HomeRegional NewsCentral AfricaElectricity prepayment models can be opportunity for SMMEs in Africa

Electricity prepayment models can be opportunity for SMMEs in Africa

In August2014, 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. Obama raised the bar, pledging to add 30 000MW of energy thereby trippling last year’s goal of 10 000MW. He also pledged US$300-million in grant assistance per year to expand Power Africa’s reach across the continent and to create new electricity connections for approximately 60 million households and businesses.

To ahieve sustainability of these connections installing prepaid meters will play a role in protecting the electricity suppliers’ revenues, enabling them to provide sustainable power in the long term. Prepayment 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.

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 minimal units 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 must travel to banking halls that are not located in their communities.

In Africa, where people have high levels of mobile phone access compared to other basic services such as in Tanzania were over 60 per cent of the population use a mobile phone, but only 12 per cent have access to electricity. Utilising the mobile phone as a potential payment device could be the best way to distribute prepaid vouchers. It is important to consider however, that although mobile phones are growing, cash is still king in a lot of informal markets where many people are unbanked and lack access to internet connectivity and mobile banking.

A potential 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.

Nicolette Pombo-van Zyl
As the Editor of ESI Africa, my passion is on sustainability and placing African countries on the international stage. I take a keen interest in the trends shaping the power & water utility market along with the projects and local innovations making headline news. Watch my short weekly video on our YouTube channel ESIAfricaTV and speak with me on what has your attention.