Lighting Africa: The Siren Call to Purpose and Profit Russell Sturm IFC Lighting Africa 2010 May 18,...

Lighting Africa: The Siren Call to Purpose and

Profit

Russell SturmIFC

Lighting Africa 2010May 18, 2010

Copyright © 2008 The World Bank – International Finance Corporation

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Where’s the POWER, Harriett?

Reality…

• 1.6 billion people live in the dark• 500 Million in Africa• By 2030, 700 Million Africans will still lack

access to electricity (IEA)

Why Lighting Africa??


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Lacking Access To Electricity, Off-Grid Populations Left with Poor Lighting Options

Fuel-based lighting... – Expensive– Emit Poor Quality Light– Unsafe– Unhealthy– Releases potent GHGs


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The Opportunity: Technological Advancements enable products MATCHED to Consumer Need

The arrival and development of new lighting technologiesIntroducing LEDS- “the next lighting revolution”

Range of technologies and delivery systems

Independent, off-grid lighting service systems create option to focus in “one” need

Simplified product allows for “small packages”

-- reducing costs across the value chain (inventory, working capital, risks) and increasing affordability


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True commercial benefits beyond cost savings…

Tanzania: shoe seller - flame [left]; 1-watt white LED [right]

VS.

LEDs offer substantially higher quality lighting than what people are using now


New technology+ innovative business models = Opportunity to redefine energy paradigm

Fuel-based Lighting LED/other modern Technology

Average kerosene expenses/month = $10-$15

High efficiency = low to zero operating cost

Low light output & quality High light output & qualityHazardous for health and safety SafeHigh emissions, polluting Clean

Traditional banking Empesa / Mobile banking

Analogue


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The Market Opportunity….is HUGE!

Fuel-based lighting accounts for 17% of global lighting market – a US$ 38 billion/year demand ($10-17 billion in Africa)

It is a commercial, functioning market– established value-chain – collection systems– spare parts, repairs services, etc

Electric Lighting

Fuel-Based Lighting

$25-38 Billion

$185 Billion

Global Annual Spending on Lighting

Source: Evan Mills, International Association of Energy Efficient Lighting and Lawrence Berkeley National Laboratory

Fuel-based lighting is ALREADY a very large market


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IFC and World Bank ASKED…

If so, can global and local private companies be engaged to develop this market commercially?

Are those 1.6 billion lacking access to modern energy services a (functional) market?

Does a market, commercial solution that increases access to modern energy services serve our development objectives?

Is there Evidence of Proven Demand/Consumer Interest & Willingness to Pay for Lighting?

Is there INVESTMENT INCENTIVE for the private sector??

Is There an Opportunity for a

Large-Scale Commercial Solution To Increase Access to Modern Energy

Services?


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Dangerous Market Interventions:Need to boost… not tame the giant

Inappropriate interventions can impede market development The market is smarter than any single actor – use it, don’t abuse it! Self – interest is real power; leverage it – don’t fight it!


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The Response

Goal: Rapid scale-up of access to clean, reliable and affordable lighting & basic energy services for 250 million people across Africa by 2030

Lighting Africa – Joint World Bank/IFC Initiative


Conceptual View of Intended Impact

Short-Term Goal: 2.5 million people

by 2012

Long-Term Goal: 250 million people by 2030

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

0

10

20

30

40

50

60

Without Lighting AfricaWith Lighting Africa

[*Illustrated example of a one-time bulk-purchase/subsidy approach (not Ltg Africa)]

*

50 million units provides access for 250 people


Lighting Africa: A response to a rapidly changing industry

Industry Association

Emerges

Industry-IFC Dialogue – Initial Mrkt Assessment

2005-2006

2007-2009

2009

2010-

A dynamic market requires a nimble platform No industry

focus on mrkt.

Cost of Ownership($/MLHr)

Efficiency

$2.66

$9.84

$20.38

$34.042004

14%

5%

4%

4%

LED Improvements


We Provide A “Bridge” Between Industry and Consumers

Building PARTNERSHIPS is Critical to Developing Effective and Lasting Markets

Wholesale Distributors

Retail Industry

International Manufacturers

End consumers

Quality Assurance Market Research Technical Advisory Bulk Procurement Concessional Finance Access to Partners

Product Quality Info. B2B Linkages Trade Finance Market Intelligence Access to Partners

Product Quality Info. B2B Linkages Financing Access to Partners

Quality Assurance Consumer Education Consumer Finance

External Partners

Joint IFC/World Bank Initiative

We Provide a Suite of Services Across the many nodes on the Lighting Value Chain


We Work to Remove Market Barriers Across the Value Chain

Production

Transport

Export/Import

Whole Sale

Transport / Distribution

Retail

Facilitating Int’l Collaboration

Addressing Policy and Regulatory Barriers

Mobilizing Finance / Business Support Services

Ensuring quality

Consumer education


2008 Development Marketplace –planting seeds of innovation

Innovations supported:1. In-country assembly

2. Product Innovation3. Power generation & community service delivery4. Innovative distribution models5. Alternative service access models

Key experiences from the LADM innovation projects:

• Market dominated by mission driven initiatives

• Following good business practices and strategies are pre-requisites to doing good

• Challenges of doing business in a developing country environment combined with an undeveloped market importation problems, restrictive duties & tariffs, uneducated market

16 projects 11 countries


How do we reduce market impediments?

