Robust Business Models to Promote Private Investment
Smallholder farmers are the breadbasket of sub-Saharan Africa. They are responsible for 80% of the region’s agricultural output. Despite their critically important role, they are largely neglected, often living outside the reach of critical infrastructure. Electricity, which plays a vital role in agricultural productivity, remains especially elusive. 80% of the region’s rural population are smallholder farmers and only 29% of this population has access to electricity. Accelerating the pace of electrification would require a fundamental shift in how electrification interventions, especially those in rural areas, are designed and implemented. This report seeks to introduce such a paradigm shift. It compiles extensive research conducted by TFE with support from industry partners as part of the Renewable Energy for African Agriculture (RE4AFAGRI) project of the Long Term Joint EU-AU Research and Innovation Partnership on Renewable Energy.
The report introduces the concept of user-led electrification interventions using renewable energy and offers approaches for how these can be designed and implemented in the context of the agri-energy nexus. Our user-led approach begins with a techno-economic model to identify agricultural value chain activities that are financially viable for electrification from the perspective of the smallholder farmer. By applying the model to the four case study countries of Nigeria, Rwanda, Zambia and Zimbabwe, we were able to identify which activities are viable for electrification in these countries, using mini-grids and standalone solar. Given this backdrop, we explore best practice business models to deploy mini-grids and standalone solar systems for the needs of smallholder farmers including pay-as-you-go permutations, appliance financing approaches, keymaker models and community-centred models. We embed these business models in the macro-operating environments of Nigeria, Rwanda, Zambia and Zimbabwe and offer recommendations on how to make these environments more favourable for organisations that are tasked with implementing business models - mini-grid and standalone solar companies. Alongside the report, the techno-economic model is open-sourced and available for download for practitioners that would like to assess the financial viability of electrifying smallholder agricultural activities in any location of their choice. A user guide for the model is presented in an annex to the report.
