Electrifying opportunities are opening up for vast numbers in energy-deprived rural communities
Have you seen the latest ‘This is not financial advice’ kind of, er, non-financial advice?
If you watch YouTube videos, it’s just about everywhere these days.
So yes, this article is intended purely for educational purposes, or maybe even just for entertainment.
After all, Joseph Conrad’s timeless classic Heart of Darkness was just a novel, also supposedly mere ‘entertainment’, set in 19th century colonial Africa, albeit that it just happens to be one of the most respected works of 20th-century literature.
Ironically, Africa’s electric lighting revolution began in a railway station in Cape Town in 1881, years before Conrad even took that fateful journey into the Congo, the one which gave him the setting for his bleakly satirical anti-colonial masterpiece.
So, surprisingly perhaps, not all of Africa was shrouded in the kind of darkness that electrification can swiftly banish, even then, well over a century ago.
But the real shock (or as the novel’s character Kurtz notoriously would have put it, ‘the horror’) in 2022, is that there is still at least one country, not so far from that birthplace of African electrical illumination, where candles, if and when they can be afforded, are still the only means of indoor lighting for the vast majority of its population of over 19 million.
Shedding light on Africa’s unelectrified millions: the deadly perils of darkness
Apart from the obvious fire risk in a country where recent brutal droughts can leave even the briefest candle-lit night-time outdoor moment fraught with mortal danger, indoor ‘alternatives’ to the much safer electric lighting that we take for granted include ‘good old’ kerosene/paraffin ‘lanterns’ which don’t just burn unaffordably expensive and even more dangerously flammable fossil fuel, but also leave the occupants of poorly-ventilated dwellings with no choice but to regularly breathe in their seriously toxic fumes, resulting in unsurprisingly widespread high-mortality respiratory health issues.
These people are not ‘living off-grid’ by choice: they live in a vast landscape that doesn’t have a grid.
It turns out that this fact opens up a huge opportunity for a very particular kind of off-grid lighting solution.
So what on earth has forced these people to remain ‘permanently unelectrified’?
The challenges that any such solution needs to overcome are the very things that characterise the predicament that these people find themselves in:
- households that do not have enough disposable income to afford anything even remotely resembling a first-world off-grid electricity generation setup
- households that are too isolated and poor to even be able to pool enough resources to collectively afford a connection to a distant accessible electrical supply
- the absence of any nearby industrial-scale commercial or public operation that could afford to subsidise or support a local electrical supply
To understand why, we first need to get our terminology right
The term used to describe anyone who lives in such rural conditions is ‘subsistence smallholder’.
Subsistence in this case specifically means that “they grow what they eat, and they eat what they grow”.
For this particularly impoverished class of “smallholder” (first-world smallholders, and there are many millions of them as well, are, by contrast, mostly not ‘subsistence-level poor’ and are also far more unlikely to be off-grid) it also means that the size of the tiny smallholding plot that they grow their food on is only just big enough to feed them, and occasionally leaves them with just a little bit extra that they can sell.
Being a subsistence smallholder is why, if there is no grid, electric lighting is a luxury you can’t afford.
Not enough money, no grid, no electricity, no light. Until now.
A country where this seemingly insoluble ‘innovators nightmare’ turns out to open up the possibility of producing a fascinatingly impressive innovation investment outcome is Malawi.
The people that have come up with the solution started off in South Africa.
Like all the best innovation stories, this one will be unashamedly peppered with lots of ‘it turns out that’.
Malawi: just the right combination of problems to inspire a unique kind of solution
It turns out that Malawi just happens to perfectly satisfy unique criteria for a very particular kind of off-grid lighting solution.
It has a comparatively high rural population density, the vast majority of whom are both subsistence smallholders and are off-grid.
I got to hear how this story unfolded from an extremely informative podcast interview on the web page below with founder Mike Heyink of a project called Yellow Africa.
This is going to be even bigger than Africa, but that’s where it all began
As exciting as this project’s prospects seemed at the time of that interview, despite the fact that it was only recorded last year, the 50,000 users that the project’s founder mentions has since blossomed into over 300,000 and the financing has gone from $3.3m to $38m.
