Sub–Saharan Africa • Kenya

ToughStuff East Africa: Affordable Quality Solar Alternatives for Low Income Consumers in Kenya Prepared by : Winifred N Karugu and Diana W Kimani Sector : Energy Enterprise Class : MNC

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Table of Contents Executive Summary .................................................................................................................... 3  

Introduction ................................................................................................................................ 5  

Context ....................................................................................................................................... 5  

The Problem ........................................................................................................................... 5  

Background ............................................................................................................................. 6  

The Solar Energy Market ....................................................................................................... 7  

The Kenyan Solar Energy Market .......................................................................................... 8  

Business Model .......................................................................................................................... 9  

Constraints and solutions strategies .......................................................................................... 11  

Constraints ............................................................................................................................ 11  

Solutions ............................................................................................................................... 12  

ToughStuff and its Partners ...................................................................................................... 13  

The Actors ............................................................................................................................ 13  

Results ...................................................................................................................................... 15  

Economic Results ................................................................................................................. 15  

Social Results ....................................................................................................................... 16  

Environmental results ........................................................................................................... 17  

Economy of Kenya ............................................................................................................... 18  

Conclusion and Outlook ........................................................................................................... 18  

References ................................................................................................................................ 20  

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Executive Summary ToughStuff East Africa is a subsidiary of ToughStuff International, a social enterprise that was incorporated in Mauritius in 2008 by Adriaan Mol (Netherlands) and Andrew Tanswell (UK) to provide clean, affordable energy to the world’s poorest people. ToughStuff’s mission statement is “to bring affordable energy products to people without access to electricity thereby helping to increase living standards, improve heath, enhance the environment, and build enterprise and employment”. In order to realize its mission ToughStuff has developed several products as part of its affordable solar energy range as solutions for lighting, and charger kits for mobile phones and radios.

ToughStuff uses a market-based business model to sell its product range. The company provides products based on the needs that exist in the particular market that it is operating in. To this end, the company uses an adaptive distribution model that allows it to make their product available in that market. ToughStuff East Africa has its headquarters in Kenya and distributes its products in the region, using a hybrid distribution model that combines traditional distribution channels, with alternative channels based on partnerships with cooperatives, NGOs, micro-finance institutions, and businesses.

ToughStuff has partnered with several organizations to ensure the success of their initiative. One Acre Fund is one such partner. Their partnership has led to the formation of a farmers’ initiative in Western Kenya that allows farmers to access essential inputs together with ToughStuff products. Both are paid for after the farmers sell their surplus. This initiative has yielded positive results and ToughStuff is looking to create similar partnerships with other agriculture-based organizations. Other partners in the solar energy market include; the Government of Kenya which has exempted solar products from taxation, banks and micro-finance institutions such as Faulu Kenya and KREP, agricultural cooperatives such as the Kenya Tea Development Agency, development agencies such as the Aga Khan Foundation and umbrella clean energy bodies such as Lighting Africa. ToughStuff works in a competitive market with other companies, such as D.Light, Barefoot and Sun King that provide similar products, however these actors also have a similar social agenda, which makes them collaborators as well as competitors.

Through the provision of solar energy products, such as PV modules, phone connectors, radio connectors, LED lamps and power packs, to underprivileged communities, ToughStuff has and continues to reduce the use of kerosene (a crude oil derivative fuel commonly used by poor people for lighting and cooking) with resultant numerous social, economic and environmental benefits. The company’s initiative has led to the reduction of toxic by-products of kerosene like soot, carbon monoxide and sulphur dioxide. These are not only harmful to human beings, but also contribute to global warming. Furthermore unsafe disposal of battery cells is equally harmful to both people and the environment. The money saved by poor people from daily purchase of kerosene and commercial charging of mobile phones, helps to improve the overall economic status of the families that adopt ToughStuff products. All these benefits together have effectively helped alleviate poverty for up to one million people in the region.

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ToughStuff is making strides towards better solar products and expanding the product line with new innovative products that would be beneficial to the market.

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Introduction ToughStuff EA is a for-profit energy company with a social agenda that seeks to help eradicate poverty through provision of affordable alternative energy solutions to poor communities. It is a subsidiary of ToughStuff International which was founded by Adriaan Mol from the Netherlands and Andrew Tanswell of UK as a social enterprise to provide affordable clean energy products for poor people without access to electricity (ToughStuff, 2010). They incorporated it in Mauritius in September 2008 as the parent and main trading company (www.toughstuffonline.com, 2013). A month later they incorporated ToughStuff Madagascar to support the growth of activities in this region. Over time ToughStuff went on to set up regional offices in Kenya (East African region) and Nigeria (West African region). ToughStuff East Africa utilizes an adaptive hybrid distribution model to sell solar lamps, mobile phone chargers and batteries to low-income rural and urban consumers. They are achieving success in reaching poor consumers in most parts of Kenya and the East African region enabling them to save substantially on fossil fuel consumption, improve their health status and protect the environment.

