Do you know how huge the potential for the solar energy business in Africa really is? This article will open your eyes to the amazing realities
Electricity supply in Africa is in a very sorry state. Millions of Africans now have mobile phones with no electricity to charge batteries.
In many countries on the continent, less than 20 percent of the population have access to electricity; the situation is much worse in rural areas where fewer than 5 percent are connected to the grid.
With an average of 325 days of bright sunlight every year, solar power remains one of Africa’s most abundant but scarcely used resources. Entrepreneurs like Tanzania’s Patrick Ngowi are already making millions from this huge gap between electricity demand and supply.
This article will open your eyes to the enormous potentials of solar power both as one of the top lucrative business opportunities in Africa and the surest way to bring electricity to millions of people on the continent!
How bad is Africa’s electricity problem?
Did you know that all the 48 countries of Sub-saharan Africa (with a combined population of more than 750 million) generate roughly the same amount of power as Spain (a single country of less than 50 million people)?
Our continent has arguably the worst electric power infrastructure in the world with the lowest scores in power generation, consumption and security of supply! (source: WorldBank).
Take the case of Sara Ruto, a Kenyan rural woman who (like many others in her village) had to take a 3-hour taxi ride to charge her cellphone batteries in the nearest town with electricity.
According to this New York Times article which featured the story, the number of people doing the same thing in surrounding villages was so high that many of them had to leave their phones behind at the charging centre (for up to three days) before returning to pick them.
To fight darkness, up to 80 percent of Africans depend on personal generators, candles and kerosene (paraffin) lamps to provide basic lighting. Let’s not even talk about all the other things we desperately need electricity for – iron clothes, pump water, charge mobile phones etc.
According to this World Bank report, the average power consumed per person in Africa every year is only enough to power one 100-watt light bulb for only three hours a day! (photo credit: care2.com)
Those of us reading this who live through electricity shortages everyday fully understand the scale of this problem. We’re only quoting research reports for the benefit of Africa’s elite and people who don’t live on the continent who may find it difficult to grasp the severity of Africa’s electricity challenges.
We understand that some countries in the region (like South Africa) have it better than the others. In many other countries, it’s just terrible!
Solar 101: A quick introduction to solar energy
Solar power/electricity is produced when the fancy, silver-coloured and shiny sheets (commonly known as ‘solar panels’ are used to capture and convert the sun’s radiation to electricity. These panels (which contain photovoltaic cells) come in different models, shapes and sizes.
In this article, we shall focus on the types of solar panels that are installed on roof tops to generate electricity used by individuals and households.
The short video below provides a great introduction to how solar energy works. It’s quite simple, interesting and less than 2 minutes long!
3 Reasons why the solar energy business in Africa will become a trillion-dollar market
We’ve got a couple of strong reasons why we believe solar energy will power Africa’s future.
It’s absolutely important that entrepreneurs understand the factors that are driving the demand for solar products and services in Africa. This will better help you to apply your creativity and sound judgment to any business ideas that come to your mind during or after reading this article.
Here are our reasons for betting on solar power’s lucrative potentials in Africa’s future…
#1 – Solar energy is the fastest and cheapest way to light up Africa
Thousands of villages in Africa are so remote and too spread apart that it would take decades and billions of investment dollars to take electricity to all corners of our continent.
Small towns and villages that were not considered a priority by governments now have a huge demand for electricity. Mobile phones, which have been widely successful in Africa, have changed the profile of power consumption in Africa.
The mobile phone revolution is forcing millions of poor Africans to demand for electricity. More people now depend on their mobile phones to contact relatives, obtain general news and information about farm product prices, and make/receive small money transfers.
Africa does not have the kind of investment and political commitment it will require to connect every corner of the continent to the power grid. It’s already too late, no matter how fast this is done.
What Africa needs now is an alternative that is cheap, easy to deploy, decentralized and effective enough to provide electricity to millions of people in the shortest possible time. Solar power is the only option that satisfies all these requirements!
Of all the other alternative and renewable sources of energy available for Africa’s future – wind, sun and water – the sun (solar power) is the most abundant and free!
Because most of Africa sits on the earth’s equator, the sun’s radiation reaches many parts of the continent including the remotest parts – villages, mountain tops, anywhere and everywhere! This raw energy already touches the parts of the continent that power grids and infrastructure have still not reached – after many decades!
