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Sunday 27, May 2018 by Jessica Combes

Electrifying the generations

 

Rural electrification is one of the biggest challenges facing African nations but Alexandre Allegue, Chairman and Co-Founder of Pawame thinks he has the solar solution

Founded in 2016 Pawame’s mission has been to provide affordable and accessible clean energy to people living in Sub Saharan Africa who do not currently have access to reliable energy. Since it began operations in 2016 the company has connected over 4,000 homes to solar energy in 14 counties across Kenya, its first country of operations. Pawame provides a variety of appliances via it’s pay-as-you-go financing model, from solar powered lights, to radios and televisions.

“We don’t sell solar panels nor electricity: we provide a full solution powered by solar, paid via mobile money through a ‘rent-to-own’ subscription. By acquiring customers with our solar home system, we collect as well reliable data to build a trusted credit history,” said Pawame Chairman and Co-Founder Alexandre Allegue.

The data the company collects on the customer’s credit history allows them to subscribe to additional services, such as micro health insurance plans or access to the internet. Pawame collects payments exclusively via M-Pesa, the ubiquitous Kenyan mobile money platform. Once a customer has made a payment through M-Pesa they will receive a code via SMS that they can enter their solar kit to activate it. This greatly reduces the risks and costs associated with handling physical cash.

“Pawame’s hardware technology is using high efficient battery solutions powered by solar through a ‘self-lock’ power controller that will only activate the kit for a specific duration, once the customer payment is received,” said Allegue. “The kit will then power our appliances designed for low energy consumption (lamps, USB slots, TV, radio, and more.)”

Approximately 62 per cent of the population in Kenya are classed as low-income (earning between $2 and $10 a day). Allegue stated that this is the market that Pawame is targeting. Whilst those earning over $10 a day are likely to be considering more high-end solutions, and those earning under $2 will not fit within Pawame’s pricing structure.

“The low-income segment is also one most likely to be relying on the dirty, expensive, and inconvenient energy and lifestyle alternatives that Pawame is seeking to displace—fossil-fuel based lamps, dry cell batteries, and centralised mobile phone charging—and for whom Pawame’s product therefore represents the most compelling value proposition,” said Allegue.

For a customer to become a Pawame subscriber they must first pay a $25 fee. The company decided on this figure as it provides a good filter for those that are likely to be able to continue paying into the overall subscription model, Allegue explained. Subsequent to this activation fee the customer then pays instalments on a daily, weekly or monthly basis. This price point, which can be as low as 50 cents per day, means that Pawame remains cheaper and competitive than existing technologies that it is trying to replace, such as kerosene lighting.

“By spreading the high costs of solar energy over time and allowing micro payments via mobile phones, the benefits we offer are life changing and demand has been stronger than our supply,” added Allegue. “Our business model overcomes a number of barriers that poor people face in accessing financial services. Small, digital payments better fit the unpredictable cash flow cycles of low-income households. The down payment encourages poor people to save for asset purchases and repayments create a credit history for poor consumers that may give them access to other financial services.”

THE CHALLENGE OF RURAL
This is not to suggest that the journey has been easy. The dual problems of financial inclusion and addressing the rural consumer have been issues that businesses have been working with for years already. The issue of sales alone has been a difficult one to tackle according to Allegue.

“We have tried multiple recipes, exploring different incentive plans, prices and geographies. Yet there is no single formula that solves it all. However, our accumulated experience on sales allows us to mingle very quickly with any new challenges and find the right solution to thrive,” said Allegue.

This issue is further confounded by the problems associated with working over multiple counties in Kenya with different languages, tribes and product requirements. Allegue points to the example that in the North of Kenya in Turkana customers were wanted water containers, whilst other regions favoured a refrigerator.

“The major energy hurdle in Africa is not only power generation, but transmission and distribution, which are usually governmental infrastructures. Due to multiple reasons, such as lack of funds required, or political stability in some countries, etc., a big majority of African countries will not see a full electrification through the grid happening soon,” added Allegue. “Moreover, the return on investment to connect remote and low-income communities will not make it viable for the private sector to step in.”

The potential growth for the pay-as-you-go market for energy in Kenya is huge. There are some eight million off-grid households in the country, noted Allegue, and industry players have only captured an estimated seven per cent of the market. He went on to point to the fact that the 48 Sub Saharan countries, excluding South Africa, currently generate an estimated 40 gigawatts of electricity—a figure comparably to that of Poland. The benefits that electrification will bring the continent cannot be understated.

Electrification levels are considered a key pillar when deciding on a country’s level of development as it provides a swathe of additional benefits, from entrepreneurship growth to social inclusion and higher education levels. This is in addition to the health benefits of moving away from current light sources like kerosene or paraffin.

“We believe that this approach, combined with the continuous drop of solar component prices (photovoltaic and battery storage) bundled with smart financing, will propel off-grid solar power to becoming Africa’s clean energy destiny,” concluded Allegue.

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