EnergyYellow – An African Start Up Solving Africans Electricity Problems

adminJune 25, 202239524 min

In this interview, the CueAfrica team sits with Yellow’s Head of Operations Malawi – Cynthia Makunganya as we discuss clean energy and how Yellow is solving Africa’s electricity problems providing service to even the most rural areas of the continent

Please tell us who you are

Hi, I am Cynthia Makunganya, a born and bred 27 year old Malawian female. I am a Development Economist passionate about uplifting lives, particularly the youth and women in rural areas; and ending energy poverty in my motherland Malawi & the rest of the continent. I completed a Bcom in 2015 in South Africa and came home to drive change in Malawi. Initially, the way to do this was not obvious, and I spent some time doing AID work and even working in a bank. When Yellow, a fledgling startup at the time, and I found one another I knew my opportunity had arrived to do good while I generated and created wealth for myself, my team and hundreds of others. I am currently the head of operations for Yellow Malawi, and more recently Uganda. I call myself the Chief of Culture. I am managing a team of 23 support staff in Malawi, 3 in Uganda and over 350 field agents in Malawi & Uganda combined (and growing). All of the responsibilities of In-country management and overall supervision of operations across various business units specifically Business Development, Rural Business Development, Customer Relations and Credit fall to me. I also manage in-country HR, Operations and Office Management duties.

What is Yellow, how did it come about and in how many African countries in Yellow operating currently?

Yellow is a Digital retail business focusing on access to energy through distribution of Solar Home Systems (SHS) and other products that improve general livelihoods of rural communities. Founded in 2018 in Malawi with the belief that it could help people follow a path towards a better & more fulfilling life, our team is now spread across the two geographies in which we operate – Malawi and Uganda, as we address the massive challenge of access to energy in rural Malawi and Uganda.

So tell us about the Yellow products consumers can enjoy?

We are expanding our product offering with uniquely sourced value products and this is based on three principals,

  1. demand,
  2. a high quality and specifications : price ratio and
  3. product backed by warranty, i.e. where the consumer has some recourse.

We feel confident differentiated products relative to what is available in the existing market will be well received, even if they are not recognizable brands at this time. Currently in addition to the basic Solar Home Systems, we offer a SHS upgrade, low voltage televisions and most recently, smartphones. Ultimately, we hope to capitalize on the massive growth in the addressable African consumer base which is set to double over the next 20 years.

In your Opinion, how can the presence of monopoly structures in the energy sectors in Africa be checked?

We all know a lack of competition in any market drives up price as the consumer is offered no alternatives. So monopoly structures, particularly in energy which is the backbone of any industrial economy, must be properly and fairly regulated if it is going to succeed in driving economic growth. Having only one operator also increases the likelihood and exposure of the industry to corruption in procurement processes as suppliers to the industry have only one operator to service. How can they be checked? I guess at this point through activism, civil society and private businesses finding alternative ways to get power to consumers that need it at a fair price, like is the case with Yellow.

Uganda in Particular produces more power than its residents can consume, in your opinion, why do you think there are rampant power cuts in the country?

Courtesy : Yellow

I think this problem is two-fold. On one hand, the current lessors of the main grid’s distribution assets are South African and English; they are of course in no way incentivized to sell the power produced in Uganda to Ugandans if they can attract higher revenues from export. As such, a lot of power is exported to Kenya, Tanzania and parts of the DRC in favour of local distribution. The second pressing issue is the state of the distribution infrastructure itself and the time lapses and costs of restoring the broken systems are slow and ineffective, hence cuts are often rampant.

According to an article written at Cue Africa, in Kenya, the minimum amount of money one can spend on electricity bill is approximately Kshs. 500 (USD 4.63). This figure, however, is dependent on the number of electrical appliances one has but it is commensurate to what one would consume for domestic use. On the other end, the minimum amount of money one can spend to set-up a solar system is about Kshs. 50,000 (USD 463). This would comprise of a single solar panel capable of lighting three bulbs, a television and radio for up to 10 hours. Households looking to install solar solutions capable of powering a refrigerator, computer, 10 bulbs, television and water heater would spend a minimum of Kshs. 450,000 (USD 4,164). How is Yellow solving the problem of high costs of purchasing solar systems and transaction costs?

