Our strategy

We have five key components to our implementation strategy:
  1. Keep a laser-focus on poverty-reduction as the top priority
  2. Work in those areas of Africa that most lack existing solar businesses
  3. Create solutions that are maximally affordable
  4. Integrate other social benefits into our solar electrification work
  5. Do a better job of growing local economic activity by distributing resources and responsibility to local partners (i.e. creating 10-100 African jobs for every US job that is created)
Below, we provide a relatively detailed description and rationale for each of these strategies.

STRATEGY #1: Keep a laser-focus on the first priority of poverty-reduction

  Poverty-reducing solar electrification in Africa is going to have to create new electricity and technology business models if it is really going to be effective at reducing poverty in rural Africa. The key reason this is true, is that if we only focus on growing a solar business in Africa, then to financially sustain growth, you have to try to maximize profits...because profit maximization is the key thing that allows you to get the investment financing for the growth that a start-up company needs.

  The big problem with focusing on profits first is, that if you design all of your pricing and distribution strategy to maximize profits as the primary objective, then under current market conditions long term poverty reduction might not happen.  When organizations only think about profits, the key impact that you will have on the economies in Africa will be to concentrate wealth and assets in the US company which has the greatest access to technology and information, rather than growing the economic activity and income in Africa over the long term by generously distributing technology, information, and assets to African partners.

  In any economic exchange of money and services, the difference between the the price that the buyer is willing the pay and the cost of providing the service is the 'total economic profit.'   If the seller has a lot more information than the buyer, then usually the seller can charge the maximum amount that the buyer is willing to pay, and most of the economic profit accrues to the seller.  If the buyer has much more information than the seller, then usually the buyer can pay the minimum amount that the seller is willing to charge (i.e. the cost of service) and most of the economic profit accrues to the buyer.  Because US companies tend to have much more information and information technology than buyers and sellers in Africa, this information advantage of the US company often leads to the majority of economic profit accruing to the US company.  This is a natural consequence of asymmetric information, and differential information technology access.

  The wealth concentration behavior produced by focusing on company profit-maximization means that if we want to create a truly poverty-reducing solar electrification company we have to not define the goal of company strategy to be primarily maximizing company value growth.  Maximizing company growth is a means to an end. Maximizing revenue and profit growth is a secondary and is not the primary objective.

  What changes when we set the primary objective of a company to be poverty-reduction? A poverty-reducing company needs instead to set the goal to be the maximization of total economic value growth...both the value of the company, AND the value delivered to the local economies in Africa to the company's customers and partners.  By making sure that economic growth is balanced between growth inside the company and outside the company, the growth of the company then goes hand and hand with economic growth with the partners and customers.  To do this, the company sets the internal pricing structures and company policies that need to be set to make sure that company internal incentives and operations are closely aligned with social goal of local economic growth acceleration in Africa.

   What do most of the other folks in the Africa solar electricity business do? What we observe is that they come up with a well designed product, and then they find the customers who are willing to buy that product at a price that hits the company's investment return goals or projections.  This means that instead of prioritizing the goal of making the product maximally affordable to the maximum number of customers, the priority becomes finding the customers who can pay the price that gets the product profitably sold in the near-term. While that is good, standard business practice, that can (according to our calculations) be bad poverty-reduction over the long term.  If long-term poverty reduction is the first priority, one has to take a little more longer term view on on company growth and investment returns and sacrifice some near-term, profits to attain long-term product affordability.  This means you will raise outside investment at a slower rate compared to a company that prioritizes investor returns.

  In short, the standard approach is to define a product and then find the customers that can buy the product profitably today.  We do the reverse and stand the typical approach on its head: we first define the customers, and then find/design the product and business model that maximizes long term value for the customers over the long term.

  This results in a different product, a different business model, and very different relationships between local partners and local communities in Africa.

