Energy Access in Post-Conflict Regions: An Interview with Qorax Energy
- Jul 7, 2018 9:25 pm GMT
Last month the Energy for Development editorial team chatted with the managing partners of Qorax (pronounced “ko-rah”), a solar asset financing and distribution company that enables access to electricity services in Somaliland, Somalia, and the Democratic Republic of the Congo (DRC), working through their local partners Enersom and ALTech. In the interview that follows, Qorax’s team discusses the energy access challenges that face these regions and the realities of doing business in post-conflict countries that have largely been overlooked by businesses and investors.
What is the state of energy access like in the regions that Qorax works?
Abdishakur Mohamoud Ahmed (AMA): In Somaliland and Somalia, 90% of the population has no or sporadic access to electricity. People in rural areas typically use kerosene lanterns or flashlights with non-rechargeable batteries. To charge their phones – an essential household item in an area that largely depends on mobile money platforms – people pay high rates. An average villager spends $3 on lighting and charging per week, though they might earn only $12 per week.
Please give us an overview of the need that Qorax is trying to fill.
Nigel A. Carr (NAC): Qorax gives families in overlooked countries the ability to choose solar for their homes and to pay for it affordably over time. We’re reducing family energy expenditure to reasonable levels that are in line with the Global North. In the process, we’re also creating local, long-term jobs in a global growth industry
AMA: Affordable electricity is a basic achievement that facilitates so many human and economic development goals. When my family moved from a rural village to Hargeisa when I was 11, it was the first time we ever had electricity. We had one light and we could only afford to keep it on for a couple hours. My parents only let me turn the light on to study. There are still millions of Somalis who are living the way my family used to.
Why did you choose the DRC and the Somali region?
NAC: Over the past few years, there has been a huge wave of interest in off-grid solar power as a solution for low energy access rates and the potential environmental consequences of meeting this need with fossil fuels. In the process, most of the resources have flown to a selected few countries, overlooking hundreds of millions of people. 225 million people live in post-conflict countries, which are the most prone to the negative effects of high energy costs and low access rates. If the goal of this industry is to create sustainable businesses and make incredible impact, we need an energy access narrative that is more inclusive.
We chose to target Somaliland, Somalia, and the DRC because there is a huge unaddressed need in these markets due to perceived political risk. We’ve developed a playbook of distribution strategies to de-risk these markets.
How have you adapted your business model to fit the unique constraints of these markets?
NAC: At this stage, the sector’s development will be more a function of business model innovation rather than technological innovation. Qorax’s local teams work by advancing inventory to sales agents, then checking in periodically to collect payments. We’ve adapted in three major ways.
First, we take a product agnostic approach. This is important because development in post-conflict areas happens more rapidly than in any other context. And frequently in post-conflict settings there are refugees and diaspora with widely varying consumer preferences. A one-size-fits-all approach is going to miss large opportunities.
Second, we operate through local brands that are led by local management teams with previous experience in logistics and energy. Local businesspeople will always understand the needs of our customers better than a foreigner ever would, so we support these local teams by bringing them access to world-class technology and financial instruments to allow them to do their job more effectively.
Finally, we de-risk our markets by working through existing social networks, using social pressure to ensure repayment. Just like you are more likely to comply with a request from your roommate in order to maintain a pleasant living situation, a Somali villager is more likely to make their payment to a sales agent in order to maintain smooth local relations. The alternative – using pay-as-you-go add-ons to our products – adds to the unit cost, which makes the purchase more burdensome for the consumer. Our approach has allowed us to distribute 40,000 products, with a default rate below 3%.
Access to financing is a major barrier even in much more stable regions. How do you overcome such challenges?
Christian Nicolas Desrosiers (CND): In all markets, developing and otherwise, access to debt is central to the growth of the solar industry. In the US, SolarCity has unlocked value for consumers by raising debt facilities of hundreds of millions of dollars to finance upfront installation costs. There are few debt providers interested in our markets. Thankfully, we’ve gotten some great support from National Geographic, Echoing Green, Shell, and other forward-thinking funders who see the opportunity that we see. We’ve been able to gain a lot of traction with their support. To build on this, we’re fundraising for a working capital debt facility. We encourage Development Finance Institutions and other donors to create access to affordable working capital. That is what the sector needs to build on its initial traction.
How does Qorax fit into the network of NGOs that are operating in conflict areas? CND: We are quite different from NGOs and other incumbents in the post-conflict space because we take the position that it is possible to create sustainable private sector enterprises around increasing energy access. The combination of the continued drop in hardware prices and advances in mobile money payments allows even the poorest consumers to affordably access energy.
Not every sector should be profit driven, and there are nuances to this conversation. However, many energy access projects in post-conflict markets impede the ability of a local industry to develop effectively because they spoil the market by dumping products into it. And when donors lose interest, the services dry up. Imagine if you owned a watch store in New York City and a Congolese non-profit—let’s call it Watches For Everyone—rented a space across the street from you and carried the same products as you, but gave them away for free. You wouldn’t be able to compete. No one would be able to come to your store. You’d be unemployed in a month. And if Watches For Everyone were the first to open up in a neighborhood, no business would emerge at all. Donors should shift their attention to providing affordable working capital to for-profit ventures that create jobs and drive broader sector growth.
Most people in the developed world likely have very skewed views of what these countries are like. Have you encountered any common misconceptions?
CND: Only certain types of stories make it from these places to the US. They are mostly the same. Somalia has its reputation for piracy and terrorism– Black Hawk Down and Captain Phillips being the primary touch points. The DRC has to deal with its associations with Joseph Kony and the Rwandan genocide next door.
Somali and Congolese people are extremely aware of this reputation. If you look obviously foreign and go to these places and walk down the street, you’ll inevitably be approached by person after person. They’re generally excited that a foreigner has disregarded the bad press and gone through the effort to see that the situation is quite safe on the ground. We’ve recently created an Instagram account to share images of our work to present a more vivid picture. Misconceptions can only survive in the absence of more accurate information.
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