How to give households in the poorest and toughest-to-reach countries in sub-Saharan Africa access to electricity? How to do that, while also building a sustainable and thriving solar power industry in those markets?
Jiwoo Choi
Those questions are what the Hardest-to-Reach Initiative aims to address. Launched late last year by “patient capital” pioneer Acumen, the $250 million blended finance facility plans to give 16 sub-Saharan African countries access to electricity with off-grid solar energy. The goal is both to help Acumen-backed enterprises already providing solar energy in Kenya expand to these nations and to incubate small local companies.
“We realized if we could replicate our success in Kenya, we could make universal energy access a reality,” says Jiwoo Choi, Acumen’s Chief of Strategic Initiatives. Acumen invests in early-stage enterprises providing products and services to low-income consumers.
Building a New Industry
Back in 2007, Acumen started investing in companies providing solar-powered electricity, primarily in Kenya. To date, it’s funded about 40 enterprises which have provided energy access to around 235 million people. But many households in other sub-Saharan countries haven’t been so lucky. There, the electrification rate is low, especially in rural areas.
So, Choi and her colleagues decided to form a strategy for helping some of their existing portfolio companies to set up shop in more ‘harder-to-reach” nations in the region and to ensure they stick around. “When they go there, we also have to make sure they stay,” says Choi. That entails putting together a financing plan of 10 to 12 years—long enough to create a new industry and ecosystem. The initiative will also back high-potential local enterprises.
Overlooked Markets
The countries range from the Democratic Republic of Congo, Somalia, and Benin to Burkina Faso, Sierra Leone, Togo, and Zambia, countries where more than 500 million people lack access to electricity.
Investors have tended to overlook these markets for multiple reasons. First is the matter of operating environments. It’s tough to do thing from importing goods to enforcing contracts there. In addition, infrastructure is highly undeveloped, so reaching people in these markets is difficult. Also their currencies are weak. And a lack of stable governments and policies adds to investor perceptions that backing projects is risky.
With that in mind, investments will include a spectrum of capital, from grants to debt, to match each market’s requirements with investors and donors who have different levels of risk tolerance. The first participants are those willing to make the first and riskiest moves. Green Climate Fund, based in South Korea, is making $65 million in grants and junior equity. The initiative will also receive funding from USAID’s Power Africa program, the Global Energy Alliance for People and Planet, Shinhan Bank Co., and hedge fund billionaire Christopher Hohn.
Pilot Results
So far, the initiative has invested a total of $1.55 million in three companies, including Qotto ($125,000), d.light ($176,000), and Easy Solar ($1.25 million). Last year, it launched a pilot with investments in Benin.
Results have been promising. For example, in Qotto reported that 34% of customers had had no prior access to electricity in 2021. That increased to 77% the next year. Solar panels are installed on customers’ rooftops or in their yard, so they can bring it inside at night.
