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EU Energy Initiative for Poverty Eradication and Sustainable Development

Lilian Munyeka Zulu

Centre for Energy, Environment and Engineering Zambia (CEEEZ)Plot No. 1635 Malambo Road, Contract Haulage Premises, Private Bag E721 Lusaka, Zambia. Tel: 260 1 243 619Fax: 260-1-240267Email: ceeez@coppernet.zm

AREED - small energy enterprise development, experience in 5 African countries

Facilitation workshop & Policy Dialogue on Energy access for the Rural Poor

Maputo, Mozambique 12-15 April 2005

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The greatest social challenge that most African governments face in the 21st century is that of poverty reduction.

Virtually all governments in Africa have embarked on poverty reduction programmes

BACKGROUND (1)

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It is now widely accepted that the lack of clean and sustainable energy is a significant barrier to the successful implementation of poverty reduction programmes in most African countries.

Addressing these issues, however, is a difficult financial and political challenge for African governments who often place the needs of concentrated urban populations ahead of those in peri-urban and rural areas.

BACKGROUND (2)

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GENERAL EXPERIENCE

Experience has also shown that despite the existence of a wide range of business opportunities in rural areas of Africa, local entrepreneurs have not taken advantage of such opportunities due to:

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GENERAL EXPERIENCE

Lack of capacity and resources by local entrepreneurs to develop robust business plans

Lack of seed financeTo overcome these constraints

requires a holistic approach involving execution of all phases of business development cycle

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Technical - Financial

Analysis and Evaluation

Topography, Hydrology, grid

Load, legal communities, social awareness

Concept development

Pre-feasibility

Investment(Fund Manager)

Project Identification

Project Developer

Developer and Financial Institution

Feasibility or Business plan

KEY PHASES OF BUSINESS DEVELOPMENT CYCLE

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BUSINESS DEVELOPMENT

It is a well known fact that the first three stages (Project identification, concept development and pre-feasibility) are often difficult and slow going requiring significant investment, in time and capital.

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In Africa, few programmes offer support to entrepreneurs involving these stages, whilst on the other hand, traditional financial institutions require ready made robust business plans

One notable institution and programme which offers support to entrepreneurs from idea to business plan is AREED

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AREED AND ITS EXPERIENCE IN PRE-INVESTMENT AND SEED FINANCING

AREED Program was established in 2000 by a group of multi-lateral (UNEP), international (E&Co) and national partners (Ghana, Mali, Senegal, Tanzania and Zambia) to:

Address this need by helping to build and sustain energy enterprises capable of delivering energy services, and promotion of clean and sustainable energy technologies for productive uses for income generating activities.

Meet on-the-ground needs of entrepreneurs and start-up businesses with a business orientation.

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OBJECTIVES OF AREED

Based on an enterprise development approach pioneered by E+Co and AREED partners, the AREED specific objectives are:

Establish and strengthen enterprises (private sector and public-private partnerships) that offer clean modern energy services to rural and peri-urban populations.

Increase the capacity of local NGOs to offer enterprise development services critical to the start-up of small and mid-size energy enterprises.

Engage local and regional financial institutions to invest in the clean energy sector.

Enhance the ability of local, regional and national governments to support business-like, solutions to the delivery of sustainable energy services by small and mid-size energy enterprises.

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EntrepreneurEntrepreneur

AREED Support

Energy Services Rural ClientsRural Clients

Enterprise Development Services

Start-up Financing

NGOs Banks

AREED Partners

AREED ARRANGEMENT

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AREED

AREED

Proposal

EDS

EDS and $

$$ and 2nd Stage $$$

IdeaIdea

Fact-FindingFact-Finding

Feasibility AnalysisFeasibility Analysis

Business PlanningBusiness Planning

ImplementationImplementation

ExpansionExpansion

TOOLKIT

ENTREPRENEUR

STAGES OF THE TOOLKIT PROCESS

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AREED EXPERIENCE

Enterprise-centered model can be a powerful means for achieving concrete and sustainable solutions to problems in energy and a variety of other development sectors.

Growing evidence from the five countries where AREED is active demonstrates that these types of energy enterprises can generate measurable co-benefits beyond the provision of energy services including: creation of jobs; protection of land and forest resources; increased productivity and incomes; provision of clean water; other development priorities.

