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Information Security. Exciting and digital. Hello and welcome to the Future of Business Podcast.
I'm your host, Alison McArthur. According to the World Bank, there are currently 1 billion people who lack access to electricity.
One company working to address this access gap is Bibox, which manufactures innovative solar systems for customers across sub-Saharan Africa.
The company is confronting the challenges posed by inadequate infrastructure in emerging markets and
uses a pay as you go system that allows consumers to purchase energy through their mobile phones.
Lawrence Copson and Gretel. But Janes are the lead finance and investment managers of B Box.
They recently joined us by Skype from one of their offices in London.
So firstly, thank you both so much for joining us on the podcast here today.
We'd like to start by exploring the electricity access challenge that Bboxx is tackling.
Would you mind telling our listeners a little bit more about the challenges of lighting up Africa?
Sure. So epochs as a company started around eight years ago,
and the context of the challenge of electrification in Africa has has changed over the last eight years,
though the challenge still remains really, really large at the moment,
42% of the population of sub-Saharan Africa do have access to electricity,
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,
for example, a fairly unreliable and intermittent grid.
But that still leaves about 60% of the population of sub-Saharan Africa, which is a rapidly growing population without access to electricity.
I think it's also important to set the scene, the kind of national level across sub-Saharan Africa as well.
So in certain countries is much more of a rural challenge and you might have urban electrification rates of 90% plus.
For example, in Kenya, that urban electrification is reaching about 90%.
Though in rural areas, it's still a large population without access to electricity.
But in other countries, it's not just a majority rural problem,
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.
So countries like Democratic Republic of the Congo, a very good example of this.
So there is a is a kind of a big challenge at the macro level.
And then if you jump down into individual countries, you start identifying the nuances of where specifically electrification needs to happen.
And the big backdrop of this is that population in sub-Saharan Africa is is growing in fastest rate in the whole world,
is just over a billion people in sub-Saharan Africa at the moment. And that's expected to at least double by 2050.
And we're only ten years away from 2030.
Population projections say that between 400 and 500 million people will be born in sub-Saharan Africa in the next ten years.
And so for governments thinking about electrification policy, they have to make sure that not only the electrification rate is going up,
but the absolute number of people that don't have access to electricity isn't rising in the backdrop of huge population growth.
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.
As you know, the U.N. has set an ambitious target of universal access by 2030.
Based on what you've seen in your efforts. Do you think that we're on track to reach this?
So the key thing that people forget here is what is the definition of energy access?
So if you're just giving someone a lantern, a solar lantern, does that really?
Justifying the the definition of giving them energy access.
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
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,
these are these are very strong statement to what they can access.
So their income increases then either they have to forego that asset that they've spent a lot of money on and upgrade,
for example, to the cable system or that kind of stuck in a bit of a lull.
So that question, I think it's it's an ambitious target, but it also depends on how you define energy access.
I think we sometimes forget the electricity is a key enabler to improve livelihoods and productivity.
For example, cooking at night or doing homework.
How did the people in the countries you operated in Africa access these services before you began providing them with people systems?
So the decision, like a typical big box customer, would be a household of about five people.
The main forms of employment for the parents would be farming,
and our customers live in very rural areas where obviously the grid will never reach them.
The current forms of light is through kerosene lanterns or candles, which is obviously both dangerous,
quite unreliable and can be very expensive comparatively to the services that we offer them.
So we need kind of transition to a solar home system or a big box system.
What they get is not only reliable electricity at a reasonable price, of course,
but they have the opportunity to upgrade and kind of move up the energy access metre.
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,
but being able to expand their access to more appliances and improve their wellbeing and lifestyle
by kind of adding a radio to be able to understand with the next market is the next month
where they can sell their produce and those kind of states on the energy axis is incredibly
important to be able to kind of give them what we call the grid experience in the off grid world.
So could you tell us a bit about how the Bboxx product works and how it addresses these challenges?
The core of the Bboxx product offering is what we call the B Power 50 again, and what it is,
it's a 50 watt solar panel with a kind of a 17 amp battery with a circuit board in there which allows
remote monitoring from our London headquarters on what the energy usage patterns are of the customer.
Now, the customer signs up to a contract which they pay off over a certain length of time.
I'm like, We would pay off our mobile phones, I suppose, and in the Western world.
The contract means that we focus on as 36 months with the appliances and a ten year contract for the underlying system.
Now that's quite different to a lot of our competitors.
But the reason for having that kind of long term contract is across that period we provide or maintenance or customer support.
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.
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,
so we don't want pieces of technology sitting around rural one day, batteries especially eroding.
And these rural areas and having that continual relationship over that ten year period means that they always
have a shock to go back to if they've gone issue increases brand trust within kind of the Xbox family and.
Essentially underlying everything. As I said before, we want to try and create their own grid experience and that off grid world.
So Lawrence, Jonah described kind of pay as you go and how these customers actually pay on a day by day basis.
Sure. So in our business model, we don't handle any cash from our customers.
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.
This is all enabled by a mobile phone technology and the pay to go software platform that we built in London.
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
don't have to handle cash obviously reduces certain risks when you're putting assets in distributed settings.
This has all been made possible, possible by mobile money and mobile phone penetration in these rural settings in sub-Saharan Africa.
So not only are pretty basic smartphones being put in the hands of millions of people across sub-Saharan Africa,
but also mobile money providers are allowing those users to easily transfer money to each other within the community,
but also to businesses then building business models on the back of the ability to get those payments from their customers.
