The Big Lead: 7 Ventures Eclipse Africa’s PAYG Solar Space
According to a new biennial report jointly released by Netherlands-based GOGLA, Kenya’s Open Capital Advisors, and the World Bank, the global off-grid solar industry is witnessing a post-pandemic recovery of the sales of household solar systems.
However, more importantly, the 160-page publication reveals a not-so-obvious anomaly: the seven largest companies building in the PAYG segment are responsible for 72 percent of the total fundraising efforts that have gone into the market. Meanwhile, 26 percent of these investments are shared by 150 other upcoming players in the ecosystem.
Showcasing investor’s willingness to promote clean energy adoption in the continent, ventures such as San Francisco-based d.light and Sun King have unprecedentedly raised huge rounds to expand their multi-market operations; the former has secured USD 365 M since February 2020, while the latter absorbed USD 260 M in Series D this year.
With d.light and Sun King as the chart-toppers, other actors that are part of what the report referred to as “the big seven” include Kenya’s M-Kopa, London-based BBOXX, Amsterdam’s Zola Electric, Dutch Lumos and French Engie Energy Access.
Per the report, between 2015 and 2021, these companies were backed with a cumulative USD 600 M; over the same time, the upstarts have raised USD 255 M. Last year alone, the big seven attracted USD 243 M in loans, and USD 70 M from share sales, while other upstarts made way with USD 52 M in equity funding and USD 9 M in grants.
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In the last decade, Africa-focused off-grid solar operators have received over USD 2 B in funding, but this year alone, almost USD 500 M has been raised by 30 companies. However, at the scaleup stage, capital inflow is obviously insufficient. This makes it harder for such businesses to purchase requisite inventory like solar kits and rechargeable appliances.
“Companies with insufficient cash positions pre-pandemic experienced cash flow shortages, with some forced to shut down. Some start-up companies, already overleveraged, continue to find it difficult to raise capital, especially equity; debt providers also steered clear, as default risk seemed high,” the report stated.
Thanks to the increasing number of urban dwellers turning to solar-powered devices and systems to make up for the electricity deficit, the study suggests that the “off-grid” term could soon become obsolete, unlocking a huge new market in which solar companies’ various models are justified.
The ultimate goal is profitability, as many players need to chase strong unit economics and grander scale, rather than mere market sizes. To cut unnecessary costs and achieve universal electricity access, actors need to find a lean approach.
