1 00:00:00,470 --> 00:00:03,140 The Future of business. Future of business, future of business. 2 00:00:03,140 --> 00:00:07,940 It's more global and more decentralised, making sure that enterprises that are a lot more responsible. 3 00:00:08,150 --> 00:00:12,410 Smart cities, more collaboration. Consumer driven productivity. 4 00:00:12,530 --> 00:00:16,100 Environmental and social responsibility. Global human centred. 5 00:00:16,190 --> 00:00:19,790 Purposeful individualised automation. Big Data. 6 00:00:19,850 --> 00:00:23,450 Climate Change. Space Exploration. Renewable Energy. 7 00:00:23,540 --> 00:00:32,840 Information Security. Exciting and digital. Hello and welcome to the Future of Business Podcast. 8 00:00:33,050 --> 00:00:40,610 I'm your host, Alison McArthur. According to the World Bank, there are currently 1 billion people who lack access to electricity. 9 00:00:41,210 --> 00:00:49,130 One company working to address this access gap is Bibox, which manufactures innovative solar systems for customers across sub-Saharan Africa. 10 00:00:49,880 --> 00:00:55,130 The company is confronting the challenges posed by inadequate infrastructure in emerging markets and 11 00:00:55,130 --> 00:01:00,080 uses a pay as you go system that allows consumers to purchase energy through their mobile phones. 12 00:01:00,770 --> 00:01:05,800 Lawrence Copson and Gretel. But Janes are the lead finance and investment managers of B Box. 13 00:01:06,200 --> 00:01:09,530 They recently joined us by Skype from one of their offices in London. 14 00:01:09,890 --> 00:01:14,090 So firstly, thank you both so much for joining us on the podcast here today. 15 00:01:14,720 --> 00:01:19,310 We'd like to start by exploring the electricity access challenge that Bboxx is tackling. 16 00:01:19,700 --> 00:01:24,200 Would you mind telling our listeners a little bit more about the challenges of lighting up Africa? 17 00:01:24,410 --> 00:01:28,430 Sure. So epochs as a company started around eight years ago, 18 00:01:28,550 --> 00:01:36,250 and the context of the challenge of electrification in Africa has has changed over the last eight years, 19 00:01:36,470 --> 00:01:40,700 though the challenge still remains really, really large at the moment, 20 00:01:40,700 --> 00:01:45,560 42% of the population of sub-Saharan Africa do have access to electricity, 21 00:01:45,590 --> 00:01:53,510 though the access is varied in the sense that in some places that might be reliable grid connection and in other areas it might be access to, 22 00:01:53,510 --> 00:01:56,270 for example, a fairly unreliable and intermittent grid. 23 00:01:56,750 --> 00:02:04,580 But that still leaves about 60% of the population of sub-Saharan Africa, which is a rapidly growing population without access to electricity. 24 00:02:06,410 --> 00:02:12,680 I think it's also important to set the scene, the kind of national level across sub-Saharan Africa as well. 25 00:02:12,680 --> 00:02:19,550 So in certain countries is much more of a rural challenge and you might have urban electrification rates of 90% plus. 26 00:02:20,060 --> 00:02:25,160 For example, in Kenya, that urban electrification is reaching about 90%. 27 00:02:25,370 --> 00:02:31,790 Though in rural areas, it's still a large population without access to electricity. 28 00:02:31,910 --> 00:02:35,780 But in other countries, it's not just a majority rural problem, 29 00:02:35,960 --> 00:02:43,040 but also an urban population where the grids are much more reliable or there's been rapid population growth and the infrastructure hasn't built out. 30 00:02:43,220 --> 00:02:47,360 So countries like Democratic Republic of the Congo, a very good example of this. 31 00:02:48,560 --> 00:02:52,510 So there is a is a kind of a big challenge at the macro level. 32 00:02:52,520 --> 00:03:00,530 And then if you jump down into individual countries, you start identifying the nuances of where specifically electrification needs to happen. 33 00:03:00,890 --> 00:03:08,090 And the big backdrop of this is that population in sub-Saharan Africa is is growing in fastest rate in the whole world, 34 00:03:08,480 --> 00:03:14,780 is just over a billion people in sub-Saharan Africa at the moment. And that's expected to at least double by 2050. 35 00:03:16,580 --> 00:03:19,250 And we're only ten years away from 2030. 36 00:03:19,550 --> 00:03:27,680 Population projections say that between 400 and 500 million people will be born in sub-Saharan Africa in the next ten years. 37 00:03:27,980 --> 00:03:35,750 And so for governments thinking about electrification policy, they have to make sure that not only the electrification rate is going up, 38 00:03:35,750 --> 00:03:43,070 but the absolute number of people that don't have access to electricity isn't rising in the backdrop of huge population growth. 