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Reports

Made in Africa: Impact of local manufacturing on profits, people and products. Insights from the off-grid energy sector in sub-Saharan Africa

An abundance of natural resources and a rapidly growing consumer market well positions sub-Saharan Africa’s prospects of becoming a prominent manufacturing destination, and a key player in global supply chains.

This recent report from PREO, ‘Made in Africa: Impact of local manufacturing on profits, people and products. Insights from the off-grid energy sector in sub-Saharan Africa’analyses the opportunity to capture the local ‘share of value’ while accelerating energy access in the off-grid sector. The report states that ‘local manufacturing and assembly can increase profitability by 10% to 40% by avoiding import duties, retaining supplier margins and reducing shipping costs’. 

As the energy access and off-grid sector faces rapid growth, incentives and enabling policies around domestic manufacturing can increase local activity leading to further expansion. Over the course of two years, the PREO programme ran a Value Addition and Employment Creation (VA&EC) challenge that set out to support five companies in assessing the viability of import substitutions. The challenge enabled the five sub–Saharan African companies to explore upstream segments of the off-grid energy value chain in their respective sectors, including local research and development (R&D), testing, manufacturing and assembly of products.

The learnings from the VA&EC challenge demonstrate what benefits can be realised from increasing local manufacturing capacity and the added value across the upstream value chain and increase in job creation to improve livelihoods. A key finding that came out of the challenge is that products manufactured and assembled locally in Africa can be of higher quality than imported products, resulting in rejection rates falling by up to 70%. This report features in-depth case studies on each of the five companies detailing their findings.

Download the report

Project News

Innovating agriculture in Malawi: Lessons from Practical Action Consulting’s project
Innovating-agriculture-in-Malawi

In Malawi, the dependence on rain-fed agriculture restricts productivity to a single growing season. Unpredictable rainfall, caused by shifting climate patterns, leads to inconsistent crop yields and produce quality. Compounded by minimal options for post-harvest storage due to low rural electrification rates, around 30% of produce is lost. This makes it difficult for many to achieve sustainable livelihoods from farming, particularly for women who face additional challenges in accessing land, finances, technologies and markets.

In 2021, Practical Action Consulting partnered with African Mini Grids and Modern Farming Technologies to pilot an innovative farming business model in northern Malawi, supported by funding from PREO. This model aimed to target each step of the agricultural value chain to address these issues. The approach involved supporting women farmers to boost their crop yield by employing greenhouses and solar drip irrigation. Additionally, a solar-powered cooling facility was set up to reduce post-harvest losses. The project also focused on establishing new market connections with various wholesale buyers, enabling women farmers to sell their produce at improved prices while reducing risks and dependency on a single buyer.

As the project came to a close in June 2023, PREO interviewed John Chettleborough, the Agriculture and Markets Lead at Practical Action Consulting, to hear the valuable insights he gained from the project.

Q: What was your intended project goal and what specific objectives did you initially set out to accomplish?

The project area, in northern Malawi, is characterised by a combination of factors that make agricultural livelihoods, the only significant source of income in the area, extremely difficult.

  • Agriculture predominantly depends on rainfall, allowing for only one harvest per year. This limitation poses significant challenges to sustaining productivity.
  • The unpredictability of both rainfall patterns and temperature has been exacerbated by the impacts of climate change. Consequently, productivity challenges have intensified.
  • Additionally, post-harvest losses ranging from 30% to 50% exacerbate these challenges.
  • Beyond its implications for food security, this situation also hinders market access for farmers, due to the inability to consistently supply produce.
  • The situation is worse for women within the community, who face challenges in accessing land, finance, and technology.

This project sought to test an ‘end to end’ business model that would secure market demand and work backwards to support solar powered irrigated horticulture by women farmers, preserve produce in a refrigerated chill plant and satisfy the market demand. It was a partnership between Practical Action Consulting (PAC) and a local Malawian social enterprise, Modern Farming Technologies (MFT), with MFT managing operations and PAC providing market, gender, and learning support.

Over a two-year period, the project set out to achieve two primary objectives: 1) enable 135 women to became commercial horticulture farmers, growing tomatoes in greenhouses irrigated by solar pumps; 2) generate enough learning to ascertain the viability of the model as a business.

Q: Could you describe your business model and highlight its distinguishing features compared to other approaches?

The business model is characterised by several key features –

  • Firstly, it operates as a ‘one-stop shop’ through Modern Farming Technologies (MFT), delivering an end-to-end solution, providing farmers with access to technology (solar pumps, greenhouses), extension services, inputs and access to markets, thus overcoming a range of challenges experienced by small farmers.
  • Secondly, it employs a contract farming and ‘rent to own’ model, helping women farmers gain access to productive assets.  Women farmers sell all Grade 1 produce to MFT, with rent to own payments deducted at source.
  • Thirdly, the model integrates an insulated solar powered refrigerated container, to preserve produce and attract buyers.
  • Additionally, it stands out for its diversified range of final produce buyers, which enhances resilience.
  • Lastly, the model allows the repaid grant finance from the ‘rent to own’ scheme to be reinvested in the inclusion of more women farmers into the project and the expansion of additional greenhouse construction.

What sets it apart from other business models is its context suitability and relevance. In this part of northern Malawi, where markets are not very developed, the presence of a singular enterprise that can provide a one stop shop to address multiple constraints, is strategically vital. In other situations, where there are many more market actors present, it may be possible to adopt a model that uses different businesses to support different functions and address different constraints.

But in both cases, there is a mutual inter-dependence between improving agricultural productivity, accessing markets, and paying for productive assets. All these challenges need to be addressed at the same time.

The ‘rent to own’ scheme, set up by MFT with grant finance, is a unique feature of this business model. Under this scheme, loans to purchase a share of solar water pump, storage tank, drip kit and greenhouses are provided to women farmer groups, who repay the loan over an expected 4-year period with 0% interest cost. This can be a simple and effective way to enable women farmers to overcome financial access problems, especially when grant or working capital is available. It can also help women build up a credit history, demonstrating to financial institutions the viability of investing in women farmers, which would ultimately provide a more sustainable solution for accessing assets such as solar pumps.

Q: Could the model be transformative for women and entrepreneurs in the vegetable sector in Malawi?

The insights garnered from the project offer valuable lessons for the development of similar models, but it is important to note that direct replication in the exact same format as the past two years might not be feasible. For instance, on a positive note, the model does demonstrate that a combination of a one stop shop and contract farming can be used to secure access to productive assets, support productivity and enable market access.

Moreover, the model shows that with production and marketing support, women farmers can generate sufficient revenue to pay for energy and agricultural assets and still take a reasonable income home. Indications are that loans can be repaid in about 4 years, assuming productivity is maintained.  

Although not employed within this project, it appears that commercial financing could viably be employed to fund pumps and greenhouses for women farmers under these conditions.

However, the model didn’t validate the commercial feasibility of investing in a cold storage plant of the scale employed (a 40-foot shipping container). Interestingly, the development of a consistent supply of high-quality produce had the effect of attracting buyers into the area. Traders are now visiting almost daily, which reduces the need for extensive storage capacity. A smaller, cheaper container would have sufficed, perhaps with the option to expand in the future, when necessary.

For the model to work well, the issue of side-selling – a common challenge with contract farming – must be addressed. As the project advanced, this issue began to emerge as a concern, potentially posing a challenge for specific entrepreneurs. The underlying issue in this instance stems from the fact that MFT has been paying a fixed price for tomatoes, in alignment with fixed-price long-term contracts with buyers. However, the price in the open market fluctuates and when it rises above the MFT fixed price, side selling can arise. To tackle this issue two approaches are recommended:

  • Firstly, ensuring that participating farmers possess an entrepreneurial mindset and understand the long-term benefits of technical support and consistent payments, as opposed to a lack of technical support and the uncertainty associated with the fluctuating pricing trends of the open market.
  • Secondly, devising a pricing structure that can accommodate some adjustment in response to the price fluctuations of the open market.

