Energy poverty and private sector in sub-Saharan Africa : role of governance effectiveness

Abstract

This study examines the effect of energy poverty on private sector development in sub-Saharan Africa. Unlike previous studies that mainly focused on macroeconomic factors such as GDP, financial development, and inflation, it places energy poverty at the center of the analysis. The study is conducted in the specific context of sub-Saharan Africa, where limited access to modern energy remains a major structural constraint. It also introduces governance as a key moderating factor. In particular, it incorporates the rule of law and control of corruption to assess how institutional quality can reduce the negative effects of energy poverty. The analysis uses panel data from 45 sub-Saharan countries covering the period 2000–2022. To ensure robust results, the study applies advanced econometric methods, including Lewbel Two-Stage Least Squares, Kinky Least Squares, Generalized Method of Moments, and quantile regressions. The findings show that energy poverty significantly hinders private sector growth. The quantile results reveal that this effect varies across different levels of development. Strong governance significantly weakens the negative impact of energy poverty, especially in countries with lower private sector performance. Overall, the results provide new and robust empirical evidence on the joint role of energy access and governance. They suggest that sustainable private sector development requires both improved energy infrastructure and stronger institutions. These findings offer clear guidance for policymakers seeking inclusive and durable growth.

HIGHLIGHTS • Energy poverty severely constrains the private sector in Sub-Saharan Africa. • Good governance reduces this negative impact. • High-performing firms are the most affected. • Sustainable growth requires reliable energy and strong institutions.