39 00:03:43,850 --> 00:03:52,970 So what you say ties closely with the SDG goal seven, which is to ensure access to affordable, reliable, sustainable and modern energy for all. 40 00:03:53,720 --> 00:03:58,550 As you know, the U.N. has set an ambitious target of universal access by 2030. 41 00:03:59,240 --> 00:04:02,720 Based on what you've seen in your efforts. Do you think that we're on track to reach this? 42 00:04:02,840 --> 00:04:08,270 So the key thing that people forget here is what is the definition of energy access? 43 00:04:08,310 --> 00:04:12,710 So if you're just giving someone a lantern, a solar lantern, does that really? 44 00:04:14,830 --> 00:04:19,930 Justifying the the definition of giving them energy access. 45 00:04:20,140 --> 00:04:29,200 And I think this is one thing also that we've debated a lot internally or tried to communicate externally is the good thing about a solar home 46 00:04:29,200 --> 00:04:38,920 system is that enables the customer kind of to move up the energy access ladder if you give them a finite kind of pico lantern or pico system, 47 00:04:39,340 --> 00:04:43,270 these are these are very strong statement to what they can access. 48 00:04:43,270 --> 00:04:52,060 So their income increases then either they have to forego that asset that they've spent a lot of money on and upgrade, 49 00:04:52,540 --> 00:04:58,060 for example, to the cable system or that kind of stuck in a bit of a lull. 50 00:04:58,450 --> 00:05:07,330 So that question, I think it's it's an ambitious target, but it also depends on how you define energy access. 51 00:05:08,080 --> 00:05:13,870 I think we sometimes forget the electricity is a key enabler to improve livelihoods and productivity. 52 00:05:14,320 --> 00:05:17,110 For example, cooking at night or doing homework. 53 00:05:17,560 --> 00:05:25,150 How did the people in the countries you operated in Africa access these services before you began providing them with people systems? 54 00:05:25,810 --> 00:05:31,030 So the decision, like a typical big box customer, would be a household of about five people. 55 00:05:31,360 --> 00:05:34,360 The main forms of employment for the parents would be farming, 56 00:05:35,110 --> 00:05:40,000 and our customers live in very rural areas where obviously the grid will never reach them. 57 00:05:40,750 --> 00:05:48,340 The current forms of light is through kerosene lanterns or candles, which is obviously both dangerous, 58 00:05:48,340 --> 00:05:54,820 quite unreliable and can be very expensive comparatively to the services that we offer them. 59 00:05:55,540 --> 00:05:59,740 So we need kind of transition to a solar home system or a big box system. 60 00:06:00,700 --> 00:06:06,400 What they get is not only reliable electricity at a reasonable price, of course, 61 00:06:06,640 --> 00:06:11,050 but they have the opportunity to upgrade and kind of move up the energy access metre. 62 00:06:11,470 --> 00:06:19,090 And that's one of the premises that's really important for the boxes company is, okay, fine, you can give a customer a solar lantern, 63 00:06:19,810 --> 00:06:26,950 but being able to expand their access to more appliances and improve their wellbeing and lifestyle 64 00:06:26,950 --> 00:06:32,200 by kind of adding a radio to be able to understand with the next market is the next month 65 00:06:32,470 --> 00:06:39,280 where they can sell their produce and those kind of states on the energy axis is incredibly 66 00:06:39,280 --> 00:06:46,390 important to be able to kind of give them what we call the grid experience in the off grid world. 67 00:06:47,320 --> 00:06:53,280 So could you tell us a bit about how the Bboxx product works and how it addresses these challenges? 68 00:06:54,070 --> 00:06:58,809 The core of the Bboxx product offering is what we call the B Power 50 again, and what it is, 69 00:06:58,810 --> 00:07:06,370 it's a 50 watt solar panel with a kind of a 17 amp battery with a circuit board in there which allows 70 00:07:06,370 --> 00:07:12,910 remote monitoring from our London headquarters on what the energy usage patterns are of the customer. 71 00:07:13,480 --> 00:07:20,710 Now, the customer signs up to a contract which they pay off over a certain length of time. 72 00:07:20,740 --> 00:07:25,240 I'm like, We would pay off our mobile phones, I suppose, and in the Western world. 73 00:07:26,470 --> 00:07:35,050 The contract means that we focus on as 36 months with the appliances and a ten year contract for the underlying system. 74 00:07:35,440 --> 00:07:37,750 Now that's quite different to a lot of our competitors. 75 00:07:38,020 --> 00:07:45,850 But the reason for having that kind of long term contract is across that period we provide or maintenance or customer support. 