Category Archives: Safaricom

Kenyan Consumer Guide on Solar for Homes

Kenya is currently the largest market for solar home systems on the African continent and second-largest in the world, after China, by both annual sales as well as the total installed base. The Kenyan solar home system (SHS) category is considered the most competitive by far, and due to its history and heritage, one of the most developed, albeit primarily in the informal sector. Today, there are over 350,000 solar home systems across Kenya and the market is still growing at more than 15% a year.

What does this mean for you, the consumer?

Variety of solar options for rural households

Choice: With so much to choose from and new products, services, and business models being launched, how can you evaluate what kind of solution would work best for your household needs?

Not only is there something for every budget but big names such as Safaricom, Total, Dayliff (Davis & Shirtliff), Sollatek and the IFC with its “Lighting Africa” initiative, all have something to offer. Do you go with the brand that is backing the product or do you evaluate the category of product and its suitability for your home?

Let’s start with what are the categories of “solar products” and then take a closer look at each brand’s offerings. The products available in the market can be clustered broadly into the following:

1. “SHS in a box” or “Lighting kit in box”

2. Stand-alone solar lanterns

3. Emerging “pay as you use” business models

4. Solar home systems (SHS)

1. “SHS in a box” or “Lighting kit in box”: Today, complete kits like the one shown below are available in certain electrical shops around the country. This particular one, sells for somewhere around Kshs 15,000 (~$175) and includes a motion sensor security light as well all the components required for installation.

They are available in three main sizes; small, medium and large – but keep in mind that since brands like these are social enterprises, they are aimed at the lower-income demographic – and the 15W kit shown above is the ‘Large’ size but is limited to providing only lights, and will not be able to power a television set or a stereo system. Note that the battery is not included. Depending on the brand, expect to pay around Kshs 4000 to 6000 extra.

An alternate type of kit is the Phillips one shown below, meant for middle-class urban homes as a backup for electricity power cuts. Available at selected Nakumatt supermarkets for Kshs 6,000 ($70), this is one of the most expensive backup solar light kits in the market, however, the elegant design and details such as a wall-mounted light switch make it an attractive option for the upwardly mobile home.

Advantages and Disadvantages

Philips kit

The advantage of this type of complete kit is that all the components are ostensibly designed to work seamlessly together and everything necessary to the system up and running is available in one box. This approach addresses one of the biggest challenges with SHS in Kenya which is the dearth of well-trained fundis (technicians/installers/repairmen) with the experience and knowledge of designing a solar home system.

The disadvantage of such a system, however, is that it is limited to the components provided, in that one cannot simply add on and build a larger system. Some of the best-provided homes in off-grid rural locales have extensive installations built up over time to power their entire homestead and numerous electrical appliances – so when choosing what kind of system to purchase, keep your future needs in mind.

2. Solar Lanterns:

Total sign

Due to donor-funded support from institutions such as the IFC, whose Lighting Africa initiative offers market research information as well as quality audits on products, the Kenyan market is flooded with a large variety of solar lanterns, both with the ability to charge your mobile phone and without.

Total, for example, distributes d.Light’s solar lanterns at its retail petrol stations, while Nakumatt picks and chooses which products it will carry according to the needs of the location their outlets serve. The basic light sold at Total costs Kshs. 999 ($12) while the larger model which allows you to charge your mobile phone as well can go for upwards of Kshs. 3,000.

Powerpoint at Twiga

Given the wide variety and choice available in the Nairobi market, one can choose according to design and price as per one’s preference. However, these solar solutions are limited to a single light and the vast majority of products tend to have the panel either embedded in the light source or attached to it permanently, limiting their flexibility.

Powerpoint’s outlet in Twiga Towers is one of the few reputable solar specialists specializing in serving the needs of urban Nairobi’s market. As you can see, the range of solar lighting and solar lanterns offers something for everyone. If you’re thinking of something solar for your household, that’s a great place to start your fact-finding trip.

