Written by Akachi Obijiaku
Access to electricity in Africa is poor; over 45% of sub-Saharan Africans (almost a billion people) are without energy access. Current deployment rates suggest that it will be 2080 before every African has adequate access. Further compounding the problem is that over 60% of the energy supply in Africa is from fossil fuels, while just about 1% is made up of wind, solar and geothermal sources. Innovative government-supported (but not necessarily government-run) financing options and entrepreneurial initiatives might prove to be beneficial in sparking change.
To avoid the deleterious effects of carbon-intensive economic growth, there will need to be an energy revolution in the region, one which is smart and dependent on client-resilient infrastructure and the plentiful renewable energy sources. A diversification of energy sources seems crucial at this point, and off-grid solar solutions are becoming increasingly relevant. Some leaders, like Oxfam’s executive director Winnie Byanyima, are going a step further and calling for African economies to be explicitly designed to achieve the wellbeing of the people as well as the environment. Such climate-smart measures will increase access to energy, provide jobs, and reduce environmental pollution.
Local entrepreneurs have already designed practical solutions and are seeking out opportunities in this space. Examples are Off-Grid Electric in Uganda and M-Kopa Solar in Kenya. At the root of their operations lies the production of cheap and environmentally-sustainable power sources which can support personal and domestic activities (for example, cooking and charging digital devices). With projections of an increasing dominance of solar energy in global electricity mix, African entrepreneurs are in an ideal position to gain from the opportunities available.
A potentially transformative way in which local entrepreneurs can finance their renewable energy businesses is crowdfunding. According to Simon Bransfield-Garth of Azuri East Africa, a commercial provider of Pay-as-you-Go solar systems to rural off-grid communities, crowdfunding has the potential to provide a new class of capital for energy access. Azuri itself used crowdfunding when it became actively engaged in an electricity initiative that required solar panels to be sold to thousands of homes in Kenya.
Sweden-based TRINE is an example of a crowdfunding solar energy platform that connects international investors with solar power entrepreneurs in East Africa; as of December 2016, the company had raised over $350,000 to towards multiple projects in Kenya, Tanzania, Uganda, and Zambia. Other crowdfunding platforms include Kenya’s M-Changa, where entrepreneurs and their teams can easily start fundraising projects via SMS; ‘Solar Kwa Wote’ is an example of an M-Changa initiative which met its fundraising target of $58,000, in order to distribute affordable solar lights. By drawing up funds from like-minded members of the public, local entrepreneurs can tackle the problem of lack of seed finance, which is not uncommon in Africa, and bypass institutional red tape that they are faced when going through traditional providers of finance.
Even though crowdfunding in Africa is limited compared to other regions, as AlliedCrowds research shows, it is expanding at a rapid pace and becoming ever more important in the search for entrepreneurial finance. In East African nations, crowdfunding is growing (from a small base) by over 100% annually, and the World Bank estimates that by 2025, it will be a $2.5bn business in Africa. To address this increasing need for non-traditional capital, AlliedCrowds’s Capital Finder provides an insight into alternative funders in emerging markets; with Africa rising, the Capital Finder is much needed in an entrepreneur’s toolkit.
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