BASIC ENERGY SUPPLY FOR RURAL AREAS IN MALI

SAFE-ELEC is a Malian limited liability company that specializes in electrical engineering and the installation of on-grid and off-grid electrification systems. The company was founded in June 1997. It has a permanent office in Bamako and a field office in Ouélessébougou (70 km south of Bamako). As part of its growth strategy, the company needed a long-term perspective in order to exploit the opportunities offered by the new rural electrification master plan created by the Government of Mali. As such one the pillars of the company growth strategy is to design, implement, and manage decentralized electrification schemes in remote communities. The operating model is a fee-for-service approach in order to ensure capital recovery and the sustainability of operations. The commercial and socioeconomic viability of this approach to rural electrification has been demonstrated convincingly by two different schemes that have been operating successfully in different regions of the country: Yelen Kuran Company in the cotton area and the Koraye Kurumba Company in The Kayes region. These schemes are implemented by multinational consortiums including respectively EDF, Nuon, and Total.
This demonstrates that meeting the electricity demand in Africa can be profitable. This niche market will certainly grow with the general economic development of Africa. Besides, since the demand of electricity is always on the rise, any new customer is a customer for ever. However, the market will remain small if limited to only one area. SAFE-ELEC has just set up a new extension project with the strategic objective of creating a large electricity company in Mali.

N.B.: About the specific characteristics of SAFE-ELEC’s proposal:
This project requires heavy investments in the start-up and will in the following years generate a stable stream of income with rather modest operational costs. One can have confidence in the continued use of the system (and continued income stream) because electricity is a fundamental need for people and history all around the world shows that the use of electricity will only grow over time. (These characteristics make SAFE-ELEC’s plan rather different from plans concerning e.g. consumer goods or services; they normally have lower investments and high operating costs).

SAFE-ELEC is looking for 200000$ investments funding (loan/subsidies/grants/ Electrical Materials) for project expansion/growth. The money will be utilized to sell and setup solar PV systems on a broader scale, to build electrical grids and service centres in rural areas directly benefiting over 8000 people in rural Mali, to buy production and distribution equipments (generators, cables, poles, solar systems, grid and mounting accessories, buildings for stations, fuel storage tanks).

Under a fee-for-service approach, SAFE-ELEC for this specific project will provide electricity services to a total of 980 customers. The breakdown is 739 households, 142 productive applications, and 99 public lighting installations in clinics, schools or community centers; thus raising the electrification rate of the area from 0.5% to ~13%. The power will come from both individual solar home systems (50-200 Watt) and diesel mini grid stations for those villages with a larger concentration of households.

The concession area has 71 villages. But SAFE-ELEC has no obligation to provide services to all villages in the concession area within a period of 5 years.
We estimate at 5000, the number of potential customers in our current coverage area, plus 3000 from other potential areas. These 8000 potential customers may spend an average of 300 euro each within three years. The distribution of the revenue would be: 10% to local partners (5% royalties, 5% sales commission), 90% to SAFE-ELEC (70% production costs and maintenance of the Network, 20% profit). Profitability will be achieved within 2,5 years, the time to add 10 more villages. Directly, the project may create 10 new paid jobs: eight in rural areas, two at SAFE-ELEC’s head office in Bamako.

Despite the attractive long-term return on investment of this proposal it is not possible to obtain a "normal" commercial loan, because the existing commercial banks in Mali require 100% collateral for any loan that they supply. Investment banks that are willing to participate in this project and share the risks, are not active in Mali.

Since news of winning the concession, SAFE-ELEC has been active in its marketing campaign. It has identified 10 target villages in which it plans to install SHS, and 5 villages for the mini grid system. For each of these target villages, Safe-Elec has created a waiting list of customers. It accomplished this by organizing “participatory planning” workshops several times in each village in order that villagers would understand the electrification program in terms of technology, finance, organizational structure and responsibility of consumers.

Sales
We can Estimate our annual sales turnover (in US$)

Assumptions 2008 2009 2010
Annual sales 283 905 328 498 396 264
Gross margin 56 978 64 636 97 544
Net profit 37 036 42 013 63 403

Marketing & Communication:

Our main marketing arm will be our good business reputation in the areas where we are currently active. We are also planning to undertake online, radio and TV advertising as well as direct marketing through traditional communication means such as griots (traditional story tellers). The positive word-of-mouth will increase the desire among the population to own such a system and use it properly. SAFE-ELEC will assist the villagers to organize in User Association in each village.
The network will be unknown without these tools which, within a few months, will allow our partners to see the results of their contribution and our company to begin selling its services. It will take more than two years to create all the marketing arms.

Marketing activities referencing of our future website will be deployed all over the media. We will also send e-mails to large organizations present in African countries, or looking to invest in Africa, to invite them to visit our website. We have already created a prospective customers file for that targeted mailing.

Because user education is essential for successful dissemination; information and training in simple maintenance and safe operating procedures will be provided to customers. Users need to understand that good operating practices minimize recurring costs and enhance battery life. End-user load demand in excess of the capacity of the system, typically caused by the failure to educate the consumer about the system’s use and limitations, is a common cause of system failure.

Communication will also focus a public on associated safety hazards, as the majority of rural consumers are first time electricity users. Through public speeches, the rural populations will be informed about the safety precautions for using electricity.

