Business support is helping more rural enterprises in Tanzania to capitalise on access to electricity
Rural businesses in newly electrified parts of northern and southwestern Tanzania are seizing the opportunities enabled by energy to develop their commercial activities and so bolster their livelihoods. Through a package of support services from Energy 4 Impact, alongside access to electric tools and appliances, these enterprises are now in a stronger position to offer improved goods and services to their communities as well as create local jobs.
This transformation is the result of a renewed collaboration between Energy 4 Impact, Multiconsult Norge AS (Multiconsult) and the Tanzanian Rural Energy Agency (REA), which is targeting 194 villages in Arusha, Songwe and Mbeya regions which have recently been connected to the national electricity distribution network. Under this agreement, Energy 4 Impact is promoting the uptake of electricity for commercial purposes as a way of improving the viability and impact of REA’s Rural Electrification Densification Project (REDP).
Besides galvanising socio-economic development, stimulating the use of energy for productive uses (PUE) is essential to making the provision of rural energy a sustainable profit-generating business. Enterprises that generate a higher turnover due to use of electrical appliances can afford to pay for more energy services in comparison to domestic customers. As a result, rural electrification projects with PUE components are more likely to achieve commercial viability, prompting further grid extension in turn, thus fostering greater long-term economic and social benefits through increased productivity of local businesses, employment creation and accelerated economic growth.
Since the second phase of the programme got underway in December 2021, Energy 4 Impact has been targeting 600 business owners, including agro-processors, manufacturers such as welders and carpenters, retailers such as shops and food vendors, services such as tailoring, phone charging, printing and catering, as well as entertainment businesses. The businesses receive a package of support services ranging from identification and assessment of potential opportunities for productive uses, training and mentoring services, market information and linkages, technology and appliances training, plus facilitating access to finance through local microfinance institutions.
This approach builds on the methodology developed and tested through a pilot run between 2018-19 across 59 villages in Tanga and Pwani regions in eastern Tanzania, which resulted in impressive socio-economic impacts with 350 supported businesses increasing their electricity consumption by 88% and profits by 183% on average, whilst creating over 500 permanent jobs.
High quality mentoring is at the heart of this collaboration, but the pathway through the programme is different for each entrepreneur. As Edward Massawe, Business Development Services Coordinator for Energy 4 Impact, explains:
Acting on a market assessment provided by his Energy 4 Impact mentor which identified opportunities arising from shortfalls in provision of local services, metalworker Peter Jimson purchased an electric air compressor with his own savings plus loans from friends. He earns money from this appliance by inflating tyres, supplying air to local well diggers and renting it out for painting jobs. With the subsequent boost in his income, Peter now plans to purchase a heavy-duty grinder and move into a more spacious workshop, thus improving his capacity to take on bigger and more demanding metalwork jobs. To further improve his turnover, Peter has received training on customer service, marketing and business management, alongside guidance on improving the style and design of his metal products.
Whilst many entrepreneurs are keen to access loans in order to purchase appliances, others are less comfortable or confident about approaching financial institutions, preferring to seek more informal loans from friends or family. In such cases, mentors focus on building a credit history which will put entrepreneurs in better stead when it comes to applying for loans in future. Either way, the agreed growth strategy for each business is designed to achieve an enhanced profitability which rapidly offsets the upfront cost of the appliances.
Ms. Nice Sokoine is a food vendor who previously only used electricity for lighting, but was keen to boost her turnover by investing in electrical appliances that would allow her to offer new products. After market research, Nice agreed with her mentor to diversify into selling cold drinks and fresh juices. She worked closely with her mentor on improving her financial management, including separating her personal and business finances, before approaching a microfinance institution for a group loan together with other entrepreneurs. After receiving a loan for the purchase of a fridge and blender, sales from her expanded range of products enabled Nice to more than double her monthly income.
Gender equality is also a priority in this second phase as Edward Massawe explains,
As local partners heed the benefits of galvanising PUE amongst local businesses, their willingness to scale this approach across more communities and regions is becoming increasingly evident. Godfrey Sanga, Director at Energy 4 Impact, comments,