Context THE PROBLEM

It has been estimated that approximately 1.6 billion people in the world are living without access to electricity (Ashden Awards, 2011), of whom, 85% are believed to reside in rural areas (IEA, 2010). 600 million of these are in Africa (www.lightingafrica.org, 2013), and this figure is expected to rise to 700 million by 2030. Kenya has a population of 40 million people of whom 70% are not connected to the electricity grid. The greater East African region (Kenya, Uganda, Tanzania, Rwanda, Burundi, Ethiopia, Somalia, Eritrea and Djibouti) has a population of 250 million and the majority of them do not have access to electricity. Lack of access to electricity has led to increased reliance on kerosene as the main source of fuel for both lighting and cooking for many such households. Kerosene lighting can absorb up to 15% of a household’s income, which is very high by any standard and particularly so for poor communities (White, 2011). This can be compared to 4% of income for domestic electricity use for middle class Kenyan households, and 4% of income for all utilities for median households in the USA (http://www.aep.com, 2013).

Moreover, kerosene, although extensively used, provides very poor quality lighting and dangerous exposure to kerosene smoke and other hazardous by-products such as soot, carbon monoxide and sulphur dioxide (White, 2011). Inhaled soot is highly toxic to both people and animals with effects ranging from irritation of eyes, nose, skin and mucous membranes, nausea, vomiting, headache and cancer. Carbon monoxide can cause death in enclosed environments while sulphur dioxide causes respiratory disease and premature births. These by-products also contribute to global warming. However the stark fact is that kerosene is still

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by far the most accessible fuel for poor people because it is low cost and easily available. This is despite the fact that is not subsidized by government but it is exempt from taxation (Republic of Kenya, 2012). Therefore promoting environmentally clean yet cost effective alternatives can yield huge benefits economically, socially and environmentally. ToughStuff East Africa is working towards the attainment of high quality clean energy products for all poor people.

To meet the demand for energy among all poor people through kerosene would not only put a strain on fossil-fuel-based energy, but would also have an unfavorable impact on the global effort to avert climate change (Trickleout, 2012). Hence, there is a need to encourage low carbon alternatives that not only meet the needs of the deprived communities, but also contributes to the overall effort toward climate change mitigation (Trickleout, 2012).

In addition to this, the world is currently facing an energy crisis. The dependency on oil and natural gas has led to many global problems, such as steep oil price hikes that have disrupted economies everywhere and caused oil dependent countries to suffer. The huge consumption of oil has also led to the global warming catastrophe and needs to be addressed (Trickleout, 2012).

BACKGROUND

ToughStuff was founded as a business, its main objective being to provide clean, affordable energy to the world’s poorest people. This is accomplished through the provision of solar-powered energy products to the low-income people.

The founders Adriaan Mol and Andrew Tanswell pooled together their different training and experience, as well as their shared vision in creating ToughStuff. Adriaan Mol who is the Chief Technical Officer, brought 15 years experience in technical and field management. He previously worked for BushProof in Madagascar creating markets and affordable clean water to poor people, and he also worked as Country Director for Medair NGO in several African countries. His specific interest is in combining appropriate technology with business models, and has established several successful micro enterprises that deliver sustainable health impact for the poor while making profit. Adriaan won the Global Social Benefit Incubator 2006.

Andrew Tanswell, a Chartered Mechanical Engineer is the Chief Executive Officer with 24 years experience, having worked as management consultant for large blue chip firms before setting up his own successful business in consultancy. He sold this business to use his expertise in business growth and strategy the not-for-profit sector. Alongside his professional career He has also led multi-disciplinary, multi-national professional teams on large scale emergency aid programmes in Somalia and Iraq. He has also been a Director and Trustee of several companies and charities. Andrew won the Global Social Benefit Incubator 2009.

ToughStuff headquarters are located in the United Kingdom, with regional offices found globally in 12 countries. In East Africa, the regional offices are located in Nairobi, Kenya; the

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offices for Southern Africa and islands, such as Madagascar, are in Johannesburg; and the West African regional offices are in Lagos.

Outside of Africa, ToughStuff has offices in the UK and Hong Kong, a distribution centre in the USA, and is working with partners in a number of countries including Haiti, Indonesia, Pakistan and the Philippines. The company’s products are assembled in China, while the components are manufactured in the United States.

After development and extensive testing ToughStuff products first entered Africa through Madagascar in 2009, and 125,000 units were sold in the first year (Trickleout, n.d.). Following this success, ToughStuff systematically expanded to 10 other African countries, namely: Kenya, Uganda, Tanzania, Ethiopia, Zimbabwe, Nigeria, Mauritius, Malawi, Rwanda and South Africa. Since then ToughStuff’s reach has grown and in East Africa the company is currently operational in Kenya, Tanzania, Uganda, Rwanda, Burundi, DRC, Sudan, Somalia, Djibouti, Ethiopia and North Sudan.

In 2010, following natural disasters, ToughStuff's became active in Haiti and Pakistan, providing emergency relief with the provision of over 30,000 emergency kits through partner organizations (Trickleout, n.d.).

In 2010 ToughStuff was the recipient of the Tech Awards and the Energy and Environment Awards for ‘Renewables Innovation’. It also won the esteemed Ashden Awards in 2011 for sustainable energy.eneurship in Madagascar (www.toughstuffonline.com).

