Description
Africa was supposed to be the new « eldorado » after China but failed to achieve social and economic progress despite the potential abundance of mineral resources and agricultural raw materials.
The continent is facing big challenges in terms of primary needs to sustain economic development; electricity is one of them. Africa on grid electricity’s coverage is less than two fifth of the population (Rastogi, 2018). Beyond the coverage, the quality of the network is quite poor even in urban areas (electrical load-shedding and regular power cuts during hours and days).
Africa’s population is suffering from poverty (in Central Africa, majority is living with 1 to 3$ per day and from informal business), having limited access to financial services, low electrification rates and high mobile phone penetration but yet challenges in terms of quality and sustainability. A few years ago, some companies saw an opportunity to develop alternative solutions to fill the gap of the lack of electricity in rural areas in emerging markets by providing quality Solar Home Systems (SHS) with an affordable leasing offer (Pay-As-You-Go companies), understanding that improving the socio-economic conditions of a country passes through the fulfillment of the primary needs (electricity being one essential driver of an economy).
According to Lighting Global, World Bank Group’s initiative to rapidly increase access to off-grid solar energy, the business model in the Pay-As-You-Go (PAYG) Off-grid Energy sector has a two-fold objective regarding the one-billion population in Africa: energy access and financial inclusion to low-income and rural populations.
But due to the complexity of the business models, uncertainty remains about the path to a productive, resilient, and customer-centric ecosystem of PAYGo lenders. PAYGo companies combines the supply and distribution of clean energy services and durables systems, and financial inclusion through leasing solutions that make the solution affordable for the low-income customer. (Lighting Global, PayGo, 2020). So, questions may be raised: why the business models of the PAYGo companies are so complex? Are they too vertical integrated, hence generating too high levels of operational expenditure, affecting the profitability of the PAYG companies?
How to effectively control the operational expenses at xxxxx in xxxx in a challenging economic environment while investors expect the company to be profitable?
