Zembo has launched the first intercity e-corridor for e-motorcycles in Africa. By installing charging stations along the 120km Kampala-Masaka highway in Uganda, this one-of-a-kind project will help to prove that solar-powered e-mobility is a viable, climate-smart alternative to petrol-powered motorcycles, and will demonstrate the vast potential for expanding in off-grid Africa.

Zembo is a start-up company that provides sustainable e-mobility solutions for Africa. With the financial support of PREO and GIZ, the company has built a pioneering e-mobility corridor between the capital Kampala and the next large provincial town of Masaka – the first route for e-vehicles outside the capital. The PREO grant fund has enabled Zembo to operationalise the e-corridor by recruiting drivers, training them and financing the sale of e-bikes in the catchment area of the corridor.

In Uganda there are more than 700,000 motorcycle-taxis, commonly known as boda boda, most of which run on petrol. It is estimated that 5% of the Ugandan population relies on this business as a main source of revenue.

Zembo makes electric motorcycles, and its rent-to-own model enables low-income boda boda drivers to own their electric bike after two years. Data shows that a Zembo electric motorcycle increases profitability for boda boda riders by 60% compared with petrol motorcycle after the two-year lease period. The electric motorcycles also reduce CO2 emissions by up to 97% as well as cutting noise pollution.

Zembo’s battery swap service also makes it possible for drivers to exchange a discharged battery with a recharged one in their network of solar-hybrid charging stations in Kampala. The company operates 27 charging stations in Kampala and has more than 250 electric motorcycles on the road, transporting 800 passengers per day and seeing 10,000 battery swaps a month.

While Zembo’s stations in Kampala meet most of the needs of urban boda boda drivers, the lack of charging stations in peri-urban and rural areas has limited their working area. The new intercity corridor, made up of three solar-powered and one solar-grid hybrid charging station at intervals of 30 kilometres, will enable electric motorcycle drivers to extend their service and increase their daily income.

“This location was chosen after surveying our drivers, many of whom have village homes in Masaka area (and in towns such as Mpigi),” explains Titus Kimbowa, Director at Zembo. “It represents a good economic opportunity for them, offering the possibility to service long-haul trips to higher-paying customers.”

The new infrastructure especially impacts low-income boda boda drivers whose daily revenue is typically €5. By going from Kampala to Masaka (120km) on an electric bike, a driver will save around 3€ of petrol and 276 kg of CO2 per trip.

Following the opening of this new route, Zembo, with funding from PREO, plans to increase their fleet by six e-motorcycles per off-grid station serving the villages in the surrounding areas. This will also create 20 new battery swapper and technician jobs.

Zembo’s strategy is to position itself as a leading battery swap operator in the country. The company plans to create a nation-wide network of recharge stations, including across off-grid areas where it is challenging for drivers to find affordable fuel and even more challenging to find electricity. Solar has the advantage of being available everywhere in Uganda, making it possible to implement recharge stations anywhere. Building and operating these first off-grid stations will be key to prove that the economic operation is possible and scalable to other intercity routes beyond Uganda.

We’ve already proved that our business model is profitable in urban on-grid areas. Now, this PREO-co-funded project will give us the opportunity to prove that our solar-powered solution is viable and replicable in off-grid areas as well. We’ll then be in a strong position to unlock private investments to expand to other African countries.

Titus Kimbowa, Director at Zembo

For more information visit www.zem.bo

How PREO supported Innovex to bring its remote technology manufacturing facility to Uganda

Innovex is a Uganda-based company with a mission to transform the distribution of off-grid solar energy systems and equipment. It produces an Internet of Things (IoT) platform called Remot, which helps businesses remotely monitor and control their solar energy systems. 

The product eliminates the need for huge capital investment in last mile infrastructure such as physical branches and vehicles – users simply have to connect the hardware to their solar system. It aims to make solar systems, solar equipment and solar appliances more accessible by reducing the operation and set-up cost for installers.

This project, with support from PREO, aimed to set up a printed circuit board assembly (PCBA) and moulding manufacturing facility in Uganda, so that assembling and manufacturing the Remot technology could be carried out locally rather than in China. This would cut transport costs and delays, create jobs and boost the local economy.

We spoke to Innovex about the project, its objectives and achievements and the lessons learned.

Q: What were the key objectives of the project?

A: The main objectives of this project were to:

  • Set up a fully equipped, low-volume printed circuit board assembly (PCBA) and injection moulding manufacturing facility.
  • Identify and recruit staff 13 technical and 10 non-technical staff
  • Manufacture 1,500 remote monitoring units
  • Create and manage processes and standards
  • Report quarterly to the Carbon Trust.

What gaps and inefficiencies in local manufacturing did the project aim to address?

Before we set up the manufacturing facility for PCBAs, there was nothing of its kind in East Africa. Innovex’s product, Remot, relies on PCBA hardware. Although Innovex designed this hardware locally, we were using a contract manufacturer in China for its implementation. The PCBAs would then come back to Innovex to be assembled, programmed and tested. With local manufacturing, we could reduce product delivery times and import duty costs.

There was also a skills gap in the local workforce, which we could address by recruiting and training staff to become highly skilled in PCBA manufacturing.

And finally, the plastic casing was off-the-shelf from a local supplier, which meant the quality was variable and couldn’t be customised. The project supported local manufacturing and an improved casing design.

How did COVID-19 affect your implementation strategy?

Firstly, it affected how we went about setting up a facility because were unable to travel to China for due diligence on equipment suppliers. Instead, we sub-contracted a Chinese company to carry out the due diligence on our behalf. There was also an increase in shipping costs because of the disruption in global supply chains. Innovex addressed this by asking for a budget reallocation from PREO.

During lockdown, employees couldn’t travel to Innovex for training, so the company van, which was allowed to move, would pick up key staff from the area where they lived. Staff were also unable to travel to China for training, so we had to improvise with online training. 

The disruption also affected our third objective – to manufacture 1,500 remote monitoring units. A delay in getting 50 product samples certified meant we could not move forward with full-scale production. As a workaround, Innovex has engaged a Flemish lab, Labodenayer, to conduct testing and we are awaiting a quotation so that work can begin.

We had a problem with faulty components due to disrupted supply chains, but after a second round of procurement, this time with a focused group of suppliers, we obtained better components which we used to fix the affected hardware. We also faced delays in the procurement of components for mass production and distribution. An order for components to manufacture 500 units was yet to be fulfilled at the time of writing. However, all the plastic casings (1,500) were manufactured.

Finally, due to delays to the overall project, we had to ask for an extension for reporting to PREO. Quarterly reporting was also sometimes delayed, although the PREO team was gracious in granting us a few days’ extension when needed.

Q: What challenges did the project face, and how did you overcome them?

As well as those related to COVID-19 which we outlined above, we faced some further challenges during the project.

One was that some of the equipment manuals were in Chinese. Using online resources and support from ED&A and IMEC, the Innovex team developed its own processes and designed training on equipment operation, maintenance and concomitant manufacturing processes.

The general scarcity of chips on the external market was exacerbated by the Chinese holiday in mid-January 2022. We were expecting these components to be delivered by the end of February and will proceed to manufacture and distribute these units.

The lockdown also caused a slow-down in our usual business activity and dampened sales. This reduced Innovex’s revenue and its contribution to project costs. Innovex mitigated this shortfall by fundraising and reducing costs such as travel, negotiating pay cuts with some staff who were working from home.

Q: Which of the objectives and targets did the project achieve – for Innovex, the sector or the geography?