THE SOLAR ENERGY MARKET

ToughStuff’s primary market is concentrated mostly in off-grid areas, which to a large extent are rural areas with impoverished communities. However ToughStuff’s market also includes urban to semi-urban areas with energy gaps exacerbated by various social-economic structures, culture and behavior characterized by people who live rural areas but work in urban towns.

These target markets are mainly made up of kerosene and dry cell battery users, as well as, users with mobile charging needs.

Africa, and more specifically East Africa, presented a unique opportunity for ToughStuff that may not have been possible elsewhere due to the sub-Saharan climate, which presents the opportunity to harness solar energy throughout the year, even in the cold seasons. Daylight in the tropics is fairly even throughout the year with 12 hours of daylight and 12 hours of darkness, which means that the need for lighting is also greater than in other regions. Solar energy’s potential has been recognized for many decades, and its abundant and limitless supply makes it the perfect new form of energy. Unfortunately this solution has not yet been widely exploited in Africa (Phan, 2009). As a result, the success of ToughStuff is based on its business model rather that its uniqueness, since there are many other companies within the energy sector, as well as other sectors, that operate much like ToughStuff, with a mix of low-cost products and employing local people as distributors; one example being Nokero, a USA-based company (At a glance, 2012).

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THE KENYAN SOLAR ENERGY MARKET

ToughStuff’s expansion into Kenya took place in January 2010 after the successful launch in Madagascar in 2009.

About 50% of Kenya’s population lives below the poverty line (Republic of Kenya, 2011); therefore, in both urban and rural areas, much of the population still relies heavily only on kerosene lamps (Climatecrocks, 2011), despite an expansive electrical grid. The main reason for this is that electricity is beyond the financial reach of the poor, whether they reside in city slums or in rural areas, as to install or even consume electricity is very expensive in Kenya. For example, a typical middle class family consumes 80 USD worth of electricity per month, clearly beyond the reach of those who subsist on less than 2 USD per day. Yet another reason is that the national grid is not extensive and large areas of the country still do not have coverage.

Despite this, the solar market in of Kenya is one of the world’s leading markets for off-grid solar energy usage, with an installed capacity of around 10 MW and over 300,000 solar home systems (Ondraczek, 2011). The growth of this market has been heralded as a model example of market-based clean energy development. This approach is beneficial because of its potential to achieve multiple goals namely; the poor gain access to services, private firms increase profits, and society achieves more extensive, cost effective, safer, environmentally friendly development than has been achieved through public sector intervention so far (Bryne 2011).

The Kenyan solar energy market leads in Eastern Africa, if not all of Africa. It has had persistently strong growth since the 1980s and is a prime example of a market driven largely by the private sector (Ondraczek, 2011). Despite its best efforts, the Kenya Power and Lighting Company (KPLC) has not been able to avail electricity to more than 30% of the Kenyan population. Most of its electricity is hydro-generated and the shortfall subsidized by fossil fuel generators and geothermal sources. Demand far exceeds supply resulting in high prices and unstable supply. The result is robust demand for cheaper more accessible alternatives. The “Kenyan experience” therefore is a model for market-driven solar electrification because its impact on and interaction with the development of Kenya’s economy as a whole has been well researched and documented (Ondraczek, 2011). However, despite more than three decades of market growth, reliable data on the solar energy market of Kenya is still generally inadequate.

ToughStuff’s efforts in Kenya over the last two years have been significant, but there is a long way to go before full shift to alternative clean energy use can be achieved. The potential is therefore considerable.

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Business Model By replacing expensive and environmentally damaging products with affordable, high-quality, and environmentally friendly solar products, ToughStuff strives to reduce poverty, help the environment, improve health, and generate micro-enterprise employment.

ToughStuff’s solar products harness the power of the sun to fulfill the three main energy needs of off-grid consumers: lighting, mobile phone connectivity, and information dissemination courtesy of the sales force, and the extension wings of partner organisations. These products offer flexibility by allowing customers to build their own, personalized solar energy solutions. Most important of all these products are both affordable and cost effective in the long run (see table 1).

Table 1: Prices of ToughStuff Products

Product Ksh USD

PV module 790 9.30

Radio connector 240 2.80

Phone connector 100 1.20

LED Lamp 650 7.60

Power pack 680 8.00

Source: ToughStuff East Africa

Their innovative line of solar products includes; PV (photo voltaic) panels, phone connectors, radio connectors, LED lamps and power packs or rechargeable units (see exhibit1). ToughStuff has sold more than one million solar lamps since entry into the Kenyan market.

The ToughStuff model succeeds because it is market-based and identifies specific problems that can be solved using low-cost products. ToughStuff accurately identified the primary uses of electricity in these off-grid rural communities. It then streamlined its products to provide solar-powered electricity for those specific purposes namely; LED lamps for lighting, mobile phone chargers for connectivity, and radio chargers radio to access information. By keeping the production costs low it was able to appeal to poor people in rural communities (At a glance, 2012).