Q: Can you describe some of the challenges faced during the project and how PAC & MFT adapted to them?

Throughout the project, we encountered several challenges, which can be summarised as follows.

  • Environmental challenges: The excessive heat experienced in the area led to significant crop damage. To address this, MFT staff sought technical solutions by studying greenhouse farming practices employed by other organisations. This research prompted a redesign of greenhouses, incorporating additional shade netting.
  • Productivity challenges: The project introduced farming practices that differed from local agriculture, requiring focused efforts to maintain consistent quantity and quality, including crop hygiene within greenhouses. This has taken time to develop and has been more successful with some farmers than with others. As a result, progress has been iterative, and it has taken longer than expected for productivity to increase. The lesson learned from this is that developing a more commercial mindset takes time. It is not achieved by one-off trainings but requires ongoing support for an extended period. The provision of this support has always been part of the MFT plan, but its value was reinforced by this experience. This also highlights the significance of strategic participant selection to ensure those engaged possess the potential for mindset and capacity development.
  • Marketing challenges: Initially, a contract was secured with ShopRite, a leading supermarket chain. However, as the project progressed, ShopRite took the decision to cease operations in Malawi due to macro-economic conditions. At the same time, the anticipation of tourist lodges around Lake Malawi playing a significant role as customers was met with a challenging reality: the recovery of the sector post-COVID has been slow. In contrast, informal buyers seemed to increase in number. Although the loss of the formal buyers was disappointing, the project had adopted a diverse and adaptable marketing strategy and so it was able to pivot and replace formal buyers with informal buyers when this opportunity became apparent.
  • Side-selling: Despite being on an upward trajectory in December 2022, sales to MFT have declined since due to side-selling. This is the period of the year when tomato prices are at their highest and traders visit tomato farms almost daily.  

Q: The journey began by supporting women entrepreneurs through two greenhouses, yet by project completion, over 135 greenhouse owners had emerged, reaching out to MFT to sell their products. What factors can account for this remarkable success?

The achieved numbers align with the project’s original targets. However, the success of the project needs to be seen in more than just the number of greenhouses and the number of women selling produce. The Impact Evaluation revealed some insightful information.

Although the project’s primary focus was commercial tomato production, its ripple effects extended to various dimensions of women’s livelihoods. For instance, 71% of women farmers acknowledged increased food security and 49% went on to adopt modern farming techniques on their other farms.

The project’s impacts were also seen at household level, evidenced by 36% of women reporting increased capacity to manage family healthcare costs, 21% experiencing improved ability to cover school fees, and a 10% rise in women farmers saving from their earnings.

There was also a positive influence on gender roles and confidence outside of the household. Over 50% of the women highlighted social benefits as the most significant impact of the project, including improved decision-making and entrepreneurial skills and heightened confidence in engaging in community activities.

The success of the project can be attributed to a range of factors:

  • Greenhouse farming is appealing to women farmers due to its efficiency, requiring less time compared to traditional methods. For time-poor women, this is an important benefit.
  • The rent to own scheme coupled with the provision of extension services by MFT has effectively eliminated barriers relating to access to finance, technology, and training for women farmers. It has enabled them to start commercial farming at no upfront cost, which helps explain the increase in participant number.  But it should also be recognised that the lack of any selection process for farmers may have contributed to the side-selling challenge.
  • The fact that women are working together, in a cooperative, has helped the development of social capital which explains some of the positive gender related outcomes. Additionally, MFT’s endeavour to sensitise men as part of the initiative, fostering an enabling domestic environment, has also contributed to this progress.
  • The market demand for a consistent supply of high-quality produce and the region’s challenges in meeting this demand, explains why it has been possible to so successfully market the tomatoes produced.

Q: What lessons can other companies and the wider sector take from this project? Which unexpected lesson surprised you the most?

The significance of the informal market: It had been assumed that the main markets needed to sustain the business were formal markets. However, a combination of political issues and the COVID pandemic have demonstrated how vulnerable those markets can be. Informal traders have shown themselves to be a much bigger market than expected and one that is more resilient to these sorts of shocks. Similar initiatives should consider gathering market intelligence on the informal as well as the formal markets available.

Assumptions about refrigeration have been challenged: High rates of crop wastage often lead, as in this project, to assumptions being made about the need for some sort of storage solution. However, the experience of this project so far has illustrated that the development of consistent and high-quality produce can be so attractive to buyers that they procure it regularity, reducing the pressing need for extensive storage space. In this project a smaller refrigeration unit would have sufficed. As with most issues, this is context specific, but it does highlight the need for more detailed market research. It also suggests that an iterative approach – in which refrigeration capacity is gradually built up as need becomes apparent – is a strategy that might be worthy of consideration. This may create a case for more modular chilling unit designs. 

The importance of a self-selection process: The project was designed to accommodate anyone who wished to participate. However, as evidenced, this open approach carries the risk of attracting individuals lacking the necessary entrepreneurial spirit and agricultural commitment. Implementing a ‘self-selection’ process, wherein certain participation barriers are introduced (such as a minor upfront financial commitment), could prove effective in ensuring that those who engage are genuinely entrepreneurial and deeply committed to making it work.

Q: Looking ahead, what are your plans for achieving scale-up?

PAC will leverage these insights to inform the design of other productive use energy initiatives in collaboration with the private sector, including those that utilise small grants to catalyse new business models. We are currently scoping the potential of similar work in East and Southern Africa.

As forMFT, there has been considerable, and very rapid growth in the number of greenhouses supported by the company. This has presented challenges in terms of retaining enough control to ensure that the model works well. The recent side-selling issues during the PREO project are an illustration of that challenge. However, MFT believes in the model, and is working through the issues to make it work better for everyone.  In response to demand from customers for a wider range of high-quality produce, MFT is now developing well managed, irrigated farming in open fields.  The aim is to get the same consistent quality and consistent supply of produce as is being achieved through the greenhouse farming, and for all the produce to flow through the chill stores as aggregation and sales outlets.

News

ClearSky Power’s solar drip irrigation project offers insights for sustainable agriculture and finance integration
ClearSky-Power's-solar-drip-irrigation-project

In the arid region of Somaliland, rain-fed agriculture dominates the farming landscape, as irrigated farms make up a small fraction of cultivated land. However, mounting water scarcity, a consequence of climate change, is making rain-fed farming increasingly unfeasible. Moreover, surging energy costs have placed irrigation, typically powered by diesel-based systems, beyond the means of local farming communities. This situation puts pressure on food security and underlines the urgency for affordable, sustainable crop irrigation solutions, especially as food demand surges.

Established in 2016 in Somaliland, ClearSky Power is dedicated to addressing the escalating energy needs of the region through advanced renewable energy solutions. In February 2021, the company was selected to receive support from PREO in the form of a grant, to demonstrate the financial viability of selling solar photovoltaic drip irrigation systems to local farmers on Shariah-compliant financing terms – a previously unavailable option for renewable energy products. This approach combined productive-use technologies with tailored financing, ongoing servicing, maintenance, and support for additional value-enhancing applications. The project’s goal was to shift from expensive diesel-based power to decentralised solar energy – curbing energy costs, boosting farm productivity, and optimising water usage.

Over two years, the project has achieved significant success, prompting the company to set its sights on scaling up. ClearSky Power aims to expand its impact by deploying solar photovoltaic drip irrigation systems across an additional 20 farms.

In an exclusive interview, Frederic Caron, the Managing Director at ClearSky Power, shared insights into the project’s accomplishments and the valuable lessons learned from its execution.

Q: What were ClearSky Power’s objectives for this PREO project, and have they been realised according to the original plan?

