reduces the per-unit cost of logistics, maintenance, and customer service. Bad debt costs do not vary with scale but are impacted by the quality of assessment and repayment approaches. Customers are also adversely affected by high financing costs, as a 2–3% increase in the cost of capital can translate into a 5% rise in prices for end-users.
Data confirm that a small number of large, vertically integrated companies, offering a range of products and operating in more mature markets, have continued to attract relatively large amounts of investment and maintained profitability. These large, integrated players benefit from economies of scale and robust operational efficiencies, which make them more appealing to investors. They dominate the financing landscape and are able to leverage their extensive market reach to secure and sustain significant funding .
Second, OGS companies that have diversified their businesses—or focused on an innovative business model— have seen improved commercial performance. By offering higher-value products, targeting higher-income customer segments, and potentially catering to commercial and industrial (C&I) customers, companies have positioned themselves to better withstand market fluctuations and achieve long-term profitability. Several companies have also been exploring alternatives to PAYG to reach more consumers. Examples include energy-as-a-service (EaaS), in which users pay a monthly fee to use a solar product but do not own that product, and rental models where in customers rent batteries or charged solar products for short periods of time from solar kiosks or hubs.
Some companies are choosing to specialize in particular segments of the value chain, while others are expanding into new areas. For example, companies like M-KOPA have shifted to focus exclusively on white-label manufacturing. This trend is driven by rising in-house and local manufacturing costs, exacerbated by global inflation.
To streamline operations and reduce costs, many OGS companies are transitioning to white-label manufacturing partnerships, often with suppliers from China, while keeping assembly and maintenance operations local.
Some OGS companies are adapting by selling unbundled SHS or developing ultra-low-cost products to reach customers who cannot afford current prices. For instance, d.light has explored this approach to enhance affordability and expand its market reach. These shifts signify the growing maturity of the OGS industry and highlight the increasing variety of strategies available for achieving profitability and growth in a dynamic market environment.
Third, the renewable energy sector in Sub-Saharan Africa, including OGS, is facing a significant shortage of skilled labor required for the sale, installation, operation, and maintenance of these systems. Recent surveys indicate that 78% of respondents in the OGS sector view the “limited skills” challenge as a notable impediment to their expansion efforts. The problem is particularly severe in remote areas, which often have the largest populations living without electricity access. The lack of local expertise in these regions complicates system installation and maintenance.
Addressing this skill gap is essential for enhancing service delivery and advancing efforts toward universal electrification in the region.
Women are significantly underrepresented in the OGS value chain, particularly in technical and leadership roles. This underrepresentation is largely due to a lack of access to the education and skills needed to participate meaningfully in the sector. Barriers such as limited access to education, technical training, and skill development opportunities prevent women from entering and advancing within the OGS sector. This exclusion not only limits their potential but also deprives the sector of diverse perspectives that could drive innovation and growth.
Excerpt of: Off-Grid Solar Market Trends Report 2024, The World Bank/GOGLA