The tipping point – How the African market for off-grid lighting products is taking off
The African market for off-grid lighting products is projected to achieve 40 percent to 50 percent annual sales growth, with 5-6 million African households owning quality portable lights (primarily solar) by 2015.
Lighting Africa contributed to this market acceleration: in 2010 alone, the sales of solar portable lanterns that have passed Lighting Africa’s quality tests grew by 70% in Africa. This resulted in more than 672,000 people on the continent with cleaner, safer, reliable lighting and improved energy access.
The state of the market
The market for off-grid lighting was initially supported by donor-led initiatives, and was characterized by high unit costs and technologically inadequate products that were not suited to the needs of African consumers. Today, the market is driven by private sector interests: innovative business models, unique marketing strategies, and products tailored to meet consumer demand hold sway.
All players along the value chain have contributed to this transformation.
Manufacturers and distributors have started to design and distribute better-quality products, with lamps that cater to the preferences of people at the base of the pyramid. These products have a longer battery life and provide better illumination. While there are many substandard products in the African market, the number of quality products is increasing. Lighting Africa has contributed to this development by designing a quality assurance program that allows manufacturers, distributors and other bulk buyers to test and improve the quality and design of their lighting products. Eight products have so far passed these quality tests and become Lighting Africa Associates. They are available in the African market, retailing for between $22 and $97.
Consumers have benefited from better-quality products that suit their needs. The new-generation lamps offer features that consumers are demanding, such as cell phone chargers. The prices of light-emitting diodes (LEDs), solar components, and batteries have also fallen sharply over the five past years. As a result, off-grid products are more affordable to low-income households. Consumers are also learning to distinguish between quality and substandard solar lamps. For example, Lighting Africa’s consumer education campaign has reached more than 9 million Kenyans living in rural areas, raising their awareness of the benefits of solar lighting over fuel-based lighting, and helping to make them informed buyers.
For African consumers, the main obstacle to making the switch to clean, off-grid solar lighting is the up-front cost of solar portable lanterns. Kerosene may be expensive, hazardous, damaging to one’s health and a pollutant, but it has the advantage of being sold in small portions. A rural, off-grid household in Kenya will typically spend between 20 Kenyan shillings (about $0.25) and 50 Kenyan shillings a day on kerosene, but would struggle to find the 2,000 Kenyan shillings ($24.60) required to purchase a quality solar portable lantern. Several organizations have started to tackle this cash-flow issue. In several African countries, distributors of solar portable lamps are partnering with savings and credit cooperative societies to provide loans to consumers who wish to purchase a solar portable lamp. This is the case of Developing a Delivery Model to Support Consumer Financing Schemes for Solar Powered Lighting Systems. The project, implemented in Kenya from November 2008 to June 2010, was a winner of the Lighting Africa Development Marketplace Competition which provides seed funding for innovation in off-grid lighting product development. Other Development Marketplace winners such as the project Recharging Fees For Lamps Can Buy hours of Solar Light in Uganda allow consumers to rent a lamp, building consumer confidence in these products over the longer term.
African governments are looking at clean, off-grid lighting as an interim measure for rural communities not yet connected to power grids. While there is no substitute for grid electrification, clean, off-grid lighting products can offer an interim solution for communities without access to power and provide immediate benefits. A number of African governments have taken this route to complement their plans for rural electrification. For example, Lighting Africa has signed memoranda of understanding with the governments of Mali, Senegal, and Ethiopia to support their work in increasing access to lightning for rural populations.
Microfinance institutions and banks are starting to see the potential of the clean, off-grid lighting market in Africa. Until recently, this was considered a high-risk market, but this perception is changing rapidly. By 2015, some 65 million in Africa could have portable solar lighting. Access to finance – for distributors in the area of trade finance as well as consumers with limited cash flow – is the single major obstacle to scaling up the market. Financial institutions may be unfamiliar with portable solar lighting and wary of the impact of low-quality products on their investments. Lighting Africa is working with banks to develop a risk-sharing facility for distributors. Over the past six months, Faulu, a leading Kenyan microfinance institution working with Lighting Africa, has begun to provide loans to rural households to buy solar portable lanterns.
Lighting Africa has been a key driver in transforming the off-grid lighting market in Sub-Saharan Africa, working as a neutral broker of industry interests and supporting the growth of innovative companies along the supply chain. This is a contribution to the global market for affordable, modern, off-grid lighting, which has the potential to dramatically improve the lives of hundreds of millions of people around the world.