The GSMA Thrive Africa 2020 event took place from 29 September to 1 October 2020. The Mobile for Development (M4D) Utilities programme hosted two sessions focused on ‘Digital Utility Solutions for the Urban Poor’ and ‘The Future of Pay-As-You-Go (PAYG) Partnerships’. These sessions featured presentations from our reports, ‘Digital Solutions for the Urban Poor’ and ‘The Value of Pay-as-you-go Solar for Mobile Operators’ and a panel session with the following speakers:
The sessions offered a common platform to utility service providers, mobile network operators (MNOs) and relevant ecosystem stakeholders and enablers to discuss the value drivers and challenges in different partnership models. The speakers stressed the importance of partnerships to scale digital solutions for on- and off-grid utility services and provided advice on how to face the challenges that arise when entering into a partnership with MNOs, governments and other large organisations.
Building strategic partnerships in the utilities sector
One of the innovators that was featured, Coliba, developed a mobile-supported recycling solution to address waste-management and recycling challenges in Cote d’Ivoire. For Coliba, MNOs were an obvious ally, as they are well established in the market and have strong brand recognition. As part of its partnership with MTN, Coliba’s app allows customers to convert points from collected waste into airtime. To catalyse the creation of valuable partnerships like these, the panels identified several opportunities for mutual value creation underpinning impactful partnerships.
1. Driving mobile penetration and mobile money adoption
According to Stephen Mutana, who is responsible for mobile financial services at MTN Uganda, MNOs seek start-ups as partners to tap into their entrepreneurial ambitions and deliver innovative solutions to drive both social change and mobile money adoption. Mutana recommends that innovators who are seeking MNO partnerships should focus on solutions that improve lives while also allowing MNOs to tap into a new market segment. In addition, it is paramount that entrepreneurs have a clear, flexible, viable proposition and openness to co-create and collaborate with the MNO.
VITALITE, which aims to increase rural electrification across Senegal, Malawi and Zambia, has played a key role in supporting MNOs to accelerate mobile penetration in rural communities. Last mile distribution is often CAPEX-intensive, and building a viable distribution network involves collaborating with NGOs, entrepreneurs and agents with strong ties to the local community. When VITALITE was first founded in 2013, the PAYG sector was in its early stages and MNOs were yet to deploy their API integration capabilities, which caused payment integration to take significant time and effort. MNOs increasingly see strong benefits of partnering with PAYG providers and have the capabilities to complete integration much faster. The sector has also witnessed the rise of an important auxiliary ecosystem, comprising software platform and integration providers that facilitates partnerships and market entry for relevant PAYG providers. Beyond this, VITALITE is also supporting digital inclusion in Zambia through its recent partnership with PayJoy, which enables it to offer PAYG smartphones to a selected cohort of its customer base. VITALITE also worked with their partner, MTN Zambia, to get introductions to relevant suppliers of smartphones.
BBOXX is a vertically integrated business that designs, manufactures, distributes and finances decentralised energy solutions. To deliver further value to their clients, BBOXX use their PAYG payment history to unlock access to other goods and services. Similar to other PAYG providers, BBOXX is offering appliances and loan products to its best paying customers.
During the session, Andrew Kent, New Product Development Manager at BBOXX, also spoke about expanding mobile money penetration through a shared agent network, where mobile money agents could become sales agents for PAYG companies and vice versa, resulting in a win-win partnership for all parties.
In the water sector, MNOs can also reach new market segments by partnering with providers such as CityTaps, which has developed a water utility subscriber management solution that allows low-income households to consume water on a PAYG basis. As a result of this partnership, 43 per cent of CityTaps’ customers became new mobile money users, most of them being women from low-income communities.
2. Finding strategic partners in the ecosystem
ENGIE, a leading global energy company, has the unique ability to deploy both centralised and decentralised solutions. In 2018/19, ENGIE acquired PAYG solar providers Fenix International and Mobisol, which came with strong MNO partnerships and agent networks as well as their brand recognition and market insights. These acquisitions not only highlight the growing maturity of the PAYG sector, but also highlight how much value strategic investors place in mobile-enabled innovations at the nexus of energy, financial inclusion, and last-mile distribution. ENGIE has now grouped these companies, as well as mini-grid provider, ENGIE Power Corner, into their ENGIE Energy Access business in Africa.
Under the ENGIE Energy Access business, the company is seeking ways in which they can bundle several solutions related to energy (e.g. water, electricity and Wi-Fi) to fulfil the needs of low-income communities. In Rwanda, ENGIE partnered with the PAYG provider, Offgridbox, who developed an all-in-one system using solar energy to purify water and distribute energy and Wi-Fi. The aim of this partnership is to better understand the transformative potential of bundled solutions, and use data to better perceive the needs and behaviours of last-mile customers. A similar pilot is being rolled out in South Africa with the clean cooking PAYG provider, PayGas, who sell Liquid Petroleum Gas (LPG) in small quantities via digital payments. ENGIE is actively looking for a partner for this venture to create credit scoring models for this use case.
Corporate/start-up partnerships can be a key opportunity to generate more revenue, but also to pilot new innovations and learn more about customers. As part of an effort to accelerate its mission and unlock value from opportunities related to circular economy solutions, Coliba is actively partnering with local and international plastic-based industries.
3. Unlocking the power of MNOs as a strategic investor
Circle Gas focuses on bringing clean cooking solutions to low-income communities. In December 2019, the Kenyan MNO Safaricom acquired a 19 per cent share of Circle Gas and currently sits on their board. Safaricom realised the need for clean cooking solutions very early on and were an anchor investor in the acquisition of the Tanzanian PAYG clean cooking provider and M4D Utilities Innovation Fund grantee, KOPAGAS, in early 2020. To scale this solution, Circle Gas raised capital to commercialise the product, invested in strong management, and will focus on further acquisitions along the supply chain to avoid potential bottle necks.
