Setting up a Solar Power Plant in Africa: Key Considerations

Setting up a Solar Power Plant in Africa: Key Considerations

Africa is endowed with a large capacity for solar energy. Seven of the ten countries with the highest supply of sunshine in the world are located on the African continent. The continent is also home to about 770 million people who lack access to power. Does Africa present an investment opportunity for power businesses? Yes, it does. The quantum of sunshine the continent receives makes it fecund for solar power investment and not just on a small scale. Africa needs huge solar farms the likes of Bhadlar Solar Park, India (2.25GW), Pavagada Solar Plant, India (2 GW) and BenBan Solar Park, Egypt (1.65GW). The continent also needs small scale solar plants and distributed rooftop solar panels. In this article, we discuss key factors to be considered by a potential investor or project developer intent on going into solar power business in Africa.

1. Business Considerations

Business Plan. Like every other business, entering into a solar power business requires a business plan. A business plan is a document that outlines the ‘what,’ ‘why,’ ‘how’ and ‘when’ concerning the business. The business plan explains what the business is, describes the reason for setting up the business, what differentiates the business from the competition, and how the business will be operated.

Financial Plan. Essential to the business plan is a financial plan. The financial plan helps determine if the business is sustainable and profitable. Where it is profitable, it gives the initial investor confidence. Where it is adverse, investors will be reluctant to invest in the business idea. There are three major parts – cash flow statement or projection, income statement and balance sheet. In essence, the financial plan or statement keeps the business founder on track to financial health as the business matures.

2. Regulatory Considerations

Business Registration. Governments require that business entities must be licenced before commencement of operations. Different countries in Africa have different timelines for business registration. In Ghana, it takes between 7 and 21 days to have a business registered. In Rwanda, it takes 1 – 2 days from the date of submission of business registration documents to have a business registered.

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