The significance of smallholder farmers in Somaliland’s economy cannot be understated, as their ability to yield successful harvests directly impacts the region’s food security. When these farmers face production challenges, Somaliland’s population is left with no choice but to resort to costly imported produce. In an effort to bolster farming communities, ClearSky Power sought the support of the PREO programme with a multi-faceted vision:

  • demonstrate the technical and financial feasibility of photovoltaic powered drip irrigation systems for Somaliland’s agricultural landscape;
  • establish a financially sustainable and scalable model involving local banks directly financing farm owners to procure irrigation systems and facilitate a two-year payback period;
  • construct a compelling business case supported by a comprehensive proof-of-concept to be shared with Microfinance Institutions (MFIs) and the broader spectrum of investors in clean-energy agriculture.

In practice, ClearSky Power has successfully designed and implemented photovoltaic drip irrigation systems for over 10 Somaliland farms, with projections to extend this number to 20 by the end of December 2023. Furthermore, we have initiated dialogues with MFIs and financial intermediaries to galvanise financial backing tailored to farmers’ needs. Recognising that traditional banks often regard farming as high-risk, thereby offering farmers less favourable financial terms due to a lack of familiarity with both the sector and the technology, ClearSky Power has directly extended financing to farmers with a two-year repayment timeline. The opportunity to engage directly with farmers during both the implementation and financing phases has allowed us to develop a deep understanding of the technical, financial and economic aspects of this pioneering project.

Q: Can you elaborate on the challenges encountered during the project and provide insights into your suggested strategies moving forward?

The implementation of our project encountered several challenges that prompted us to adopt creative solutions:

1. Stringent MFI terms – Securing upfront capital for investing in new technology remains an ongoing challenge for farmers. Among the farmers involved in the project, 90% opted for financing. However, despite our efforts to collaborate with local banks and enhance financial access, we found that MFIs impose strict conditions that are unfavourable to farmers. MFIs lack financial products specifically tailored for the agricultural sector, applying instead conventional financing terms. These include credit assessments based on credit history, a process that clashes with the reality of farmers relying on seasonal harvests for their livelihoods. Additionally, MFIs require collateral beyond their farmland, along with a guarantor to sign a notarized agreement in the event of payment default.  These conditions have proven to be too onerous for farmers.

To move the projects forward, ClearSky Power opted to provide farmers with direct financing options, structured with monthly repayments. ClearSky Power developed its own financing terms and made them as simple as possible for farmers to understand. These involve different ways of evaluating creditworthiness, taking into account farmers’ capability and commitment to achieving a steady yield; and using the installed system equipment as collateral in case of payment default. Going forward, ClearSky Power would support the adoption of more efficient terms and procedures for equipment repossession, along with enhanced credit-worthiness checks.

2. Late loan payments – While nearly half of our clients stand as testament to the successful extension of financing, the other half struggle to adhere to timely monthly payments. It’s not uncommon for these clients to commit to payment dates. However, we often find ourselves in the position of having to chase payments or dealing with instances where payments fall short of overdue balances, and occasionally, no payment is made at all. This dynamic underscores a broader issue: despite our proactive communication through phone calls and face-to-face interactions, clients in financial constraints tend not to fulfil their commitments. This obviously has an adverse effect on ClearSky Power’s cash flow and monthly budgeting for overheads. It also taints the records of diligent farmers who have adhered to payment schedules or exceeded expectations, compromising our ability to showcase their creditworthiness to local micro-financing and lending institutions for potential project funding.

In light of this, we have formulated a 3-step action plan. First, we engage existing loan customers with outstanding balances, highlighting the impact of delayed payments, and reiterating their contractual obligations. The second step involves collaboratively setting a date for balance settlement, accompanied by clear guidelines. Finally, if balances remain unsettled beyond the agreed due date, the third step entails potential disconnection of services. While this strategy has yielded promising outcomes, including partial payments and balance clearances from some clients, a complete resolution to this issue is yet to be found. ClearSky Power also plans to strengthen its systems with remote monitoring and remote shutdown capability as a way of enforcing on-time payment.

3. Difficulty in Data Gathering – We faced some difficulty in gathering Key Performance Indicator (KPIs) data on incremental earnings. Farmers are not used to sharing their income statements and revenues and most of them are unwilling to share any data regarding revenue growth. To address this, we adopted a tailored approach, engaging farmers individually. We also conducted surveys covering farm aspects like land expansion and crop yield, enabling us to collect essential KPIs from initially reluctant farmers.

4. Marketing Challenges – Some challenges have come up during the marketing campaigns. Many Somaliland farmers are reluctant to make upfront payments when goods or equipment haven’t arrived in the country yet. They would rather personally interact with all the equipment needed for the project before they commit to anything. ClearSky Power has found a solution to this by first identifying potential customers then importing essential inventory items. Secondly, our early market research highlighted a demand for case studies that substantiate the credibility and reliability of our systems. While this initially slowed our market penetration, farmers’ concerns eased following successful initial installations and live demonstrations. ClearSky Power intends to leverage these case studies to develop a more compelling marketing campaign.

Q: What are the key achievements of the project? To what extent does solar pumping contribute to enhancing the livelihoods of Somaliland farmers and what are the essential factors for realising this potential?

1. Women entrepreneurship at the nexus of agriculture and clean energy

In Somaliland, 80% of the local crop sellers in markets are women. After farmers harvest the crops, women entrepreneurs take the lead in selling produce such as lemons and watermelons at local markets. Traditionally, farmers give their produce to women on credit to sell, and women pay back the farmers while keeping a proportion of the revenue. However, recent diesel price fluctuations have made it difficult for farmers to wait to be paid, prompting tighter payment schedules for these women entrepreneurs. Solar pumping has helped by boosting farmers’ yields and providing a steady harvest all year, ensuring a reliable food supply. Additionally, with affordable payment plans for solar pumps and reduced pumping costs, farmers have become more flexible and can afford to wait longer for collecting payments from women sellers, strengthening their position in the local food market. This combined effect of improved year-round yields through sustainable pumping solutions has fostered women’s entrepreneurship and brought about positive community impacts.

 2. Enhanced agricultural yields and productivity

The PREO-funded project has revealed that solar pumps are responsible for a 40% increase in agricultural yields and heightened land productivity. Agricultural yields vary widely, depending on rainfall, insect infestations, and other natural phenomena, but solar pumping has helped to mitigate some of these challenges. The shift from diesel to solar energy has allowed farmers to pump more water throughout the day and strengthen their crop fields. In addition, the ability to operate the solar-powered pump for a prolonged period has also enabled them to expand the cultivated area, previously limited by the prohibitive cost of diesel. The farmers involved in the project now enjoy stable and improved agricultural production owing to enhanced yields from existing plots, the year-round diversification of crops, expansion of cultivated areas, and a rise in cropping cycles.

Remarkably, one of the supported farmers has doubled their farming land, while almost half of the other farmers have increased their farmland by at least a third. This expansion also applies to cash crops, as two-thirds of the farmers have integrated these crops into their farming plots. Reliable water access through solar pumping has been crucial for nurturing these extra crop types.

3. Increased revenues for farmers

The significant upfront cost of solar water pumping often led small-scale farmers to choose diesel- generators for their pay-as-you-go cost structure. However, improved financing options now enable farmers to overcome this adoption barrier. This shift has not only increased income from better agricultural production but has also resulted in savings through decreasing dependence on fuel.  Even farmers with limited generator use were previously spending between $100 and $300 USD per month on fuel. Additionally, the enhanced yield and consistent harvest have created extra income sources for farmers. Most of the farmers have witnessed a 40% rise in revenue. On average, each farmer enjoys an additional monthly income of $200 USD, along with a monthly reduction of $300 USD in fuel consumption.