Circle Gas has a brand agreement with Safaricom, where the equipment is co-branded. Co-branding means Circle Gas’ products can benefit from the strong brand recognition and trust that Safaricom’s name brings. Additionally, they have an operating agreement where Safaricom provides support for procurement and expansion issues. Safaricom also provides connectivity services as part of the partnership.
Another example of MNO investment raised on the panel came from CityTaps. After a successful partnership between CityTaps and Orange in Niger, where CityTaps’ customers significantly increased their usage of Orange Niger’s service, Orange Burkina Faso invested in CityTaps’ prepaid smart meters in Ouagadougou. This was to help them offer the solution on a lease basis to the utility, where CityTaps provides the solution at a lower risk and Orange collects therevenue from the utility via mobile money.
4. Alignment with government
A key ingredient for successful start-up/government partnerships is political will. Often, governments struggle to deliver on obligations towards low-income communities. However, Sanergy, Coliba and Circle Gas highlight that innovators can be uniquely positioned to work with and partner with public sector stakeholders that recognise their obligations, and are open to innovative solutions. When entering into partnerships with governments, an existing partnership with an MNO can be helpful in order to demonstrate credibility and vice-versa. In the context of PAYG companies, mobile payments also are a key source of transparency that can allow all stakeholders to openly track service delivery.
Off-grid suppliers such as BBOXX aim to partner with governments to breach the energy access gap in rural, and poor urban/peri-urban communities. In Togo, the government has subsidised these services in partnership with BBOXX. The customer makes a payment via mobile money, the MNO in turns verifies if the customer is eligible for subsidies, and tops-up the subsidised amount before sending the payment to BBOXX.
Such solutions may have helped pave the way for digital government-to-person payments and subsidy schemes that have become particularly important in light of the COVID-19 Crisis. In Togo, the government deployed a new innovative social assistance scheme, named Novissi. It provides mobile money cash transfers to support Togolese informal workers and allows them to receive a state grant worth at least 30 per cent of the minimum wage, with women receiving the highest pay-outs, as they play an essential role in child duties.
Sanergy has been working with governments and local utilities to help tackle the challenge of non-sewered sanitation by designing, manufacturing and distributing low-cost, high-quality sanitation facilities called Fresh Life Toilets (FLTs) for informal settlements in Nairobi, Kenya. Sanergy uses technology to track waste collection and has a mobile application for consumer feedback, payments and referrals. Sanergy also uses digital mapping technologies to further understand the gaps in service provisioning. This is valuable information that governments could utilise to inform service planning for underserved communities.
Important lessons learned
While creating partnerships is essential to service provision in the utility sector, these partnerships will also come with a range of different challenges, such as financing, lack of political will and time constraints.
1. Understand different time horizons of large organisations
Gregoire Landel, CEO of CityTaps, spoke openly about how dealing with large corporations can be challenging for start-ups with short cash horizons. Entrepreneurs must often make quick decisions while large corporates or government stakeholders will likely have significantly longer-term financial timelines. Similarly, Genesis Ehimegbe, CFO and Co-founder of Coliba, shared that it’s critical for innovators to understand these different time horizons and develop the necessary patience and strategic outlook.
2. Find a champion
There was a consensus among panellists on both sessions about the importance of finding someone on the inside who thoroughly understands the benefits and end goals of the project and has compassion, as well as the necessary power to make decisions. Landel also underlined that the challenges of forming partnerships can be further compounded for entrepreneurs from marginalised backgrounds, who can often find that the doors are closed, or cannot access a champion due to their ethnic background or gender.
3. Develop a flexible business model
Richard Wright, Behavioural Science Director at Unilever, spoke about the key difference between technology and innovation. Often businesses fail to adapt technologies, when importing these into emerging markets. Successful innovations will instead require the innovator to work closely with their target market and adapt accordingly. Wright also underlines that it is important to give start-ups the room to fail and embrace the learning curve early on. Habitually, donors or funders will set down strict KPIs that limit the ability of companies to develop their business model. Unilever has adopted a long-term approach which allows companies to pivot and adapt as necessary.
“There is a difference between technology and innovation. If you’re just bringing technology without any support that is just spam!”Richard Wright, Behavioural Science Director, Unilever
4. Use technology to unlock innovative financing mechanisms
The World Bank estimates that achieving the targets set by Sustainable Development Goal (SDG) 6 on water and sanitation for all, will cost approximately $114 billion a year between now and 2030. CityTaps argues that the traceability and transparency that come from digital solutions allows innovators and utilities to unlock the massive amount of money needed to finance. Landel underscored that the private sector will play a key role in achieving SDG 6 and digital solutions are a great way to reduce the risk and bring in the capital needed.
Accountability and traceability are instrumental in unlocking new forms of agreements and financing solutions such as results-based financing. This is a form of financing that provides rewards to individuals or institutions after agreed-upon milestones are achieved and verified. While digital innovators will be well positioned to take advantage of results-based financing, Wright pointed out that these can place a burden on the innovator to deliver on the results it has committed itself to, instead of focusing on other business priorities. The consensus among our participants was that results-based financing is best for those start-ups that have already validated and scaled their solution widely.
We would like to thank all our insightful panellists, as well as all the audience members that have tuned in. We look forward to having you at our next session, ‘Building Inclusive and sustainable cities through digital solutions’, taking place at Thrive Asia Pacific on Thursday, 5 November at 13:00 (GMT+8).
The GSMA Mobile for Development (M4D) Utilities programme is funded by the UK Foreign, Commonwealth & Development Office (FCDO), and supported by the GSMA and its members.