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AREED ACHIEVEMENTS (1)

Since 2000, the following accomplishments have been obtained through the AREED partnership: Training of 250+ entrepreneurs on business

planning and enterprise development; $1,133,800 invested in 23 enterprises,

including enterprises active in the following:

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AREED ACHIEVEMENTS (2)

Country Investment NameTechnology

Applied Description of BusinessFinancing

US$Investment

Type

Ghana Translegacy Venture Limited LPG Fabrication and sale of LPG stoves

$20,000 Debt

Ghana AB Management Energy Efficiency Power factor correction $122,400 Debt

Ghana Anasset LPG Retail of Liquefied Petroleum Gas

$38,000 Debt

Ghana Fee Hi Ventures LPG Operates a Liquefied Petroleum Filling plant

$33,500 Debt

Ghana Gladymanuel Energy Efficient Lighting

Sale of compact fluorescents $70,000  

Ghana Lambark Gas LPG Retail of Liquefied Petroleum Gas

$109,945 Debt

Ghana M 38 LPG Filling Plant LPG Retail of Liquefied Petroleum Gas

$59,000 Debt

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Mali Bagani Bio Fuel Jatropha powered multifunctional platforms to peel, ground cereals and charge batteries

$15,170 Debt

Mali Eco'Home Energy Efficient Lighting

Sale of compact fluorescents products

$112,782 Debt

Mali Sodigaz LPG Distribution of Liquefied Petroleum Gas

$183,088 Debt

Mali USISS Solar Thermal Drying of food crops $19,665 Debt

Senegal AME Solar Thermal Repair and installation of solar water heaters

$41,563 Debt

Senegal Foyers Ameliorés Biomass Manufactures and Sales cookstoves

$19,455 Debt

Senegal VEV Wind Repair and installation of wind pumps

$22,395 Debt

AREED ACHIEVEMENTS (3)

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Tanzania BETL Biomass Sourcing Biomass Waste for Cement Production

$25,000 Debt

Tanzania Mona Mwanza Electrical 2 PV Installs and maintains Solar PV Systems

$50,000 Debt

Zambia Chavuma Energy Efficiency Installation of EE motor control gear

$22,300 Debt

Zambia Chavuma2 Energy Efficiency Installation of EE motor control gear

$40,500 Debt

Zambia KBPS Biomass Manufacture of charcoal from renewable eucalyptus waste

$75,300  

Zambia Rasma Engineering Co. Energy Efficiency Manufacture and sale of energy efficient stoves and ovens

$20,000 Equity

Zambia RCI Biomass Manufactures and Distributes Nyemba Oil Fuel and its by products "pressed cake/fertiliser"

$8,000 Debt

Zambia TSADC Solar Thermal Solar Bakery $10,000 Debt

Zambia Ubwato Enterprises Energy Efficiency Manufacture and sale of energy efficient stoves

$15,700 Debt

AREED ACHIEVEMENTS (4)

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CHALLENGES (1)

While it is acknowledged that a good start and foundation have been achieved, the most pressing challenge is attainment of long term sustainability and contribution of AREED to national development priorities of partner countries.

Problems that are seen as threatening the long term sustainability include:

limited flow of rural-based enterprises (RBEs) through the pipeline

insufficient resources to support long term EDS delivery and investments

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CHALLENGES (2)

The problems above are being caused by the following negative conditions prevailing on the ground. Contact between partners and RBEs is limited Entrepreneurs do not have knowledge of technologies for

delivery of energy products and services Entrepreneurs, particularly those in rural area, are unaware

of application of clean/renewable energy technologies for productive use.

Entrepreneurs have limited awareness of business opportunities in the energy sector

Entrepreneurs capacity to write project proposals is limited.

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The problems identified above require

provision of funds to increase and sustain the flow of proposals through the pipeline through the following strategies:-

WAY FORWARD

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Increase dialogue between partners and umbrella organisations who support entrepreneurs for increased production through provision of energy as part of their production.

Initiate targeted marketing of packaged technologies.

Work closely with national and international agencies in the demonstration of viable energy technologies as a business.

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CONCLUSIONS

The AREED model has demonstrated that use of clean and renewable energy can go along way to contribute to poverty reduction and the EUEI can play a big role in leveraging these efforts