Solar energy is clearly the fastest way to get all of Africa connected to electric power!
Samsung’s first Solar Powered Internet School in South Africa. This transportable facility helps students to study without having to worry about electricity or internet connectivity. (photo credit: samsungvillage.com)
#2 – The demand for cleaner and greener alternative power sources is gaining momentum
A significant portion of electricity generated on our continent is from non-renewable sources like petrol, natural gas, coal and other fossil fuels. These fuels remain expensive and have dangerous effects on our health, the environment and climate.
In fact, at the current rate of consumption and population growth, Africa’s estimated petroleum reserves (roughly 60 billion barrels) is not likely to last for very long.
Africa’s solar power potential is so huge and has the capacity to generate and supply electricity to Europe and other parts of the world in the near future.
For those who don’t know, Africa’s solar revolution has already started!
Google, one of the world’s most successful multi-billion dollar corporations recently invested $12 million in the Jasper Power Plant, a South African solar project. This solar plant is planned to supply nearly 100 Mega Watts of clean energy to the country.
There are also other huge multi-billion dollar investments like the DESERTEC project that plans to set up solar farms in vast areas of the Sahara desert and supply Europe with the generated electricity.
These ambitious and high investment projects prove that solar energy will power the future; and Africa will be the major source of it!
#3 – The cost of buying and installing solar power equipment is falling
Despite all the cool things we’ve said about solar power, it has not spread as fast as expected because of its cost. 🙁
The high upfront cost of solar equipment has made it difficult to compete against other sources of power.
Investing in solar energy may have a lot of benefits and save lots of money in the long term, but many African families can simply not afford the high initial capital.
However, all of this is changing. Over the last decade, a lot of progress has been made in solar technology – making it cheaper, reliable and more efficient. As a result, solar power equipment prices have been falling, and are now within the reach of many Africans.
The scale and wonder of Chinese manufacturing is also helping to bring down prices. US and European makers of solar equipment have been facing stiff competition from Chinese solar products.
What can we say – ordinary people get to win in the end as these competitive forces push down prices. 🙂
In addition to lower manufacturing costs, some African governments have started removing the high import tariffs and levies that helped to make solar panels and equipment expensive in local markets.
In fact, several suppliers now offer flexible financing options that allow people to pay a small fee every month to cover the cost of the equipment and installation. This Pay-As-You-Go strategy is paying off as millions of households can now afford solar power through these little payments.
We are almost at the point where the average cost of solar energy falls below kerosene, petrol, charcoal and other common fuels currently used to produce electricity. As a result of this, it is expected that more people will naturally shift to using solar power full-time!
This is already happening in many rural areas as revealed in this article.
How to start a business in Africa’s promising and lucrative solar energy market
The beautiful thing about the solar power market in Africa is that it’s relatively new and not everyone really understands it.
The virgin nature of this market gives smart entrepreneurs an early advantage to establish themselves. Although solar equipment requires significant investment in capital, there are smaller niches within this market that can accommodate entrepreneurs with little capital.
There are three broad ways to enter this market and start a business in the solar industry.
These paths are: Wholesale supply, Retail and Installation service contracting. We’ll look at each of these groups in turn…
Wholesalers are usually the importers who stock large volumes of solar equipment.
These guys usually import all kinds of materials, equipment, appliances and materials relating to solar energy from overseas manufacturers or major distributors in the USA, Europe and Asia.
As expected, playing at this level requires a significant amount of capital. The exact figures will depend on the type of equipment and volume.
China has become a significant manufacturer of solar products although the quality is often considered to be less desirable.
Retailers are the folks who buy in smaller quantities from wholesalers. They usually don’t stock huge quantities of products and often sell directly to consumers.
Unlike the wholesaler who stocks goods in a warehouse or depot, a retailer is likely to sell his products from a shop or stall. Of course, retailers require much less capital to start up and offer a wide range of options to customers.
Installation service contractors are the technical guys who do the actual work of fixing solar panels to rooftops and setting up the entire system to make it work for customers.
Due to their skill, these guys are contracted by individual customers; and work on government and NGO projects. They also help to maintain, service and fix problems relating to solar systems.
While anyone can become a wholesaler or retailer, it takes sound knowledge and practical skills to provide an installation service. The best part is, installation contractors may require no capital to run their business.