76 00:07:46,360 --> 00:07:57,700 If any challenges arise, like technically with the with the system, we immediately replace, replace it, take it back to our passenger and fix it. 77 00:07:58,210 --> 00:08:07,390 What super important to us about having that kind of ten year relationship with the customer is that we don't want stranded assets in the field again, 78 00:08:07,570 --> 00:08:14,320 so we don't want pieces of technology sitting around rural one day, batteries especially eroding. 79 00:08:14,320 --> 00:08:21,370 And these rural areas and having that continual relationship over that ten year period means that they always 80 00:08:21,370 --> 00:08:29,290 have a shock to go back to if they've gone issue increases brand trust within kind of the Xbox family and. 81 00:08:30,450 --> 00:08:37,560 Essentially underlying everything. As I said before, we want to try and create their own grid experience and that off grid world. 82 00:08:38,610 --> 00:08:44,040 So Lawrence, Jonah described kind of pay as you go and how these customers actually pay on a day by day basis. 83 00:08:44,700 --> 00:08:49,320 Sure. So in our business model, we don't handle any cash from our customers. 84 00:08:49,980 --> 00:08:59,010 All customers basically prepay electricity onto their system and then they use it in terms of days as there as the usage that they're paying for. 85 00:08:59,910 --> 00:09:06,930 This is all enabled by a mobile phone technology and the pay to go software platform that we built in London. 86 00:09:07,800 --> 00:09:15,870 And it's only really been made possible. This whole sector and the pay as you go technology that is behind the payments and that the fact that you 87 00:09:15,870 --> 00:09:21,100 don't have to handle cash obviously reduces certain risks when you're putting assets in distributed settings. 88 00:09:21,120 --> 00:09:29,460 This has all been made possible, possible by mobile money and mobile phone penetration in these rural settings in sub-Saharan Africa. 89 00:09:29,640 --> 00:09:35,880 So not only are pretty basic smartphones being put in the hands of millions of people across sub-Saharan Africa, 90 00:09:36,180 --> 00:09:44,729 but also mobile money providers are allowing those users to easily transfer money to each other within the community, 91 00:09:44,730 --> 00:09:51,870 but also to businesses then building business models on the back of the ability to get those payments from their customers. 92 00:09:52,330 --> 00:10:01,620 Just reiterate that point. If mobile money didn't exist and if smart basic smartphones hadn't proliferated like they had in sub-Saharan Africa, 93 00:10:01,800 --> 00:10:06,510 this business model would be much, much more risky because we'd be handling a lot of cash. 94 00:10:06,660 --> 00:10:11,490 Mm hmm. And have you faced any political cultural challenges? 95 00:10:13,320 --> 00:10:17,220 I think the key to overcoming that is hiring really good local talent. 96 00:10:17,250 --> 00:10:23,640 I think that's always a challenge to. Um, but I think our. 97 00:10:24,840 --> 00:10:36,660 Key kind of operational stop by how retail manages our peer manages in the markets all have strong local links to the communities. 98 00:10:37,320 --> 00:10:41,820 All our sales agents come from the kind of villages that they're selling in. 99 00:10:42,210 --> 00:10:43,980 So in that way, 100 00:10:44,080 --> 00:10:54,900 we've made a concerted effort to make sure that the operations themselves are driven by kind of locals and people from those communities. 101 00:10:55,200 --> 00:11:03,720 So I think in that way, there are always going to be political and cultural challenges when you are operating in a completely foreign market. 102 00:11:04,140 --> 00:11:09,440 But I think. There. There are steps that you can take to mitigate that. 103 00:11:09,440 --> 00:11:12,970 And I think Bboxx is very proactive in that way. 104 00:11:12,980 --> 00:11:20,090 So we haven't had any major hurdles. And I think as we all know, the DRC, for example, is a very challenging market at the moment. 105 00:11:21,230 --> 00:11:26,390 But those are kind of hurdles that you just overcome as as they arise. 106 00:11:27,080 --> 00:11:32,060 Building on that, I think the two other areas which are which are big challenges. 107 00:11:32,090 --> 00:11:43,220 First is on the financing side. So the the business model that we're essentially financing all our customers, the purchase of the assets. 108 00:11:43,640 --> 00:11:52,370 And this costs millions of dollars of upfront capital that's required to be raised, whether it's on the equity side or the debt side. 109 00:11:53,450 --> 00:11:56,809 I think when I first joined, they walked about two and a half years ago. 110 00:11:56,810 --> 00:11:59,970 We were just closing off those debt transactions. Okay. 111 00:12:00,050 --> 00:12:07,100 Basically to fund, can you start to grow our portfolio? And I think the biggest challenge and kind of. 112 00:12:09,150 --> 00:12:13,200 These sort of spaces across Africa is closed, those first transactions. 