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,
this business model would be much, much more risky because we'd be handling a lot of cash.
Mm hmm. And have you faced any political cultural challenges?
I think the key to overcoming that is hiring really good local talent.
I think that's always a challenge to. Um, but I think our.
Key kind of operational stop by how retail manages our peer manages in the markets all have strong local links to the communities.
All our sales agents come from the kind of villages that they're selling in.
So in that way,
we've made a concerted effort to make sure that the operations themselves are driven by kind of locals and people from those communities.
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.
But I think. There. There are steps that you can take to mitigate that.
And I think Bboxx is very proactive in that way.
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.
But those are kind of hurdles that you just overcome as as they arise.
Building on that, I think the two other areas which are which are big challenges.
First is on the financing side. So the the business model that we're essentially financing all our customers, the purchase of the assets.
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.
I think when I first joined, they walked about two and a half years ago.
We were just closing off those debt transactions. Okay.
Basically to fund, can you start to grow our portfolio? And I think the biggest challenge and kind of.
These sort of spaces across Africa is closed, those first transactions.
Yes. So financing in the impact investing space is a really exciting area being at the moment.
Do you find in terms of raising funds that there's a lot more interest in social enterprise?
I mean, we were actually discussing kind of this idea earlier, and I think this kind of two stages,
I suppose, that a social enterprise goes through and the maturity of the investors that it approaches.
I think in kind of the early stage and probably after about five, five years of operating,
but this is beatboxer story anyway, it was very much impact investors that were our primary equity investors.
And on a debt side, it was also kind of impact debt funds that were supplying us with facilities.
What we see now is now that we're part, we're going through a lot of more partnerships and expanding geographically.
We're seeing interest from a much wider range of potential investors.
So large institutional investors. You'll see that in December we closed the transaction with the largest infrastructure fund in Africa.
So this is of course, our business model is completely different now used to project finance and wind windfarms,
for example, and now that they've invested and and offered solar companies.
So I think absolutely there's a huge amount of interest and impact investing space.
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?
Sure. And mobile phones have just dramatically changed the whole landscape in the last ten years.
I think countries like Canada are very high levels now of of access to two mobile phones and then being used regularly.
So in the same way that mobile phones have kind of shrunk the world in the UK,
it's also shrinking the size of the world in sub-Saharan Africa as well.
There's no way without added technology and improvements we've seen in battery technology and mobile money access and mobile
phone access amongst our customer base that this business model would never be able to exist because otherwise it would be.
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.
You know that that would be a very, very hard business model to run, particularly one based out of a headquarters in London.
Whereas these days we have customers using mobile money,
making payments that's going through that's going through our international software system that that doesn't abide by,
you know, the borders of states. Right. So the technology has been a huge a huge game changer there.
So electricity access is one of the key challenges in sub-Saharan Africa.
But I imagine there are other critical services and utilities where a pay as you go model could also work.
I know you mentioned clean cooking earlier. Is that something that you're looking into?
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.
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
people who are particularly peri urban households on the on the periphery of the grid who I mean,
I'm sure that big box electricity solutions would be good for them if the grid is really intermittent at the periphery,
but they're using dirty, expensive charcoal that is, you know, super harmful for the health.
And and in countries like Kenya at the moment is there is policy that's coming
along that is basically putting bans on this on charcoal in different ways.
And is is meant that is a massive incentive for people to come along with great solutions to solve
that problem and an end it is almost the case of anything will be better than the current solution.
We can kind of people might hear saying think about LPG or natural gas and go how
amazing that fossil energy that is fossil energy that's much better than deforestation.
The black carbon that's produced from charcoal, for example, when it's born and the increase in radiative forcing there.
It has much higher global warming potential of it's probably measured in someone using a natural gas to cook with and
then also biogas in rural farms that have cattle that are producing lots of waste and very calorific plant waste.
So there's going to be a host of solutions in the clean cooking space and how you can apply
pay as you go technology to help customers with the fact they won't be able to afford.
The upfront cost of the asset, particularly a biogas system that's even larger than buying the the a canister, for example, of gas.
So we're having to think now much more about, okay, smart bands.
What do they look like?
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?
There's huge this huge potential there. And so many of our customers, it's the next thing that they really, really want.
And they they know that that will make their life better. And charcoal, literally, on a month by month basis, is getting more expensive.
East Africa is that is really why this is why this is happening.
And one thing I'd just add also is like we were looking at these figures yesterday,
actually the population growth in Africa is going to be standing over the next 50 years.
We need kind of business models in terms of energy access, cooking that is scalable.
Often solutions are scalable and challenging, but they are scalable.
I mean, you look at Nigeria, the population is projected to reach 1 billion in 2100.
So the opportunity is there from a business perspective, the need is there from like a customer and customer population perspective.
But I suppose bridging those two things and making sure that like the political environment,
the business model is sustainable, the technology can scale a still massive highlands and it's still an unknown.
But the success of these businesses is not a sure thing yet.
But so I think whether the business model develops over the next ten or 20 years, undoubtedly I, I,
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.
But what will be there, I genuinely think, is an energy to service the business model, how they pay, I don't know.
And most utilities that a majority of customers will be using in Africa will be on a pay as you go basis.
So yeah, I think population growth in Africa is huge.
The current solutions are not suitable for them and the emergence of industries such as the Off-grid sector
will play a major role in improving the lives of what will be billions of people in the next kind of 27 years.
And thank you for joining us for this edition of the Future of Business podcast.
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