The rise of the e-mobility industry in Africa

A lot can change over the course of a few years. The effects of the pandemic have necessitated many changes - and not all of them have been negative. At Energise Africa we welcome positive change and opportunities to grow and develop as a force for good.

When Energise Africa was formed in 2017, our main purpose was to help everyday people in the UK to use their money to support pioneering solar energy companies in Sub-Saharan Africa to supply clean and affordable energy to off-grid homes and businesses, while targeting a return on their investments. 

The model we developed has been a great success, with over 4,000 individual investors each making investments from £50 to several thousand pounds raising over £30 million in total for solar energy access. This has enabled over 850,000 people across 15 countries to access affordable, life-changing solar energy and mitigated over 180,000 tonnes of CO2 a year.

We have been busy planning an expansion of our investment offering, realising that there are many other impactful sectors in developing countries that are in need of catalytic funding to help them grow and work towards achieving the UN’s Sustainable Development Goals. In the future, we will be bringing on more sustainable organisations from sectors across many more countries, giving our investors an opportunity to expand their portfolios.

One of these new sectors is the e-mobility market and we will have some exciting investment opportunities from businesses in this area in the coming months. But why is the increased uptake of electric vehicles in Africa vital to achieving the SDGs? Who will benefit and what does the future for the industry look like? In this blog, we answer these questions to provide clarity around why we are excited about supporting this new sector.

David Wambua* grew up in Makueni County in Eastern Kenya. When he was fourteen his father, who ran a shop in the Wote town, brought home a solar home system. That was the first time he saw an electric light. Every week, for a year, his father paid for the solar system by making a mobile money transfer. Earlier this year, David moved to Nairobi and enrolled in a vocational school. To pay for his fees he started driving a motorcycle taxi. In Nairobi, like many other cities in East Africa, motorcycle taxis (called boda bodas) are a popular form of public transportation. However, with increasing fuel costs David’s earnings have been steadily shrinking and he is worried that he would be unable to save enough for his college fees. He is now seriously considering buying an electric two-wheeler to be able to save on fuel. And as people in Kenya now have much better access to electricity, charging his electric bike would not be a problem. David is now looking for a “pay as you go” option to buy an electric bike just as his father had bought his solar system before. 

Another major benefit of the shift to electric vehicles is cleaner air for the polluted cities of Africa. According to Kenyan government statistics, there are about 1.4 million diesel and petrol boda bodas in Kenya. Studies have shown that the level of black carbon particles in the air of both Nairobi, Kenya and Kampala, Uganda is far higher than the WHO limits.  The WHO estimates that air pollution causes more than a million people to die in Africa every year and this makes air pollution more deadly than diarrhoea, HIV or malaria. 

And it’s not just motorcycles that are going electric. Authorities in many major African cities are keen to shift to electric buses. Paying for the upfront cost of the electric buses isn’t a problem as the buses are often run by saving and credit societies (SACCOs) who have the financial resources to pay for the buses and benefit from the lower operating costs. 

Local and international entrepreneurs are already taking advantage of these opportunities in Africa.  A study commissioned by the Dutch development financial institution FMO conducted by consultancy firm Dalberg counted 50 EV start-ups in Kenya alone. In West Africa, the study found 37 such companies in Ghana. The biggest market is for bikes to be used in public transport, followed by buses. And another rapidly growing market is for logistic and delivery companies. Across much of Africa, fossil fuel subsidies are relatively low, so there is a strong financial argument to shift from petrol and diesel to electric. Electric vehicle entrepreneurs are expecting an increase in demand there as fuel prices rise. 

Companies are also setting up the charging infrastructure needed for electric vehicles. The electric bikes can be charged at home but to be effectively used as a means of public transportation or goods delivery, a network of battery swapping stations is needed in every city. Other companies are using technology to help poorer people without a credit history get loans to buy electric bikes. And others are offering electric bikes on a subscription basis. 

At this point, the market is still in its infancy. But it’s expected to grow rapidly. India, another middle-income country provides some indication of how the market can evolve. According to news reports, electric bike sales have grown more than 5 times to 231,338 units in the last year and electric three-wheeler sales have doubled to 177,874 units.. Tuk-tuk drivers who ferry passengers in Indian cities are driving this demand. Like in Africa, these drivers find they are saving money by switching to electric. The other source of demand is the e-commerce and home delivery companies. Here too, rising fuel costs are driving the switch.     

Across the world, a switch to electric transportation is vital to meet the climate goals pledged at COP26 in Glasgow. Though African nations are not key contributors to climate change (they emit less than 3% of global carbon emissions), reducing black carbon from vehicular pollution will have both local and global benefits. The global warming potential of black carbon is much more than carbon dioxide even though it still stays in the atmosphere for only two weeks. The more people who are able to make the switch to electric vehicles, the less carbon will be generated, resulting in cleaner air in towns and cities too.

Electric Vehicles will also provide an opportunity for African nations to provide manufacturing jobs which are unfortunately rare in Africa. As it is a young continent, it is absolutely critical to provide young people with well-paid jobs to prevent social unrest. Encouragingly, many companies are importing components and assembling electric vehicles locally. These assembly operations also employ a high proportion of women, another added advantage for local economies.

Entrepreneurs have been raising equity capital from investors who specialise in investing in Africa or climate action. The FMO-Dalberg study estimated USD 26 million has already been invested in Kenya and USD 23 million in Uganda in 2021.

Energise Africa recently launched our first investment opportunity in the African e-vehicle sector, with Bisedge, a company that provides electric forklifts to its customers in Nigeria.  Bisedge is planning to buy more electric forklifts and rent them to its customers. For every diesel forklift replaced by an electric forklift, Bisedge will save 124 tonnes of CO2 per year. Each forklift also creates around 4 jobs and Bisedge are committed to increasing their female workforce, in fact, they have a target that women will make up at least 30% of their total forklift operators.

Roam, an organisation set up by Swedish entrepreneurs is assembling electric bikes and buses in Kenya. It has already started its electric bike assembly operations and has been shortlisted as a bidder for the supply of electric buses in the country. Roam has also successfully completed the largest Sub-Saharan Africa e-mobility equity fund raise to date. We look forward to welcoming Roam to the platform soon.   

We are excited to support these two pioneering companies, operating in different parts of the continent and addressing two different markets. This will give our investors the opportunity to invest in the growth of African companies that are generating a spectrum of social, environmental and economic returns. The success of these front runners would help establish that working towards meeting Africa’s climate goals can be consistent with the continent’s economic development.    

  

 

                          

*not his real name