ToughStuff’s solar products come with a one-year warranty. Should the products malfunction, there are warranty centers where trained technicians test for faults, service products, and report back. Most issues revolve around faulty use, mishandling, or required cleaning. When the products have manufacturer’s defects they are replaced free of charge, but when they have been mishandled they are repaired for a fee. The market has responded well to this.

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Microcredit is part of the distribution model for ToughStuff. Microcredit groups such as KREP, KADET, and Faulu Kenya offer microcredit facilities through loan officers to enable individuals to gain access to the products, and pay over an agreed repayment period. Typical microcredit loans start from a minimum of about 100 USD, and are repaid over one or two years at an average interest rate of 16%. Low income consumers are attracted to them because the repayments will be low and thus affordable to them, for example repayment on 100 USD would be about 6 USD per month.

ToughStuff International’s operations fall into two main spheres – development and emergency relief. In the former products are sold in developing countries, improving customers' quality of life. In emergency relief, ToughStuff products provide much-needed relief to those affected, helping them rebuild their lives. In this case, ToughStuff partners with NGOs and Disaster Relief agencies to provide their products. Emergency relief conducted by ToughStuff is provided to affected areas by the closest office; for example, emergency relief in Somalia and Ethiopia was spearheaded by ToughStuff East Africa, whereas in Haiti, ToughStuff International leads distribution.

The company does not depend on one fixed business model. ToughStuff uses different models to cater to diverse needs; the distribution model is designed to meet each country’s particular needs in every area of their operation. The distribution of products varies according to the partners the company engages with. Their normal distribution also varies, there are many partnerships with women groups, churches, NGOs, disaster relief agencies, MFIs, cooperatives, SACCOs1 as well as, door-to-door buys. In some areas, ToughStuff has registered independent sales people around the country, whereas, in other areas, like Rwanda, there are direct sales representatives with a multi level sales structure.

In Kenya, ToughStuff utilizes a hybrid model for distribution that combines traditional distribution outlets such as electronic outlets, supermarkets, and mobile phone shops, with networks and channels provided by partners. The traditional distribution network in Kenya has 500 outlets stocking ToughStuff products while some partners distribute their products in their areas of operation. They also use mobile service providers, such as Orange, as a distribution partner for their mobile charging devices.

In Kenya, one of their current projects, Farmers Initiative, is being carried out with partner One Acre Fund in order to create affordable and sustainable agricultural opportunities for farmers in Western Kenya. Together, One Acre Fund and ToughStuff provide lamps, solar panels and phones chargers along with farming inputs, such as seeds and fertilizers. There are 50,000 farmers in schemes in the area and so far 30,000 of those farmers have signed on to the initiative. The project aims to allow farmers to source seeds and fertilizers along with solar products, like lamp panels and phone chargers, that allow them to work longer and with less distractions (e.g. going to charge phones etc). When farmers sell their crops, they use their surplus to pay for the farming inputs and solar products they previously received. This

1 Savings And Credit Co-operatives

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initiative has been extremely successful and ToughStuff is looking to partner with other organizations for similar developmental initiatives.

Another feature of the ToughStuff business model is that half the purchase price of every solar kit bought in developed countries goes towards funding the Business in a Box programme. Business in a Box (BIAB) is a micro-enterprise programme that aims to generate employment and ‘stimulate entrepreneurship in local communities’ (ToughStuff, 2012). Business in a Box selects local Solar Village Entrepreneurs (SVEs), equips them with a ready-made business tool kit, and helps them build micro-businesses. SVEs typically raise funds and buy ToughStuff kits at discounted prices. They then sell them at normal retail prices with the mark-up catering for their margin. NGOs and MFIs often help raise working capital. SVEs also receive product and sales training, access to networks, and marketing support. The program also helps distribute ToughStuff products to more remote off-grid communities who lack access to conventional retail outlets.

Constraints and solutions strategies CONSTRAINTS

ToughStuff’s products are currently bringing numerous benefits to over 140,000 families, mostly in Madagascar and Kenya.

In Kenya the government is committed to phasing out kerosene within the next six years and to replacing it with clean energy. However because a third of the population is dependent on kerosene for cooking and lighting, the Kenyan government must be sensitive to their needs hence kerosene is exempted from tax to make it cheaper.

The cost of ToughStuff products may seem very cheap from a global perspective but, the larger majority of the poor communities in Kenya would challenge the affordability of ToughStuff products. With fossil fuels such as kerosene still substantially cheaper in the short-run, they remain the preferred energy source for poor communities in the country. This is, however, based on a daily spending perspective, as the investment in solar energy is ultimately much cheaper in the long term. Figures to support this are highlighted below in the economic impact section.

Consequently, one of ToughStuff’s main constraints has been changing people’s attitudes that solar is expensive. The majority of the target market weighs consumption against daily spending and not cumulative yearly or monthly spending. From this perspective, poor people consider ToughStuff products to be extremely costly due to the fact that the cost is upfront. ToughStuff staff and that of partner organisations therefore constantly educate the people on cost-benefit analysis and likewise on the benefits of clean energy.

