Nuggets for Business Owners In Africa’s Solar Industry

The next hotbed of innovation is Africa, specifically the nations of South Africa, Rwanda, Nigeria and Kenya. Many industries are being disrupted at the moment, from the African mobile money market – the undisputed leader, Kenyan start up, M-Pesa – to job hunting, by South Africa’s Giraffe, a mobile recruitment app for low-income workers without internet, and so on.

Yet the largest revolution that’s sweeping across the continent’s emerging markets is in renewable energy, specifically solar power. Today, solar is growing so quickly that of the nearly 600 million Africans living off-grid, experts estimate that approximately 10 percent are using clean, renewable energy to power their homes. There are many lessons business owners can learn from the ingenious, resourceful entrepreneurs operating in the continent despite the challenging conditions. Three key lessons are:

Provision of decentralized solutions

Without a doubt, solar energy faces considerable obstacles, not only in Africa, but internationally as well. The biggest barrier may well be integration into existing infrastructure, particularly power grids, which may not be able to accommodate the variability of solar, for example – rainy days produce less power. African solar start-ups understand that building large solar farms, then connecting homes with extensive power grids is a lengthy undertaking that can take years, if not decades without the support of the government. Instead, entrepreneurs have gone the path of decentralization, skipping big infrastructure to bring power directly to the people.

M-Kopa is arguably the leader in African solar energy. The company’s bundle, which costs $35, provides a solar panel, multi-device charger, several charging cables, lights, radio and a SIM card for mobile payment. M-Kopa has already sold 300,000 kits across Kenya, Uganda and Tanzania, leapfrogging extant power grids entirely and empowering their customers. Now that’s not to say that big solar farms don’t exist; rather, they’re far less prevalent, and much less important, than the small-scale, personalized touch of a start-up like M-Kopa. Rather than relying on large, centralized networks, devise a decentralized, low-cost solution that could reach hundreds of thousands of households. One of such example is Blockstack, a startup that uses the encryption-based technology Block chain to guarantee anonymity while surfing the web.

Don’t wait for government support
It’s important to note that while government subsidies and intervention can help your business, such support may never come, which is true when it comes to many African nations. Bearing that in mind, two entrepreneurs founded Juabar, a Tanzanian franchise focused on small, solar-powered kiosks that offer cellphone charging. Rather than wait for the government to build the requisite infrastructure, Juabar’s two founders simply stepped in and created a network of solar powered, micro-enterprises. Such franchise owners earn, on average, between $75-150 per month, in a nation where the monthly average is around $45 per month. In the future, Juabar plans to offer Wi-Fi and other information services.

Leverage on new technologies

M-Kopa’s success – $19 million round of funding in 2015, owes a lot to the convergence of two factors. The cost of solar panels have decreased, and in the US, the price of solar panels has dropped by 5 percent for residential households, and 12 percent for large-scale solar farms. Secondly, M-Pesa revolutionized the payment landscape, allowing users to pay off anything from cab rides to M-Kopa’s solar energy bills. In fact, MIT researchers have found that services like M-Pesa improve access to capital by the poor and increase their consumption, a boom to startups like M-Kopa.

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Image Source: Unlocking social capital