• Green Rising
  • Posts
  • 🚁 Heli view: Watch Africa’s next leapfrog

🚁 Heli view: Watch Africa’s next leapfrog

Climate action in Africa will no doubt require some heavy lifts. Take the hundreds of billions of dollars (!) that are projected for green hydrogen on the continent over the coming decades. 

  • But sometimes it’s the little things that make the real difference – and happen much faster. One of them is the Pay-as-you-go (PAYG) innovation, nay revolution.  

Head on: The problem it solves is an obvious one. Many Africans do not have enough capital to switch to cleaner and greener ways.

  • Individuals struggle to buy solar panels or clean cookstoves.

  • Few companies have upfront cash for electric vehicles or irrigation systems powered with renewable energy.

  • Plenty of climate solutions exist – but they’re not given away for free. 

Enter PAYG: What started as a workaround to onboard a few extra customers who lacked capital – has now become the single most popular innovation in the climate sector. 

How it works: The process is simple but was unthinkable at scale a decade ago. 

  • A provider of capital goods such as a company selling solar panels allows customers to pay in instalments rather than upfront. So far, so familiar. 

  • The difference is that the solar kit includes an off-switch linked to the mobile network that the provider can flick remotely if a customer fails to make payments. 

  • Thus customers’ equity in a device is frozen – unless and until they pay. Keeping devices on turns out to be an incredibly strong motivator to pay. 

  • Thus was born “pay as you go”, where delays in payment, due to common cashflow shortages in Africa, do not result in automatic default but merely a pause in service. 

The unlock: PAYG builds on the success of mobile phones as well as mobile money. 

  • Customers can make instant payments from their phones. 

  • And providers manage access to the half-paid devices online.

  • This became possible when Africans widely adopted mobile tech. 

Corporate interest: The solar sector is a major beneficiary. Before PAYG, solar customers had to pay for years' worth of energy upfront.

  • “By introducing PAYG – and creating the technology to enable it – we were able to make solar power affordable,” said Mansoor Hamayun, CEO of Bboxx, a solar kit provider.

  • Clean cooking is another popular application. Few households can afford a complete refill of clean gas bottles at an up-front cost of $20. 

  • PAYG allows them to pay only for the amount of gas used.

The impact: PAYG now represents 37% of global solar kit sales. Last year, 1.7 million new PAYG kits were installed, worth $200 million, avoiding more than 100 million metric tons of CO2.

  • Sun King has doubled installations in two years, with most of its 23 million customers opting for PAYG. 

More funding: The success of PAYG has unlocked capital, drawing in investors. Two of the highest funded African startups, M-Kopa and Sun King, rely on the system.

  • PAYG combines impact, profitability and risk diversification, said Patrick Walsh, CEO of Sun King. 

  • Repayment rates for the $900 million of credit it extended to customers is unusually high. 

  • And the simplicity of a system relying on mobile infrastructure makes for fast deployment and scaling.  

  • “Mobilising capital had been difficult. But with a strong track record, we’re starting to see capital flow into the PAYG energy market in Africa,” said the BBoxx CEO. 

Challenges ahead: There are a few hurdles to overcome. 

  • “The locking mechanism may be tempered with by users who want to bypass payment,” said Max Garnick, an independent consultant. “Network accessibility in rural areas can also be challenging.” 

  • “Varying regulatory frameworks across countries can complicate implementation,” said Tonye Irims, CEO of WiSolar, a provider. “Companies must navigate local laws related to financial services, energy provision and consumer protection.”

Future plans: The vibe in the sector though is upbeat. The Bboxx CEO said, “There is almost unlimited scope to expand this into other markets.”

Get the full story...

This content is free, but you must be subscribed to continue reading. Cancel anytime.

Already a subscriber?Sign In.Not now