A: Firstly, we set up a high-tech electronics manufacturing facility in Uganda to operate the PCBA and injection moulding manufacturing lines. The PCBA line is the first in East Africa. The injection moulding line also gives us flexibility for just-in-time-manufacturing and customisations, as well as quality control of our plastic casings.

We demonstrated that local manufacturing of PCBAs is financially feasible. With the production line fully functional, Innovex manufactured 55 PCBAs. Preliminary analysis reveals a saving of at least US$10 (25%) on the baseline, based only on the cost of importing Chinese assembled PCBA vs importing components and materials.We are now working with a consultant to evaluate the cost-savings from local manufacturing, including other costs such as utilities and labour.

We created high-skilled local jobs, recruiting 17 technical and seven non-technical staff and training them in equipment operation and maintenance. The team will remain in place beyond the project timeline. We also created indirect jobs through subcontracting, including the electrical and air conditioning installation, to local companies.

We improved our products through development and testing of new firmware and design for manufacturability analysis, and we developed two new product lines: the PUMP DAVIX, in collaboration with APTECH Africa, and the cold-chain DAVIX, supported by CLASP. Fifteen pilots have been installed in Kenya and a pilot in India is in the works.

With support from our investors, we revitalised our strategy for building partnerships to support sales and the business in general. We already have more than 1,500 sales in the pipeline for 2022. Just a few of the organisations we have onboard are Village Energy, Hello World, UNCDF, Advanced Solar, Access Energy Limited and, Powerpay. We also developed 40 partnerships during the project period, including ED&A (SMT manufacturing), IMEC (SMT manufacturing and standardisation), Iungo Capital (loan), China Impact Sourcing (procurement due diligence) and Uganda Industrial Research Institute.

Q: What are the main lessons that Innovex learnt from the project?

A: The project has given Innovex huge momentum to become an industrial leader in electronics manufacturing that transforms the energy sector in Africa. Our key lessons learnt from this project are:

  • The need to continuously pursue government incentives, as evidenced by more than 40,000 in tax waivers on equipment importation.
  • The need to establish strong on-the-ground partnerships in China for equipment and component sourcing.
  • Locally manufactured hardware has enough quality to compete with that contract-manufactured in China.
  • Innovex has built competence in equipment operation and processes for both SMT and injection moulding, although further training of staff is needed. Planned training at ED&A/IMEC will help.
  • At least three months should be allowed for sourcing of components from China.
  • We need to comprehensively evaluate the cost-savings from local manufacturing, apart from the saving on components. We have procured a consultant, to undertake this.
  • More local partnerships should be identified for contract manufacturing in order to become profitable and efficiently use the installed machinery.

Q: How did PREO accelerate your success in setting up the manufacturing facility?

A: PREO provided all the funding for manufacturing equipment and supported various aspects of OPEX and human resources, including M&E and training. The PREO team were also supportive every step of the way, providing strategic guidance and support in periodic reporting. Together, we shall make sustainable energy for all a reality, in Africa and globally.

For more information visit www.innovex.org

LAGAZEL is a leading manufacturer of high-quality solar lamps and kits, and it is the first company to manufacture solar lamps in Africa on an industrial scale. The company has been making internationally certified solar lanterns in Burkina Faso since 2016, and more recently solar-home-systems, sourcing quality-controlled components from reliable suppliers in Europe or Asia, which are then assembled, tested and packaged locally.

Its mission is to industrialise the manufacturing of solar-powered products, bringing affordable and high-quality electricity solutions to African people who do not have access to energy, while also developing the local economy and creating sustainable jobs.

With support from PREO, the LAGAZEL has been working since February 2020 to increase the local added value of its manufacturing facilities in Dédougou, Burkina Faso, expand its range of products and open a new facility in Porto Novo, Benin, thereby creating more specialised jobs and training opportunities for local people.

PREO spoke to LAGAZEL about its project’s aims and achievements, the challenges it faced and the key lessons to be learnt from the project.

Q: What problems did the project aim to address? 

A: Most solar products available in African markets are imported from Asia and many of these are of poor quality. Local operations are usually limited to assembling made-in-Asia products or handmaking non-certified products.

These products are generally produced and assembled in China or India by international companies or contract manufacturers on behalf of solar product developers. The lack of local mini-grid equipment in Senegal (batteries, electronic systems) makes the systems more expensive. Other challenges relate to both R&D (a lack of consumers insight, which is needed to design products that match local needs and expectations) and manufacturing (a lack of reliable or good-quality suppliers and local manufacturing partners, as well as and limited access to growth capital to scale operations and realise costs savings).

This makes it difficult to create local jobs and develop the local economy. On top of that, based on our experience, remote suppliers can be a high entry barrier for small or medium local distributors. Often, they don’t have the funds to import containers from China, and in the downstream segment of the value chain, there are inefficient repair and after-sales services and poor recycling activities. This has a negative effect on the development of an active local entrepreneurial base in the OGE sector.

Increasing local manufacturing capacity of quality-certified products has a huge potential to generate specialised jobs, develop the economy and reduce the environmental footprint of the products.

Our approach puts local people at the heart of the project. The aim was to boost local manufacturing of solar home systems, and to support local production of a range of components and spare parts for solar products, which are currently imported from Asia.

By supporting our operations in the local upstream segment of the value chain in this way, we aimed to stimulate the off-grid electrification market in Burkina Faso and Benin; boost the development of local economy through increased productivity, professional training, skill transfer, jobs creation, and increased revenues for employees and economic partners in the value chain, including women and young people.

In addition, we sought to bring added-value in the off-grid energy value chain by developing synergies with other players in the off-grid energy sector, and the proximity of LAGAZEL to local manufacturer means that local distribution players benefit compared to importing from China. Risks of importation are limited, the proximity of production and after-sales service reassures local distributors; working capital needs are reduced, as the distributor can place various small orders instead of one big order.

Q: What did you want to achieve with this project, and how was your implementation strategy affected by COVID-19?

A: The project aimed at strengthening and developing local production at our LAGAZEL manufacturing facilities, so that off-grid products could be produced locally. This meant introducing processes, for example, that require manual rather than automated operation, such as assembling battery packs. We wanted to:

  • Expand the range of products we manufacture in Burkina Faso
  • Scale-up production of solar home systems and sub-components by replicating manufacturing operations in the Porto Novo, Ouémé region in Benin
  • Develop synergies with other players in the industry in order to reach sufficient scale and to be competitive, by providing sub-contracting manufacturing services for the off-grid energy sector.
  • Initiate R&D partnerships to co-develop a full range offer of locally made off-grid electrification products and spare parts.

Achieving these objectives involved implementing the following activities:

Phase 1: Manufacturing a first series of 250 Sobox light & Sobox power solar-home-systems (SHS) and increase production. This pre-production phase is needed in order to check quality and efficiency before increasing production and manufacturing a further 750, available for distribution in association with high quality proximity services (warranty, after-sales, proximity of stock, etc).

Phase 2: Finalising the development of components/spare parts of off-grid solar products, manufacture the first series and replicate. This range of products is aimed at distributors and installers in the OGE sector, who would then be able to source these quality products locally instead of importing them from China. The project focused on two main components: bulblights and battery packs. LAGAZEL aimed to finalise the prototypes and rate routings for both bulblights and battery packs, purchase components and train the production team to produce the first series. Once the pre-series was validated, LAGAZEL aimed to scale up by purchasing equipment, training staff, replicating in Benin, and sharing experience and best practice.