This innovation’s success is about so much more than just a clever piece of kit
The solution that this project has created has several different moving parts
- inexpensive, solar panel-based, multi-room LED lighting kit that also lets users charge their phone
- an instalment-based payment approach which allows subsistence smallholders to afford it
- a local-agent-based customer outreach network of over 1,000
- an offering of low-cost smartphones as a follow-up to customers of the lighting kit
- a mobile app-based approach to integrating the recruitment of agents and their clients
- strong adherence to a community-minded approach to supporting clients and agents
- an astonishingly negligible rate of client instalment payment defaults
- an exponential growth rate
Just before we innovation investment types get carried away (as we are inherently inclined to do) with probing incisively into the intricacies of Yellow’s business model, its technology solutions and its funding experience, let’s just focus for a moment on something else that might just turn out to be the most important improvement that this project has made to the lives and lifestyles of those it is serving.
Education yes, but not just about solar power or electrification
Sure, successfully getting the message across and enlightening huge numbers of off-grid subsistence smallholders about the availability, affordability and effectiveness of Yellow’s solution to their hitherto seemingly insoluble energy and lighting challenges can be viewed as a huge educational win in itself, but it turns out that on their education agenda, there is an even bigger prize.
After sunset, the fact that schoolwork and homework don’t get done in the dark of an unelectrified household or village should hardly come as a surprise, but to those of us from the first world encountering it for the first time, this often still comes as quite a shock.
A place where graduating from anything like school or university is just a dream
The high school education that the offspring of these subsistence farmers desperately need in order to lift themselves and their families out of poverty is mostly ‘denied them by the setting of the sun’.
I found an excellent video from a completely different project (which also happens to be set in Malawi, see the link below) which also brought a very similar solar lighting solution to people in these very same kinds of circumstances, but the story it tells specifically focuses on the educational impact.
When you can fix the lighting problem, you can also fix the learning problem
Fixing the lighting problem for the off-grid subsistence smallholder turns out to have an even more transformational impact on their lives than just making every night less of a nightmare.
By releasing their next generation from nature’s ruthless nocturnal study-preventing curfew, this seemingly almost trivial combination of little solar panels and a few bright LED lamps holds out the prospect of giving many millions a very different, much brighter future.
So let’s quickly get to the innovation investment questions:
How can I quickly get some insight into Yellow Africa’s business model?
This video gives you some insight into Yellow Africa’s business.
Yes, I know, the video does come across as an ad for Zoho, the no-code App building toolkit that Yellow has used to create their IT systems, but I think that there’s enough directly relevant context in there to give you a flavour of some key aspects of Yellow’s overall business structure.
What can you tell me about the precise nature of Yellow Africa’s technology solution?
This isn’t a video of Yellow talking about their solution, but instead, it’s a video made by a retailer giving a very detailed walk-through of the Biolite 620 solar lighting kit (that Yellow sells to its subsistence smallholder clients who pay for it using very small regular instalments) demonstrating its functionality and intended use cases.
You’ll notice if you watch this video or any one of the many others which review this kit, which is available on the open market, that most of the use cases mentioned have nothing to do with providing lighting to the unelectrified subsistence farmer, but instead they focus on addressing the needs of first-worlders, for uses such as camping, night time outdoor barbecues and dealing with on-grid blackouts.
As a product, it’s a mostly fun-focused first-world box of tricks that is finding a market where ‘dealing with undesirable darkness’ is less about keeping the fun going after dark and more about transforming the quality of life itself.
Ok, innovation investment journal, clue me in on the Yellow Africa funding story
The article in the link below covers some key Yellow Africa investment news and history, but spoiler alert, here are two fun facts taken from it:
“Yellow’s asset-backed finance offering has delivered revenue growth of 350% per annum.”
If you watched that video above on Zoho and Yellow’s technology, you’ll probably remember the last line:
They were expecting to be able to serve 10 million people by 2050
But that was last year (May 2021)
Here’s the relevant claim in that article from June of this year:
“Yellow is now growing its team of software developers, actuaries, data scientists and managers to achieve its goal of serving 10 million households by 2030.
African fintech start-up Yellow raises $20m in debt financing
I am just not convinced that this kind of solution is only an Africa thing, simply because I am not convinced that this problem of off-grid subsistence smallholder clusters is just an Africa problem.
This business is very likely already worth over a billion dollars, but their unique combination of insightfulness and a lack of hesitancy about continuing to scale could bring lots more than lighting to hundreds of millions of users: too much of this world still has a heart of darkness that needs mending.