The next frontier: where renewable energy and investment meet in Africa

The businesses supported with these funds were identified through a business plan competition organised by a Dutch NGO called the Business in Development Network. This competition, which occurred in late 2009 through mid-2010, resulted in grants and investments being made to eight social businesses.

Simon Collings, Chief Operations Officer at GVEP, explains the basic concept behind the programme: “We take enterprises with potential on a journey to strengthen them so that they can operate profitably and become attractive to investors. This initiative is different from typical charity grants: Barclays is providing seed funding for entrepreneurs who are aiming to create financially self-sustaining businesses which deliver social and environmental benefits, for example: energy services, waste recycling, and job creation. As well as the funding, GVEP is providing technical and business advice and support to the enterprises to give them the best chance of success.”

The eight selected businesses were provided with up to US$75,000 in funding through a system of ‘smart grants’.  Peter George, Manager, Energy Finance at GVEP, explains: “We believe this programme demonstrates that there is a role for early stage grant funding for businesses provided the funding is accompanied by coaching and technical support. That being said, these businesses and their underlying business models must be evaluated in the context of some level of due diligence, otherwise you will not be able to determine which businesses are likely to achieve success with the resources you commit.”

 

One business that was considered to have significant potential was AAES, a recent start-up focused on the Ugandan market. Its founder and CEO, Harry Nielsen, has 40 years’ experience as an entrepreneur in information technology. After a volunteer stint in Uganda, he decided to turn his energies to finding a solution to the country’s chronic load-shedding problem: the result was the Auto PowerStation, a product which allows electricity generated from a car’s alternator to be stored for use in the home when the grid goes down.AAES’ long-term goal is to expand and establish a production plant in Uganda – allowing the company to supply systems and training to surrounding countries while boosting employment locally.

An initial $15,000 grant from the fund was used to fund a marketing campaign and purchase a new demonstration vehicle which allowed AAES to take part in the Ugandan Manufacturers Association Trade Show, to an overwhelming reception. AAES then received a further $25,000 from the fund; allowing it to acquire computers and capital equipment, improve its website and develop a new range of products. Since initiating operations, the company has introduced new solar and inverter systems, all of which has led to an impressive doubling in sales each quarter over the past year. In Q3 of 2011 the business turned over $84,522 showing a profit for September and breaking even over the quarter. 

 

 

Harry is looking for investment to help him scale up the business to respond to the increasing demand. ‘In all my years in business I have never seen opportunity like this,’ he says. ‘We need additional working capital to take advantage of the demand.’

 

GVEP staff are working with Harry to try to help him find that investment.

 

The Clean Energy Company in Mozambique was another business selected for start-up funding. The company’s aim is to provide wind energy to remote off-grid areas in northern Mozambique with micro-wind turbines, developed and produced locally using recycled materials. The company’s founder, Jason Morenikeji, is passionate about using Mozambique’s abundant wind resources and appropriate technology to address the challenges of energy poverty and climate change and to offer pro-poor social and economic opportunities. To this end, the project seeks to promote sustainable local growth and bring about a lasting social impact by developing local supply chains and training people from communities leading to an improved local skill-base.

 

The company utilised the grant funding from GVEP to outfit a workshop, purchase a vehicle and expand their distribution network in the region. Jason is positioned his business to tackle the problem of chronic food insecurity in a region where 22.5% of children under the age of five are malnourished.

Jason explains the situation on the ground: “The food production is characterised by small scale agricultural inputs which produce modest harvests resulting in cyclical food shortages. Sources of income besides agriculture are very few, and this increases the vulnerability of rural poor people to natural disasters. In times of scarcity they have little to buffer them from food insecurity. From October to January - known as the ‘period of hunger - many subsidence farmers finish their family food reserves and apply survival strategies, for example reducing the number of daily meals, decreasing the quality of their food diet and selling their production goods”.

 

Jason’s project will involve the construction of a locally-produced 1kW wind turbine and a 200W solar array to generate enough energy to pump 5,500 litres of water per day per to 1,000m² of land which had previously been fed by rainwater alone. The 22 farmers in the Mipandi Farmers Association will be trained in basic maintenance of the system and will pay a rental tariff for its usage to cover additional maintenance costs. The farmers will also be trained in best-practice agricultural approaches such as soil conservation and agro forestry techniques to ensure crop sustainability. Excess energy produced by the system will be used to provide lighting for the community and to power a cold store freezer to allow food preservation.

 

The company has also provided indirect solar driers to farmers. This device, developed in conjunction with Helvetas and The NEMA Foundation, applies a constant temperature and adequate air-flow to remove moisture as quickly has possible from range of crops using a thermo-siphon collector and a separate drying chamber. The device has allowed farmers in the region to dry very large quantities of produce in hygienic conditions – reducing waste due to spoilage and making it possible to sell valuable fruit cash crops to more distant markets.

According to Jason, “Creating linkages between my locally fabricated micro wind turbines and rural food security through appropriate technology allows smallholder farmers who are traditionally dependent on long established farming methods and manual cultivation technique to cultivate crops throughout the year. I established The Clean Energy Company to develop intelligent innovation in renewable energy and appropriate technology to create a blue-print that can be used across Mozambique and other countries in East Africa to address this challenge”.

Where might all this lead in the future? Peter George has high hopes for renewable energy on the continent – and the wide range of positive impacts on communities. He reflects: “For someone like me coming from the traditional energy finance and investment world, this type of work is particularly exciting because there is incredible potential in these markets in general – we have reached a point where there is a lot of momentum that didn’t exist until now. There are more and more people and organisations trying to achieve both impact and financial viability, across the commercial-philanthropic spectrum. There are so many people who are interested in working in the developing regions of the world, and in particular Africa, and I think it is exciting that we have the potential to raise capital and make an impact on so many businesses which otherwise would not exist or be able to scale-up because they are not able to access traditional financing. With our combination of financial, social and environmental focus, I believe that we can effectively support many businesses which otherwise wouldn’t reach their potential, and more importantly see the impacts generated by that support.”