Tough Stuff

Here, ToughStuff’s ecosystem of products built to work independently around a durable solar panel – available at Nakumatt – offers you flexibility in terms of whether you want only a lightweight portable mobile phone charging solution or if you’d prefer a light or both.

3. (Pay as you go) Mobile Business Models for Solar products: With Safaricom’s launch of the M-Kopa business model, customers now have the choice of paying for a solar product using M-Pesa over an extended period of time. The solar light is from d.light such as that available via Total. Their kit contains 3 bright lights and a mobile charging system, similar to the “Kit in a box” described above. The business model is designed to automatically deduct Kshs 40/= ($0.47) from your account in order to use the lights until the point where you own the system. Alternatively, the complete kit can be obtained for Kshs. 15,000 ($175) upfront.

Another is Eight19’s Indigo pay as you go solar that seems to be piloting in Kenya. Here they use vouchers or scratch cards to top up your charge rather than directly via the SIM card. This is however still in the pilot stage as the company websites do not yet show a Kenyan outlet.

4. Solar home systems (SHS): Known colloquially in upcountry locations as “sola”, the basic SHS consists of a solar panel, a battery for holding the charge, between 2 to 4 fixtures for holding energy saver bulbs (known informally as “solar lights”) and the requisite wiring. These kits can cost as little as Kshs 10,000 ($118) including installation and tend to be the starting point for many homes seeking modern energy systems.

From here, one can build up to including inverters and larger panels such as the 100W-120W kits popular in Maasailand, can power flat-screen Sony Bravia televisions, kitchen appliances and the latest stereo systems in addition to lighting the home inside and out. Colour television and new digital systems require 60W at a minimum in order to work. Such panels alone cost around $200 upwards but prices are very rarely displayed and often negotiable.

For a household in Nairobi, an SHS would be the first recommendation. Dayliff is probably one of the most credible brand names, as long as the technology is German. (Be sure to check the back of the panel to ensure this). Ubbink is a newly launched brand that fundi’s consider to be efficient and high quality. It is manufactured by a Dutch company establishing Kenya’s first solar panel factory in Naivasha and their panels are smaller than average offering higher wattage and more affordable cost due to lack of import duties and transportation. Check them out. Its a commonly held fallacy that the physical size of the panel is important.

Do’s & Don’t’s on How to buy an SHS: (also applicable to the other options above)

* Do find a reputable fundi with references and experience in calculating your power requirements and designing the requisite home system. This is the biggest reason for customer unhappiness with the performance of solar energy.

* Don’t try to talk to all and sundry and make up a list of components yourself. This is another major reason for inadequate systems that fail to meet customer needs.

* Do your homework, however. Nairobi’s CBD is the heart of the solar power industry for the entire country and the latest products are seen here first.

* Don’t go window shopping without a list of minimum requirements on what you wish your SHS to be able to power and for how long.

* Do have an idea of your estimated budget. For a 3-bedroom house in Nairobi, it’s possible to start as low as $500.

* Don’t let the salesman confuse you until you simply give up and plunk down the money for the nearest panel. Take the time to think over what you really need to purchase.

* Do keep in mind that SHS are modular and an experienced fundi can help you figure out your starter kit on which you can keep adding over time as budget permits.

Photo and market research courtesy of @nitibhan

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Urban Inflation Index December 2012

Five years after the last election that derailed Kenya’s image as stable economic regional powerhouse, it’s political season again with just two months to the next general election. How does the cost of living compare to a year ago and three years ago?