4. Reduction in greenhouse gas emissions

 The farmers involved in the PREO-funded project have transitioned away from, or considerably minimised their reliance on diesel-operated systems for their farming operations. Initially, farmers with diesel generators were consuming around 100 to 400 litres per month, leading to emissions of about 1/3 to 1 ton of CO2 per farmer. This decreased reliance on fossil fuels in agriculture is crucial for the environment and aligns with Somaliland’s move toward cleaner energy sources.

Q: What insights can your project offer to your company, as well as others in your industry, and the broader sector?

1. Women as early adopters

The pivotal role of women as early adopters of solar-powered drip irrigation remains a cornerstone of the project success in the community. Our first pilot centred around a woman-owned farm, and it has formed the backbone of our model’s proof of concept. Women often are seen as trusted advisors in many key aspects of Somali society and those venturing into entrepreneurship are often regarded as pioneers in their respective domains. Initially, during the early stages of the PREO-funded project, we had difficulty with getting interested clients to commit. However, following the solar installation on Amina’s farm we have seen a major surge of requests with many directly expressing their desire a system “just like Amina’s”. This remarkable shift has not only positively transformed community perspectives on the solution but also ignited a surge in new installations, significantly contributing to the overall project’s success.  Therefore, it is crucial for the design and implementation of solar-powered drip irrigation initiatives to recognise women as catalysts for driving agricultural and clean energy solutions.

2. Service and Maintenance and after sales-support

Another key lesson we’ve learned revolves around the importance of delivering post-sales support. Providing comprehensive after-sales support, encompassing staff training and service maintenance, is crucial for the success of projects bridging clean energy and agriculture, particularly during critical farming periods.  As demonstrated by our maintenance trips, having trained on-site staff and continued service and maintenance significantly enhances system performance and reliability. This, consequently, elevates the value proposition for farmers considering solar-powered drip irrigation solutions.

3. Importance of clear and concise contracts

A significant insight gained from this project is the value of maintaining concise and straightforward contractual agreements with farmers. Given their limited familiarity with the technology and financing intricacies, farmers often struggle with, or are deterred by, lengthy contracts. Instead, they favour condensed versions that focus on essential terms. This underscores the need for brief contracts, even when detailing aspects like payment default.

4. Loan repayment schedule is farm-specific

In farming communities, harvest times vary. Some harvest crops all year, while others do so only at specific times of the year. This leads to different income patterns, with some farmers having steady income throughout the year, while others are getting money only occasionally. This impacts payment plans. Farmers with occasional income might struggle with regular payments. So, it’s important to adjust repayment schedules based on their harvest cycles. One solution is milestone payments aligned with harvest periods, instead of spreading payments equally throughout the year.

Q: Looking to the future, what are your plans for developing your project?

1. Financing Engagement

Throughout the duration of the PREO-funded project, ClearSky Power has strived to engage local lenders in facilitating financing the farmers. But, as previously mentioned, local financial institutions are often unwilling or unable to extend loans to customers lacking credit histories and guarantors, or in the absence of compelling business propositions and comprehensive proofs-of-concept that underpin farmer funding requests. The development and implementation of customer financing innovations by local lender institutions is pivotal to ClearSky Power’s mission to scale-up clean energy technologies and farmer-oriented solutions. In light of this, ClearSky Power aims to use the success of the first and second rounds of PREO-funded installations as compelling models for banks to validate more certain paths to profitability in farmer financing.

Sharing knowledge and experiences gained through the first two phases of the project with MFIs is a pathway to achieving that goal. ClearSky Power has continued throughout the project to collect and analyse financing data, findings and lessons derived from these initiatives. These assessments encompass an evaluation of farmers’ repayment capacities, the optimal scheduling for loan repayment, adaptable strategies for payment collection, payment default avoidance strategies and holistic insights into loan-related challenges to prevent them from becoming barriers to success.

Moreover, ClearSky Power intends to harness project-based concessional finance to catalyse additional investments in solar-powered drip irrigation by developing and designing farmer friendly finance loan products in collaboration with MFIs.

Meeting these goals and attracting additional solar-powered drip irrigation investments will establish the necessary foundations for a thriving clean energy and agriculture market within the country.

2. Facilitating the expansion of solar-powered drip irrigation across other regions

ClearSky Power aims to capitalise on its PREO-funded project experience and reputation to advance the synergy between clean energy and agriculture, specifically through solar-powered drip irrigation. One significant challenge we encountered is building trust within the farmer community regarding the added value of drip irrigation technology. To address this, we’ve demonstrated drip irrigation solutions on one farm and we’re currently implementing a second farm model demonstration.

We anticipate a shift in farmer behaviour, where they opt for full systems rather than standalone components like water pumping alone. This evolution will enable ClearSky Power to seamlessly integrate comprehensive solar-powered drip irrigation systems into the burgeoning market demand for solar pumping. The company’s expansion plan includes reaching 60 more customers within the next three years across three regions: Awdal, Darasalam area (Maroodi Jeex region), and Togdheer region.

3. Research

Recognising the significance of reliable, clean and affordable energy in increasing agricultural productivity, ClearSky Power plans to undertake research to determine the optimal size of a generation plant that provides base load power for water pumping and additional power for additional energy services in the agricultural cycle. This includes evaluating the marginal cost of additional energy production and exploring potential surplus energy utilisation.

TRī is an early-stage electric mobility company offering affordable three-wheeled vehicles to professional drivers on a lease-to-own scheme.

Based in Tanzania, where 50% of transportation on the roads is comprised of two- and three-wheeled taxis, the company intends to make it easy and affordable for drivers to switch to electric vehicles. Most taxi drivers are unbanked solopreneurs without access to formal finance, who depend on rented petrol vehicles that cost up to a half of their daily revenues. Ever-increasing fuel expenditure, when combined with high vehicle maintenance costs, is typically pushing their incomes below the poverty line as their net profit drops to just 7% of their revenues on average.

TRī seeks to support drivers to become vehicle owners by offering fully maintained electric three-wheelers through its lease-to-own scheme. This enables drivers to immediately double their daily income from $5 to $10, making the decision to drive an e-vehicle even more enticing. Drivers can also take state-of-the-art speed chargers on the road with them, which enables them to travel up to 200km a day. This innovation reduces anxiety around range limitations often associated with electric vehicles.

Founded by Niko Kadjaia and Kunze Peng in 2021, TRī brings together a team of international experts with a wealth of experience in sub-Saharan Africa. With over 100,000 3-wheelers on the road in Dar Es Salaam, 90% of which are providing a form of transport to the public, TRī has the potential to create a huge impact in the transport sector.

With financial support from PREO, the company aims to demonstrate the validity of its financial model as well as the stability of its operational model. In addition, advancing a widespread transition to electric vehicles has the potential to greatly reduce the carbon footprint of drivers compared to the dominant petrol models, as well as improving air quality and noise pollution in urban areas. As the Tanzanian electricity grid decarbonises, charging the batteries from mains electricity will contribute to fewer and fewer greenhouse gas emissions.

TRī also strongly promotes gender equality in its workforce and through its customer base: 50% of the board and 40% of the management team are women. To further support gender inclusion in the sector, the company also intends to list the women enrolled with the Kinondoni and Ubungo programme for disabled women drivers as preferential customers, to further support gender inclusion in the sector.

For more information on TRī, visit growtri.io

PROJECTS

ECOBODAA

Ecobodaa is a Kenyan e-mobility start-up with a mission to provide affordable, electric motorcycle taxis to riders in Nairobi on a lease-to-own payment plan.

With nearly 1.3 million petrol motorcycles on the road in Kenya, many of which are used commercially as motorcycle taxis known locally as ‘bodaboda’ the opportunity to grow the market for zero-emission two-wheeled vehicles is potentially huge.