Phase 3: Conducting R&D and testing activities on new innovative products. The objective was to co-develop off-grid products that can be produced locally. During the project, LAGAZEL had regular meetings with all stakeholders in order to encourage communication between technical staff, production staff and sales team so that customers’ needs and the technical constraints of local production are taken into account.

Phase 4: Evaluating the viability of local production, impact on employability, and the direct and indirect economic and social impact. We aimed to train 20 people in the production segment of the value chain, and develop partnerships with main players in the OGE sector. Activities were conducted in partnership with local companies that comply with legal and regulatory requirements.

Q: What challenges did you face in implementing the project in Burkina Faso and Benin, and how did you overcome them?

A: The main challenge was related to the business model of local manufacturing. There’s a large number of suppliers in Europe and Asia who provide raw materials and components to Africa, making the logistics extremely complex. Lean manufacturing is difficult to implement and the model requires significant funding to meet the working capital and stock needs.

These difficulties became more pronounced in 2020 and 2021 because of the COVID-19 crisis, which led to a shortage of raw material and disrupted international transportation. One solution was to create, when possible, a buffer stock of components in France that could be sent to local facilities quickly when they needed it. In any case the COVID-19 crisis led to delays in constructing the new facility in Benin and in delivering components to both facilities, making it difficult to deliver on time.

Another challenge was insufficient commercial sales generated on the Burkinabe and Benin market. After five years of operations in Burkina Faso, we noticed that production capacity was higher than market capacity after taking into account increased competition from other solar product distributors. On top of that, LAGAZEL faced logistical and customs challenges for exportation across Africa. It is difficult for a facility in Dedougou (Burkina Faso) to sell in Senegal, for example, so targeted markets are limited to neighbouring countries.

LAGAZEL mainly sells B2B, and sales fluctuate depending on the time of year, making it difficult to secure long-term contracts for technicians.  In the future, LAGAZEL will need to diversify manufacturing activities in order to optimise material and HR resources.

Finally, the research study conducted by our partner IFSRA also highlighted some global challenges. There was strong competition at the local level from cheap, poor-quality products, and international quality certification standards do not take the specifics of local manufacturing into full consideration. The current security climate, particularly in Burkina Faso, was also a real challenge for the company to operate normally.

Q: Which objectives and targets did the project achieve – for the company, the sector and/or the geography?

A: We now have the capacity to produce locally a diversified range of quality certified solar products. We enlarged the range from simple pico PV solar lamps to more powerful solar home systems (SHS) and spare parts, such as bulblights and battery packs. Despite supply and logistics challenges, 470 Sobox SHS were manufactured and sold in Benin and Burkina Faso. We designed the tools internally for drilling and for moulding bulb metal sheets and plastic parts and a pre-series of 100 units of a new version of Sobox SHS were in progress at the end of project. We also implemented new software to improve purchase, stock and production management as well as quality and traceability.

Another big result was the opening of the second production facility in Benin. The facility was inaugurated in October 2021, creating around 10 permanent jobs. The facility is already a reference for training in solar equipment production in Benin.

We also set out to increase the local value of LAGAZEL products, and we developed our own bulblight PCB in order to increase local production. We developed prototypes of battery packs and equipped a local facility so it can assemble nude cells to produce battery packs. By the end of 2021, 950 bulblights had been manufactured in Burkina Faso and Benin.

We conducted R&D and created iterative prototypes in the field, including battery pack assembling without welding, a collective phone-charging station and power bank casing. Pre-studies and requirements specifications have also been defined for assembling PV cells with resin matter and for developing a marketing and communications unit. These two will require more funding to develop further.

Finally, through a partnership with the research association IFSRA, an in-depth study was conducted to assess the viability of local production and the project’s direct and indirect economic and social impact on the local community. The evaluation highlighted major impacts of the presence of the factories:

  • The creation of quality formal jobs with an effort to include vulnerable people
  • The creation of training opportunities at a local level, contributing to the national effort to increase qualified manpower in the solar sector
  • An improvement in living conditions for employees, retailers and end users. Replacing highly polluting and harmful products had a positive effect on health and education
  • The supply of sustainable products and quality and proximity services, including efficient after-sales and an R&D department that will help evolve the products and adapt them to local needs and problems
  • A local presence allows local demand to be met rapidly and reduces taxes and transport costs
  • Consumers are proud to buy local products, which fits perfectly into the trend for promoting “Made in Africa”
  • Replacing traditional oil or battery lamps leads to reduced CO2 emissions, less exposure to harmful fumes and fire risks and, thanks to the durability of the products, a reduction in waste.

Q. Was there anything you were unable to achieve?

A: Globally, we did not achieve the quantitative objectives we initially defined for the production of SHS, bulblights and battery packs. This was mainly down to construction and supply chain delays, but it was also because LAGAZEL produces quantities of SHS units according to demand, and demand was lower than expected. However, we are very satisfied with the qualitative results – a bigger range and better quality of products manufactured locally and a reduced production time.

Another limitation was on R&D, which was mainly conducted in France because of its proximity to our technical partners and suppliers. Testing activities in the field were reduced due to travel restrictions during the COVID-19 pandemic and feedback was mainly collected through videoconferences.

Q: What lessons have you learnt from the project implementation?

A: We learnt that local production per se is not a problem. LAGAZEL is able to produce high-quality products locally, teams are flexible and production time can be reduced (for example in Benin we have the capacity to produce more than200 SHS in five days). The challenges around local manufacturing are related to complex logistics and supply delays and exporting across Africa.

Another lesson is that conducting R&D is still a challenge when the economic and industrial environment is not favorable, as it requires regular back-and-forths between France and Africa.

And finally, the impact study highlighted some results we did not anticipate. Not only were jobs created and living conditions improved, but the study also emphasised the training opportunities that local facilities create. A significant number of trainees are regularly welcomed at both facilities. This needs to be more formalised so it can gain visibility with national and local institutions. Gaining this visibility is hugely important for the company, as, at the moment, we do not benefit from much local institutional support.

Q: How did PREO help in the success of the project?

A: PREO funding helped to launch a pre-series of new products and parts of off-grid solar products. It also contributed to the development of a new production facility in Benin and helped foster the sharing of experiences between teams from Burkina Faso and Benin. Finally, the project gave us the opportunity to conduct an external study to evaluate the impact of LAGAZEL local facilities that will be used in the future to advocate LAGAZEL’s local manufacturing model towards authorities.

The PREO funding was the only financial support we could find that was dedicated to the upstream elements of the off-grid energy value chain. As LAGAZEL is dedicated to local manufacturing, this grant was crucial to support our strategic development plan.

Q: What other transformative ideas or projects have you generated for the sector in the region? 

A: We have worked on replicating local production facilities in other geographies. In Senegal, LAGAZEL  has built the capacity of a training centre, PROMESS, to become a one stop centre for the establishment of other LAGAZEL  local assembly facilities in the region. This has been in operation since 2021 and aims to establish 50 other local stations across West Africa. In Mali,LAGAZEL is working closely with our main distributor to implement after-sales and repair services as well as local production/assembly capacities.

LAGAZEL would also like to offer sub-contracting services to other players in the off-grid energy sector for assembling or manufacturing operations locally in Africa. This topic was discussed with players including ENGIE and OffgridSun, Novea Energie and Fonroche, but no formal partnership has yet been established.

