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Interview with Nick Sireau, Founding Executive Director of SolarAid
In this Viewpoints feature we caught up with Nick Sireau, to find out how his charity SolarAid is evolving into a social enterprise, with commercial marketing at the heart of their solar market development efforts.
[top] [end]Interview[top] [end]Q1. Nick, could you tell us a little bit about yourself, your background and how you became involved in marketing solar power to the bottom of the pyramid?I was recruited three and a half years ago to set up SolarAid, the original idea for which came from Solarcentury, one of the UK’s largest solar energy companies. Solarcentury at the time was putting 5% of its profit into setting up an independent solar charity. While Solarcentury focused on the western market, SolarAid (based on a charity model rather than a commercial model) would focus on providing solar energy to developing countries. At the time I was looking for the opportunity to set up a charity and this also perfectly aligned with my interest in poverty and climate change issues.After completing a Bachelor of Arts in History and Economics at Oxford and then an MSc in Business Management in France, I became a financial journalist for a think-tank for a couple of years, before joining the non-profit sector where I spent 10 years working with different international development agencies. During that time I set up the AKU Society, a medical charity dedicated to finding a cure for a rare genetic disease called Alkaptonuria. I also conducted a PhD in the social psychology of the international development movement - which has been published as a book called ‘Make Poverty History – Political Communication in Action’. This was looking specifically at the Make Poverty History campaign and how anti-poverty campaigns affect people’s understanding of poverty. When we initially set up SolarAid we didn’t have much money, around £35,000, and so we started a very small project in Malawi with some help from ChristianAid. At the beginning our focus was on fundraising and helping our projects grow but soon our work attracted the interest of corporate foundations, philanthropists and more traditional foundations so we were able to initiate more projects. [top] [end]Q2. Could you tell us a bit more about SolarAid’s aspirations to become a social enterprise? What is the charity’s business model?There is no legal structure for a social enterprise, although in the UK we do have the Community Interest Company model. A social enterprise is less defined by a legal structure and more by its business model. We consider ourselves a social enterprise because we are generating revenue from our products, which have strong social outcomes for our customers. Enterprise was always at the centre of what we wanted to do. From my experience of development, I had seen that many NGO projects tended to be ineffective, or achieved the opposite effect from the one intended. One of the reasons, I feel, is that these are very much based on a hand-out model rather than a model that can create economic development.When I studied the Make Poverty History campaign, I saw that the NGO movement is very ideological and old school in its approach and has never embraced Market Economics, despite claiming to be progressive. And so I saw very well intentioned models, some quite sophisticated, but actually often ineffective. Take the whole intermediate, appropriate technology movement for example and the idea that people can build their own devices to meet their own needs. Well, in the beginning, that’s what we did within SolarAid. Our first project involved people building their own solar panels and lanterns in workshops we had set up in Kenya and Malawi, until we realised the process just didn’t work. In the west for example, since when do we ask people to build their own washing machines? We were having huge quality issues. Our workshops in Malawi and Kenya could not compete with the quality and the price of products manufactured in China in professional factories. Then there was the cost involved, the fact that our labour wasn’t sufficiently skilled and the fact that a lot of components would go missing and be stolen. That’s when we realised that our real aim was to make solar as widely available in developing countries as possible, and that the real problem that had to be addressed was distribution, not product design. There are many good products produced at the moment in India and China for the world market that could well be used in developing countries. So in SolarAid we are not only trying to innovate and develop our own products but our priority is to develop distribution networks, and that is incredibly difficult! The base of the economic pyramid theory says that there are 3 billion people in the world living on less than US$2 a day. One looks at that and thinks that’s a huge US$6 billion a day market. Unfortunately, it’s not a market in the real sense of the term. It’s a potential market if you can reach and actually sell to those 3 billion. Today you would define a market within an economy as one which has all the structures of distribution, marketing, finance, legal, training institutions and universities in order to create demand and create answers out of demand. We found ourselves working in crumbling economies and not healthy, functioning markets. So we have had to create markets from scratch. In order to create demand, we have had to do, what I like to call, seeding the market. In our projects we do this through big demonstrations in rural communities and through collaborations with community leaders, NGOs, churches, everybody really, in order to tell people about solar energy and electricity. Once they’ve heard of it and want to buy solar products then we focus on putting a distribution system in place. And for that we use a technique known as micro-franchising. This is taken from the franchising concept applied at a micro-level, similarly to how micro-financing is taken from conventional banking.