Gotten cheaper

None really

About the same

Fuel: A litre of petrol is Kshs 112.6 (~$5.96/gallon) – compared to Kshs. 124 a year ago and 83.5 three years ago. The government controlled price of petrol (as well as Diesel at 105.7 and kerosene at 86.4) somewhat mirrors the international price of murban crude oil ($111.8 in December 2011, and $76.1 in December 2009) rightly shifting the discussion on price controls to other areas like the high price of cargo transport within Kenya and the East Africa region (about the same price as shipping from Asia or Europe) and the impact on local good prices.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 (~$2.10) The price of beer is more expensive than 140 3 years ago, but it seems to have stabilized with the influx of beer and other alcoholic companies capitalizing on the affluence’ or consumption habits of urban Africans and companies like Martini, Jameson, Heineken, Smirnoff, Castle and Pepsi bottling in Kenya, are now doing their own marketing, distribution and extravagant event promotions.

Martini mixing session at the Tribe Hotel

Staple Food: A 2kg pack of Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily costs Kshs. 107. This compares to 113 a year ago and 83, three years ago.

Other food item: A 2 kg. pack of Mumias sugar pack is Kshs 250. This compares to Kshs. 375 a year ago and Kshs. 200 three years ago. It’s unclear if the COMESA exemption for Kenya will continue, which limits the amount of regional sugar that can be imported at lower tax rates, but the country has attracted interest and an investment from a large Mauritius producer into a private sugar company at Kwale.

Communications: These are largely unchanged though there have been modest increases in the costs of mobile money transfers (Safaricom’s M-Pesa), internet data (Orange) and call rates (Airtel, Essar) .

At the release of Safaricom’s half year results about a month ago the company Chairman declared that there had been a recovery (end) from the damaging price wars as they recorded an increase in their half year pre-tax profits of 113% to about $135 million with M-Pesa now accounting for half their non-voice revenue. However , the Kenya government now seems intent on latching an excise tax on mobile money transfer transactions – bumping up that cost for users.

More expensive

Foreign Exchange: 1 US$ equals Kshs. 86 compared to 84 a year ago and 75.6 three years ago. This is expected to dip even further given Kenya’s low exports and growing debt and deficits with new government structure.

Outlook:

It’s likely that by the next quarterly review, Kenya will have had a successful general election with a clear winner or be facing international sanctions for electing accused war criminals or have a close disputed election that may lead the country to disintegrate like in 2008 or be preparing for a second run-off round of Presidential elections. Regardless of these scenarios, the next quarter will also see the country emerge with a larger, more expensive government with new levels of administration and devolved authorities – as a result of the constitution adopted in 2010.

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Credit Scoring the Informal Worker

Documenting the informal economy has been a challenge, the importance of which is increasingly being seen in recent banking, real estate, consumption and other economic statistics that, thanks to data from Telco’s about m-pesa and other money transfer systems, shows up as a grey ocean of money flowing (daily) through the economy that amounts to a significant fraction of Kenya’s GDP.

But how about the users who are moving this money? Can they derive creditworthiness value from this information that is being captured? i.e. These are the self-employed workers, and people without payslips or steady banking habits, but who have some scanty history with banks, savings societies, church groups, or utility companies.

But now with services such as SelfCare from Safaricom, one can see three months of M-Pesa transactions – and in the last three months, funding a project outside Nairobi, I’ve deposited about $3400, sent about $2800, withdrawn $200, received $150, and bought $100 of airtime.

All that should qualify for more than a Khs 2,000 ($25) instant loan from Safaricom/CBA’s, M-Shwari, but since it’s a new system, it may be too early to determine the creditworthiness of a borrower, using their M-Pesa history alone. Selfcare could, with time, become more useful, allowing users to export or print statements, older than three months, and other financial institutions to access & review the data – and with that, a hawker, taxi driver, or other self-employed worker, without a formal banking history could generate a decent, mature, credit position to discuss with a new bank.

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Safaricom & CBA Launch M-Shwari

This week saw the launch of what is likely to be a revolutionary mobile phone product called M-Shwari. It comes from two long-term partners; Kenyan mobile company Safaricom, well known for its world-famous mobile money product – M-Pesa, and a local bank, the Commercial Bank of Africa (CBA) who have been custodians of M-Pesa funds for years.