For more information visit www.lagazel.com

In 2015, all United Nation Member States pledged to end poverty and protect the planet by 2030, through a coordinated universal agenda that involved the 17 Sustainable Development goals (SDGs). Before the global COVID-19 pandemic hit, the estimated annual financing gap for meeting this agenda in developing countries alone amounted to $2.5 trillion. And, according to OECD Global Outlook 2021, this funding gap may have increased by another 70% driven by the necessity to divert financing to meet COVID-19 emergency response needs. This widening of the financing gap has highlighted the need to diversify finance flows and that by relying on public resources alone we risk failing to achieve SDG targets. There is an urgent need to attract private capital into the relatively young companies and emerging business models needed to deliver a just transition by de-risking their inflows.

Over the past two years, PREO (Powering Renewable Energy Opportunities) has demonstrated a blended financing approach in which donor capital is used to buy-down the demonstration risk associated with early-stage business models, thus lowering the investment risk and improving the risk-return profile for incoming private capital investors.

PREO is a €20 million progamme co-funded by the IKEA Foundation and UK aid via the Transforming Energy Access platform, that deploys high-risk catalytic grant capital – along with technical assistance, knowledge management, data platforms and strategic engagement advisory services – to demonstrate the viability of productive use of energy (PUE) business models in sub-Saharan Africa.

PREO has successfully used blended finance to support innovative PUE enterprises which were struggling to raise finance during their business model demonstration phase. The innovators are able to direct the PREO grant funding to cover the CAPEX of initial field units, cover operational expenses, build capacities, design information systems and generally to absorb unit-level losses to ensure financial sustainability. As a result, the innovators successfully demonstrate positive unit- economics, refine and improve the business model, and gather critical business data needed back up the business plan and attract sufficient commercial capital that would otherwise materialise far more slowly.

One of the companies that successfully went through this process is SokoFresh, a business built on the belief  that the barriers to providing accessible cold storage to smallholder farmers are not down to technology, but down to the business model. SokoFresh built a market-linkage service layer over and above the cold storage service, transporting the produce to markets and selling it through pre-agreed contracts to buyers on behalf of smallholder farmers. When SokoFresh applied for PREO funding and support in 2019, the company was just out of the concept phase and had identified the technology partners, value chains and the regions. PREO helped SokoFresh to procure the cold storage technology, build a Minimum Viable Product (MVP) for its market-linkage platform, and get the concept from paper to reality. SokoFresh onboarded around 1,500 smallholders, traded more than 110 tonnes of produce, demonstrated reduction of post-harvest losses to less than 2% vs a 30% baseline, and collected critical unit economics data.

SokoFresh

The evidence and data collected through the PREO project, enabled SokoFresh, to raise €892,676 in scale-up capital from both performance-based and private sources, generating a leverage of 5.2x on the PREO funding.

Overall, of the 12 enterprises (two of which are non-profits) that PREO supported in 2019-20 period, seven have successfully raised scale-up capital amounting to €15.6m, generating an average leverage of 7x on the €2.26 million disbursed in the form of grants.

Another big step for the 2020 cohort was in e-mobility, where PREO supported OPIBUS and MobilePower. In November 2021, OPIBUS, the largest manufacturer of electric vehicles in East Africa, raised growth capital through a $7.5 million round, which at the time was the largest fundraise ever in e-mobility in sub-Saharan Africa. Today, OPIBUS is developing products in three main sectors – electric motorcycles, electric commercial vehicles and charging solutions –, and PREO played an instrumental role in rolling out its first batch of 150 e-motorcycles. OPIBUS used PREO grants to get the e-motorcycles to the market as quickly as they could, test the user perspective of the product, build local supply chain ecosystem, invest in product design, and improve manufacturing capacities. During the project period staff headcount grew from 37 to 90 with 91% of Kenyan employees and 40% women.

OPIBUS

Within the e-mobility sector, companies supported by PREO adopted a variety of promising business models, to achieve shared goals of improving health and reducing emissions. While OPIBUS aims to become the largest manufacturer of e-vehicles in Africa, Mobile Power, is building a battery management platform that it could lease out to e-mobility companies.

MOPOMAX developed by MobilePower

With funding from PREO, Mobile Power developed a multi-purpose 1kWh battery called the MOPOMAX and successfully demonstrated its e-mobility use case in Sierra Leone by rolling out 17 e-motorcycles powered by solar in off-grid and weak-grid areas. In addition to e-mobility, MOPOMAX is gaining traction in use cases such as diesel generator replacement, energy access, and powering productive use equipment. Data gathered from the PREO project has helped Mobile Power mobilise €5.5 million in growth capital including a £1.9 million in Series A funding lead by Camco REPP and RBF from Beyond the Grid Fund for Africa (BGFA).

In addition to supporting early-stage enterprises, PREO, also supported more established businesses that sought financing for demonstration of new business models.

Simusolar

Simusolar, a Tanzania based distributor of irrigation equipment that had already sold more than 600 solar water pumps, wanted to demonstrate a business model that can catalyse the pace of customer acquisition by partnering with established players in agricultural value chains. The idea involved using a cooperative’s hubs as demonstration sites for solar water pumps and giving the hub’s staff the tools needed to convert coop members to customers. Though Simusolar faced initial challenges in the coffee value chain, it successfully set up its operations in Uganda and sold 186 solar pumps by replicating the model in horticulture, livestock, and dairy value chains. Demonstrating its ability to work with agricultural value chain partners and its capacity to scale up operations in a new market proved critical to Simusolar in raising $ 1.5 million in debt from ElectriFI.

InspiraFarms

PREO also supported InspiraFarms, a cold storage market leader with operational track record in central packhouses to rollout and demonstrate a first-mile mobile pre-cooler unit. The technology uses forced air pre-cooling to rapidly reduce the field heat in the produce, intervening immediately post-harvest, when the quality of produce drops disproportionately with time. Through the PREO project, InspiraFarms demonstrated to exporters that the use of its mobile pre-coolers can lead to a 16% increase in monthly earnings and for investors that the unit-level payback can be less than five years.

In addition to successfully blending private capital with donor capital over different transactions across different timelines, PREO is also seeing an encouraging trend in which public capital funded projects are positively influencing private capital investment decisions.

Koolboks off grid solar refrigerators for fish traders Nigeria-
Koolboks

In 2021, PREO funded Koolboks, a manufacturer of solar-powered freezers equipped with PAYG technology. Having started in 2020, Koolboks quickly expanded to 14 countries and sold more than 1,000 units but did not have a B2C sales model. Initial attempts to partner with a financial institution in Nigeria to finance the end consumers faced challenges due to lack of sufficient credit history among borrowers and the lengthy approval process. With PREO funding, Koolboks directly validated the product market fit for the B2C segment, developed a customer acquisition strategy, and started financing the sale of units from its own balance sheet. In the short span of nine months, Koolboks sold 219 units through a B2C sales channel in Nigeria and achieved a consistent on-time repayment rate of 97%. This better-than-expected pilot performance along with the demand intensity experienced among the pilot customers during the field visit encouraged private investors to catalyse their investment decision in the recently concluded $2.15 million Series A round in Koolboks. In addition, the private capital providers who were initially drawn by the B2B model have become supportive of the B2C model developed through PREO, even committing to meet follow-on financing needs and acknowledging B2C as the key growth driver for their investment.

PREO, in addition to using grants, has also deployed Technical Assistance (in-kind) across its portfolio and other companies to address knowledge gaps, to improve the business viability of the companies, and enhance potential investment performance for private investors.

