Our survey results: Understanding the challenges energy enterprises face in emerging economies

Invested Development and GVEP International recently conducted a survey in collaboration with Power Africa and UN Foundation’s Energy Access Practitioner Network to investigate the challenges that energy enterprises experience in emerging markets. Of course, company financing is a big issue, but we wanted to dig deeper into manufacturing, human resources, consumer financing, and sales. The goal was to identify the types of support products and services that the industry can provide to move the needle further on energy access.

To get the best results, it was important to survey the industry’s most active energy access practitioners. We worked across our organizations to reach 131 respondents. Each respondent represented an energy enterprise in an emerging market, 80% of which are SMEs with 25 or fewer employees. Not surprisingly, 90% of the companies operate primarily in Africa and more than half are focused on developing renewable energy solutions (33% focused on solar energy and another 20% split between hydro power and micro grids).

To better understand and digest the results, our partners at GVEP International created an infographic. In this post, we will dive into the key challenges highlighted by the survey and identify projects, enterprises, and initiatives providing solutions to some of the specific problems identified.

Manufacturing and Product Development

Half of respondents reported manufacturing less than 10% of their products locally in emerging markets. Reasons for low levels of local production were high prices, limited availability, and low quality of materials as the main barrier. Relatedly, over 30% of companies said they do not have access to critical prototyping resources, such as 3D printers and laser cutters. Groups like Gearbox in Kenya, backed by Ushahidi, BRCK, iHub, MIT, and more, are attempting to solve this problem by creating hardware-focused co-working spaces where entrepreneurs can access tools that are normally prohibitively expensive.

Consumer Financing

The majority of enterprises collect cash payments hand-to-hand. Of the very few that utilize credit sales, 33% require large down payments of between 26% and 50%. The 15% of enterprises who reported using mobile money operate primary in East Africa. The challenges with creating good financial models and handling accounting were largely attributed to difficulties recruiting capable people and building internal tools. We are seeing companies like EGG-energy, SolarNow, and Simpa Networks break this barrier by utilizing pay-as-you go technologies and working with innovative forms of working capital and alternative financing.

Sales and After-Sales Service

Most last-mile distribution, installation, and after-sales activities are done in person. Less than 10% of enterprises are leveraging information and communication technologies (ICTs) for these activities. As a result, information sharing within the value chain is a major problem. Half of the respondents cited poor transportation as the greatest bottleneck to product delivery and installation, understandably so, as most enterprises operate in areas with underdeveloped transportation infrastructure. In response to this issue, many enterprise resource planning (ERP) systems and management information systems (MIS) are available for offline and contexts where field agents collect information and operate remotely. This means sales agents can operate without needing to return to the office as frequently.

When products are delivered, enterprises face major impediments to after-sales services, the greatest being lack of capable technicians and customer service representatives. This, in turn, relates to the human resources challenge as these roles are the most difficult to recruit for or train. This remains a difficult challenge, but we are seeing an increasing interest from universities with institutionalized social enterprise programs raising awareness among talented students about the opportunities to work abroad. We frequently hear about our portfolio companies working with fellows from universities, exposing them to the opportunity to work on technology in a new context.

Working Capital – The Holy Grail

This survey not only highlighted a lot of the challenges we had anticipated, but confirmed them directly from some of the world’s most active energy access practitioners. Despite the variety of operational challenges, working capital continues to be the biggest challenge for energy enterprises. Enterprises in emerging economies do not have the ability to leverage the necessary technologies to aid product development, maintain inventory, provide consumer financing, or integrate ICT solutions to optimize HR and sales activities without greater cash flows.

With limited track records, limited cash flow, and a lack of access to capital providers, this continues to be a challenge, but not one that is unaddressed. Loans from groups like OPIC and loan guarantee facilities such as those from African Guarantee Fund and GVEP are examples of ways to alleviate these financial challenges. By providing innovative forms of working capital for young energy enterprises, they can afford to invest in solutions and gain efficiencies in the other operational areas mentioned above.

What other solutions are out there to address these individual challenges, or the greater working capital challenge?


energy access practitioner challenges

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