If a client wants to install a solar power system, contractors send in their quotes and often get paid to purchase the equipment and materials to be installed.
Although this is the cheapest way to enter this market and start a business, it will require an upfront commitment and investment in your learning about solar power, how it works, related equipment and materials, how to install, maintain and repair the system.
Patrick Ngowi, the 28-year old solar entrepreneur and CEO of Helvetic Solar Contractors based in Tanzania has installed roughly 6,000 small home solar systems, and worked on several government and NGO solar projects across East Africa.
His company’s $15 million annual revenue proves that unlocking the value in the solar energy market lies in the hands of those who can put smiles on customers’ faces by getting the job done!
For those of you interesting in gaining the knowledge and skills required to take off, we found two free and useful guides during our research for this article.
Here they are:
These materials won’t make you an expert, but they provide a good foundation for you to start your learning.
We have also included a 25-minute video below from MJ Lorton who runs a series of tutorials for beginners in the solar power business.
In addition to this series, you should look out for training centres around you that offer a course in solar electric installations. It will be one investment in your education you’ll never regret!
Some things to consider if you plan to succeed in the solar power business…
Like every other business, there are a couple of things you should keep in mind to ensure your long-term success in the solar power business. This list is by no means exhaustive but gives you some hints that will help you.
1. Target the right customers
There are a few segments of the African market that offer huge potentials to a solar power business. The people in these segments have a genuine need that attracts them to solar power. A couple of these customer segments that come to mind are:
- People in rural areas who do not yet have access to the electric power grid;
- People who are already connected to the grid but spend a lot of money on high (and crazy) electricity bills; and
- Environmentally-conscious people who appreciate the ‘green’ benefits of solar power.
Rural people without any access to electricity will gladly embrace a solar option, as long as it’s affordable. Anyone who’s paying a lot already on electricity bills will welcome a solar solution that cuts down electricity costs in the long run. And people with a green awareness and philosophy will often pay top dollar to go solar.
Solar power appeals to these three groups because it makes their lives easier, makes them spend less on electricity, and offers them some fulfillment that they are using clean energy that doesn’t damage the environment.
As long as you identify any of these needs in a customer, it becomes very easy to get them to hire or buy from you.
Other interesting customer segments are: government agencies and non-governmental organisations (NGOs – local and international).
Every year, governments and NGOs are responsible for several multi-million dollar solar power projects ranging from providing electricity to rural areas to basic street lighting.
Because governments and NGOs are often keen to help local businesses, local suppliers of solar panels and equipment, and installation service contractors will gain a lot from targeting these customers.
2. Focus on building strong customer relationships
The standard guarantee on some solar equipment (like solar panels) can be up to 25 years! Yes, you read that right.
That’s a long time to enjoy a place in your customers’ lives.
It’s very likely that when you’ve installed solar equipment for a customer, you’ll be responsible for any maintenance, repairs, upgrades and more work! With excellent service, it’s more than likely that you’ll be recommended to their friends, family, colleagues and neighbours.
The benefits of quality, excellent customer service and building strong relationships can be huge in the solar business. You must strive to use all of these to your advantage from the very start.
At a time in the future, your huge customer base will support your business even if you don’t have any new customers coming in.
3. Always watch out for the latest trends and technologies
The solar power space is an evolving and fast-changing one. Newer models of solar panels, inverters, meters and other equipment are likely to perform much better than older ones.
To remain competitive and relevant in your market, it’s important that you follow these trends, understand and apply any improvements to your practice.
Ignoring them may make you own equipment no one wants to buy.
Newer consumer products (especially solar torches, battery chargers, and solar-powered LED lighting) come into the markets every year.
Some of them become instant hits while many others may pass unrecognized. If you find one that you believe will sell well in your village, town, city or country, you should order a sample and test the market’s demand and reaction. If it goes well, you may just have a best seller on your hands!
You should be interested in the solar energy business in Africa!
Solar power will continue to provide great business opportunities in Africa over the coming decades.
If you believe this type of business will work for you, start working on a business plan and take action now! You could also choose from many more amazing business ideas in the Business ideas section of this website.
We would love to hear from you about your successes, challenges, advice and questions. Do not forget to leave a comment in the section below and share this opportunity with your friends using the Facebook, Twitter and Google+ buttons below.
To your success!