By using catalytic grants and technical assistance as its instruments, PREO has attracted €20.6 million in scale-up capital primarily from commercial investors (on top of the €10m that the grantees contributed to the project demonstrations) into bankable projects that were otherwise considered too risky. In doing so, PREO has demonstrated how public capital can be deployed to attract commercial capital and how the blending can happen over different transactions, while extending the reach and effectiveness of the co-finding by the IKEA foundation and UK aid via the Transforming Energy Access platform.

M-KOPA is a Kenyan connected asset financing platform that provides underbanked customers in Africa, lacking access to formal credit for their business needs, with products such as solar lighting, televisions, fridges, smartphones and financial services.

To address some critical gaps in the market, in January 2020 M-KOPA designed a package of products consisting of an IoT-lockable smartphone powered by a solar home system, bundled with business management tools and low-cost internet connectivity for micro, small rural businesses in Kenya.

M-KOPA initially intended to use their PREO funding to support a trial of this bundled product and service offer to grow their business. However, the onset of the COVID pandemic disrupted their original plans to roll out the full package of services, as it would require a significant on-the-ground presence and face-to-face training. Instead, M-KOPA developed a new strategy that the company could implement remotely. They redesigned the product as the ‘Micro-Biz Bundle’, consisting of a solar home system (including a solar-powered TV and lights) and a smartphone coupled with an electronic voucher (e-voucher) to the value of $50.

The bundle was sold on a pay-as-you-go (PAYG) basis to small rural businesses in collaboration with an online e-commerce platform. The aim of this redesigned pilot was to enable small businesses to gain access to affordable business stock through the platform, build competitiveness through the adoption of e-commerce and unlock access to business credit and energy. The pilot targeted 100 small rural businesses and M-KOPA leveraged its existing network of sales agents to reach enterprises such as general stores, grocery shops and agribusinesses, while at the same time ensuring gender balance in ownership of the enterprises.

This was M-KOPA’s first PAYG multi-product bundle. Despite the tough business environment, M-KOPA sold over 40 Micro-Biz Bundles in four locations in Kenya. 

PREO has interviewed Rebecca Glas, Project Manager at M-KOPA, to capture the lessons learned from the implementation of the project.

Q: Could you tell us how COVID-19 led to the change in the project’s scope, design and implementation strategy?

A: The project faced initial implementation delays of several months due to the pandemic. We had to pivot away from face-to-face market research towards desk-based research and phone-based customer and provider interviews. Moreover, the original package of business management tools demanded a high level of digital skills from the customer, so the customers would have required sufficient in-person training to use them effectively, which the company was unable to provide under lockdown. We therefore decided to change the focus of our project to an e-commerce solution as this required lower-level digital skills, while also providing businesses with credit through the e-voucher that allowed them to purchase business stock from the online e-commerce platform. 

Ongoing COVID-19 restrictions meant the project also faced further difficulties in ongoing implementation. It largely prevented travel by team members and therefore limited in-market activation and engagement. As a result, we had minimal engagement with customers and sales agents which delayed customer uptake and insights gathering. It meant we also had to choose our pilot location based on where we had active team members on the ground, which was not the most suitable location for our e-commerce partner.

The economic hardship faced by Kenyan small rural businesses during COVID also had an impact on uptake, given the relative high cost of the bundle compared to what the customers could afford to pay.

Q: What challenges did the project face during the rollout of your Micro-Biz (e-commerce) Bundle?  And how did you overcome these challenges?

A: Apart from the COVID-related challenges mentioned above, the project also needed to tackle further issues:

M-KOPA systems & technical backend: this was M-KOPA’s first multi-product bundle offering on one PAYG payment plan. This meant a significant amount of set-up and troubleshooting on M-KOPA’s backend systems was needed to enable the launch of this product.

Partnership: we faced initial complications with our e-commerce partnership. We had to select Eldoret, a town in the Rift Valley region of Kenya, because we had an active team on the ground there to facilitate the pilot implementation during COVID. However, our partner did not have active operations in this location, though it was on their pipeline. We therefore had to troubleshoot by using M-KOPA’s supply chain for part of the delivery which caused some delivery delays at the start of implementation.

Location: we started the pilot in Eldoret as it’s a market where we have a strong footprint and an active team. However, the demand for solar home systems was low because most of the targeted businesses operating in Eldoret are connected to the national electricity grid. We therefore decided to expand the pilot to three additional locations that were more rural and off-grid. This strategy proved effective and uptake peaked as a result.

Pricing: Even after rolling out to more locations, sales were still slower than we had hoped. After testing the roll-out for a couple of months and conducting more research on the demand and uptake barriers, we decided to lower the upfront deposit paid by customers to enable a higher uptake. This stimulated a higher demand for the bundle across all locations.

Q: Which of the planned objectives and targets did the project achieve for M-KOPA, the small business owners and their communities?

A: We’re proud to say that despite the challenges we managed to achieve many impressive results:

Use of solar home system: the businesses primarily used the solar home system (solar TV and lights) in their own homes and not at their business premises as originally intended. However, customers found the solar TV and lights to be highly beneficial products for their whole family, providing access to information and education for them and their children, which was particularly important as schools had closed during the pandemic.

Productive use of the smartphone: The bundled smartphone was used daily for business and personal use. The main benefits are communicating with suppliers and customers, making mobile money transactions, sharing photos of products alongside the ability to access e-commerce platforms.

Access to credit via the e-voucher: The e-voucher was used to purchase household items from the e-commerce platform rather than business stock (which was the original objective). However, the e-voucher provided households with approximately 2 months of savings that could be injected back into the business, providing businesses with critical cash flow for business operations. Despite the low digital literacy levels, 88% of customers on this project used an e-commerce platform for the first time, showing the transformational impact that the e-voucher had for their businesses and households, and the potential that recurring e-vouchers could have for e-commerce serving MSMEs or households.

Q: How did PREO accelerate the success of M-KOPA in commercialising its first bundle?

A: Through PREO, M-KOPA was able to design and roll-out its first e-commerce product bundle, an innovation which wasn’t on our initial commercial feasibility pipeline due to other business priorities and constraints. It would not have been possible without PREO funding which helped us test and roll this out much sooner by de-risking the cost and allowing for more in-depth market research and testing, which was critical to designing a bundle tailored to the needs of small businesses.

Q: What is it that you were unable to achieve and why?

A: We were unable to hit our original target of 100 business customers served. This is primarily due to the project delays and complications faced caused by COVID which shortened our product launch and roll-out timeline, and meant we were not able to engage with sales agents and customers in the market as comprehensively as we would have liked.

A secondary reason is the narrow customer segment the project was targeting due to the product specificity and high cost of the bundle, which was driven by the inclusion of the solar home system. This meant our sales agents had to identify businesses that had a need for all three products in the bundle along with the available capital to afford it. This led to a slower uptake, particularly before we branched out into more areas.  The affordability barrier was compounded by the financial hardship faced by small businesses in Kenya due to COVID.

Q: Which valuable lessons has M-KOPA learned from the project implementation? Which lessons have you learned that would help you and your peers to scale the bundling of products in the sector? 

A: Findings from the Micro-Biz Bundle pilot would indicate a low demand amongst small rural businesses for solar lighting as a productive use product i.e. to extend business operational hours. However, I’m not convinced this is an accurate picture as these findings were skewed by the fact that some of the customers in the main pilot location of Eldoret already had a grid connection. In addition, all the surveyed businesses experienced COVID curfews which limited the possibility of extending business operational hours anyway. However, a PAYG bundle of smartphone plus digital financial services and e-commerce showed a stronger potential to unlock access to capital, markets and services for income generation and business growth, as long as customer digital literacy levels are improved through training.

