Baseline study: Madagascar ToughStuff, Energizing ......with what percentage of the BiaB cost should be subsidised. At first, the level was 80%. This has since dropped to 50%, and

1 | Baseline study: Madagascar ToughStuff, Energizing Entrepreneurs

Baseline study: Madagascar ToughStuff, Energizing Entrepreneurs- Summary Report

Focus on energy and climate change


Access to sufficient, clean energy is generally assumed to be a condition for achieving the Millennium Development Goals. In order to underpin this assumption, the impact of creating access to energy on social and economic developments should be determined. Measuring this impact starts with recording various socio-economic indicators, such as energy consumption, the amount of households and people connected to energy and amounts of jobs created. This is done during a so-called baseline-study, prior to the implementation of the project activity. Once the project has been implemented, the same indicators again are measured during an impact study. Differences between both studies are subsequently attributed to the project activity i.e. the provision of energy.

In this document you will find the summary of a baseline study, being a Master’s thesis performed by a student from the University of Eindhoven. The study was executed in Madagascar at ToughStuff Energizing Entrepreneur project. The study resulted in the graduation of the student. The following issues will successively be addressed in this summary:- Daey Ouwens Fund;- Energy and the MDGs;- ToughStuff Madagascar – the Village Entrepreneur

project;- Results from the baseline study;- Background information.


The Daey Ouwens Fund aims to provide people in Least Developed Countries (LDCs) with access to energy by promoting small-scale projects in the area of renewable and job-creating forms of energy supply.

The Daey Ouwens Fund thus fits the Netherlands’ wider objective of contributing towards the achievement of the United Nations’ eight Millennium Development Goals (MDGs). The fund focuses particularly on the goals:

• MDG1 eradicating extreme poverty and hunger and

• MDG7 creating a sustainable environment.

The Daey Ouwens Fund is commissioned by the Netherlands Ministry of Foreign Affairs and is managed by NL Agency.

More information on the fund and the projects supported can be found at www.daeyouwensfonds.nl

Daey Ouwens Fund

http://www.daeyouwensfonds.nl


MDG1Energy plays an important role in achieving MDG1 (eradication of extreme poverty and hunger) as it underpins all economic activity and is a prerequisite for development. Improved access to (renewable) energy sources in least developed countries reduces time spent on firewood collection. Replacing firewood with affordable renewable energy sources allows (mainly) women and children time to engage in economic activities and employment creation, or attend school. Renewable energy also offers possibilities for improved lighting, facilitating a broader range of activities after sunset. Moreover, income spent on energy can be decreased, allowing households to spend more on other essentials. Modern energy also offers potentials for deploying machines in agricultural production processes, having positive effects on production scales and labour diversification to other economic activities.

MDG7MDG7 (creating a sustainable environment) contains important links between renewable energy, environmental sustainability and health. In practice, high dependence on firewood negatively impacts the environment and climate. This can be reduced if firewood is substituted by renewable energy sources. Wood is not scarce but is not always used sustainably. And a rapid population growth means that demand often outstrips supply. Replacing fossil fuels with renewable sources also mitigates accompanying greenhouse gas (GHG) emissions, leading to improved climate conditions. Moreover, access to energy allows water pumps to be installed, supplying the local population with cleaner water by which health conditions are importantly improved.

Energy and the MDGs


The ‘Energising Entrepreneur’ project is one of the projects funded by the Daey Ouwens Fund. The project is executed by ToughStuff, a social enterprise providing affordable solar products to families in developing countries. ToughStuff aims at bringing social, economic and environmental benefits. “Selling products is more effective than giving them away, as a sense of ownership makes people more appreciative” according to Adriaan Mol, one of ToughStuff’s founders. However, one problem encountered was that products were too expensive for the poorest sections of society. The project ‘Energizing Entrepreneurs’ respond to this problem by renting out lamps or rechargeable batteries, and offering this service for the same price (or cheaper) as other sources of lighting such as candles or kerosene lamps.The ‘Energizing Entrepreneurs’ project has two goals. One is to enable entrepreneurs to set up their own business; the second is to offer consumers a cleaner and cheaper energy source. Village entrepreneurs buy a Business in a Box (BiaB) - a set of ToughStuff products containing solar panels, lamps, rechargeable batteries, plugs to charge cell

phones, and radio plugs – and thus start up in business. They earn money by renting out batteries and lamps and providing a place where phones can be charged. ToughStuff is currently experimenting with what percentage of the BiaB cost should be subsidised. At first, the level was 80%. This has since dropped to 50%, and may be reduced further to 20%.The second focus is providing affordable clean energy to customers. The indoor LED offers a healthier source of lighting, and replaces smoky kerosene lamps that produce only a little light and pose a fire risk. Solar phone chargers provide a solution for families who have difficulties keeping their phone charged. Many are not connected to the electricity grid, thus the rechargeable battery pack can replace the non-rechargeable batteries, decreasing the environmental pressure arising from disposal.

