(opinion piece) Electricity in Africa: is the real problem payment?
By Nomanini CEO, Vahid Monadjem. Looking at the best solution to Africa’s electricity payment challenge.
22 SEPTEMBER 2014
SummaryWhile prepaid meters go halfway to solving the problem, making payment points widely available for people to purchase prepaid electricity vouchers is just as important.
In August 2014, US president Barack Obama announced a renewed commitment to Power Africa, a private sector-led initiative aimed at doubling electricity access in sub-Saharan Africa, where an estimated 600 million people are without reliable access to power. He raised the bar, pledging to add 30,000MW of energy (triple last year’s goal of 10,000MW) and create new connections for at least 60 million households and businesses. He also pledged $300m in grant assistance per year to expand Power Africa’s reach across the continent.
Installing prepaid meters is a big part of the solution, and will play a huge role in protecting electricity suppliers’ revenues, enabling them to provide sustainable power for the long term. These meters are already having an impact in a number of countries including Kenya, Nigeria, Uganda and Zambia, and the potential for growth is huge. In Nigeria alone, the prepaid electricity market is worth an estimated NGN150bn, with 50% of the market yet to receive prepaid meters.
We are finally starting to see some real progress in lighting up the continent! But very soon, infrastructure won’t be the biggest obstacle, payment will be.
While prepaid meters go halfway to solving the problem, making payment points widely available for people to purchase prepaid electricity vouchers is just as important. Unfortunately, it’s proving difficult in areas where retail is primarily informal, and where household incomes are so low that people can often only afford to purchase a couple of dollars’ worth of electricity at a time.
In Zimbabwe for example, rolling out prepaid meters has been quite successful, with over 400,000 installed since August 2012. However, many Zimbabweans with meters are still without electricity because, in order to purchase prepaid vouchers, they are forced to travel to banking halls and queue for hours - something that could take the better part of a day for someone who lives in a very remote area.
In Africa, where people have high levels of mobile access compared to other basic services (like in Tanzania for example, where over 60 percent of the population use a mobile phone, but only 12 percent have access to electricity), mobile seems to be the best way to distribute prepaid vouchers. It is important to consider however, that although mobile is growing, cash is still king in a lot of informal markets where many people are unbanked (and lack access to online or mobile banking).
Perhaps the best solution to Africa’s electricity payment challenge is to empower informal vendors such as taxi drivers, local shop owners and micro entrepreneurs to use mobile technology to buy prepaid electricity vouchers, which they can then sell for cash. This replicates the success of mobile airtime distribution and enables electricity providers to ensure that even unbanked, unconnected people in the remotest of areas can access and pay for electricity conveniently. And they’ll be empowering local entrepreneurs in the process!
About Vahid Monadjem - CEO and co-founder, Nomanini
Vahid Monadjem is the co-founder and CEO of Nomanini, a South African-based mobile Point of Sale service for facilitating cash transactions in emerging markets. He is passionate about working at the intersection of technology and design in informal markets, where Nomanini’s solutions can directly impact people's lives.
Vahid’s vision for Nomanini is to provide platforms for transactions in emerging markets by empowering local partners to create the tools that best suit their particular environment. He is a trained engineer with extensive innovation and product design experience.
Before founding Nomanini, he was McKinsey & Company’s global fellow for Emerging Market Product Development. He has worked in Africa, South East Asia, North America and Europe within a wide range of industries, including technical services, design, consumer goods, state-owned utilities, petrochemicals and telecommunications.
"We are finally starting to see some real progress in lighting up the continent! But very soon, infrastructure won’t be the biggest obstacle, payment will be." Vahid Monadjem
"Perhaps the best solution to Africa’s electricity payment challenge is to empower informal vendors such as taxi drivers, local shop owners and micro entrepreneurs to use mobile technology to buy prepaid electricity vouchers, which they can then sell for cash." Vahid Monadjem
"While prepaid meters go halfway to solving the problem, making payment points widely available for people to purchase prepaid electricity vouchers is just as important." Vahid Monadjem
As the pioneering fintech platform for the informal retail ecosystem, Nomanini connects merchants and distributors to each other and global service providers, integrating payments, working capital, and data analytics to unlock the latent potential of Africa’s economy.
Nomanini turns any mobile device into a retail point-of-sale solution for informal merchants that is connected to an interoperable merchant wallet. The interoperable merchant wallet allows merchants to offer a broad range of digital banking (including cash-in/cash-out), mobile, utility and entertainment services to their customers boosting competitiveness. In turn, digital service providers rapidly increase the scale and reach of their offerings. By generating real-time insights based on transaction data, distributors using the platform gain a single view of their merchant network, ensuring inventory is where it is needed most to improve sales. Distributors can also begin to accept payments for goods electronically, eliminating the risk and inefficiency of collecting cash. With data analytics, Nomanini helps extend working capital loans to merchants via distributors allowing them to invest in inventory to grow their businesses. The increased volume of goods and services set against reduced operational friction increases the profits for all platform participants.
Nomanini was founded in 2010 and is headquartered in South Africa.
For more information, please visit https://www.nomanini.com