We also found that the value customers receive from a PAYG e-commerce voucher is significant. However, many business owners will not have used e-commerce before and will need additional support and digital skills training to use it effectively and repeatedly. This upskilling should be worked into the implementation plan so that customers can unlock the full benefits of e-commerce and digital financial services.

To effectively deliver an e-commerce solution, the partnership is critical. The e-commerce partner needs to have a strong operational footprint in the active markets to enable the efficient processing and delivery of goods to the customer, and so provide the highest value and create the most impact.

We know that customers appreciate multi-product bundles because they can receive more products and benefits at once, and so feel they are receiving better value for money. However, the multi-product bundles also come with a higher overall price, as compared to other MKOPA single products, even when providing it on a PAYG model which makes it more accessible. So the product selection and price point should be carefully considered and tailored to the customer segment. A less-is-more approach would be wise, starting with bundling only two products to lower the bundle cost which is the main access barrier for first-time customers.

Q: What is the project’s potential to open e-commerce opportunities for rural retailers and suppliers?

A: The insights gained from the PREO project have been instrumental in forming M-KOPA’s approach to the future roll-out of e-commerce products. This is a particular area of interest for us since the demand for our PAYG smartphone continues to grow across our markets, and M-KOPA is exploring additional digital financial service offerings for smartphone customers.

For more information visit m-kopa.com

How-Simusolar-leveraged-PREO-funding

Simusolar is an agricultural equipment company providing solar-powered water irrigation pumps to smallholder farmers in East Africa. Given that only 3% of farmers in Tanzania and Uganda currently have access to irrigation technology, with the vast majority using inefficient, high carbon diesel pumps, Simusolar’s water-pumping solutions have the potential to sustainably increase productivity, as properly irrigated crops achieve higher yields and allow farmers to grow additional harvests during the dry season. Through many years of experience of working with smallholders, Simusolar has identified ways to make their products affordable to low-income farmers.

With the aid of funding and technical support from PREO, Simusolar has expanded from Tanzania into Uganda, where the company has managed to set up innovative distribution partnerships and engineer solutions that use surplus energy from solar water pumps.

PREO recently caught up with Marianne Walpert, Co-founder of Simsusolar, to reflect on her project experience and to identify key learnings for the benefit of the sector.

Q: What were the objectives at the start of your PREO project and how did you plan to achieve them?

A: We initially proposed a project to PREO to experiment with a business model whereby the last-mile delivery of solar water pumps is transferred to a farming collective. In this model, Simusolar would hand over the products and sales tools to the farming collective and build their capacity to market and sell the solar water pumps, as well as provide after-sales services to the customers. Simusolar would supply the solar water pumps, offer financing to customers, track sales and quantify the economic benefit of this model for both parties.

The initial proposal was to start with the coffee value chain, as this has growing commercial value for smallholder farmers in Uganda and there is already a coffee cooperative with a wide network of smallholders and hubs across the country.

This cooperative of coffee growers expressed a strong interest in bringing our solar water pumps to their farmers. Initial indications suggested that the economics were attractive, with farmers increasing yields by 50% on average. Ten of their hubs would become demonstration sites to introduce solar water pumps to the farmers, and we would train the members of the cooperative to sell and, eventually, install the solar water pumping systems.

In addition, since the coffee farmers would not need 100% of the solar water pumps’ power year-round, we felt that there would be some aspect of the post-harvest coffee processing that we could power with their solar array when it was not needed for irrigation.

Q: What were the challenges you faced during the project implementation phase, and how did the business model pivot to reach the planned targets?

A: The primary challenge we faced was that, contrary to what we had expected, the coffee farmers were not able to realise significant revenue gains through the addition of a solar water pump, so the economics of the project at the farmer level were not very encouraging. Uptake of the solar water pumps was low among this large group of coffee farmers.

When this became clear to us, we instead decided to consider other agricultural value chains that had a higher demand for water and more frequent planting-to-harvest cycles. We found great potential in horticulture and livestock value chains, whose value proposition for solar water-pump systems appeared to be strong. We decided to focus on targeting partners with a good network of farmers in these value chains. These included Palm Corps, UCCCU, Omia Agribusiness, CEPA, Allison Consults, Vida Verda, Holland Green Tech, CURAD, EKR, Celebrate hope SACCO, Anuel Energy, Access Energy, FAIDAH and Spark Agro. We are grateful that PREO was flexible enough to support our strategic change of direction.

We changed the nature of our partnerships so that Simusolar would continue to control the sales tools and carry out demos through the partners’ field sites, while also managing sales, installations and payments. The partners would help build a pipeline of customers through marketing the solar water pumps, running demos in their field sites, and stocking the solar water pumping systems. The partners also provided some after-sales support to farmers depending on the technical nature of the support.

Since we were not working with coffee farmers, we also needed to revisit the add-on technology that would be viable in the market. After a market survey of our existing customers, we found that a PAYG water dispenser seemed to be the most valuable additional asset for our customers, so we set out to demonstrate that technology. For farmers, selling water to their neighbours gives them an additional revenue stream from their solar water pump system.

Q: What did you end up achieving through the PREO project? What have been the key lessons coming out of the project for the solar water-pump sector?

A: PREO funding and technical support enabled us to expand our solar water-pump distribution and service business into Uganda. We worked together with PREO on the completion of a market assessment which included analysing client data to identify opportunities for growth and formulating a viable business development strategy. This research and development stage

enabled us to learn a lot about which Ugandan agri-value chains benefit most from solar water pumps.

For example, farmer networks in Uganda have a wider reach and are more actively involved in agricultural activities than what we saw in Tanzania – an insight that has been invaluable as we penetrate the Ugandan market. Farmers in Uganda also have slightly different technical requirements for their solar water pumps, often dictated by the size of their farms and the depth of the water sources. We have seen a rise in the demand for smaller and shallower pumps than those we distribute in Tanzania. We have also learned a lot about quantifying economic benefits to farmers across the different value chains.

We are also very happy with the number of partners that PREO enabled us to engage. Over the course of the PREO programme, Simusolar (or Tulima Solar as we are known in Uganda) engaged more than 25 partner organisations that are helping us reach and educate farmers about solar water pumping technology. We are still learning about the economic benefits and value proposition of the PAYG water dispensers and hope to gather more data from the first five demonstration installations.

The knowledge we acquired through the programme enabled us to devise the following methodology:

Monitor solar water pump utilisation in water dispenser installations: Average pump utilisation is about 45% (pumps water 45% of the time to meet irrigation needs). The additional functionality of PAYG water increases pump utilisation as well as the farmer’s income. We will track utilisation and income over time.

Water usage tracking and reduction of water losses: For customers who are already involved in the water-selling business, the water PAYG capabilities minimise losses (spillage and theft) through remote monitoring and timely reporting. We will track income with PAYG vs income without.

Track additional employment through PAYG water: PAYG water creates direct employment through agents that sell water credits to customers. We will track direct and indirect jobs created through this service.

Report additional community water access points: Creating additional water points in the community gives more people access, helps prevent disease and increases overall community productivity. We will report water points before the business rollout vs after one year, two years, etc. against other impact metrics. 

Q: Venturing into a new market often comes with challenges What lessons have you learned in the two years that you have been operating in Uganda?

A: The biggest hurdle has been the initial education and customer acquisition effort for our business model and technology in Uganda. We underestimated the amount of time and financial resources we would spend to tell farmers about our unique offering and solar water pumps in general. We needed a substantial investment in market awareness to acquire the critical mass of early adopters that would spur growth. We believe we will get over this hurdle and greatly reduce customer acquisition costs in a couple of years at the current funding level.  The scale up can be achieved more quickly with more upfront investment.