[top] [end]Q3. Could you tell us a bit more about micro-franchising and how this can strengthen local markets?We work with the community to find local entrepreneurs who are reliable and trustworthy. We train them and then give them access to business in a box – under a brand we call Sunnymoney. We created this brand because the ‘Aid’ in our name ‘SolarAid’ has proved problematic. There are so many charities called something-aid, that aid has become linked to dependency. It is expected from a charity called ‘aid’, that it will provide products for free. So we called our micro-franchising system Sunnymoney to show that it’s promoting entrepreneurialism. The franchisees become Sunnymoney entrepreneurs and have access to products we develop, which they sell to generate revenue for themselves. They can hire people, grow their franchise and also generate some revenue for SolarAid so that we don’t have to be entirely dependent on grants. Eventually we want SolarAid to become a self-sustaining social enterprise.[top] [end]Q4. You mentioned that you first need to seed the market and create demand for the product. What are the messages SolarAid uses to promote solar technologies? Are CO2 reductions for example an incentive for people to invest in your products?The reason why someone in a rural village in Africa is going to buy a solar lamp rather than a kerosene lamp has nothing to do with climate change. We promote solar products through a number of factors. The first key factor is that of safety. We actually tell people that by having reliable lighting at night they will be safer. And this is something they know themselves. People are reluctant to go wandering around villages in rural areas at night as it is dangerous. So we find that the first thing people do with the solar product they’ve purchased is to hang it outside their house for safety. We sell products as autonomous units, containing a solar light bulb linked to a power pack, which makes hanging them outside possible.The second factor is that of saving money. When we do seeding in the communities, we help people calculate how much they spend on kerosene on a monthly basis. When they realise they are spending a fifth to a quarter of their income on kerosene and candles they are appalled. When you tell them that within three months they will have spent on energy as much as the price of one of our products they think it’s amazing. They say, ‘If I buy one of your solar products, after three months, I’ll be saving 20% of my monthly income!’ The third factor is education. Getting the point across that kids could study in the evening with light. The fourth factor is health. People are continuously exposed to kerosene fumes which are bad for the eyes and the nose. Just the other day we were informed by one of our staff in Kenya that their neighbour’s house caught fire as one of their children overturned a kerosene lamp. The child unfortunately did not survive. Something like this gets the message across about the dangers of kerosene and the need for alternatives. There are other selling points of course that are more context specific. We are the first organisation to be generating Gold Standard carbon credits in sub-Saharan Africa. Such that, when we sell a solar lamp to a consumer in Africa, they have to assign the right of this CO2 reduction to SolarAid for us to sell and get the money which goes straight back into the project, subsidising the products. Of course, when you try to explain to the consumer that by buying the product they have a right to an emission reduction, the right to an absence of CO2, it seems nonsensical. So no, CO2 doesn’t really motivate people at the end of the day. And of course, the product needs to look good, which brings in the status element of it. For example, our product looks like a light bulb, so that when a customer has visitors, the latter will see the product and think, ‘Oh, you have real electricity in your home!’ That’s very important. It’s the same in the west, where people buy a product because it is functional and because it looks good. Because of what it will do to their lives. Everything else is secondary to that. [top] [end]Q5. You mentioned an autonomous, modular product design and I was wondering if you can elaborate on how you can turn a smart technology that works, into a marketable product for the bottom of the pyramid?One of the first things to note is that Africa is flooded by poor quality cheap products from China and this gives a very bad name to new products. That is the context in which we have to work. So we have to make sure that the product is robust. You need a product that will last in a tough environment where it will be moved and bumped around. The average Chinese product in Africa, if it works at all, will last a few days to a week. We want a product that will last at least three years if not more. Our aim is seven years.Secondly, it has to obviously be of good quality, reliable and to shine a light that is equal or better to what you get from kerosene. For this reason, we use very good quality LED (Light-emitting Diodes) that last tens of thousands of hours and long lasting, good quality rechargeable batteries. The third design criterion is that of affordability. And often there is a trade-off between quality and affordability. The other day we were presented with a solar lamp from a big multinational company that targeted the base of the pyramid. It may be designed to high specifications, but at its current cost of US$80 it will not sell. We aim for products at around US$25-30 and are in the process of developing one at half that price. Once we have the product ready, we just need to sell at the right time of year, for example after the harvest, when there is a lot of disposable income. Families can come together to buy it or we through our partnership with micro-financing institutions can lend money for consumers to buy it. The stock we provide to our franchisees sells out within days. There is a demand for our products now that the pricing is more accessible.