The ToughStuff initiative revolves around provision of energy. The categorization of their products, definitively categorized as “providing energy” has been challenged (At a glance, 2012). KPLC for example supplies electricity that can is put to many uses by households,

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including lighting, cooking, ironing, water heating, powering various devices, etc. The International Energy Agency, for example, only considers households with access to central or local power grids as “having electricity”, due to the limited uses of these smaller scale products (At a glance, 2012). Thus, it must be noted that the much-improved reach of this kind of model comes with the trade-off of a more limited range of possible improvements.

The low cost energy alternatives have also been seen as a hindrance to long-term permanent electrification by some of the market players in the energy industry, especially in rural and underprivileged communities. This is because they tend to negate the urgent need for electrification in the short run. However the position in Kenya is that the country is (and will continue to be energy deficient) in the foreseeable future. This makes overall electrification a very slow process.

Although microfinance is effective in enabling poor people to buy the products, such lenders find it challenging to provide loans of such small amounts. The loan officers often work towards targets that are strained by such small loans, and they are usually more interested in funding costlier items, unless they can put together a critical mass of buyers.

Another major constraint is the difficult geographical terrain where the majority of ToughStuff’s market is located. Access to potential customers in some parts of Kenya can be very difficult not only due to the arid terrain, but also due to the fact that the people in such areas are often nomadic and therefore not always accessible as they relocate often. Also in some areas, infrastructure such as roads and communications systems is inadequate, making access to potential markets extremely difficult.

SOLUTIONS

Awareness of the products is raised by word of mouth through the partners, and in traditional “Below the line” solutions e.g. banners, brochures, radio advertisements and talk shows, TV talk shows, giveaway promotions, and merchandise such as branded T-shirts, mugs, and bags. ToughStuff also hosts opportunity meetings2 in more remote areas and by attending the meetings (known as ‘barazas’) routinely called by local government administrators in all parts of Kenya.

MFIs become more interested in providing microfinance for ToughStuff products when they can build a critical mass of consumers. One way in which this is done is by working together with other partners with many potential customers, such as agricultural cooperatives or SACCOs. ToughStuff approaches MFIs, NGOs and agricultural cooperatives to take advantage of the opportunities to make bulk sales. Exhibit 2 contains a list of collaborators, with a description of the role each partner plays.

2 Opportunity meetings are public gatherings in which Toughstuff talks to potential customers about their products.

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ToughStuff employs a sales force of approximately 25 local people to market and sell their products to potential distributors and users. This is in addition to the Business in a Box program mentioned earlier.

Effective partnerships have allowed ToughStuff to overcome some of the previously discussed constraints. To address the issue of geographical constraints, ToughStuff has a program entitled “Last Mile Entrepreneur Program” (another name for Business in a Box) which aims to reach people through NGOs that operate in these regions. ToughStuff has partnered with World Vision, an NGO that works closely with nomadic people to help access these communities.

The Kenyan government has zero-rated solar products for tax purposes, making them more affordable. In addition, the government, through the Kenya Bureau of Standards, enforces high standards for solar products to pre-empt substandard imports that can potentially depress the market, reducing competition from counterfeit or substandard solar dealers. ToughStuff products meet the quality standards.

Further, the Kenyan government is generally supportive of solar energy products in recognition of the great need for energy in the country; in addition to its taxation and standards initiatives, this is evident in policy. Government policy is to completely eradicate use of by kerosene by 2018 as part of its Vision 2030, a government development initiative currently ongoing in Kenya. This is in line with the overall goal of ToughStuff to replace kerosene.

ToughStuff and its Partners THE ACTORS

There actors present in this market include government, NGOs, cooperative, SACCOs, and competitors.

Apart from its taxation and standards initiatives, government is supportive of solar energy products, in recognition of the great need for energy in the country. Government policy is to completely eradicate use of kerosene by 2018 as part of its Vision 2030, a government development initiative currently ongoing in Kenya. This is in line with the overall goal of ToughStuff to replace kerosene.

ToughStuff’s network of partners include banks and micro-finance institutions such as Faulu Kenya, KREP and KADET, NGOs such as World Vision, One Acre Fund, Kenya government, development agencies such as the Aga Khan Foundation, and agricultural cooperatives such as Kenya Cooperative Creameries, Kenya Tea Development Agency, and Githunguri Dairy Farmers Cooperative (see Exhibit 2 for the complete list).

ToughStuff aims to partner with more agricultural cooperatives, horticultural export companies and development agencies in future initiatives currently in the pipeline.

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ToughStuff has an estimated 11 competitors currently within the Kenya market including D.light, Barefoot, and Sun King. These companies, however, are only competitors from a product-provision aspect but they are also (usually) partners in their social developmental outlook.

Most of the aforementioned actors3 in the market have formed an umbrella body known as Lighting Africa. Lighting Africa, a joint IFC and World Bank program, is mobilizing the private sector to build sustainable markets that provide safe, affordable and modern off-grid lighting to Africa’s un-electrified communities. ToughStuff is an associate member of the Lighting Africa. ToughStuff therefore only carries products that are approved by this body. Lighting Africa’s mandate is to create awareness, work with government for beneficial legislation and to work to replace kerosene with affordable, high quality benchmark products so as to prevent poor people from getting discouraged by bad experiences and returning to kerosene.