The second notable challenge has been the country-wide lockdowns due to the Covid-19 pandemic. Restrictions in movement for the whole population have curtailed farmers’ access to markets. The has meant a decrease in farmers productivity and incomes, which has contributed to slower solar water pump adoption. A lot of leads we had signed up are waiting for an improvement in the economy before they make their purchase.

Lastly, government and NGO micro-scale irrigation programmes have distorted solar water pump’s prices in the market and eroded our traction for the past couple of years. Some customers have opted to make use of the subsidies (35% to 65%) these programmes offer. It would be nice to build in pricing flexibility for discounts or subsidies when we enter new markets in the future. 

Q: What demonstration effect did this PREO-funded project enable you to achieve, and what are the project’s outcomes?

A: The 10 demonstration solar water pumps we installed across Uganda helped us acquire four lead-generation partners that contributed to 16 of the 192 solar water pumps sales. The demos also helped us attract a USD 30,000 revenue-based financing with GIZ, which has been key in funding our customer-acquisition activities, and a B2B partnership with NEC (National Enterprise Corporation) AGRO SMC, which has signed a Memorandum of Understanding with Tulima Solar to purchase 2,000 solar water pumping systems over the next three years.

Virtually all of the solar water pumps sales made in Uganda are a direct result of the PREO funding, which enabled us to launch the business in Uganda.  In addition, the traction we have in Uganda has helped Simusolar to raise USD 1.5 million from ElectriFI to grow the business in both Tanzania and Uganda.

Q: What does the future hold for Simusolar in terms of serving the agricultural sector in sub-Saharan Africa?

A: Simusolar and Tulima Solar will continue to develop the market for solar water pumps in Tanzania and Uganda. We will be looking for additional partners in these countries and will look to expand into other countries when the conditions are right.  We are continuing to raise equity and debt and see a very big potential for growth in the productive use of energy sector. We will continue to expand our product offerings to develop financed, solar-powered equipment that will bring income-generating capacity to the off-grid communities in sub-Saharan Africa.

For more information visit www.simusolar.com

4R-Digital-aims-launch-affordable-solar-water-pumps-kenya

4R Digital aims to launch affordable solar water pumps and irrigation kits in Kenya, with water equipment supplier partners Davis and Shirtliff.

In Kenya, smallholder farmers produce the majority of the food supply, but most rely on increasingly unpredictable rainfall for irrigation. However, formal finance providers have long been averse to extending credit to smallholder farmers because they are perceived as high risk. Without tailored financing, most smallholder farmers are unable to access the solar irrigation that could almost double their daily income.

To address this challenge, 4R Digital is partnering with Davis & Shirtliff to adapt their business model to bring high quality solar irrigation solutions within reach of smallholder farmers in Kenya. Specialists in developing digital micropayment solutions that enable credit sales, 4R Digital will build a payment platform that offers credit for solar irrigation equipment on flexible and affordable terms, suitable for smallholder farmers. The platform will also allow for remote monitoring and locking of the equipment whilst providing full visibility to customers of their own financial data through the account management system.

The project will support up to 35,000 farmers in Kenya to replace unsustainable and inefficient hand, petrol and diesel pumps with modern smart solar water pumping systems. Davis & Shirtliff has a pre-existing range of solar pumping kits, the Sunflo Solar Pumping Systems, consisting of panels, a controller and a pump. The digital payment and monitoring platform designed by 4R Digital will be incorporated into the pump controller providing a payment facility.

Funding from PREO will enable the development and trialling of a digital PAYG platform suitable for the sale of solar water pumps and irrigation equipment to smallholder farmers. Ultimately, the partners hope this project will lay the groundwork for launching a commercially sustainable new water management company called New Water Management Company (NWMC) that can provide asset financing and solar water pumps to smallholder farmers more widely across the region.

Read more about 4R Digital: www.4rdigital.com

Read more about David & Shirtliff: www.davisandshirtliff.com

Powerhive Kuku Poa Project aims to solarize poultry production and create new opportunities for small holder farmers in Kenya.

The poultry industry in Kenya is dominated by large-scale production companies. For most small-scale farmers poultry production remains a subsistence activity. Even if commercial poultry off-takers (purchaser of product) were interested in supporting smallholder farmers, local brooders would be unable to fulfil their requirements without a reliable energy source along the value chain. Powerhive has seen this gap as an opportunity to create viable offtakes from small-scale, regulated producers powered by renewable energy.

In order to support rural farmers, commercial off-takers of poultry supplies are exploring ways to purchase from rural farmers while still ensuring the quality of the chickens purchased, which requires reliable energy at every stage of the value chain. Powerhive’s Kuku Poa project will not only deploy renewable energy solutions to modernise the entire small-scale poultry production process— from the hatching of the egg through to the rearing of the chicken – it will also create partnerships with financial and input suppliers, as well as commercial buyers to integrate small-scale farmers into the mainstream poultry market.

Funding from PREO with enable Powerhive to work with local farmers on the construction of brooder houses. It has also established partnerships with companies such as Sigma Feeds and Insinya to ensure farmers can secure high quality inputs such as chicks and feed; as well as connecting farmers to a financial services provider that will extend the credit they need to purchase the inputs. The company is also facilitating the training of chicken brooders, monitoring poultry processing, and guaranteeing the sale of mature chickens. Through their participation in this project, small-scale rural brooders will see a significant boost to their quality of life as it has the potential to triple their income. This improvement in income will, in turn, benefit their families and local rural economies.

Read more about Powerhive and Kuku Poa: powerhive.com/about/

The digital finance solutions agency 4R Digital is set to receive €198,000 funding from PREO, the Powering Renewable Energy Opportunities programme, for a partnership project with water equipment supplier Davis & Shirtliff. The project seeks to address the need for high quality, affordable solar water pumps and irrigation kits amongst small-scale producers in Kenya.

Davis & Shirtliff are well-established suppliers of solar irrigation equipment in sub-Saharan Africa, but have so far struggled to penetrate the potentially huge market of smallholder farmers. In Kenya, smallholder farmers produce the majority of the food supply, but most rely on increasingly unpredictable rainfall for irrigation. However, formal finance providers have long been averse to extending credit to smallholder farmers because they are perceived as high risk. Without tailored financing, most smallholder farmers are unable to access the solar irrigation that could almost double their daily income.

To address this challenge, 4R Digital is partnering with Davis & Shirtliff to adapt their business model to bring solar irrigation solutions within reach of smallholder farmers. Specialists in developing digital micropayment solutions that enable credit sales, 4R Digital will build a payment platform that offers credit for solar irrigation equipment on flexible and affordable terms appropriate to smallholder farmers.

During the initial phase, the project will support up to 35,000 farmers in Kenya to replace unsustainable and inefficient hand, petrol and diesel pumps with modern smart solar water pumping systems. Davis & Shirtliff has a pre-existing range of solar pumping kits, the Sunflo Solar Pumping Systems, consisting of panels, a controller and a pump. The digital payment and monitoring platform designed by 4R Digital will be incorporated into the pump controller providing a payment facility. By tailoring payments to the agricultural or income cycles of the individual farmers, the initial phase will develop and test different plans to reach an understanding of the farmers’ ability to repay loans and the extent to which seasonality and harvesting affects the payments.

