Big Returns For Businesses In Rutenderi Thanks To New Mini-Grid
A new 50kW mini-grid in the village of Rutenderi in eastern Rwanda, has kick-started the local economy and is beginning to transform the sleepy rural village into a productive hub. The new mini-grid was formally launched on 16 May 2019 and is now making electricity accessible to the whole village, including its 560 households and 36 businesses.
The new mini-grid was commissioned by Absolute Energy, an off-grid utility developer that specialises in renewable energy solutions for businesses in Africa. Energy 4 Impact is a key partner of Absolute Energy, providing the expertise to help small businesses and entrepreneurs to take advantage of the newly available source of power.
Energy 4 Impact helps businesses to realise the benefits of having a reliable source of energy and supports them in developing new lines and activities. This in turn gives a boost to the economic and social development of the whole village as new products and services become available.
“Access to electricity such as that provided by the new mini-grid is a huge boost to the village, its economy and quality of life”, said Robert Mutalindwa Energy 4 Impact Business Development Services Coordinator.
“However, the availability of electricity does not automatically translate into enhanced productivity. Businesses need new skills and tools to fully benefit from reliable energy for commercial use. That’s where Energy 4 Impact comes in.”
Good take-up by business is also important to guarantee the long-term sustainability of the grid. Commercial energy consumption accounts for more than 60% of the capacity on the mini-grid (over 30kW of the 50kW project) and probably over 80% of energy consumed given the fact that they operate during the day, so business take-up is crucial for the future viability of the electrification project.
Rutenderi’s economy is based mainly on agricultural crops such as rice, maize, and bananas. Having a steady power supply can improve livelihoods in a rural area such as this thanks to the new economic opportunities it creates: new businesses and jobs, and access to a more diversified pool of products and services for the community. Before electricity arrived, people in Rutenderi had to travel, often on foot, for services such as welding, carpentry, phone charging and even for entertainment activities. Thanks to the mini-grid and Energy 4 Impact more of these are now available locally.
Energy 4 Impact is mentoring eight micro-enterprises in the village, six of which are now connected to the new mini-grid: two millers, a popcorn maker, a bar, a welder, and tailor. A video showroom and a carpenter will soon be connected. Energy 4 Impact business mentors help them to see the opportunities of using electricity to make their businesses more efficient, cut costs and diversify.
Energy 4 Impact provides a three-pronged approach to help businesses improve productivity and profits:
- Value chain analysis to assess how value can be added to products and services as a result of having an electricity supply: this may be introducing some electrical processing facilities as products produced locally often do not have any processing attached or are low-level manual processes, or there may be scope for bringing in new products and services that need electricity such as ice making or welding;
- Development and training to help build the business and technical skills of local entrepreneurs, and training them to select and use electrical appliances;
- Financing; small businesses often have difficulty in accessing the funds needed to purchase new equipment so accessing finance is crucial for entrepreneurs to take forward ideas and opportunities.
Access to capital
Micro businesses, especially those in the informal sector, have a hard time accessing bank loans. A majority of African micro businesses rely on personal savings or start-up capital from friends and family. A grant scheme programme – such as the Swedish government-funded Scaling up Off Grid Energy in Rwanda (SOGER) that helps entrepreneurs acquire the equipment and tools they need to make their business more productive and profitable – makes a massive difference. Energy 4 Impact funded 70% of the appliance costs through SOGER grants, with the remaining 30% being funded by the micro enterprises themselves through their own savings, or through loans from local Savings and Credit Cooperative Organisations.
The businesses involved are already making more money, and showing a good return on their investments. The popcorn maker recouped the cost of their investment in the popcorn machine in just three months.
At the launch of the mini-grid in May, Alberto Pisanti, Chief Executive Officer of Absolute Energy, highlighted the importance of its partnerships with the Government of Rwanda, the district, the province, Rwanda Energy Group, Energy Development Corporation Ltd., Rwanda Development Board, Endev and Energy 4 Impact, to bring power in the remote village.
“We believe that distributed energy systems are the most exciting leapfrogging opportunity readily available for developing countries today. They can provide affordable, reliable and green electricity supply, replacing diesel or petrol generators to power machines and replacing kerosene for lighting.
“Our partnerships are key to the successful development and operations. We are pleased to have Energy 4 Impact as a key partner, and grateful for its work in helping business take advantage of the new mini-grid in Rutenderi. The expansion of existing businesses and the creation of new ones through productive use of energy stimulation increases the average electricity consumption and revenues for the mini-grid thus improving the chances of its long term viability. Absolute Energy has a role beyond that of a traditional power project developer, investing also in other development projects alongside local entrepreneurs, so as to grow together with its customers. If they grow, we grow,” he said.
Fred Mufulukye the governor of the eastern province said that the project is not just about lighting: “We should know that it brings opportunities that transform lives. People now can extend their working hours and that is going to soar revenue for small businesses’’ he said.
Speaking at the launch, Energy 4 Impact Country Manager Herbert Njiru said, ‘’Energy 4 Impact is supporting mini-grid companies in stimulating demand, defining their productive use of energy strategies, and training and mentoring micro-enterprises to use the energy for commercial purposes.
“This support is crucial for the sustainability of the mini-grid and helps the village’s long-term social and economic development. It’s a win-win for local people and the economy and contributes to Rwanda’s achieving the Sustainable Development Goals (SDGs) such as those on increasing access to energy and reducing poverty,” he noted.
Mariam Bugenimana was running a small tailoring business and a grocery shop in in Rutenderi village Kabarore sector, Gatsibo district. She is now $100 a month better off after her monthly revenue was boosted almost fourfold from 23,500 rwf ($25) a month to more than 90,000 rwf a month after Energy 4 Impact helped her set up a new business making popcorn.
Mariam’s new business takes advantage of the availability of maize and the new power source. Energy 4 Impact helped her assess the market for popcorn and develop a business case. However, to start up the popcorn making business she needed investment capital of 150,000 rwf for equipment and other set-up costs. This was beyond her means so Energy 4 Impact stepped in, providing 70% of the costs of the popcorn machine through SOGER grant funding while Mariam put up the rest herself from her savings.
To support the development of her new economic activity and help Mariam run the business cost-effectively, Energy 4 Impact has provided business management training to Mariam including record keeping, customer care, and marketing. Energy 4 Impact’s business mentor provided hands-on support to Mariam throughout to help her implement the agreed business actions.
Mariam’s activity has yielded great results. She now has a daily income of some 2500-3500 rwf from her popcorn making business, boosting her income by an extra $100 per month. Thanks to the growth in her sales she recouped her investment within three months. Better record-keeping means she can now track daily sales and profit, and she has brought her husband into the business. The equal participation of the couple in the business has resulted into increased sales and profit.
With the extra income from her business, Mariam, who has one child, is able to meet her family’s basic needs such as education for her child, more nutritious meals, and health care services. She is also planning to venture into selling agriculture commodities such as maize and rice, which are the most popular crops in her area.
“Grants are crucial for micro-entrepreneurs to meet the upfront cost of powered appliances, which are transformative for their business”, explains Robert Mutalindwa, Energy 4 Impact.
“Once appliances such as the popcorn machine have been purchased though, they can recover the cost quite quickly as the profit increase is quite staggering.”