By Kevin Johnstone, IIED
Since 2015, the Energy Change Lab (a programme of IIEDand Hivos) has been researching, prototyping, implementing, and testing productive uses of energy (PUE) activities to help build end-user electricity demand in Tanzania (read more here and here). Initial research by the International Institute of Environment and Development (IIED) highlighted the fact that electricity demand does not necessarily grow organically; developers, policy-makers, and other stakeholders must support demand stimulation (more here).
To try and help spur electricity demand, the Energy Change Lab (ECL) has been working with mini-grid developers PowerCorner and Rafiki Power as well as others in Tanzania to catalyse PUE, so electricity demand and local economies can grow. Some of the PUE barriers, prototypes and lessons from ECL’s work are highlighted below.
Table 1: Highlights from Energy Change Lab’s PUE Work in Tanzania (adapted from the recently published Remote but productive: Practical lessons from productive uses of energy in Tanzania)
PUE in Njombe Region
Eager to build on this work, ECL recently kicked off its new partnership with the Matembwe Village Company (MVC) and the European Committee for Training and Agriculture (CEFA) with a field visit to MVC’s mini-grid sites in the Njombe Region of Tanzania. ECL’s staff in Matembwe is working closely with MVC and CEFA to implement PUE activities.
CEFA had initially installed a mini-grid system in the village of Matembwe in 1986 and successfully spun off and supported the MVC to expand into eight surrounding villages with plans for more. The villages have been electrified at various points over the decades, which makes this an ideal location for experimenting to prompt productive uses of energy (PUE) uptake. Originally quite isolated when the mini-grid was initially installed, Matembwe and the surrounding villages are growing rapidly, with agriculture and timber as the main revenue generators. Many entrepreneurs source appliances and materials 60km away in the larger town of Njombe.
Emerging lessons from Njombe Region
Building on the previous prototyping PUE work with Rafiki Power and PowerCorner, ECL is rapidly defining and exploring the PUE issues specific to the Matembwe economy and context. Initial discussions with community leaders and existing PUE customers in the villages of Matembwe, Ikondo, Isoliwaya, Nyave, and Image (815 household connections and 176 PUE customers) have highlighted various PUE successes and barriers to uptake in the Njombe Region. These PUE businesses range from general goods stores that use electricity only for lighting to workshops that use three-phase electricity to power larger processing equipment.
Based on these initial interviews and meetings, several PUE lessons are emerging for the area:
- Technical learning - Successful entrepreneurs have links to formal training and education. These types of programmes are typically found outside the small communities near Matembwe, so these entrepreneurs have the know-how, means, and motivation to travel and/or live outside their communities, for example in Njombe. This also exposes them to larger towns with bustling trade areas and new ideas that germinate. Apprenticeships located in these communities can be helpful for building experience for youth, but also tend to reinforce and perpetuate inaccurate or weak skills, as one master carpenter explained.
- Market information - Successful entrepreneurs gather inspiration from larger towns and replicate them in their communities.
Entrepreneurs watch and learn in shops and markets in Njombe, Iringa, and sometimes Dar es Salaam, seeking advice from existing businesses on operations and sourcing quality appliances and materials. This also gives them a plethora of examples to replicate, which they use to diversify across many sectors in their communities.
- Business acumen - ‘Copy-paste’ entrepreneurs are not very successful.
These entrepreneurs see opportunities that mostly have low barriers to entry (eg selling second-hand clothes, petrol in plastic bottles, etc.) and simply try to replicate what they see, rather than trying to understand market dynamics and seeking differentiation and competitive edges. For example, one successful entrepreneur in Ikondo had seen four people lined up all selling the same petrol in plastic bottles, which he said was a typical (unsuccessful) strategy for more popular products and commodities in the area.
- Risk appetite - Many entrepreneurs are not interested in taking loans for their businesses.
Many of the most successful entrepreneurs started by farming and saving money to invest in their small businesses. They are mostly wary of taking on any debt and wish to expand slowly but assuredly by reinvesting profits. A few expressed tepid interest in loans but stated that the business opportunity would have to be quite big for them to consider debt as an option.
- Trust in the market - A lack of trust between businesses can be a major barrier to expansion or investment.
One milling machine owner expressed interest in investing in packaging equipment for his flour but still needed a middleperson he could trust to connect him to larger markets. Expanding along the value chain, or delivering the goods himself, would take additional investments that he was unwilling to take on at the moment.
Built on ECL’s prototyping experiences with PUE in Tanzania, these emerging lessons from the Matembwe context are helping to shape prototypes that build out the PUE Champions Network and dive more deeply into the issue of end-user financing and skills development. Along with MVC and CEFA, ECL is connecting various partners and stakeholders together to shape prototypes that can be implemented and tweaked quickly to learn what works and what doesn’t in this context.
Ultimately, ECL aims to uncover viable pathways to scale these prototypes and approaches across mini-grid communities and contexts in Tanzania.
See more about CEFA here: https://www.cefaonlus.it/