[top] [end]Q6. Regarding your micro-franchising model, how do you build the business and marketing capacity of the franchisees so that they can run a sustainable business?Well, for example, in Kenya we set up our franchisee selection process such that entrepreneurs have to be elected by the community. If people want to be even considered as franchisees, we have to know they have the support of the community. So they will undergo a rigorous selection process during which they run campaigns and that way get their own customer base. After that, we interview those elected and select the best ones who we train in marketing, sales, business planning, solar technologies, repair etc. At the end of that they sit a test after which, if they pass, they become franchisees. We then give them access to product stocks which they begin selling. After one and a half to two months they get a Refresher course, which involves them coming back for more training and to give us feedback. We stay in contact with them every week over SMS texting and pay them a visit once a month to make sure things are running smoothly and to give more training. We also provide them with an operations manual, which explains everything in detail including warehousing, stocks, pricing, repairs, warranties etc.[top] [end]Q7. Can you tell us more about the promotion aspect of your marketing strategy? How do you promote the Sunnymoney scheme and how do your franchisees promote their products?We start with the seeding of the community, which involves big demonstrations on how our products work, to thousands of people. We also have a solar vehicle in Kenya we call the Solar Roller. This is painted yellow and has a 250W/150W solar cinema that travels from one community to another, showing films on solar energy. Furthermore, during their election campaigns, the franchisees -in promoting themselves- are also promoting their future business and products. Once established, they will promote and sell their products at weddings and funerals; they will do radio advertising and distribute branded material including leaflets, branded caps and t-shirts. Our brand is of course on product boxes as well. We are trying out each technique to find the cheapest and the most effective.[top] [end]Q8. Have you experienced any problems of corruption regarding elections? For example people getting votes in return for a share of the profit...We haven’t really experienced anything like that. Many people run for campaign and some of them secure thousands of votes. Our star franchisee, Ramana in Kenya, secured 994 votes. Giving financial benefits to so many would be expensive and our process is quite rigorous. It quickly eliminates candidates with such intentions.[top] [end]Q9. What is in your opinion, the role of local governments or the NGOs sector in trying to introduce solar technologies into the market? How can social enterprises best collaborate with them?I think NGOs and governments have a huge role to play. I do not believe that at the moment, commercial entities can really make a profit using this micro-franchising model in markets that are still in need of development in these countries. In my opinion, existing lighting companies try to follow a commercial model and use existing distribution networks. When they realise that these in many cases do not exist, they end up distributing to NGOs, which in turn give them out for free or at a subsidised cost. So NGOs and governments have potential to build up the markets.The micro-finance industry model for example took 20 years to become viable. The industry at first was heavily subsidised by grants and donations from governments, individuals and foundations. So I would say that the first role of governments would be to subsidise these programmes, because setting up a distribution network from scratch takes a lot of work, time, money and people, and it would take time to become commercially viable. Secondly, governments need to harmonise the actual regulatory environment. What we found in Africa for example is that the regulatory environment was not really conducive to our work with enterprises and solar technologies. In Malawi for example, until recently, a 47.5% tax was imposed on all imported solar products. We joined solar companies in lobbying to have that reduced and it has been partly successful, but nowhere near where we’d actually like it to be. On their part, NGOs can operate similar micro-franchising models, or partner with other organisations, like micro-finance institutions or micro-enterprises to build a solid market and provide finance. [top] [end]Q10. What is your view on subsidising or donating products as a means of distributing technologies?What we found is that if you give stuff for free you kill the