As for competition, there are very few other private energy suppliers in Mali, who are located elsewhere. Some of these competitors are opportunist one-time suppliers; typically NGO’s who see an opportunity to get some money through subsidies. Of course these opportunist suppliers never have technical knowledge nor management capabilities to go far.
The main competition comes from national utility supplier (EDM for example). But he has no means to cover all the country, nor interested to rural areas.

Distribution:
For the first year, Safe-Elec plans to focus in a few villages (15) and focus on implementing these areas very well. The hope is that positive word of mouth will increase desire for systems and proper usage. Because of the family connection, Safe-Elec is likely to choose the sponsor’s home village as one of the likely places to start. Safe-Elec, in conjunction with the Chiefs, is able to select their customers. Safe-Elec is allowed to repossess or disconnect any non-paying customer.

Four levels of electricity services will be offered in order to respond to the different levels of demand and income.

The manager is native of the concession area, that ensure SAFE-ELEC’s first-hand knowledge of the area. Professional level maintenance will be provided by SAFE-ELEC’s own technicians The main selling point is that we make electricity available to users in rural areas for which the customers are not required to make a large investment (by buying their own equipment):
- As a consequence we have a high capital requirement, because we are financing the initial investment in equipment mainly with government subsidies and we will be paid back over a longer period during the use of the equipment.
- Our market is legally protected exclusively for at least 15 years. Since the concession is given for 15 years.
- We have very good partners like E+Co which can provid to SAFE-ELEC with Enterprise Development Services (EDS) and financial support.

Coming directly from the private sector, Mr. Doumbia is convinced that the development of SMEs must be the central focus of a winning long term strategy for developing African continent. This is why in 1997 in Bamako Mali, he founded his company in computer and electrical servicing, named SAFE-ELEC.

With a Master of Sciences Degree in ELECTRICAL ENGINEERING coupled with a “MASTÈRE SPÉCIALISÉ” IN CONTROL SYSTEMS / COMPUTER ENGINEERING and 17 years of work experience, Mr.Doumbia is a good professional with sound background in the design and implementation of Electrical schematics/wiring diagrams, calculations of short circuit, load flow, voltage drop, cable sizing and associated controls. One-Line drawings, equipment schedules, and cable and raceway schedules.

In addition to his Scope of work as lead electrical engineer, Mr.Doumbia masters the:
• Design and specification of electrical systems including generators, high voltage substations, medium and low voltage switchgear, bus duct, power transformers, medium/ low voltages electrical switchboards, power panels, UPS, transmission and distribution systems, protective relaying and metering, grounding systems, lighting and security systems and Motor Control Center (MCC) specification.
• Construction coordination and project management for plant / building facilities.
With Complete familiarity with French, Canadian and Malian Electrical Code (NF-C) Mr.Doumbia can act as Project Manager to implement the project.

Local employment and/or income
In long-term:
o Number of direct jobs created: 10
o Number of indirect jobs created: 30
o Each village will have two people appointed by the Chief to make collections on a monthly basis. Customers will pay for their monthly service in advance. By asking for the Chief’s involvement, Safe-Elec expects to strengthen the community’s sense of obligation to pay Safe-Elec in a timely manner. In order to properly document the collection process, they will receive invoices and receipts from Safe-Elec. These individuals will then deposit the funds into one of the dedicated accounts within one of the many locally based micro-finance institutions throughout the area. They will not be Safe-Elec employees, but instead will be compensated by keeping 5% of the money they collect.

Improving the quality of living standards
Short-term (1-2-3 years) Social impact:
Households: As a result of electrification, households will enjoy a significantly higher quantity and quality of illumination (at lower unit costs) than that provided by kerosene lamps or candles, improved safety and security (avoid accidental spills of fires), and inclusion effects due to the ability to operate radio and television. Children would be able to read and study at night and women will gain extended hours to complete domestic tasks or home-based business activities. Furthermore, positive impact on reducing migration to the cities is expected to be substantial in the long term.

Small and micro businesses: the electrification will benefit private entrepreneurs in rural areas by enabling (a) increased productivity of local micro and small businesses requiring electricity access, and microfinance; and (b) the creation of new businesses due to electricity access. Existing businesses will be able to upgrade their operations to use new technologies and processes (especially those connected to the mini grid), and will be able to work longer hours, with lighting available.

Public and communal uses: Villages will benefit from the provision of electricity to schools, clinics and other public service centres through improved facilities, services, and extended service hours. Lighting and TV in community centres will enhance or make possible important community activities that increase the social capital. Street lighting is especially important for women and children, as it allows them to participate in community social activities during the evening hours. The central and local governments will benefit by being able to fulfill their social and political commitment to improving the living conditions of people in remote and marginal areas of the country.

Health and Safety:
The company plans to implement the occupational health and safety management system standard recommended by Malian Government, to reduce risks and accidents involving its staff and other concerned people.

Knowledge and skills transfer
• To build community sense of ownership, Safe-Elec will temporarily hire 15 community members for erection of poles, digging, and of carrying equipment.

• Safe-Elec will hire and train local technicians for routine/preventive maintenance of both the Solar and the mini grid systems. They will be employed full-time by Safe-Elec and will be involved in the installation and basic maintenance of the systems. Safe-Elec expects to have 10 full-time technicians once all connections have been made.

• Professional level maintenance will be provided by Safe-Elec’s technicians or engineer located in Bamako or Kati. They will deal with resolving problems that the village technician cannot solve. It is estimated that Safe-Elec will need two full-time employees for this. Telephone service is available in all of the large villages to facilitate communication between the field and Bamako.