Founded by Kim Chepkoit in 2020, in the company’s first 2 years, Ecobodaa tested a set of 10 electric motorcycles with riders from UberEats and other delivery and transport services in Kenya’s largest slum, Kibera. After more than 150,000 km travelled, Ecobodaa was able to gather valuable user feedback to improve the design of the product. Ecobodaa learned that a key for riders considering switching to electric motorcycle taxis is a lack of flexibility in power purchases at the company’s network of 20 swap stations, with many drivers reluctant to make full upfront payment for battery swaps. In response, the company developed a game- changing platform that enables micro pay-as-you-go (PAYGO) payments for energy purchases. As the technology allows drivers to make quick and easy energy payments on the go, it requires no major behavioural change from fuelling petrol motorcycles, thus reducing user adoption barriers.  Given that riders are not required to purchase a full battery-worth of power at any given point, the PAYGO platform offers them more autonomy over the management of their cashflow and reduces digital transaction costs. Moreover, if a rider swaps out a battery with unused power, the value left from their token is transferred to the new battery, ensuring that the driver never loses out. With support from PREO in the form of a financial grant, the company will be able to trial the PAYGO technology and grow its fleet to up to 1,600 electric motorcycles.  

Alongside the company’s aim of scaling its footprint and demonstrating its viability through a successful trial, Ecobodaa is also targeting long term benefits for the local economy, environment and community.

Displacing the incumbent petrol boda-bodas with electric alternatives has the potential to dramatically reduce greenhouse gas and particulate emissions in Nairobi. Ninety percent of grid electricity in Kenya is generated by renewable sources (predominantly hydroelectric) therefore charging the e-bike batteries using mains electricity results in far lower emissions than the use of fossil fuels. This will also bring enormous benefits for air quality in urban areas, by eliminating the output of harmful particulates from the exhaust pipe of the internal combustion engine.

Ecobodaa also intend to create jobs for local young people since 75% of boda-boda riders in Nairobi are currently between 23-35 years old. The company also wants to address the gender disparity among boda-boda riders, as women account for only 3% of the workforce. Working with boda-boda associations, Ecobodaa is targeting increasing the percentage of women riders to 10%. Furthermore, Ecobodaa aim to have all 20 charging/swap stations operated solely by women within 18 months, with women comprising 50% of the leadership positions within the company.

For more information on Ecobodaa, visit ecobodaa.bike

PROJECTS

HINCKLEY

Hinckley Associates, in collaboration with Carnegie Mellon University (CMU) and Fan Milk, is spearheading an initiative to produce second life lithium battery packs to power fridge-freezers in Nigeria’s cold chain sector.

Having established Nigeria’s first government-approved e-waste recycling facility in 2016, Hinckley has developed a semi-industrialised recycling facility that processes 10,000 tons of e-waste annually. In 2019, Hinckley partnered with CMU to develop second life and end-of-life solutions for solar lithium battery cells and won the CLASP Global Leap Challenge. CMU, through its Industrial Innovation Laboratory, continues to provide technical expertise and business innovation support as Hinckley’s project partner. The funding received from the Global Leap Challenge has been allocated to training a local, gender-balanced team of ten electrical engineers, who will work on battery and software development in the lab in Lagos, as well as conduct field research.

In March 2023 Hinckley was selected to receive support from PREO in the form of a grant to launch a project that targets reducing uptake barriers and improving outcomes for frozen product resellers. The expert team assembled with CMU will be instrumental in the successful delivery of this project.

Fan Milk, Nigeria’s market leader in ice cream products, is the industrial partner in Hinckley’s project. With over one hundred ice cream vendors and distribution centres across Nigeria, Fan Milk faces persistent challenges in powering fridges, often resorting to costly and polluting petrol or diesel generators. Hinckley’s innovation provides a cleaner and more affordable energy source that can support Fan Milk’s nationwide distribution network for over two years, Hinckley has been offering responsible recycling services to Fan Milk, collecting and processing end-of-life fridges from their off-grid resellers at their recycling plant in Lagos. This has provided Hinckley with invaluable insights into the environmental challenges faced by Fan Milk resellers and has enabled the company to develop processes and expertise in both fridge processing and repurposed energy storage.

To further enhance the project, Hinckley has also partnered with Quadloop, a local solar system manufacturer, to continue the development of solar solutions by using second life batteries.

The project aims to remove barriers for small resellers of frozen products in off-grid settings, which can lead to increased local incomes, more feasible reseller opportunities, job creation for both men and women, and increased social and economic value through clean, modern off-grid energy. The solution being developed by Hinckley is targeted at improving the business operations and profitability of Fan Milk and its franchisees by reducing operational costs, improving reliability of fridges, and increasing revenue through reduced spoilage of stock.

For more information on Hinckley, visit hinckley.com.ng

Feature Story

How entrepreneurial women in Malawi are breaking down barriers by growing tomatoes that transform lives
PREO-entrepreneurial-women-Malawi-growing-tomatoes

Starting a new business is like planting a seed. No one knows that better than the group of women who have brought their tomato farm to life near the white sandy beaches of Lake Malawi.

The community project in Chintheche, northern Malawi, represents a simple solution to some of the multiple challenges the wider rural community here face. It’s also a financial lifeline for some of its members – and the chance to join a network of women entrepreneurs growing as strong and fruitful as the vines they tend to. As 32-year-old Lydia Phiri says: “I enrolled in the project to make more money to support my family, but over the last couple of months, I have gained a lot more.”

The backdrop to the farming project is that less than 10% of farmers in Malawi have access to irrigation, which leaves them dependent on the increasingly erratic rainfall. Coupled with a lack of refrigeration for produce – due to affordability and low rural electrification rates – and limited access to markets in which to sell crops, almost a third of harvests are lost. This is a figure that goes up to almost 50% for more delicate produce such as tomatoes. This obviously has a knock-on impact on farmers’ livelihoods – and the environment, due to the wasted food and wasted resources used to grow it. For women farmers there are other barriers to overcome, too. These include difficulties accessing land, finance and the latest technology. Women may also be caring for family members, limiting the time they have to run a farm or business, which affects their earning potential. Gaining access to markets is also often harder for women farmers than men.

Cultivating a business

A solution to these hurdles arrived in the form of the humble tomato – for which there is an appetite in the local market, particularly for a consistent, high quality and reliable supply, all year round. But to meet this demand, and overcome the challenges involved, an innovative business model was needed. So began a partnership between renewable energy developer African Mini Grids (AMG), development organisation Practical Action Consulting and agribusiness experts Modern Farming Technologies (MFT), which mainly works with women farmers.

The resulting project – called Renewable Energy for Agriculture – was funded with a grant from the Powering Renewable Energy Opportunities (PREO) programme, supported by the IKEA Foundation, UK aid via the Transforming Energy Access platform and GIZ. It aimed to tackle some of the challenges the women faced, supporting them to be less reliant on the weather, respond to a changing climate and grow produce all year round by looking at each stage of the value chain.

Starting in September 2021, the women were provided with solar-powered pumps, drip irrigation systems and greenhouses on a ‘rent-to-own’ scheme, which will take three to four years to pay off between them, depending on their collective level of production.

This addresses the challenge of irrigation (the water comes from Lake Malawi), energy and land access (the greenhouses take up little room), and asset ownership. Meanwhile, the greenhouses help tackle the obstacles of farming in an environment where it is hard to control conditions; the tomatoes grow well in the greenhouses, and pests and diseases are better controlled. Ongoing technical support means the women are able to learn the skills they need to be able to produce high quality tomatoes consistently – whether that’s how to use the pumps or techniques around harvesting.

In terms of post-harvest, a solar-powered chilling plant developed by AMG extends the shelf life of the tomatoes, again meeting the energy challenge that results in the produce spoiling in the heat without refrigeration. The project also works to tackle the market barriers the women face, linking them with local and national buyers so that they get better prices and a steady demand for what they grow. An additional benefit for the time-poor women is the reduced time commitment needed to run and manage the greenhouses. They work in shifts, freeing up time for other activities, as each individual works no more than an average of 15 hours a week. For this, they make a reasonable income that far exceeds other opportunities in the area.

