The Africa Enterprise Challenge Fund (AECF) is a multi-donor funded financing vehicle that provides grants and interest free loans to businesses who wish to implement innovative, commercially viable, high impact projects in Africa. The AECF supports businesses working in agriculture, financial services, renewable energy and technologies for adapting to climate change. It also supports initiatives in media and information services where they relate to these sectors.
Through AECF, we manage a special window focused on renewable energy and adaptation to climate change technologies (REACT) projects. The REACT window has grown to USD35m, with 33 grantees across Kenya, Tanzania, Uganda and Rwanda. These grantees are exploring exciting, innovative new business models in the RE-CC space to bring sustainable energy and adaptation technologies to rural consumers. The first two rounds have been piloted in East Africa, where roughly 118 million people have no access to electricity. That represents 89% of the population.
Pay-as-you-go financing: M-KOPA offers pay-as-you-go solutions through mobile money for purchase of small solar systems in Kenya. We selected this exciting company as a grantee in our first REACT window because we saw the opportunity to address a persistent market bottleneck: the inability of low-income customers to pay for RE products up front. We have since funded three more companies offering pay-as-you-go solutions through REACT round two, recognizing that with a little support this promising business model can change the market going forward.
Rural distribution: Nuru Energy is hoping to market a simple pedal charger for LED lights across East Africa. The business model only works if the company secures a lot of customers in multiple countries – the volume game. To cover that ground, Nuru is building a network of agent franchises. Customers pay agents and agents pay Nuru via mobile money, at which point Nuru unlocks the technology for use remotely, and the agent charges his customer’s light.
Technology Transfer: Simgas BV is mass producing biogas systems for rural households in Tanzania, distributed through a piggy-back model that leverages an existing, already widespread distribution network. Simgas is a joint venture between a well-established, large Tanzanian company and a smaller Dutch company. The local Tanzanian partner has manufactured and distributed water tanks widely in Tanzania for years. It brings to the table an existing distribution network , local market knowledge and credibility. The Dutch company provides the new biogas technology, which is distributed now along with the Tanzanian water tanks. This is an excellent example of technology transfer from a Western market into Tanzania, leveraging the value of an established local business.
- Total cumulative benefits of US$1.6m for 18,272 households as of December 2012
- 249 new FTE jobs created in 2012
- Innovations: mobile banking solutions, carbon credit financing, industrial-scale biomass, piggy-back distribution, franchised charging stations
- By 2018, REACT grantees are collectively expected to add 116 MW of installed energy capacity in East Africa, and curb roughly 2.4m tonnes of CO2 emissions.