market for entrepreneurs trying to sell similar products. If I am distributing radios for free for example, any shop in Africa selling radios will end up shutting down. Programmes therefore, that hand products out for free, actually undermine the economy and put people further into poverty. Mind you, this is different from providing aid in a disaster relief context, such as in Haiti for example, where everything has been destroyed. There you have to give stuff to people who have lost everything and are in urgent need of specific supplies. But I do feel that part of why Africa has remained so poor is because it has remained dependent on well-intentioned donations from western governments and NGOs. So my plea is that NGOs stop all donation schemes of solar lamps and lanterns. There are a number of organisations distributing these for free in Kenya for example and they are destroying the local economy having the exact opposite effect of alleviating poverty. In my view donations outside a relief context are immoral and unethical.[top] [end]Q11. Do you feel you may be creating dependency of the communities you are operating in, to cheap products from China?In a perfect world we would be able to have manufacturing facilities in the areas where we operate in Africa. But as I have already mentioned, when we actually started trying to build that capacity ourselves we found that we could not find labour that was skilled enough, parts were going missing, we could not get the quality of the product right and it was a nightmare to manage the import of all the different components, each of which was produced in China anyway. So, I don’t think Africa can compete with the industrialisation we see in China, nor with the quality. You have to look at what you have to offer the consumer. Your priority is to offer the rural villager the best product you can at the best price and that, at the moment, is produced in China. This is the reality. So, does it create dependency? I question that whole debate.[top] [end]Q12. Do solar lamps produce enough comfortable light for reading at night for example? It is better than nothing, but is it a sustainable solution?Of course it’s not better than what you get from grid electricity in the UK, but it is definitely better than what you get from kerosene and better for your eyes. So is this a sustainable solution? Yes, it is entirely sustainable. But is it ultimately what people should be aspiring for? Well, I think people should always aspire for better. So we start (people) off with solar lights and show how that will save them enough income to slowly invest in bigger systems. This is the first step on a run.[top] [end]Q13. Do your entrepreneurs make a profit out of the sales? Have you found products cheap enough to manufacture but of good enough quality that you can sell and make a profit?Yes, and our entrepreneurs do make a profit. They earn roughly three or four times what they would otherwise be earning if they were not a micro-franchisee.[top] [end]Q14. Do you offer different products for different affordability levels?That is the aim. At the moment we only have one product called Ravi, named after the Hindu Sun God. This comes with a 1.8W solar panel, costs US$28 and can power a mobile phone charger or provide lighting. We are also in the process of introducing a desk lamp for half that price and a large multi-lamp for twice that price.
[top] [end]Q15. Would you ever consider powering your own home on solar power alone?Yes, I would very much like to. I live in rented accommodation however and my landlord has no intention of going solar.[top] [end]Q16. Thank you Nick, is there anything else you would like to mention?One thing I have realised is that what we are trying to do in the areas we are operating in is incredibly tough and it takes time. It is difficult because we are working in environments where there is no infrastructure, no transport, no banking system, little legal structure and the distances are huge. This is not a problem we can solve in two or even five years. It will take a long time. We are therefore interested to partner with organisations and individuals on a similar journey. The ethos of our whole organisation is based on sharing, transparency and accountability - finding people to work with, share our learning and improve what we are doing. We are massively into partnerships.[top] [end]@HEDON[v][e][top] [end]Contents: Boiling Point 58 - Marketing
Categories: Boiling Point 58| Marketing| Sunnymoney| Gold Standard| Microfranchising| Enterprise| SolarAid| Solar Power | ||||||||||||||
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14 May 2010; Last edited:
09 July 2010; Version: 1 | ||||||||||||||
Pagename: BP58:SolarAidInterview @HEDON: PKUA | ||||||||||||||
