Reflections from the East Africa Partner Trip
Editor’s note: earlier this month, 17 Partners traveled to East Africa with members of our staff to visit several of our investee companies in the region. Brent Kessel was kind enough to share some of his reflections from the week-long trip. His thoughts from two of the site visits are included below.
Affordable Solar Energy – M-KOPA
At the current electrification rate of 23%, approximately 6.2 million households in Kenya lack access to electricity. This hinders productivity as it limits daily activities such as schoolwork, household chores, and business at night or in the early morning. This population incurs sizeable daily fuel expenditures, with three-quarters of Kenyan households spending nearly $0.50 on average (~20% of their income) per day on kerosene fuel.
The Acumen investee company, M-KOPA’s pay-per-use and purchase model spreads the price of a solar home system out over several months, allowing consumers to redirect wasteful daily spending on kerosene and other lighting sources towards gradual ownership of a better, solar-based system. Customers pay M-KOPA through small payments made through their mobile phone – a practice that is already widespread in Kenya. The M-KOPA solution is a high-quality solar home system that supports three LED lights and a charger to charge a mobile phone, which customers acquire with small daily payments by mobile phone.
To buy M-KOPA’s system outright is well out of reach for people earning around $5 per day. So their most popular pricing model includes a small deposit plus daily payments which are close to what they would be paying for kerosene anyway. After paying for 365 days of energy, they own the system outright.
They started selling in 2012 and have already sold thousands of units, with thousands more being sold each month. From what I could glean, the business model is very sound, so if they can keep their dealer network growing, they’ll have a bright future. A future that will be profitable for M-KOPA while providing clean energy at a price that is affordable to low-income households seeking a safer, cheaper alternative to kerosene.
Economic viability in war-torn Northern Uganda – GADC
Later that week, we chartered a small plane to fly to Gulu in Northern Uganda, where up until just two years ago, the Lord’s Resistance Army headed by Joseph Kony was coming to the end of its 20-year campaign of terror, child-soldier abduction, and genocide. We visited Gulu Agricultural Development Company (GADC), a cotton-ginning plant that was brought back to life and is now processing hundreds of tons of cotton a year which it buys from 30,000 farmers. Ninety-five percent of these farmers have lived in the Internal Displacement Persons’ camps, many for 20 years. The company had to re-educate them on how to farm sustainably, make a market for cotton, sesame, and red chilies, and get organic certification so it could pay bonuses to the farmers. These people’s lives have been restored by social enterprise, and they were singing and dancing their appreciation to us as we sat in the shade of a small tree in the sweltering equatorial sun.
Tim and Will, two Irishmen and fellow Acumen Partners with more expertise in agriculture than anyone I’ve ever talked to, were telling us over Tusker beers that night that improvements in agricultural productivity are the key to ending poverty in Africa. Their reasoning was simple. Seventy to eighty percent of the population is involved in agriculture, and a similar percentage lives below the poverty line in many countries. A century and a half ago, both the US and Europe had similarly high percentages of their populations in agriculture.
Notwithstanding any romantic notions of farming life, this was and is out of necessity. If you’re a subsistence farmer, you likely need the entire family working on the farm just to avoid going hungry. As soon as you’re taught how to rotate crops, you can bring in irrigation so your planting season isn’t limited to when the rains come. Additionally, when you learn how to increase yields, at least two things happen: a) you no longer need as much labor just to feed your family, allowing some family members to pursue other forms of income or education, and b) you have more income with which to pay school fees or improve the family’s healthcare.
Tim envisions an Africa in which a minority of the population is required for subsistence. And given that world population is going to be about 2 billion higher in forty years, Africa is well-positioned to become the breadbasket to the world.
On a final note, what surprised me most on my trip was the hope and willingness to work hard in so many of the people we met. I can’t help but feel that headway is being made, important lessons are being learned and shared, and dignity is being created. There’s still a very long way to go to reduce poverty throughout the region and continent, but with more investment and growth in social enterprises like those we visited on the Acumen Partner Trip, I’m sure that lasting solutions are close at hand.