Lessons Learned
Note 17 / June 2018
Improving Electricity Access for
Low-Income Households in Zambia
Project Components
Development Challenge
OBA subsidies were paid to ZESCO once connections to
Zambia is a lower middle-income country that has made low-income households and micro and small enterprises
significant socioeconomic progress over the past to the electricity network were verified. Technical
decade, with economic growth averaging 5.7 percent assistance was extended to help ZESCO identify
and 2011 per capita income reaching US$1,160. Despite eligibility of MSEs and provide analysis of energy
robust annual growth, poverty is widespread and is efficiency.
persistently higher among women. Economic growth
Project Partners
has had a small impact on overall poverty reduction
because much of the benefits of growth have accrued An important way to achieve effective results is to
to those who already live above the poverty line. In define clear roles for the project stakeholders under the
2014, during project preparation, 47 percent of people contractual agreement. The project defined the
were living in urban and peri-urban areas and only 3 following roles for each project stakeholder:
percent in rural areas had access to electricity.
A grant agreement was signed between ZESCO, the
implementing partner, and GPOBA to provide
The Project and Its Partners
connections to about 22,000 low-income households
In 2015, the Global Partnership on Output-Based Aid and 5,000 MSEs in the targeted areas using an output-
(GPOBA) approved a US$4.95 million grant to increase based subsidy for the connection fee. To verify the
access to grid-based electricity services for 22,000 low- connections reported by ZESCO, an independent
verification agent (IVA) was hired. The Ministry of
income households and 5,000 micro and small
Mines Energy and Water Development (MMEWD)
enterprises (MSEs) in urban and peri-urban areas provided project oversight for the government of
through use of targeted subsidies, with the aim of Zambia.
reaching low-income communities who would
otherwise have gone unserved. The project was expected to benefit approximately
140,000 people. Subsidies were disbursed based on the
Based on the results-based financing (RBF) component result of connecting low-income households and MSEs
of the Increased Access to Electricity Services (IAES) to the national grid infrastructure through standard
project launched in 2008, the project was implemented household connections and offering the targeted
consumers energy-efficient compact fluorescent lights
by Zambia Electricity Supply Corporation Limited (CFLs). The subsidy was expected to be 86 percent of
(formerly known as ZESCO) - the national utility - and the cost ($175) for standard connections and 82 percent
was co-financed by the World Bank’s International of the cost ($210) for enhanced connections, with
Development Association (IDA) and the European beneficiaries contributing the balance of $28 and
Commission. The IAES project had a connection fee $46.60, respectively. Beneficiaries were identified
subsidy (CFS) program, which ultimately connected through geographic targeting of low-income
80,000 low-income households to the national grid at a communities.
subsidized rate. Funding was disbursed against specific
project milestones achieved, linking funding to actual
results achieved.
All currency amounts are in US$ unless otherwise noted.
Results
• The GPOBA project exceeded its target, extending independent verification of connections. Thus, ZESCO
energy access to 32,843 households (about 150 had strong incentives to connect low-income
percent of original GPOBA target) and 5,117 micro and households to the network. It also had the
small enterprises, benefiting approximately 200,000 implementation capacity to do so. ZESCO prefinanced
residents in low-income townships. Together, the the extension program and was reimbursed after the
IAES and GPOBA Connection Fee Subsidy programs outputs were independently verified.
3
managed to connect over 113,200 low income
households and more than 5,100 MSEs in low income ZESCO proactively used the short-term gains of
areas to the grid. Therefore, over a five-year period the depreciation of the local currency to
(2012-2016) the CFS program succeeded in providing finance additional network connections. The
access to electricity services to more than 600,000 subsidy reimbursement was set to be paid in US dollars,
beneficiaries. and the Zambian kwacha depreciated 90 percent
against the US dollar over the life of the project.
• The project successfully mobilized consumer Although ZESCO's costs in kwacha increased because of
contributions of 18 percent of the total project cost inflation and imported inputs, ZESCO used the gains
(about $900,000) generated by the currency depreciation to connect an
• In addition to increasing electricity access throughout additional 10,000 households to the network.
4
the country by approximately 1.3 percent (an increase
to 5 percent in relation to existing electricity access), Valuable consumption data about consumers
nearly one in every six newly electrified household was captured by tasking the Independent
started a business. Verification Agent (IVA) to monitor the
electricity consumption of connected households. The
• The success of IAES CFS in providing access to low- IVA found the median consumption to be 145 kWh per
income households has encouraged other month for connected households and 40 kWh per
cooperating partners to join the program, increasing month for micro and small enterprises. The data can
overall access in Zambia. In addition to the support help inform the design of new projects, help ZESCO
provided by the Swedish International Development plan an electrification strategy that can yield a positive
Cooperation Agency (SIDA) through the GPOBA grant economic return, and help assess the financial viability
facility to scale up the connection fee subsidy of connecting low-income townships to the national
program, the European Union also agreed to provide grid.
last- mile connectivity in the Lusaka region.
Lessons Learned 5 To support the uptake and roll out of ready
boards, ZESCO needs to be more sensitive to
1
the needs of users, find ways to meet their
The success of IAES CFS and GPOBA connection needs for multiple sockets and power points within
fee subsidy initiatives clearly demonstrated that their homes and businesses, and undertake an
high connection fees are a major barrier to access awareness campaign. No enhanced connections with
to electricity services in Zambia, and that connection ready boards were made under the project. However,
subsidies could encourage wider access to electricity and site visits suggest that ready boards could be useful
help low-income communities benefit from grid electrifi- because they would save the consumer the expense of
cation. using electricians to perform very basic wiring within
2
the premises. Some premises had one bulb and one
Shifting the financial and operational risk to a
socket, which a ready board could cover. However,
client with strong implementation capacity
having the ready board with light sockets and power
and providing incentives to connect low-
points at a single location connected to the meter may
income households yielded positive results. The
not be ideal for consumers. Such connections need to
output-based project reimbursed ZESCO after
be extended to other points in the premises.
Part of the World Bank Group, the Global Partnership on Output-based Aid (GPOBA) provides innovative financing solutions that link
funding to actual results achieved. Our results-based financing (RBF) approaches provide access to basic services like water and sanitation,
energy, health and education for low-income communities that might otherwise go unserved. By bringing together public and private sector
funders to maximize resources, and designing effective incentives for service providers, we give people the chance for a better life. Visit
www.gpoba.org to learn more.