You are here: Strategic advice helps solar irrigation company overcome barriers to market scale

6/06/2017

Energy 4 Impact assisted SunCulture – a company providing pay-as you-go, solar-powered drip irrigation systems and services – to devise an innovative strategy that de-risks the company’s business model by helping small farmers increase profitability through improved access to market.  This pioneering approach is hoped to jump start a sustainable market for clean irrigation, while promoting the development of the agri-food sector in the country.

Only 25% of irrigable land is under irrigation in Kenya. Irrigation is key to improving agricultural production, thereby generating prosperity and employment in small farming communities. Solar-powered drip irrigation can save up to 80% of water compared to current practices. In addition, it significantly reduces the cost of labour, fuel and fertiliser, while improving crop quality and yields.

There is demand for our solar irrigation systems because farmers are always looking for ways to minimise their costs. The largest cost farmers incur in is diesel fuel for running their water pumps, with the typical farmer spending between 500 and 1500 Kenya Shillings per day.

- says Samir Ibrahim, CEO and Co-Founder of Nairobi-based SunCulture.

We estimate that our current customers would enjoy over 151,000 kilowatt hours of renewable energy, save 4.4 billion litres of freshwater and increase their yields by up to 300%, resulting in the production of over 24,000 tonnes of fresh fruits and vegetables in a year.

While SunCulture’s ‘Pay-As-You-Grow’ model has succeeded in making their technology accessible to most farmers, its success depends on farmers being able to generate a steady income from the sales of their produce. This is often a challenge for small farmers, who struggle to keep their cash flowing consistently.

Energy 4 Impact has been working with SunCulture on addressing these barriers, especially in the areas of end-user financing and access-to-market for smallholder farmers.

When SunCulture approached us, it became clear that for the company to be able to expand its market reach to smallholder farmers it needed to understand the market environment in which their customers operate, and come up with a sustainable business model that fitted their needs.

- says Energy 4 Impact Head of Advisory, Shashank Verma.

Energy 4 Impact conducted a study, which looked at the horticulture value chain and related dynamics (players, prices and profit cycles) for selected crops and vegetables in a number of counties in Kenya. The study revealed that because most smallholder farmers in Kenya sell their produce at wholesale markets through brokers, their profit margin remains small. This, combined with the price volatility of horticultural produce in the wholesale markets, hampers their ability to pay for solar irrigation on a cash basis.

Our advisory team suggested that SunCulture should adopt a strategy that would guarantee access to an assured market for the farmers, thus helping them get assured returns for their investment into a solar irrigation pump. This is important in the African context, where due to market inefficiencies, risk-averse farmers miss out on innovative solutions. By taking out the market risk, we expect to see a higher take-up of the solar irrigation pumps by the farmers, thus creating a win-win situation for both the company and the farmer

- says Shashank

This advisory work forms part of Energy 4 Impact’s Energy for Business Development (EBD) programme, funded by the World Bank, and providing advisory services and capacity building support for clean energy access to micro, small and medium enterprises in Kenya, Tanzania, Senegal and Uganda. It also supports the productive use activities of newly electrified villages, clean cooking and women’s economic empowerment.  Advice and services include business consulting, customised projects, capital raising and partnership support.