Market Barrier Lighting Africa Program Response

High Transaction Costs to Understand the Market

Lack of Understanding of Consumer needs/preferences, size of market opportunity

Lack of access to partners and understanding of playing field, distribution channels

Market Intelligence

Buyer inability to make informed purchasing decisions and decipher quality in the market

Lack of understanding of the comparative advantages of off-grid lighting to fuel-based lighting

Consumer Education

Lack of product quality standards in the marketplace

Lack of testing facilities, manufacturing standards High risk for buyer dissatisfaction and market spoilage Lack of local capacity to test products,

develop/maintain product standards

Product Quality Assurance

Lack of access to finance: consumer, trade, Lack of business support services, proven business

models and marketing strategies

Access to Finance & Business Support

Inconsistent regulations and poor business enabling environment Policy and Regulatory Reform

5 Program Areas address specific market barriers

Copyright © 2008 The World Bank – International Finance Corporation19

Market Intelligence: lowering barriers to entry and mitigating risk for new entrants

Market assessments and consumer profiles reflect multiple segments

Field-tests, interviews, and focus groups Public information Going Forward Will publish condensed synthesis report on results of 10,000

interviews (early summer 2010) Will publish market trends report (early summer 2010)And… for Associate Members Baseline survey to profile what products exist in the market Monthly retail audit to track changes

Copyright © 2008 The World Bank – International Finance Corporation20

Access to Finance

Objective: Address key gaps in financing along the value chain Manufacturers: growth and working capital requirements

– IFC Clean Tech Fund– Dedicated funds, incl. E&Co, Acumen, GBF, Responsibility etc.

Distributors/Importers: working capital and trade finance– Dedicated funds, incl. E&Co, Acumen, GBF, Responsibility etc.– Collaboration with local commercial banks

Consumers: financing product purchases – Collaboration with formal and informal Microfinance Institutions (eg, Susus and

merry-go-round approaches)– Collaborations with large corporates, e.g. Unilever Tea Co. Kenya


Product Quality Assurance

LED technology is promising, but– Danger of market spoiling is real– Large # of products, some perform poorly– Integrated systems are complex

Primary QA Components:– Standardized Test Method– “Pre-Screening” /Local Testing Capacity Building– Technical Notes/ Information Dissemination– Products of the Year Awards- TONIGHT!

Quality Assurance Advisory Committee– China Solid State Lighting Alliance Member

Low cost LED torches for sale in Kenya

Counterfeit LED torch(3 non-rechargeable batteries; non-

functional mechanical charger)


Consumer education

Honest Broker introduces technology and supports educated consumers– Creates awareness to inform purchase process– Giant marketing umbrella to support all quality products

Complement mass media with experiential marketing and interactive discussions .


Responding to industry need for a consistent, supportive enabling environment

8 Country Assessments• Cameroon• DRC• Ethiopia• Kenya• Ghana• Rwanda• Senegal• Tanzania

Comprehensive Kenya Policy Dialogue and Reform

Following the 2008 Lighting Africa Industry Consultation Session…

…We have launched two levels of initiative…

Policy and Enabling Environment Support


LA Website - the “virtual” home of the industry – www.lightingafrica.org

Access Partners Across the Industry and Supply Chain Post and receive business leads; form local and global partnerships Access off-grid lighting research; follow latest industry news, and MORE Register today


Thriving Online Industry Community

>2500 Members

9,000 Hits Per Month

49,000 Page Views Per Month

650 Followers on Twitter

Lighting Africa Web Activity Sept 09 – April 10

Sept Jan Oct Nov Feb Apr Mar Dec


Invitations to members only events

Access to LA research findings, publications, etc.

Access to financing institutions

Testing feedback to improve product design

Business development assistance

“Matchmaking” to financial institutions (reference)

Advanced marketing & consumer education support

Custom strategy and mgt. support

Registration on the Lighting Africa Website/ Database

Products submitted and passed initial quality screening by LA

Products have been tested and passed LA’s quality assurance testing methodology

Company passes good corporate governance screening

We propose a three tier membership system for our clients

Member

Network

Associate

Membership Level CriteriaLighting Africa Service offerings


Africa Renewable Energy Access Grants Program

Let’s meet the team


A Dynamic Industry In Motion

8 products in 2008 71 products 49 companies

Market dominated by >$50 products

$15 - $25 products abound

Quality Issues Paramount

Yesterday Today

Lighting Africa Outstanding Product Award


Innovation Drives The Market: Emergent Business Models

• Leverage multiple consumer interests• Enable incremental purchase/finance• Ride the Mobile Telecom Wave

Modular/ Pay as you go

• Enable financing and provide marketing partnerships

• Formal (MFIs) and informal (SACCOs)

Microfinance Institutions

• Leverages community leaders• Lowers distrib costs for remote mrkts• Build consumer confidence for new products

Direct Marketing

• Form of consumer finance• Opportunity to monetize full value• Opportunity to cross-sell other services

Fee for Service

• NGO networks• Large employer / plantation operators

Joint Marketing Partnerships

• Leveraging existing distribution networks (kerosene, soap, cigarettes, softdrinks etc)

Leverage existing distrib

channels


A Transformative Industry is Born

Industry leaders discuss terms of proposed Off-Grid Lighting Stakeholders Association


A Call to Purpose – Responding To Our Moment in Time


The rumbling under the surface is us…

Thank you for sharing your energy, your talents, and your time

Lighting Africa: The Siren Call to Purpose and Profit Russell Sturm IFC Lighting Africa 2010 May 18,...

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Transcript of Lighting Africa: The Siren Call to Purpose and Profit Russell Sturm IFC Lighting Africa 2010 May 18,...