In 2017, the Bank of Industry (BOI) launched a N1 billion fund for the solar industry. The fund is targeted at increasing access to clean energy by helping Nigeria’s solar entrepreneurs grow their businesses. Some entrepreneurs like Ifeanyi Orajaka, CEO, GVE Projects, have already benefited from it. “The fund is available and we are looking for entrepreneurs to come forward and take advantage of it,” Obaro Marvel Osah, Regional Manager (Southeast) SME Group, BOI, said during an off-grid energy panel at StartupSouth4 that I was privileged to moderate.
“The BOI is a N1.2 trillion balance sheet. So we have the capacity to provide more funding beyond the current one”. Asides BOI, local banks have also started providing funding for the solar industry. “We are working with the GIZ and AMDA to help mini-grid developers access funding,” Michael Nwachukwu, Renewable Energy Manager, Commercial Banking Directorate, Sterling Bank said.
Local banks and international lenders are working together to increase the adoption of clean energy in the country by providing access to local currency funding. Nigeria’s Central Bank is also working on a fund for the clean energy industry. When you put these funding opportunities side by side with those from impact and institutional investors, mostly international, there’s funding available for the clean energy industry.
The challenge is that it can be difficult to get access to these funds especially local currency funding. There are barriers to accessing funds One of the issues with local financing opportunities is the high interest rates. Entrepreneurs have a hard time accepting loans from banks due to the double-digit interest rates.
The high interest rates are reflective of the country’s inflation rate. To encourage solar entrepreneurs to apply for funding, “the BOI works with international partners to provide low-interest funding,” Obaro Marvel Osah said. However, some entrepreneurs find the collateral requirement by the BOI challenging.
One solar entrepreneur told me this is one reason some of them have not taken advantage of the BOI fund. The BOI introduced collateral requirements for its loans to reduce the number of bad debtors, one investor I spoke with explained. Although the increasing availability of local currency funding indicates progress, more needs to be done to lower the barriers to accessing it.
The skills shortage problem While funding is available though difficult to access in most cases, “there is a lack of skills,” Ifeanyi Orajaka, said during our off-grid panel discussion at StartupSouth4. This was my second major takeaway from our panel. Although funding is an important input, talent is equally critical. “For every solar home system, at least two installers are needed,” Ifeanyi explained.
According to Power for All, Sub-saharan Africa excluding South Africa has only about 16,000 people working in renewable energy. The region has about 600 million people without electricity. A recent Project Syndicate article notes that about 5 million new jobs could be created by Africa’s solar industry. These jobs will be added via the African Development Bank’s Job for Youth in Africa initiative between 2016 – 2030.
Without the necessary skills, some of these jobs could go unfilled. General Electric in its 2017 Future of Work in Nigeria report, identified a technical skills gap of over 8 million in the Oil and Gas, Transportation, Healthcare and Power sectors. Some solar companies across Africa have expressed the difficulties they now face with hiring skilled workers.
Mugo Kubati, M-Kopa’s Chairman, says his company which has 800 fulltime employees is now facing difficulty hiring job-ready talent. “In nearly every region, African countries have been slow to ensure that the next generation of energy workers is ready; capacity building has been an afterthought,” Mugo Kubati said in the Project Syndicate article he co-authored with Gilles Vermot Desroches, Senior VP for Sustainability, Schneider Electric.
In a similar fashion, Kweku Yankson, Global Head of HR at BBOX, has also mentioned that they are facing hiring difficulties in markets like Rwanda, DR Congo etc. The lack of skilled workers in Nigeria and many parts of Africa points to the failure of the education system to produce a labor force that can cater to what the solar industry needs. There is a lack of vocational institutions that will cater to the specific needs of the sector. The quality of the education system of a country and the educational achievement of its working-age population typically determines their skills level.
Resolving the problem In an attempt to tackle the skills shortage in Nigeria’s solar industry, Ifeanyi Orajaka is working with some partners to build a regional training centre in South East Nigeria which played host to this year’s StartupSouth event. This he believes will help provide some of the skilled personnel the industry requires. Another good step will be for more solar companies to invest in internship programmes. This will also contribute to building a critical mass of talent for the industry.
Uche Aniche, Convener, StartupSouth4, believes that when there is a shared vision, challenges like skills shortage can be resolved. A shared vision, for example, will allow the government, the solar industry, and the education sector work together with a common goal in mind, making it easier and faster to tackle the skills shortage challenge.
The lack of an adequate talent pool for the industry will limit it because companies will find it difficult to scale without skilled workers. Although the challenge is not unique to the industry, there needs to be a deliberate effort by solar industry stakeholders to solve the problem.