113 00:12:13,770 --> 00:12:19,200 Yes. So financing in the impact investing space is a really exciting area being at the moment. 114 00:12:19,560 --> 00:12:24,060 Do you find in terms of raising funds that there's a lot more interest in social enterprise? 115 00:12:24,450 --> 00:12:31,349 I mean, we were actually discussing kind of this idea earlier, and I think this kind of two stages, 116 00:12:31,350 --> 00:12:39,240 I suppose, that a social enterprise goes through and the maturity of the investors that it approaches. 117 00:12:39,510 --> 00:12:45,030 I think in kind of the early stage and probably after about five, five years of operating, 118 00:12:45,030 --> 00:12:51,930 but this is beatboxer story anyway, it was very much impact investors that were our primary equity investors. 119 00:12:52,140 --> 00:13:01,470 And on a debt side, it was also kind of impact debt funds that were supplying us with facilities. 120 00:13:01,800 --> 00:13:10,020 What we see now is now that we're part, we're going through a lot of more partnerships and expanding geographically. 121 00:13:10,170 --> 00:13:14,520 We're seeing interest from a much wider range of potential investors. 122 00:13:14,700 --> 00:13:24,990 So large institutional investors. You'll see that in December we closed the transaction with the largest infrastructure fund in Africa. 123 00:13:25,890 --> 00:13:31,049 So this is of course, our business model is completely different now used to project finance and wind windfarms, 124 00:13:31,050 --> 00:13:35,590 for example, and now that they've invested and and offered solar companies. 125 00:13:35,600 --> 00:13:40,850 So I think absolutely there's a huge amount of interest and impact investing space. 126 00:13:40,890 --> 00:13:47,880 And as the world is becoming more interconnected, would you say that it's easier to do business in Africa than it was, say, ten years ago? 127 00:13:48,240 --> 00:13:55,230 Sure. And mobile phones have just dramatically changed the whole landscape in the last ten years. 128 00:13:55,620 --> 00:14:04,650 I think countries like Canada are very high levels now of of access to two mobile phones and then being used regularly. 129 00:14:05,910 --> 00:14:11,270 So in the same way that mobile phones have kind of shrunk the world in the UK, 130 00:14:11,280 --> 00:14:15,060 it's also shrinking the size of the world in sub-Saharan Africa as well. 131 00:14:15,150 --> 00:14:24,059 There's no way without added technology and improvements we've seen in battery technology and mobile money access and mobile 132 00:14:24,060 --> 00:14:29,850 phone access amongst our customer base that this business model would never be able to exist because otherwise it would be. 133 00:14:30,210 --> 00:14:37,950 Even if you had the first two things, you'd have a huge network of sales agents going around collecting cash, physical cash, bring that back to shops. 134 00:14:39,700 --> 00:14:49,110 You know that that would be a very, very hard business model to run, particularly one based out of a headquarters in London. 135 00:14:49,830 --> 00:14:52,889 Whereas these days we have customers using mobile money, 136 00:14:52,890 --> 00:15:00,670 making payments that's going through that's going through our international software system that that doesn't abide by, 137 00:15:00,670 --> 00:15:09,270 you know, the borders of states. Right. So the technology has been a huge a huge game changer there. 138 00:15:09,840 --> 00:15:13,710 So electricity access is one of the key challenges in sub-Saharan Africa. 139 00:15:13,950 --> 00:15:19,680 But I imagine there are other critical services and utilities where a pay as you go model could also work. 140 00:15:20,280 --> 00:15:23,910 I know you mentioned clean cooking earlier. Is that something that you're looking into? 141 00:15:24,300 --> 00:15:32,430 If you look at the off-grid, at the off-grid rates for electricity, you know, their strikingly high numbers, then look at no access to clean cooking. 142 00:15:32,730 --> 00:15:41,430 And, you know, sometimes in countries that are 20, 30% higher than the amount of the population that has access to electricity is actually loads of 143 00:15:41,430 --> 00:15:49,139 people who are particularly peri urban households on the on the periphery of the grid who I mean, 144 00:15:49,140 --> 00:15:53,340 I'm sure that big box electricity solutions would be good for them if the grid is really intermittent at the periphery, 145 00:15:53,520 --> 00:16:00,090 but they're using dirty, expensive charcoal that is, you know, super harmful for the health. 