Undoubtedly, the money in Africa is in its fast-growing cities. Africa’s urban population already numbers around 400 million, and is estimated to rise by a further 200 million in the course of a decade. Urban incomes tend to be 2-3x higher than rural areas; to put it another way, 40% of Africa’s collective GDP stems from its largest 50 cities – although they account for only 13% of the continent’s population. Mobile money is ubiquitous, while mobile, smartphone and internet penetration are rising all the time.
Technology adoption and disruption is rife; consumers have access to more reliable electricity than ever before. There are widespread efforts being made to extend the reach of the grid, and to offer financed solar home systems to rural and peri-urban households. These efforts are certainly transformative, and deliver major quality of life and environmental improvements.
And yet, despite rising disposable incomes, so many urban consumers continue to cook with dirty fuel sources. There is a major disconnect when it comes to cooking fuel: consumers, quite rightly, demand modern solutions to all aspects of their lives, and access to quality products. In Nairobi, the majority of urban households now have a television, sound system and smartphone. Seeing these same households cooking with charcoal and kerosene is quite jarringly out of place with their rapid embrace of life-improving technologies. The consumer spending power is certainly there, but the hard reality is that consumers are badly underserved by limited options in the cooking fuel market.
The point is, cooking fuel is one of our most basic human needs. It’s a non-discretionary, non-cyclical spend category for every household, rich or poor. Humans lived in the dark for centuries before the advent of electricity, but yet we have always found ways to cook.
Urban cooking fuel is a huge market, worth more than $20bn annually in Africa’s 40 biggest cities alone, and mass-market customers shouldn’t be priced out of a modern, clean and safe solution. We estimate that urban households in Africa spend an average of $25-30 per month on cooking fuel – a 2-3x higher spend than mobile. More than 75% of consumers use dirty fuels and want to upgrade to a modern solution.
That’s no surprise. The consumer problems of charcoal for cooking are extensive: dirty to handle, slow to light, a major cause of indoor air pollution, creator of soot and smoke, and increasingly expensive as forests retreat further and further from cities and towns. In many cities, such as Lagos, Johannesburg and Nairobi, kerosene has entered the bottom end of the market as a direct response to rising charcoal prices. In many ways, this is an even worse cooking option, causing toxic, carcinogenic fumes and a terrible smell that is irritating to skin and eyes, and causes clothes, hair and food to stink. Not only that, but unsafe kerosene retail points – refilling points that bypass formal fuel stations, with little to no safety standards – are also a major cause of slum fires. Charcoal and kerosene are not the answer to the rising demand for modern, clean and safe cooking fuel.
Even LPG, which presents a much more modern cooking experience, is not without its challenges. Since it is a pressurised gas, the infrastructure costs associated with scaling LPG cooking to the mass-market are extremely high, and often require significant government subsidies (as in India or Brazil, for example). As a consequence of these high costs at a macro level, upfront customer costs are often prohibitively high. By the time a user has purchased a 2-burner gas cooker, a gas cylinder (including the cylinder deposit), plus a regulator, hosepipe and valve, the cost is over US$100. And after all that, purchasing gas in the small quantities that customers prefer is generally not possible.
LPG also faces an increasing brand safety issue. The illegal refilling of gas cylinders is rife in Kenya – experts estimate it to be anywhere between 50 and 80 per cent. This is potentially extremely dangerous, as it means cylinders do not go through the very important safety and maintenance checks that are prerequisite to the safe operation of LPG. Cylinder degradation is a major issue, and customers are anxious. Many smartcook customers in Nairobi, for example, are fathers who worry about their family’s safety with using LPG – not because LPG is fundamentally unsafe, but because the widespread illegal refilling that occurs in Kenya is damaging the safety brand of LPG as a category.
Liquid ethanol is a proven new consumer fuel that delivers on the core consumer demands of cleanliness, modernity, safety, convenience and affordability. Combined with KOKO’s technology suite, which has been proven in Nairobi this year, it is now the most competitive fuel for the mass-market.
There is a significant opportunity to positively disrupt the huge market for urban heat in Africa and elsewhere, a market in which tens of millions of consumers are underserved.
It’s time to stop overlooking the “low-hanging fruit” of energy access.