Figure 1 below shows the relationship of the actors in this market.

3 The actors include the Kenyan government (Ministry of Energy), Kenya Power and Lighting Company, and all producers of clean energy

Fig 1 Actors in the Solar Energy Market in Kenya

ToughStuff International

ToughStu ff East Africa

Wholesalers Lighting Africa Kenya Government ( Umbrella Body ) ( Policy ) Reta ilers

Consumers

Cooperatives  

NGOs  

Microcredit   Institutions  

Development   Agencies  

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Results ECONOMIC RESULTS

The economic impact of ToughStuff products is extensive. Baseline studies show that most farmers who buy ToughStuff lamps save half of the money they spend on kerosene approximately KES 200-400 per month (2-4 USD), or KES 4800-6000 per annum (USD 60-75). This can be put other more beneficial use. It is estimated that each household uses two ToughStuff lamps with an estimated life span of 3 years each. This would lead to a total saving of up to KES 18000 (USD 211.7) in the products life (Interview, ToughStuff EA CEO).

Charging of mobile phones costs poor people an average of KES 60 (USD 0.70) per week. GSMA studies have indicated that 40% of household income is spent4 on mobiles per annum. This is extremely exorbitant, especially for low-income homes. ToughStuff products create a saving of up to KES 3120 (37 USD) on mobile phone charging per annum.

Partnership in Focus

In Kenya, one of their current projects, Farmers Initiative, is being carried out with partner One Acre Fund in order to create affordable and sustainable agricultural opportunities for farmers in Western Kenya. Together, One Acre Fund and ToughStuff provide lamps, solar panels and phones chargers along with farming inputs, such as seeds and fertilizers. There are 50,000 farmers operating in the area and so far, 30,000 of those farmers have signed on to the initiative. The project aims to allow farmers to source seeds and fertilizers along with solar products, like lamp panels and phone chargers, that allow them to work longer and with less distractions (e.g. traveling to charge phones, etc). When farmers sell their crops, they use their surplus to pay for the farming inputs and solar products they previously received. This initiative has been extremely successful and ToughStuff is looking to partner with other organizations for similar developmental initiatives.

The use of dry cell batteries has been rampant in Kenya, especially for radio use. Solar panels can be used to play radios a saving of KES 240 (USD 3.0) per month on dry cell batteries approximately KES 2880 (USD 33.8) per annum.

Some consumers of ToughStuff products use the solar panels to earn some income. For example, one young man makes use of ToughStuff products to charge phones for people in his community at a small fee. He initially bought 10 panels and charges about 20 phones a day at a cost of KES 20 per charge, earning KES 400 per day or approximately KES 12,000 (141.2 USD) per month. With an initial investment for ten universal chargers and ten panels,

4 The income is mainly spent on the phone itself, purchasing top-up vouchers and use of mobile money services.

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he was able to recover his costs in just one month. This allowed him to repay his KES 12,000 loan from Faulu Kenya in three months with ease.

In all the countries it operates in, ToughStuff has generated employment hiring local people and making use of the in-country expertise of local partners and distributers.

SOCIAL RESULTS

The provision of electric lighting can provide support to families attempting to break away from poverty through increased productivity resulting from an extended working day, enabling children to study effectively after dark, reducing expenditure on consumables such as kerosene and improving the overall health of the whole family by removing exposure to kerosene by-products. The positive impact of solar products is undeniable given facts such as the carbon monoxide and sulphur dioxide reduction, poverty reduction and micro enterprise and employment.

ToughStuff currently employs over 40 direct sales staff in Kenya and Madagascar (ToughStuff, 2010).

Through the use of ToughStuff lamps, children can study longer in their homes. ToughStuff is currently tracking performance of all levels of education among children in homes of users to weigh actual impact.

Similarly, mothers are able to work at ease throughout the day without constraints of having to finish household chores within daylight hours. Previously daily duties, like travelling to the shops to purchase kerosene, have been substantially reduced.

As evidenced by farmers in Western Kenya mentioned above, ToughStuff consumers are able to work on their farms longer in order to finish farm work in seasonal time and produce better harvests. These benefits accrue to urban dwellers as well.

Communities are able to socialize more and for a longer time, allowing them to become more plugged-in to their communities. Access to media (radio, phones, etc) is also beneficial as it allows for increased awareness.

Being able to charge mobile phones also eliminates opportunity costs that come along as a result of not having active communication, for example, receiving money through Mpesa (a mobile money transfer service), missing important calls of business or personal nature, internet surfing, etc.

Lamp users are seen as modern or progressive and this provide the users with confidence and a sense of progression encouraging others to emulate.

There is also a great reduction in opportunistic crime such as rape, and theft in place such as IDP or refugee camps through provision of light.

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The World Health Organisation (WHO) warns that kerosene fumes indoors can cause chest infection and promote TB and consequently lowers immunity and well being. Use of ToughStuff products has therefore resulted in reduction of medical costs and improved overall health within homes.