The project has also shown a positive impact on the environment too – through the generation of renewable energy and a total of 7 tons of CO2 emissions reduced thanks to diesel not being used topower the cold storage units and the pumps.

The future looks rosy for the group of women, like the red produce they cultivate. Since 2021, the project has grown from two greenhouses and a handful of women to 45 greenhouses and 135 women.

They produce up to 3,500kg of tomatoes each week, with MFT selling what they grow to shops, hotels, restaurants, farmers’ markets and the wider community. Taking into account what they pay back on the rent-to-own scheme, if production is maintained at that level for a year, each farmer’s annual net income adds up to 624 euros for the hours they work each week – and that is not even peak production.

To put that in context, the poverty line in Malawi is an estimated 150 euros a year. And while there is no data on what constitutes a living income in northern Malawi, the average household in southern Malawi needs 1,092 euros to achieve a decent standard of living, according to 2019 figures. And so 624 euros would provide more than half of that.

Budding entrepreneurs

Lydia, a single mother of five, is one of the leaders of the community scheme in Chintheche. Before the PREO-funded project, she and her family were struggling to get by on their cassava, maize and rice farming. Due to the hot and unpredictable weather along the lake shores, Lydia could only farm during the rainy season. What Lydia earned from her harvest didn’t cover the needs of her family.

From the money she’s earned from the tomato farm, Lydia has sent her son to secondary school, bought food for the family and school uniforms for her children who are still at primary school. Lydia encourages other women in the group to use their money wisely so that they can fulfill their ambitions.

It’s not all about money though – but knowledge too, and the experience has improved Lydia’s decision-making and entrepreneurial skills.

Lydia explained: “I’ve had the chance to learn how improved farming works; making manure, planting other types of crops, tomato trellising and de-suckering, pest and disease management, and how to use a solar irrigation pump – which I will one day own. Knowing that I will own the greenhouse and the pumps just makes me feel happy. Other women who’ve recently become members of the community project feel the same, we’re all committed to the pay-back period because we’ve never owned equipment or assets.” Lydia added: “The project is a life-changing one, which needs to be sustained.”

Role models

Profits are invested back into the project so that other women can join – and women are inspired along the value chain. This includes those who source the tomatoes for bigger businesses, like Sunbird Mzuzu Hotel procurement officer Agness Banda, who appreciated the quality of the women’s tomatoes.

Spurred into action by their success, Agness hopes to buy her own greenhouse and grow tomatoes on a small piece of land she owns.

There is also a big opportunity for women traders to buy the tomatoes and sell them on at a profit in more informal markets, a potential that hadn’t fully been anticipated as part of the PREO project. These enterprising women typically buy 20-30kg of produce each day and anecdotal evidence suggests they are making a 15-20% margin.

Fyness, 37, is a businesswoman whose dynamic approach to life lives up to her name. She decided to set up a kiosk and start selling the women’s tomatoes in her neighbourhood, impressed by the quality and longer shelf-life.

Seemingly ever searching for new business opportunities, the mother of three has bought a secondhand car from selling the tomatoes grown by the women and her poultry farming. She uses it as a taxi.

Attracted by the relatively quick return on investment for the tomatoes, Fyness is using the income from her taxi to save for a greenhouse too. Given that she’s reached her other goals, it seems a plan destined for success. There’s just one more ambition for now. Like a plant that sheds its seeds so others can grow, Fyness wants to be a role model to other women in her community.

And so the vine continues.

News

PREO support enabled Bodawerk to test affordable mechanisation services for agro-processing on smallholder farms in Uganda

In September 2022, Kampala-based social enterprise Bodawerk completed their PREO-supported field trial of farm mechanisation services powered by renewable energy in rural northern Uganda. The trial tested the deployment of their multi-purpose electric tractor which provided local smallholder farmers with access to machinery for their ploughing, tilling, threshing, milling, and grain transport activities. This initiative enabled Bodawerk to better understand how well their mobile mechanisation services meet the needs of low-income farmers, particularly around cost savings and improved productivity.

Specialists in developing circular energy solutions in the field of lithium-ion batteries, Bodawerk was founded as a social enterprise in 2017 to bring beneficial products and services to low-income customers. Smallholder farmers in remote, off-grid regions of sub-Saharan Africa typically struggle to afford the high upfront costs of labour-saving machinery, which can be difficult to source and runs on expensive and polluting diesel fuel. To address these challenges, Bodawerk pioneered the ‘AgrE-Hub’, which brings a range of farming technologies within reach for smallholder farmers as a one-stop service-based business.

Charged at a standalone solar PV station, the Bodawerk system entails electric tractors transporting cutting-edge lithium-ion batteries over long distances whilst also being powered by them, enabling smallholder farmers to pay flexibly for mechanised services at a low cost and at a suitable point in their agricultural cycle. Mechanisation powered by clean energy provides a vital means for farmers to improve their livelihoods by reducing time spent on preparing the field and post-harvest processing, whilst also enabling them to get fresh produce to market quicker. Further benefits include less waste, reduced manual labour and fuel cost savings.

PREO interviewed Bodawerk’s Chief Operations Officer Janos Bisasso as the pilot was coming to an end to find out about their experience and capture some of the key lessons learned.

Q. Can you elaborate on what you intended to achieve through the PREO project and Bodawerks’ initial targets?

Smallholder farmers in sub-Saharan Africa are unable to access affordable mechanisation services as grid connectivity is typically poor and affordable off-grid mechanisation is usually unavailable. The PREO project aimed to assist Bodawerk in addressing these development challenges.

With support from PREO and co-financing from the DOEN Foundation, Bodawerk International Limited set up an AgrE-Hub in June 2019 in the Apac District of Northern Uganda. The objective of the project was to facilitate the productive use of renewable energy within agricultural mechanisation services.

To pilot the concept, Bodawerk established an AgrE-Hub comprising of the E-Trak and the AgrE-Hub:

The E-Trak is a low-cost, multi-purpose tractor that can provide agro-processing services. These services ploughing, tilling, threshing, milling, grinding and transportation services using a multi-purpose electric tractor. The Battery pack is a li-ion battery pack charged through a Bodawerk-owned standalone Solar PV station. During scaleup, we plan to purchase electricity from rural mini-grid operators thereby improving their utilization instead of building in-house infrastructure.

The AgrE-Hub structure allows for the use of E-Traks as mobile power stations that serve farming communities within a 50km radius of the solar PV station and enables low-cost farm mechanisation as a service.

Q. What were the key service packages that Bodawerk designed and delivered through the PREO project? What problems did they solve for the smallholders?

The goal of agricultural mechanisation was to reduce the manual labour required by farmers and increase their crop yields, while also improving the sustainability of farming practices. Bodawerk implemented a categorisation system for our services, dividing them into four major categories: field services (such as ploughing and tilling), hub-centric services (such as threshing, milling, and grinding/pasting), transportation services and energy-as-a-service. This categorisation allowed us to effectively track our activities and streamline the data-labelling process. Furthermore, it has also enabled us to communicate more clearly with our clients and stakeholders about our services and how they fit into our business operations.

The pilot featured the following services available to clients and stakeholders:

Field services

Farmers were able to hire ploughing services to facilitate early planting which leads to decreased incidences of pests and diseases, resulting in higher yields.

Hub-centric services

Farmers were able to access value-added services for their produce at a convenient local hub, avoiding the need to transport crops to distant processing locations. Reduced transportation costs resulted in lower production costs and increased profitability for farmers.

Transport services

Electric tractors are more cost-effective than gasoline-powered vehicles. They have lower operating and maintenance costs, making them an attractive option for farmers who need affordable transportation. By having access to affordable transportation, farmers were able to transport their goods to local markets more efficiently.

