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Industry News
Lighting Africa Through Market Transformation
March 31, 2008

Article provided by:

Francis Ameyibor, AfricaNews reporter in Accra, Ghana

The problem is particularly acute in Africa, where more than 90% of the rural population and 74% of the total population live outside grid connectivity.  Consequently, the 500 million “energy poor” are reliant on traditional forms of energy to meet their lighting needs, dominated by fuel-based sources such as kerosene, a costly and inefficient alternative that consumes 10-15% of annual household income.

For the poorest families, the significantly high expenditures on kerosene for meeting their lighting needs affects their ability to pay for other day-to-day necessities, such as children’s education, family health care and nutrition.   

Exacerbating this problem, fuel-based lighting also produces Greenhouse Gases (GHGs), leads to increased indoor air pollution and associated health risks, inhibits productivity and jeopardizes human safety.
 
The opportunity

African people can neither afford to wait for electrification access rates to rise to the level of other world regions nor continue relying on expensive, inefficient, and unsafe fuel-based products to meet their lighting needs.     

Fortunately, new evidence suggests that solving Africa’s lighting issues may be more achievable than ever before, largely the result of recent advances in modern lighting technologies, such as improved, efficient products like Compact Fluorescent Lamps (CFLs) and light-emitting diodes (LEDs).

Coupled with new findings revealing that Africans may be willing and able to pay as much for modern lighting technologies as they are already paying for kerosene and other inefficient sources.

At the same time, an increased focus by international donors on promoting energy access in Africa, for example through the World Bank and the International Finance Corporation (IFC)’s Clean Energy and Investment Framework and the Africa Energy Action Plan, provided an opportunity to develop innovative and clean energy solutions for off-grid populations of Africa.

Recognizing the opportunity at hand, supported by growing interest from the international lighting industry looking to move into new growth markets, The Lighting Africa program was conceived in 2007. 

Opting for a market-base approach, Lighting Africa was designed to support the private sector innovate and deliver off-grid lighting products and solutions to Africa, in turn aiming to accelerate access to non-fossil fuel-based, low cost, safe, clean and reliable off-grid lighting products with associated basic energy services, with the ambitious goal of reaching as many as 250 million people in Sub-Saharan Africa by the year 2030.

Engaging global and local private sector

The prospect of increased revenues through the African off-grid lighting market, the potential of substantive social and environmental impact in Africa, and Lighting Africa’s commitment to support the industry in growing this new market area, continue to persuade global and local entrepreneurs to follow its lead.

But surely, one is entitled to ask whether those 1.6 billion people lacking access to lighting really represent a promising market? The argument is exceedingly convincing: at a time when oil was $50 per barrel, research indicated that approximately US$38 billion per year was spent globally on lighting.

Seventeen billon dollars of which was spent in Africa alone, in a commercially viable, functioning market. For African entrepreneurs, this represents a much welcome new opportunity to increase wealth and, concurrently, improve standards of living.

It also means new partnerships with stakeholders across the global lighting industry supply chain, and for many African business developers, a first chance to step into the international business arena, and at the same time, foster economic development in their own continent. 

The Program Manager, Cyril Kattah told newsmen that despite the promise of this unique opportunity, global and local entrepreneurs who are interested in this market find themselves ensnared by the inevitable hurdles and perceived uncertainties that accompany the development of a market as undiscovered and undefined as this one.

The barriers they have identified are many, including a lack of information about consumer needs, product preferences, and affordability or willingness to pay.

Others were cost barriers associated with new product development and market entry; policy impediments such as kerosene subsidization and tariffs on imported products; absence of institutional mechanisms, which would facilitate the identification of suitable partners for product sale and delivery; product standards and quality assurance; and legal concerns like protecting intellectual property rights.

Non-fuel based off-grid lighting solutions

To help solve these and other issues, Lighting Africa has started working with global lighting companies, local private sector service providers and distributors, Non-Governmental Organisations and the domestic financing industry (including micro finance organizations) to develop appropriate and viable business models for delivering modern, clean and safe non-fuel based off-grid lighting solutions.

The project focuses predominantly on reducing market entry costs, providing information about African markets and consumers, and developing an enabling institutional and regulatory framework.

Lighting Africa’s commitment to support the private sector is carried out through various initiatives, including: Market research:

Lighting Africa is helping entrepreneurs gain a better understanding of the African consumer, providing answers to questions like, “What does the African market look like?

What kinds of products do African’s want? What technologies do they prefer?  What are they currently spending on lighting?  How do products get from manufacturer to market successfully? 

What modes of communication reach the African consumer most effectively and how might one market a new product in a way that attracts consumer attention?

Surveys


To answer these and many other questions, Lighting Africa is sending teams of researchers to conduct surveys in households and small businesses beginning in five countries- Tanzania, Zambia, Ethiopia, Kenya, and Ghana- to gather critical insider information to share with the industry.

This component of the project will determine the key parameters essential to an effective market transformation. 

Business to business web portal: aimed at exposing the African off-grid market opportunity to the global industry, facilitating the exchange of market and consumer knowledge and information, and promoting business partnerships between global and local actors of the African off-grid lighting supply chain, Lighting Africa has developed an interactive business to business web portal. 

Navigating through one of its most popular features- a dynamic business opportunities forum which allows entrepreneurs to post and receive business leads- the Lighting Africa Web Portal has become a Mecca of online social networking activity, which has so far attracted over 1200 entrepreneurs, investors, and other stakeholders interested in pursuing new investments and establishing partnerships across the supply chain to deliver their products and services.

The Development Marketplace Grant Competition:

The Development Marketplace Grant competition is a competitive grant program which plans to award up to $200,000 each to about 15 to 20 finalists for presenting the most innovative and viable ideas for designing, developing, and delivering modern off-grid lighting products and services to Sub-Saharan Africa. 

Based on the premise that a sustainable market is one that grows the local economy, the competition required that each project team include a partner organization based and operating in Africa. 

400 proposals from 54 countries, including 38 African countries, were received in the first round, creating an extremely competitive applicant pool.  Of the 54 finalists in the current second stage of the competition, about 15 to 20 winners (of the grants) will be selected and announced after final proposals have been presented to an international panel of jurors during the Lighting Africa 2008 Global Business Conference, to be held in Ghana from May 6th to 7th, 2008. 

 

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