David Kivai Olwangu

David Kavai Olwangu, was employed as a cleaner at Cape House, which houses ToughStuff East Africa. He became curious about the products and decided to buy and use the products as instructed. David bought the Solar panel, lamp, radio connector, mobile connector, and power pack. Upon using the products David was very pleased when he found he had no problem charging his phone. He uses the connector to charge phones for extra income at a charge of KES 20 per charge per phone making him about KES 60 (USD .75) extra per day. When the lamp is fully charged it can last up to 6 hours, allowing him and his family to enjoy pleasant bright lighting at night and his children are able to study without hindrance. Their performance in school has improved considerably. David can use his radio either using direct sunlight or through the power pack. David used to spend KES 20 per day on kerosene and KES 15 for three radio batteries that would last for 4 days. The total spending on this was KES 960 (USD 12) per month, which was about 10% of his income, and which he can now save. In fact, as a result of charging phones for others at a small charge, David now makes extra income of KES 1800 (USD 22) per month. He is very happy with his purchase

ENVIRONMENTAL RESULTS

Every lamp saves two tonnes of carbon in its lifetime of three to five years, which is a significant lowering of carbon emission and will help in reversing the effects of the current global climate.

Radio connectors have a life span of 10 years, and each set of three prevents the disposal of 720 dry cell batteries in its lifetime. Dry cell batteries contain lead, which finds its way into water, farms, and eventually, food. Lead is very dangerous as it causes cancer. This has been the primary reason there has been a shift to unleaded fuel world-wide. In Kenya 95% of radios use D-size batteries, so this is the size that ToughStuff has being selling. However those radios that use AA or AAA batteries can be connected to the power pack or directly to a panel.

Kerosene lamps cause many fires within slums and rural communities. Thus the use of solar lamps also reduces this hazard.

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Kerosene fumes are emitted into the atmosphere and affect the ozone layer. By-products of kerosene include sulphur dioxide, soot and carbon monoxide. Sulphur oxide causes yellowing on paper and plants; it also corrodes surfaces and softens plastic. When it rains sulphur oxide become sulphuric acid, which is very harmful to the environment. Soot causes severe respiratory problems and eye irritation. Collectively these by-products also contribute to global warming. All these problems are reduced by the use of ToughStuff products.

Although ToughStuff contributes significantly to reduced pollution and global warming, their products do need to be disposed of safely at the end of their useful life. ToughStuff is in the process of preparing for this eventuality with programs aimed at recycling.

ECONOMY OF KENYA

The largest import bill in the country is fossil fuel; kerosene accounts for about 30% of that fuel, which is 10% -11% of value by both value and volume (Republic of Kenya, 2011). Kenya imported KES 300 billion (5.6 billion USD) worth of oil in 2011. Sub Saharan Africa consumes 100 billion USD on oil each year, of which 30 billion dollars is spent on kerosene alone. Yet this translates into less than 1% of total effective energy generated, which projects a very mismatched cost and effect structure. Increased use of solar power would thus benefit such economies immensely. The Government of Kenya is committed to the continued reduction of kerosene use in favour of clean alternatives.

Conclusion and Outlook Solar energy has the potential of alleviating many economic, social, and environmental problems that poor people face. However, solar energy proliferation in the country has generally been challenged by the poor supply, because despite vast efforts, the majority of Kenya’s poor communities have no access to these innovations due to extreme poverty, inadequate official support in terms of distribution and low visibility of the products and initiatives. ToughStuff’s goal is to replace entirely the use of kerosene entirely with solar products. With this objective in mind, they are developing other products that will address the energy needs of poor people. In Madagascar, the company is working on energy stoves that use wood or charcoal, but reduce significantly the amount of this fuel used. They are also working on a new range of solar panels that will be more efficient in power production. There are also plans to create affordable solar equipment capable of powering other household appliances.

In Kenya, ToughStuff is currently approaching other partners for collaborations similar to that with One Acre Fund. They include Kenya Creameries Cooperative, Frigoken, KTDA and Githunguri Dairy among others. All of these are agricultural organizations with wide access to farmers in Kenya, For example, Frigoken is a horticultural company with a network over 150,000 farmers. Such initiatives will greatly improve their reach

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Other initiatives assist those with limited financial assets to obtain access to basic solar energy services and reduce living costs, including a ‘rent-to-buy’ (hire purchase) scheme now being piloted, and a ‘layaway’ scheme (The “Toughstuff” Story, n.d.) that will soon be implemented.

ToughStuff is tapping local knowledge through market research to find out what the current gaps and needs in the market are. This information will be especially helpful for the research and development of new innovative products through two R&D labs one in Kenya and another in Hong Kong. ToughStuff is also in the process of creating product extensions to address gaps in the market (George Gitau). Information on these products will be made public in the near future just prior to their entry into the market.