Funding from PREO will enable the development and trialling of a digital PAYG platform suitable for the sale of solar water pumps and irrigation equipment to smallholder farmers. Ultimately, the partners hope this project will lay the groundwork for launching a commercially sustainable new water management company called New Water Management Company (NWMC) that can provide asset financing and solar water pumps to smallholder farmers more widely across the region.

4R Digital is the second Partnership Services project to receive PREO funding in order to maximise its potential. PREO is co-funded by the IKEA Foundation and UK aid via the Transforming Energy Access platform. The Partnership Services initiative aims to build, fund and support three corporate organisations for the purpose of developing mutually beneficial partnerships in their sub-Saharan African value chains. Their productive use of energy will bring with it social and economic benefits such as improved earnings potential, job creation, empowerment of female rural workers, localisation of value-chains, as well as more profitable and reliable supply chains for these corporate actors. PREO has allocated a total of €580,000 for funding Partnership Services projects.

Read more about 4R Digital: www.4rdigital.com

Read more about David & Shirtliff: www.davisandshirtliff.com

Up to 50% of all horticultural produce in Kenya fails to make it to market due to lack of cold storage facilities, which are often unaffordable to smallholder farmers. Not only does this affect their ability to earn a decent living, but it also has an impact on the country’s food security.

In an effort to reduce post-harvest losses, Kenyan company SokoFresh is offering solar-powered off-grid cold storage services that smallholder farmers can afford.

Through PREO funding, SokoFresh has piloted farm level cold-storage as a service, coupled with a digital market linkage platform to integrate small and medium scale farmers into professional value chains. This mobile cold storage solution and pay-as-you-store business model, gives farmers, traders and exporters a risk-free opportunity to safeguard the quality of their produce and increase their bottom-line.

PREO has interviewed Paul van der Linden, Region Director East Africa & Head of FoodFlow Program at SokoFresh, to find out how the piloting of two off-grid cold storage units and a market linkage platform in Kenya has enabled the company to develop a scalable, replicable and financially sustainable business model making it a reality for thousands of low-income farmers in Kenya.

SokoFresh – Project Closure Q&A

Q: What were you hoping to achieve with the PREO support, and do you feel it helped you achieve your objectives?

A: Support from PREO has been crucial in the start-up of SokoFresh. SokoFresh was ideated by Enviu after a thorough issue analysis on food systems in Kenya. One of the key market inefficiencies that we identified was the lack of access to cold storage, and access to market to capitalise on professional cold chains. The problem was not in the availability of a viable technology, but in figuring out a business model that makes the technology accessible, affordable and reliable for rural smallholders. Our solution involved setting up a one-stop shop for cold storage, transportation, and market linkage to replace a multitude of intermediaries, thereby achieving reduced food loss, improved shelf life and a 100% traceable supply chain.

Through a feasibility study we validated our above understanding, determined the ideal value chains and regions to start in, and the partners to kick-off with. Coming out of the research phase, PREO gave us the opportunity to actually set up the first pilots. We were able to purchase the first 2 cold storages with PREO funding, build an MVP for the market linkage platform, and get the concept from the paper into reality. Once we were up and running, it was quite easy to convince others of the need and viability of what we’re doing. PREO was absolutely catalytical to proving the concept in real-life and bringing us to the next stage.

Q: Can you describe the different approaches you devised for the B2B and B2C business models (explaining the critical differences)? What were the main challenges that you faced during the project implementation phase in both B2B and B2C markets?

A: Our key focus is on increasing the income of smallholder farmers and reducing agriculture’s strain on the environment, by eliminating post-harvest losses. Since ~80% of produce in Kenya and most of Africa is grown by smallholder farmers, we’ve focused on developing a business model that works for this target group. As smallholder farmers are often cash-strapped, it’s impossible for them to move away from brokers who pay on the spot, to quality off-takers who pay more, but later. Let alone for farmers to invest in proper aggregation and logistics to ensure they get the highest price possible for their produce. Therefore, we have designed a cashflow positive experience through which farmers are paid immediately when they store the produce in the cold storage. Then, after we transport the produce to the market and sell it to buyers, we deduct our fee for the services and transfer the remaining amount to the farmers.

With this full-service model (B2C) we facilitate trades through our market linkage platform and charge a fee per kg for cooling and logistics. Within the B2C model, SokoFresh’s hub operators manage the cold storage, farmer engagement and harvest throughputs.

While developing this concept, we also got a lot of requests to lease out units to value chain players such as exporters and Agro processors who work with groups of smallholders through contract farming schemes. This is where we also developed a B2B proposition, where we customise the cold storage unit with value chain-specific, optimal operational parameters for the client – often an exporter, processor, or wholesaler. This includes optimal temperature and humidity, and aggregation and storage protocols, as these are different for each value chain. With the B2B model, the client mostly manages the cold storage themselves.

Q: Focusing on the B2C model, what are your key achievements from the project? Can you provide specific impacts? (Please explain the impact at the company’s level, the farmers’ level (growth, income) and at the industry level)

A: We were able to validate the financial model, commercial viability, willingness to pay, and scalable operations model. During the project we have onboarded ~1,500 smallholder farmers in the avocado, mango, and French bean value chains. We traded over 110tn of produce for them through the platform and using cold storage. With these trades we had less than 2% post-harvest loss, compared to 30-40% that’s common in horticulture value chains, and increased their income after costs with an average of 20%.

Q: We understand that market linkage was your USP in attracting smallholder farmers. What success have you had to-date in building this service offering, and how do you plan to scale it up?

A: Absolutely, farmers won’t use cold storage unless they are sure that they will earn back the costs of it. Therefore, providing market linkage to buyers that value quality is essential. We have trialed cold storage solutions for export, processing, wholesale, and retail. Initially it was quite challenging as each crop has unique harvesting, aggregation, storage and logistics requirements, and each buyer unique quality requirements. After the initial trials our team has become quite the expert in our core value chains of Avaocado, Mango, French beans, and we could start building up volume. We’re currently harvesting over 10tn of produce per week, building up to 30tn per week in peak season this year. As a first mover we had to prove the value of our services and the impact on the quality of the produce, which is now clearly converting into more and larger orders.

Q: With your B2C model, what experience did you have focusing on different value chains. What challenges did they pose and how did you overcome them?

A: We have chosen to first focus on avocado, mango and French beans value chains. The reason is that cold storage has a lot of value for these crops, the margins are reasonable, the volumes are growing and their combined seasonality builds up to year-round utilization. We learn by doing, so I can definitely say we made a lot of mistakes the first time. Mistakes led to opportunities, like the time when we supplied an exporter and 90% was rejected, after which we had to quickly activate the retail market to not let anything spoil. This became the start of linking farmers to the retail market. We’ve also learned a lot about the correct processes for harvesting, storing and logistics. By now we have a very skilled team, and excellent partners to figure out the needs for new crops. This is why we’ve comfortably added bananas to our portfolio in the last months and are exploring a couple of new use cases.

Q: How did PREO support help to de-risk and prove your B2B and B2C business models? How will this help your future business development strategy, and can you share details of your fundraising plans?

A: We had a very solid plan and feasibility study, but it was all on paper. Not yet a moment in which an investor or debt provider dares to step in. By allowing us to set-up the demo sites, do the first pilots, and prove the actual operations and commercial viability, PREO support helped us to get to investment readiness since we were able to gather critical business and operational data through the PREO project. Because of it, we’ve been accepted by EEP to scale up our demonstration efforts, started an origination trajectory with Dutch Fund for Climate and Development (DFCD) that will provide us with scalable debt finance, and soon will close our first seed investment.

For more information visit www.sokofresh.co.ke