Energy-as-a-service

Providing energy-as-a-service to customers through smart lithium-ion battery technology offered several benefits to farmers and small businesses. By powering small-to-medium enterprises such as welding and fabrication businesses, retail shops and restaurants, energy-as-a-service created opportunities for farming households to engage in income-generating activities. This can help farmers to diversify their income streams and improve their financial stability. Smart lithium-ion batteries are portable and can be easily transported to different locations, particularly beneficial for farmers needing to move their energy source from one location to another.

Q. What were the most significant challenges that Bodawerk faced in implementing the project?

Some of the key technical challenges that we faced included, imported equipment purchased for tractors that were tested on arrival and we, unfortunately, ran into mechanical issues during operation. These issues required a considerable amount of time, knowledge, and skills to modify and retest the equipment ready for operation. Another challenge came from operating just two tractor prototypes at a time as we sometimes encountered breakdowns in parallel. This led to lengthy recovery processes from the field as we were then without a tractor to pull the broken one back down to the hub. We also experienced several technical challenges with the tractors. To overcome these barriers, our project engineer and his team had to repeatedly conduct repairs under the guidance of the Chief Technical Officer at the head office.

In addition to the technical issues, we also faced significant capacity constraints, including skills gaps among our staff which became evident during the implementation of the mechanisation activities, which we did by training the workforce with tailor-made resources.

It also became evident that there was a need to allocate and train more resources in machine operation to meet the increasing demand for agricultural mechanisation services in our area of operation. For instance, during the land preparation season, the team trained in ploughing also handled other activities such as grinding or milling if customers had requested those additional services at the same time. Without enough trained staff in place, a specific service has to be prioritised, causing delays in production. This challenge highlighted a significant need to allocate more budget to training personnel, materials, and facilities.

Lastly, smallholder farmers also reported challenges around not having enough money to pay for services upfront, yet the Agr E-hub did not offer more flexible payment options for customers such as credit or instalments.

Q. What challenges did Bodawerk face in building a commercially sustainable model in the provision of farm mechanisation services? What solutions might allow you to achieve business viability?

Upon analysing the agriculture ecosystem, we assessed that the revenue generation over a period of 18 months amounted to approximately UGX 15,000,000 (equivalent to roughly 4,000 USD) per AgrE-Hub. We found that this amount was relatively insignificant considering the costs of acquiring and maintaining the necessary assets and infrastructure.  Considering this, we determined that the revenue generated would not be sufficient to justify investment into these assets.

If we were to present a scenario where a less energy-dense battery had already been fully amortised, and then integrated into our agricultural hub system, this could be more economically viable and would present an opportunity to utilise the battery at a lower overall cost. If the initial use of the battery is within the e-mobility sector, which has high energy requirements, then after 2-3 years when the batteries no longer achieve their full capacity of 4kWh, we can repurpose them for use in agriculture mechanisation services. At this point, the battery would have already been written off and can be used for stationary storage in service provision.

Bodawerk’s core business model is battery manufacturing and building a network of swap stations for electric motorcycles, with plans to expand into rural communities in Northern Uganda. As we progress, we aim to revisit our business case for providing agricultural mechanisation services by integrating learnings generated from the PREO-supported project. Such learnings include using amortized batteries from e-mobility businesses and leveraging pre-existing infrastructure such as e-mobility charging stations which we believe provides a more practical use case.

Project News

PREO support enabled DRC-based Café Kivu to scale its coffee production sustainably by shifting to a solar-powered roaster.

Café Kivu is a Congolese coffee company aiming to create and capture more of the value of coffee at its origin, by sourcing beans from the northeast Kivu region of DRC, then roasting and packaging them at their facility in the regional city of Goma. Of recent, fair trade has increased coffee value primarily in the export of raw beans, creating increased value addition. Café Kivu estimates that approximately $0.86 of every dollar of coffee sold to consumers worldwide is generated outside the country of origin.

 In 2020, with funding from PREO, Café Kivu set out to test the economic and financial viability of replacing a gas-powered coffee roaster with an electric roaster powered by a solar plant. By the end of the pilot, in December 2022, the transition had enabled Café Kivu to scale their production, whilst reducing roasting energy costs by 64%. By providing more finely calibrated control of the roasting process, the electric roaster has also enabled the company to significantly improve their coffee’s quality, further enhancing their brand and market recognition. Café Kivu’s pioneering transition has paved the way for other local coffee manufacturers in the region to explore more sustainable solar-powered production.  

Despite significant operational challenges and a complex business environment exacerbated by the Covid-19 pandemic, the Nyiragongo volcanic eruption, and ongoing armed conflict within the region, Café Kivu has shown tremendous resilience in their ability to continue sourcing and processing high-quality coffee in eastern DRC. Looking ahead, the coffee production company is exploring plans to enable local consumers to enjoy their produce at affordable prices, as well as building sales internationally in Western markets (US & UK).

PREO interviewed Aaron Wolcott, CEO at Café Kivu, to learn about their experiences and capture some of the key lessons learned.

Q. Tell us more about Café Kivu and what motivated your shift to an electric roaster.

Cafe Kivu is a boutique coffee roasting company that has been operating in Eastern DRC since 2015. We purchase green coffee from local coffee producer cooperatives with a strong track record for promoting sustainable and environmentally friendly farming in North Kivu province. We then roast and package the coffee for sale in both local and international markets. Café Kivu boasts superior product quality and a valuable regional distribution network that allows us to implement a ‘route to consumer’ distribution strategy across East and Central Africa.

When we first moved to Goma, we rented a gas-powered roaster which was both costly and polluting. With no real electricity grid in place, fuel in Eastern DRC is amongst the most expensive in Africa. Given we were focussed on scaling up production, the gas-powered equipment could no longer meet our need to produce consistently high-quality coffee in larger volumes. So, we decided to partner with Nuru Sarl (a renewable energy company dedicated to enhancing connectivity in the DRC) to secure a cost-effective source of clean energy for future production.

From 2020 to 2022, thanks to the grant from PREO, we set up a new office and roasting facility in Goma for which we purchased a Giesen 6WE electric roaster. As well as improving the quality of our coffee, the electric roaster has enabled us to lower our overall operating costs, as well as to reduce the amount of smoke, odour and dust emitted during the roasting process.

Q. Do you think electric roasting will prove transformative for the coffee processing industry in the Goma region and more broadly in DRC?

The use of an electric roaster operating on solar energy, is a first for the local coffee industry, meaning Cafe Kivu is setting the standard for Congolese coffee beans roasted at origin. As we extend our reach both nationally and internationally, it is hoped that electric roasting will become increasingly popular among other local coffee producers. Given the country’s poor electrification rates, off-grid solutions are becoming a necessity.

Q. The project contended with a variety of challenges from the outset. Can you describe some of the challenges faced and how Café Kivu adapted to them?

We first experienced two major external challenges, the restrictions on movement caused by the Covid-19 pandemic and the explosion of the Nyamulagira volcano about 15km north of Goma on May 29th 2021. Both events caused major supply chain disruptions throughout 2020 and much of 2021.

Even putting such exceptional circumstances aside, DRC is a difficult market for businesses and importing equipment proved to be highly challenging. It took months to establish a transporter who was willing to carry the electric roaster from Europe to Goma, and even when ready for shipment, the transporter opted to send the machinery by sea instead of airfreight, as formerly agreed. This led to further delays and when the equipment finally arrived, the roaster had been damaged on route. The transporter agreed to replace the broken parts, but we had to wait a further six months for the new parts to arrive. Inevitably, getting production to the desired level took much longer than we had expected.

Despite the roaster being fully operational, we still faced challenges getting our finished product to markets within and outside of DRC. This is partly due to local corruption and excessively complicated administrative procedures, which held up both our green coffee supplies and certification for exporting our coffee once roasted.