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References At a Glance http://scholar.googleusercontent.com/scholar?q=cache:MuFLRiruuTkJ:scholar.google.com/+toughstuff+kenya&hl=en&as_sdt=0,5]

Ashden Awards (2011) Case Study Summary ToughStuff International UK and Africa, www.ashden.org/files/ToughStuff%20winner.pdf

Energy: Mauritius Company to Provide 33 Million Africans Access to Cheap, Affordable Solar PV [http://cleantechnica.com/2012/02/17/fighting-poverty-with-clean-renewable-solar-energy-mauritius-company-to-provide-33-million-africans-access-to-cheap-affordable-solar-pv/]

Climatecrocks.com/2011/12/06/toughstuff-urban-solar-in-kenya/

George Gitau, (2012) CEO of ToughStuff East Africa, Nairobi

Godfrey Wood, R. (2011) ‘Is There a Role for Cash Transfers in Climate Change Adaptation?’, IDS Centre for Social Protection Conference, “Social Protection for Social Justice”, Brighton: Institute of Development Studies, Brighton, UK

IEA (2010) World Energy Outlook, Paris: International Energy Agency

Karekezi, S., 2002. Renewables in Africa: meeting the energy needs of the poor. Energy Policy 30, 1059- 1069.

Lightingafrica.org http://www.lightingafrica.org/about-us/program-overview.html

Ondraczek, J (2011), The Sun Rises in the East (of Africa): A Comparison of the Development and Status of the Solar Energy Markets in Kenya and Tanzania, Working Paper FNU-195, University of Hamburg, Research Unit Sustainability and Global Change, Germany

Phan, Hai-Vu, "The Elusiveness of Light: The Difficulty with Harnessing the Omnipresent Solar Energy in Africa" (2009). ISP Collection Paper 780.

Republic of Kenya (2012) Budget Statement 2012/2013, Ministry of Finance, Government Printer, Nairobi

Republic of Kenya (2011), Economic Survey, Ministry of Planning, Government Printer, Nairobi

Solar Success, The ToughStuff Story, Case Study 10 [http://www.ids.ac.uk/files/dmfile/LHcasestudy10_ToughStuffKenya.pdf]

Solar lights up Kenyan Village [http://www.nation.co.ke/Features/smartcompany/Solar%20lights%20up%20Kenyan%20villages%20%20/-/1226/1071696/-/dtnc42/-/index.html]

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ToughStuff: Urban Solar in Kenya [http://climatecrocks.com/2011/12/06/toughstuff-urban-solar-in-kenya/]

ToughStuff Solar [http://trickleout.net/index.php/casestudiesmainmenu/toughstuffmenu]

ToughStuff [http://www.toughstuffonline.com/news/2010/sep/toughstuff-2010-tech-award-laureate-winner]

White, C (2011), EWB-UK National Research & Education Conference 2011‘Our Global Future’, Conference, Cambridge University, UK.

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EXHIBIT1: TOUGHSTUFF PRODUCTS Source: www.toughstuffonline .com/

LED Lamp Solar Panel

Mobile Phone Connecters Rechargeable Battery Pack

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Radio Connectors

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EXHIBIT 2: TOUGHSTUFF’S LIST OF PARTNERS

Partner Contribution to ToughStuff

One Acre Fund Collaboration on 30,000 Farmers initiative in Western Kenya

Last Mile Entrepreneur Program

Assists ToughStuff to access areas with geographical constraints

Bestnet A/S Bestnet represents ToughStuff products sold into emergency and humanitarian situations

Interhealth A London-based travel-medical charity, fulfills ToughStuff's UK orders

Kopernik An online store of innovative technologies providing an online platform for ToughStuff's products

Goya A pan-African market entry, management and development consultancy

Baobab Are acting as ToughStuff's Malawi partner

Help Aid International Distributed ToughStuff emergency kits to older earthquake victims in Haiti

World Vision Distributed ToughStuff emergency kits to earthquake victims in Haiti

Christian Aid Works with ToughStuff to establish new solar village entrepreneurs in Kenya

The Salvation Army Partnered with ToughStuff to deliver emergency kits to earthquake victims in Haiti

Good Returns A lending portal that enables individuals to connect with poor people around the world to provide them with a loan.

Living goods Sells ToughStuff solar products through its network of women Community Health Promoters in Uganda, bringing access to clean energy while creating additional income for these women

Send a Cow Uganda Helps remote farming communities gain access to solar light by selling ToughStuff products through its extension workers

Edirisa UK Is establishing a network of solar entrepreneurs selling ToughStuff products in southwestern Uganda

Humedica Distributed 6,000 solar lighting kits to refugees in Dollo Ado, Ethiopia, escaping famine in Somalia

Linklaters Provides pro-bono legal support to ToughStuff

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A4ID Provide valuable legal support to ToughStuff

One for One Joined forces with ToughStuff to create a way for Dutch customers to buy green energy and help people in developing countries benefit from solar power

United Nations Global Compact

A strategic policy initiative for businesses, whom ToughStuff support and are a participant of

Energy for All ToughStuff will help achieve their aim to provide access to energy to 100 million people in the Asia and Pacific region by 2015

Sustainable Energy for all ToughStuff are part of the Practitioner Network working on the delivery of energy services and solutions related to electrification in a range of developing countries

The Business Call to Action

Challenges companies to develop innovative business models that achieve commercial success and development outcomes