STRATEGY #2: Work in those areas of Africa that most lack existing solar businesses

  Second of all, even though there are approximately 45 countries in Sub-Saharan Africa, the vast majority of companies working on solar electrification are focusing on primarily four countries: Kenya, Tanzania, Rwanda, and Uganda. There is one major company working in Nigeria, there is a whole set of companies in South Africa, but there is only one initiative: Akon Lighting Africa which has a relatively wide reach of countries. What our effort does, is develop a business model and custom technologies for those hundreds of millions of potential users that may be falling through the cracks of current efforts.

  Here's a quick list of some of the major companies/projects working in Africa:

Juabar: Tanzania
Simu-Solar: Tanzania
Mobisol: Tanzania & Rwanda
Akon Lighting Africa: ~15 countries: primarily West Africa and Kenya
  (Senegal, Guinea, Sierra Leon, Burkina Faso, Benin, Senegal, Mali, Niger,
   Kenya, Equaltorial Guinea, Gabon)
M-Kopa: Kenya, Uganda, Tanzania
D-Light: Kenya
Solar Energy for Africa: Uganda
Off-grid Electric: Tanzania & Rwanda
SolarNow: Uganda
Solynta: Nigeria

  The other countries in Africa: Zambia, Zimbabwe, Malawi, Mozambique, Angola, Burundi, Cameroon, Central Africa Repulblic, have hundreds of millions of people who could also benefit from solar electricity.  While some of the demand is being satisfied by current efforts and local entrepreneurs, there is a huge population of customers who are largely outside the sphere of operations of current efforts.

STRATEGY #3: Create solutions that are maximally affordable

  The third reason we are working on this is that we think we can do better than the other folks in terms of providing a better and more affordable solution that is relevant and feasible for a larger number of Africa's poorest customers.

  Note that the fact that we are trying to make a solution that is affordable for lower income countries and customers is not a criticism of projects and efforts that are targeting African middle-income households and countries.  In monetary terms the middle-income market is much larger than the very low income market.  It is simply that because our venture has a moral focus (to help as many people as possible with limited funds), we have to reach greater levels of affordability than other suppliers.

  For example M-Kopa, and Mobisol are charging approximately $10/month and $21/month respectively (according to news reports), whereas the solution we provide to households in Malawi scale down to an entry level system of only $2/month. The difference between a $2/month solution and a $10/month solution is very important for the lowest income customers.

  In spite of official figures that say that most Africans have a per-capita income of >$500/year (i.e. $40/month), in reality, this is an adjusted, average number.  When you look at the actual cash that the poor majority of rural African household actually have access to, it is more like $100 to $250 per year per person ($8 to $20/month/person or $40 to $100/month) most of these households cannot afford $10/month for electricity.  In Malawi, the situation is even more severe with most rural households earning less than $40/month cash.

  A focus on maximum affordability should allow us to serve tens of millions of rural households sooner than otherwise possible with current approaches.

STRATEGY #4: Integrate other social benefits into our solar electrification work

  The fourth reason that we are involved in this adventure is that we are integrating social and health benefits in the solution that we provide in ways that are probably pretty unique.

  As we develop our project, we hope to integrate kitchen ventilation technologies and distribution of anti-malaria-mosquito bed nets to amplify the positive impacts of our community-based solar electrification.  As I hope to describe later, this should amplify the positive impacts of our project by a factor of 2-5 per dollar invested. 

STRATEGY #5: Do a better job of growing local economic activity by distributing resources and responsibility to local partners

  Last, but not least, our grass-roots-oriented approach contributes much more to local economic development (per $1000 dollars invested) than the solutions that other companies are pursuing more packaged gadget-oriented approaches. This due to two factors:  The first is that we have a much more equitable and fair local partner arrangement that leaves more income in the country and greater responsibility in the hands of the local partner.  The second big factor is that we assemble and install much of our system in-country which means that a very significant part of the initial investment (about one fourth) is spent on value-added that is created in Malawi.

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