In its current evolution, with a maximum loan limit of Kshs 20,000 (~$235), this is not a banking product that will threaten the banking fraternity – for now. What it will impact are the savings and credit societies (SACCO’s) and shylocks who people turn to for payday (month-end in Kenya) and emergency loans. With M-Shwari, they can apply for loans on their phones, repay by phone, get a statement by phone and won’t have to get 2 or 3 guarantors (SACCO) or exchange an electronic item or vital document like a logbook (Shylock) to get it. But like with SACCO emergency loans, the terms are strict and not cheap. You can only take one M-Shwari loan at a time, and one has to be paid before another one can be taken up.

In the five years since M-Pesa was introduced in Kenya, banks have gone from fighting mobile phones intruding on their financial turf to fully embracing the convenience. About a dozen banks, now integrate their bank platforms with M-Pesa, a partnership between Equity Bank and Safaricom got over 700,000 accounts in its first year, and two months ago, Nation Hela was launched by the Nation Media Group and Diamond Trust Bank to bridge remittances in the Diaspora to debit cards and mobile phones.

But, when (then) Safaricom CEO, Michael Joseph spoke at a Fireside Chat at the iHub in 2010, he had a warning to banks, saying that retail banking will disappear in 10 years time. Customers will not go there (to brick & mortar branches) except for loans, as ordinary banking will be on (the) mobile phone whose convenience is unprecedented.

Other M-Shwari Notes

The 7.5% charge per loan looks simple but can be astronomical for a repeat M-Shwari borrower. However, such a person is probably already serial borrower elsewhere without accumulating any savings.
In terms of default protection, the loans are self-securing in that for each loan, an equivalent amount of a person’s savings in the phone are frozen until the loan is repaid. Also, with five years of M-Pesa data, it’s unlikely that people will default on an easy product.
The M-Shwari brochure states that borrowing will be based on these savings and past usage. The M-Shwari T&C go quite a way to exclude CBA from dealing with the customers whose savings and loans they are handling by stating that no M-Shwari services will be performed at any CBA branches.
A side story to this is the amazing ability of the two institutions and the several government regulators to keep a secret going for several years.

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Thanksgiving Portfolio November 2012

Compared to last quarter and four years back.

The Stable

Barclays ↑

Bralirwa (Rwanda) ↑

Diamond Trust Bank ↑

East African Breweries (EABL) ↑

Equity Bank ↑

Kenya Airways ↓

Kenya Commercial Bank (KCB) ↑

Kenya Oil Company (Kenol) ↓

Safaricom ↑

Scangroup ↑

Stanbic (Uganda) ↓

Unga ↔

What’s changed?

In: Unga

Out: None

Increase: None

Decrease: None

Dividends: Safaricom, KCB, Barclays, EABL

Unexpected gains/losses: Bralirwa’s share price appreciation and Safaricom’s rebound (back up to the Kshs 5/+ IPO price) coupled against another shocking half years Kenya Airways forex loss

New listings not taken on: There are on-going rights issues for Family Bank, UAP Insurance, SMEP Trust, Uchumi and CFC Stanbic

Best performer: Bralirwa’s (up 54% in 3 months) then Safaricom, Diamond Trust, KCB

Worst Performer: Stanbic Uganda (down 33%)

Performance Summary: The NSE 20 share index is up 10% in the last three months, while this portfolio is up 22%. Compared to four years ago, the NSE Index is up just 6%, but the portfolio only had Diamond Trust↓KCB↓ Safaricom↓Scangroup↓ Stanbic (Uganda)↓ in 2008, is much larger.

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Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: Safaricom

Kenyan Consumer Guide on Solar for Homes

Urban Inflation Index December 2012

Credit Scoring the Informal Worker

Safaricom & CBA Launch M-Shwari

Thanksgiving Portfolio November 2012