Yellow is doing this in two processes. First, we are providing the SHS to our customers on a PayGo basis. This means they are able to enjoy the fruits of the machinery for a monthly installment of less than USD5. Secondly, we are managing our costs in the way we operate. By incorporating digital tools with a network of agent entrepreneurs and working with mobile money platforms as a means for receiving payment, we are able to reach the last mile customer in a cost-effective manner allowing the company to serve even the most remotely located household.

How has Yellow been affected by the COVID-19 pandemic?

Covid has been hugely disruptive to our launch in Uganda. We have historically been able to leverage off community gatherings to generate brand awareness and sales, training many agents in one go at large training events and also getting our agent groups together to discuss their approaches, trials and successes in the field in team building events.

Courtesy : Yellow

The inability to reach mass groups to educate how our product works, why you should buy it and where to find it has been very difficult. All our agents are new and require more support to learn and grow than COVID has allowed us to give them.

There’s definitely need for more investment in clean energy in Africa. In your Opinion how can the hurdle of large capital required to fund sustainable schemes be solved?

I have always maintained the best way to attract capital into an economy is to give the private sector the right incentives to influence their entry into the sector. As mentioned before, money makes the world go around and if there is a return to be made with an attractive relative risk factor, money will follow it. The energy play across the continent is one with highly attractive macros, so the market exists; it is now about setting up policy and regulations to give investors some certainty that their large-scale investments can perform for them. Some examples of opening up the regulatory space to incentivize capital to produce clean energy are things like rebate targets, tax breaks etc. This can of course always be balanced with other economy objectives like hiring thresholds.

If not through a policy driven incentives, businesses like ours that are demonstrating the ability to generate sales and growth in untapped or previously ignored consumer segments like rural Africa are making huge strides in attracting capital to the continent in the Clean Energy space.

What role is Yellow playing in attracting foreign investment in Clean Energy on the African continent?

Yellow is demonstrating the ability to meet customer demand at the right price with the right products. This in itself means there are problems to be solved and return on investments to be made. As we know, unfortunately money makes the world go around, and if businesses like ours continue to demonstrate the opportunity available in the last-mile customer[1] , we can attract investment. Moreover, we work hard to promote Uganda, and the African continent as a space for investment opportunity. We do this through our own fundraising, PR campaigns and presenting at meaningful conferences and institutions such as SingularityU and Harvard Business School.

According to a report by the United Nations Conference on Trade and Development, Africa’s CO2 emissions from energy use increased by 2.5% and the also region accounted for 3.4% of global emissions in 2014, how do you think Africa can transition towards clean energy?

I think this is only possible through intentional and deliberate action at a governmental level. There are a few ways to encourage this. At Yellow, we are all about incentives, the way we manage our operations teams allows them to earn in line with their productivity. Our agents are incentivized to maintain healthy portfolios. So, I think a transition to a renewable energy dominated power supply should be no different.

As mentioned before, some clear incentives that encourage the use and production of solar over other sources of electricity can be done through tax rebates, allowing independent power producers to sell into the national distribution grid, price monitoring and subsidy if required to ensure relative affordability of clean energy to name a few.

What do you think are the future prospects of renewable energy in Africa?

Huge. Let’s assess the macro’s for instance in East Africa. We have a rising GDP per capita with large portions of populations unelectrified. The established electricity producers service small segments of the market. There is almost a greenfield opportunity in many of the African economies to come up with models which suit their populace best – centralized, decentralized, mixed producers etc. at the moment, we are taking advantage of the high density rural populations which give our agents the ability to have enough of a market, close enough to them to generate and create a meaningful business for themselves, this is our unit economics approach. 

Any last words for the Cue Africa audience?

“Money is only worth making if it is used as an instrument to set people free”. This is my professional mantra and guiding purpose. I think it is tremendously powerful and if more of us adopted this approach, and assessed our impact regularly, prosperity for Malawi, Uganda, Africa and the world would be closer every day.

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