Further complications arose from the resurgence of armed rebellion groups causing insecurity and instability in North Kivu since May 2022. The groups have cut off all supply routes to Goma from the northern part of the province where we typically source our coffee. The conflict has forced many businesses in Goma to shut for weeks at a time or significantly reduce opening hours due to protests. To lessen the impact and ensure business continuity, we kept in contact with our clients during the closures whilst sourcing coffee from other areas which remain free from conflict.

To succeed in such a trying environment, we learned to be extremely adaptable and flexible in our approach. For example, whilst waiting for the electric roaster, we made do with the gas-powered roaster when we first arrived in Goma so we could continue to grow our sales. Whilst we successfully overcame the logistical challenges on the production side, sales have remained a struggle in parts of the country where we don’t have a physical presence such as Kinshasa. However, we intend to maintain our flexible approach by iterating new commercial strategies to find an effective way of penetrating these markets. 

Q. Despite these challenges, the project has demonstrated strong progress. What are some of the key achievements?

Cafe Kivu is passionate about making quality Congolese coffee widely available around the world, so the fact that we have persisted in the face of such adversities is a testament to our commitment to helping to build a new future for Congolese coffee. Since moving the company to Goma, we are proud to have grown our monthly sales from almost nothing to over $2,500 each month. This revenue has enabled us to train staff on the job in general management and sales, as well as improve roasting techniques..  

Purchasing the Giesen 6WE electric roaster has been transformative for our company. Firstly, the new roaster has significantly decreased the cost of energy for roasting. With the gas roaster, we spent $1.05 in gas per kilogram roasted. With the electric machine connected to Nuru’s solar energy grid, this amount has decreased to $0.30 to $0.35 depending on the number of roasts we do per day. Given the fluctuations in coffee price over the last few years, this reduction in costs has been enormously helpful. Moreover, given the CAPEX investment for the roaster amounting to $32,000, the payback period is calculated at three years, making the roaster a sensible investment.

Furthermore, the gas-powered roaster did not allow us to track the bean temperatures and required a significant amount of manual manipulation to get the roast right. With the electric roaster, we are now able to monitor roast duration, drum speed, air flow and bean temperature in a way that assures us that we can achieve a standard roast each time we roast our coffee beans. This has in turn enabled us to give our staff better training on the intricacies of producing high-quality roasted beans. Such skills will stand them in good stead for many years to come.

We have also been able to build a much stronger relationship with the cooperatives of farmers where our coffee is grown. The cooperatives that we purchase from are certified Fairtrade and organic suppliers, for which we pay a premium, but we welcome the fact that this value is going to the farmers themselves. Additionally, we help promote the quality of the coffee on an international level which is important for the cooperatives and farmers.

The deployment of renewable energy has also made our brand more distinct: few coffee companies in the region are doing this and we are certainly the only company currently in DRC. Our hope is that we can set a trend around sustainability that new coffee companies will then follow.

Q. What learnings can other companies and the wider sector take from this project?

There are several key learnings that we are happy to share for the benefit of other players in the sector.

For a company operating in DRC, learning to anticipate and manage the constraints around supply chains is crucial to achieving financial viability. It usually takes double if not triple the amount of time to receive equipment and supplies compared to elsewhere in Africa, so it’s important that enough time is built into the project plan to allow for any delays. It has also taken us over a year to navigate the regulations and red tape around exporting to US and UK markets, but I’m pleased to say that now our coffee is available in these markets via e-commerce company Amazon. Needless to say, for companies sourcing raw materials or products within the DRC, monitoring socio-political developments that could impact supply is a must, so it is important to put contingency plans in place so the company can be resilient against regular supply chain disruption.

Government regulations can also be a major obstacle. Coffee production and distribution is overseen by different government departments: the OCC (Office Congolaise du Control), ONAPAC (national coffee and cacao regulator), the Ministry of Agriculture and the Ministry of Industry. Our advice to anyone interested in operating in this sector in DRC is to make sure they thoroughly review all the related laws and regulations and understand the implications for their business.  The banking sector is also stringently regulated due to issues with money laundering in the country, which makes connecting online sales to a Congolese bank almost impossible, so we advise other companies to investigate workarounds sooner rather than later in their project journey.  

We are also learning to lean into the most important elements of our story in our marketing and branding. For us, attaining and then maintaining the exceptional quality of our coffee has been a real achievement, as that is what makes our product stand out in both local and international markets. The use of renewable energy also enhances our reputation, particularly in the UK and the US, given consumers in those markets are increasingly passionate about sustainability. Our company has also been built around capturing the value of coffee at origin, so we know that comprises a compelling unique selling point too.

Q. Turning to the future, what are your plans for achieving scale-up?

In February 2023, Cafe Kivu received a bridge loan to push our product to US and European markets. We will also use this capital to build sales in Kinshasa and other parts of the DRC. The loan will allow us to show full proof of concept in the export of roasted coffee so that we can effectively engage with long-term investors. Once further investment is secured, Cafe Kivu plans to set up a coffee shop in Goma which will increase revenues for our coffee, as well as widen the employment opportunities we can offer to local communities.

News

African climate innovators secure scale-up funding

Ecobodaa is a Kenyan start-up with a vision; to replace the country’s 1.3 million polluting petrol motorcycles with locally designed and assembled electric motorcycles, cutting emissions and improving air quality.

This vision has just received a significant boost, with Ecobodaa becoming one of five sub-Saharan African start-ups to secure a share of nearly £900,000 in grant funding.

The funding comes from PREO the Powering Renewable Energy Opportunities programme. The programme is funded by the IKEA Foundation and UK aid from the UK government via Transforming Energy Access (TEA) and delivered by the Carbon Trust and Energy 4 Impact.

To qualify, projects must demonstrate their contribution to “Productive Use of Renewable Energy” which means their business models generate local, economic, and social value, with the potential to scale operations.

Ecobodaa’s hopes to have 1000 e-bikes in operation by the end of the year and its work will help hundreds of small business owners, as most of the country’s motorcycle riders operate as taxis, known as boda bodas.

Riders have been reluctant to trade their fossil-fuelled bikes for electric alternatives, due to the high upfront capex cost of batteries which often require large down payments.  

While cheaper in the long run, the upfront cost of each battery is anywhere from six to eight times the cost of a tank of gas.

Instead, Ecobodaa are removing this barrier to ownership by offering a lease-to-own payment plan through a digital platform which riders can use to make micro pay-as-you-go (PAYGO) payments on motorcycles and batteries.

PREO funding will enable the company to trial this technology for a fleet of 50 electric motorcycles in Nairobi.

Jon Lane, PREO Programme Manager, said: “We are proud to be supporting five early-stage productive use of renewable energy companies creating pioneering solutions in e-mobility, sustainable cooling and low emissions power. Through PREO the financial and advisory support will accelerate the progress needed to support these companies to prove and scale their business models, creating positive impact socially, economically and environmentally across sub-Saharan Africa. In the past, this support has led to organisations securing investment to grow their operations further. We look forward to seeing how this group of organisations will develop in future.”

The other four successful projects also receiving funding are SokoFresh, Hinckley Associates, Charm Impact and TRī.

SokoFresh is a Kenya-based social enterprise which provides affordable cold storage for rural communities to reduce waste and financial losses for farmers.

TRī offers affordable electric three-wheelers to professional drivers in Tanzania on a lease-to-own scheme, aiming to support small business owners and decarbonise the country’s transport.

Hinckley Associates is creating lithium battery packs to power fridge freezers across Nigeria during power cuts, replacing petrol and diesel generators.   

Charm Impact is a peer-to-peer impact investment platform, which provides loans to local clean energy companies. So far, they have provided 23 loans, improving energy for more than 350,000 people across seven countries.

The five recipients join a cohort of 29 previously supported private sector and non-profit enterprises to previously receive a share of £5.5 million in PREO grant funding.

This funding has helped these projects scale and go on to raise a further £24 million in public and private capital.