146 00:16:00,360 --> 00:16:04,200 And and in countries like Kenya at the moment is there is policy that's coming 147 00:16:04,200 --> 00:16:09,630 along that is basically putting bans on this on charcoal in different ways. 148 00:16:09,840 --> 00:16:16,499 And is is meant that is a massive incentive for people to come along with great solutions to solve 149 00:16:16,500 --> 00:16:21,750 that problem and an end it is almost the case of anything will be better than the current solution. 150 00:16:22,620 --> 00:16:28,529 We can kind of people might hear saying think about LPG or natural gas and go how 151 00:16:28,530 --> 00:16:34,680 amazing that fossil energy that is fossil energy that's much better than deforestation. 152 00:16:35,310 --> 00:16:42,150 The black carbon that's produced from charcoal, for example, when it's born and the increase in radiative forcing there. 153 00:16:42,170 --> 00:16:49,110 It has much higher global warming potential of it's probably measured in someone using a natural gas to cook with and 154 00:16:49,110 --> 00:16:55,860 then also biogas in rural farms that have cattle that are producing lots of waste and very calorific plant waste. 155 00:16:57,180 --> 00:17:01,979 So there's going to be a host of solutions in the clean cooking space and how you can apply 156 00:17:01,980 --> 00:17:07,540 pay as you go technology to help customers with the fact they won't be able to afford. 157 00:17:08,550 --> 00:17:16,860 The upfront cost of the asset, particularly a biogas system that's even larger than buying the the a canister, for example, of gas. 158 00:17:17,160 --> 00:17:20,459 So we're having to think now much more about, okay, smart bands. 159 00:17:20,460 --> 00:17:21,450 What do they look like? 160 00:17:21,600 --> 00:17:31,410 What's the appropriate technology, what are the payment plans on how we can finance these in ways that we've been successful with solar home systems? 161 00:17:32,570 --> 00:17:38,820 There's huge this huge potential there. And so many of our customers, it's the next thing that they really, really want. 162 00:17:38,970 --> 00:17:45,780 And they they know that that will make their life better. And charcoal, literally, on a month by month basis, is getting more expensive. 163 00:17:46,650 --> 00:17:50,760 East Africa is that is really why this is why this is happening. 164 00:17:50,970 --> 00:17:57,629 And one thing I'd just add also is like we were looking at these figures yesterday, 165 00:17:57,630 --> 00:18:03,360 actually the population growth in Africa is going to be standing over the next 50 years. 166 00:18:03,690 --> 00:18:07,800 We need kind of business models in terms of energy access, cooking that is scalable. 167 00:18:08,130 --> 00:18:11,950 Often solutions are scalable and challenging, but they are scalable. 168 00:18:11,970 --> 00:18:17,370 I mean, you look at Nigeria, the population is projected to reach 1 billion in 2100. 169 00:18:18,170 --> 00:18:30,990 So the opportunity is there from a business perspective, the need is there from like a customer and customer population perspective. 170 00:18:31,380 --> 00:18:36,630 But I suppose bridging those two things and making sure that like the political environment, 171 00:18:36,870 --> 00:18:44,279 the business model is sustainable, the technology can scale a still massive highlands and it's still an unknown. 172 00:18:44,280 --> 00:18:48,150 But the success of these businesses is not a sure thing yet. 173 00:18:48,160 --> 00:18:56,430 But so I think whether the business model develops over the next ten or 20 years, undoubtedly I, I, 174 00:18:56,700 --> 00:19:03,990 I would say with kind of a reasonable amount of certainty that the business model we're operating now will not be the same in ten years. 175 00:19:04,320 --> 00:19:11,670 But what will be there, I genuinely think, is an energy to service the business model, how they pay, I don't know. 176 00:19:12,720 --> 00:19:19,170 And most utilities that a majority of customers will be using in Africa will be on a pay as you go basis. 177 00:19:20,250 --> 00:19:24,960 So yeah, I think population growth in Africa is huge. 178 00:19:25,200 --> 00:19:34,410 The current solutions are not suitable for them and the emergence of industries such as the Off-grid sector 179 00:19:34,770 --> 00:19:43,140 will play a major role in improving the lives of what will be billions of people in the next kind of 27 years. 180 00:19:43,860 --> 00:19:47,700 And thank you for joining us for this edition of the Future of Business podcast. 181 00:19:48,060 --> 00:19:51,240 If you enjoyed the episode, please do rate review and subscribe. 182 00:19:51,480 --> 00:19:58,080 We'd love to hear your feedback. And as always, if you have comments or questions or if you'd like to suggest a topic for a future episode, 183 00:19:58,380 --> 00:20:06,630 please feel free to email us at SBS Podcasts. SB Stocks Don't Ask, Don't UK until next time goodbye.