By creating business opportunities and providing renewable energy, the project hopes to contribute positively to the MDGs - a requirement for receiving support from the Daey Ouwens Fund.

ToughStuff Madagascar - the Village Entrepreneur project


Socio-economic situation in MadagascarThe average family size for all 260 households surveyed was 4.36, while the average family size of those using ToughStuff products was 4.8. The non-customer average was 3.9. ToughStuff products seem to be more popular among the relatively larger households.

The average age of the head of the household was 40.5. On average, the heads of the surveyed households had not completed secondary school. Furthermore 24.7% of the heads of the households worked as employees doing salaried work, 24.3% were entrepreneurs, and 18.9% listed fishing as the main occupation.

For all households 28.4% needed some form of medical care. Some 3.2% can never afford what they need, and 50.2% can only afford it occasionally. Of everyone interviewed, only 16.9% of the heads of the household were illiterate, well ahead of the national figure of 37%. Over all households 84.1% of those who should go to school did so. The main reasons for non-attendance are the too high tuition fees and that the children are needed for tasks at their homes.

It is difficult to gather accurate information on income, as people are often unwilling to share such information. To reduce irregularities in the study, households were also asked about their ability to save money.One good indicator of financial standing is food consumption. Of the heads of the households 22.8% said their income was insufficient to buy enough food for everyone.

Another indirect way to determine a household’s wealth is an index based on ownership of consumer goods, such as refrigerators, bicycles, radios and telephones. Other relevant factors are the number of rooms in a house and the access to services (electricity, drinking water, toilets).

Energy patternsData showed that 20.8% of all households found it ‘very difficult’ to access different energy sources, and 38.8% found it ‘difficult’. Only 7.1% said it was ‘easy’ or ‘very easy’.

Heating and cooling are applications for which most households (77.8%) would like to have more energy. More energy is also desired for work and transportation, while 68.8% would like to have more energy for lighting.

The most widely used energy sources in Madagascar are charcoal, wood, batteries, candles and kerosene. Wood is mainly used for cooking. Charcoal is used by 81.9% of households. Almost everyone uses charcoal for cooking. This is explained by charcoal being cheaper than (bought) wood. For wood and charcoal, 2/3 of households reported problems. Charcoal is considered as too expensive, while burning wood produces too much smoke and involves odour nuissance. Households were also asked where they cooked meals and on what kind of stove. More than half of the households prepare meals outside. Most of them uses the improved cooking stove (61.2%), although 35.7% still uses the traditional three-stone stove.

Candles are used by 51.4% of households. One incentive for people to use ToughStuff lamps instead of candles could be the price. About 2/3 of all households spend up to 1500 Ar. (€0.54) per week on candles, while the rest spent more. On average, one candle costs 200 Ar. and lasts one night. The rent of a ToughStuff lamp is also 200 Ar., so there is little difference in price at this time. Batteries are another important source of energy. Of the households 59.5% uses them. Another important energy source is kerosene. Of all households using kerosine, 72.4% uses kerosene for lighting. The main complaints are smoke and odour nuissance.

Results from the baseline study


The village entrepreneur projectAlso an analysis of the project and of all influencing elements was made. Village entrepreneurs play a key role here, by setting up businesses renting out lamps or batteries, or offering phone-charging facilities. Three entrepreneurs have been given a closer look.Of the 3 village entrepreneurs chosen for further evaluation, two set up businesses using their own funds. One of them received a 50% subsidy.

Village entrepreneur 1: Miss Randrianasolo in Tulear

Miss Randrianasolo being a mother of 3 children has been a village entrepreneur for 4 months. She has 25 solar panels and 23 lamps, which she rents out on a daily basis. Most customers use her lamps at home, while some use them for lighting bicycles or businesses. Usually this is for selling products on the street, as there is no street lighting. The customers seem very satisfied.

Some even put their names on lamps to guarantee they can rent the same one each night. Miss Randrianasolo wants to expand her business since many people have already asked her for more lamps. Most of them are pouse-pouse drivers who work at night and are currently forced to use candles. Candles are known to cause fire hazards.Most customers pick up the lamps themselves, but some live too far away. Thus Miss Randrianasolo also employs Rambo, a local boy, to take lamps to customers and pick them up next morning. Lamps are picked up between 4 and 8 pm, and brought back between 7 and 10 am. Between 10 and 4 the lamps are recharged with solar panels. They are rented out for 200 Ariary per day (€0.07), the same price as for one candle. But an advantage of the lamps is the light is more powerful and lasts longer. Using kerosene lamps here costs on average 300 Ar. a night, making rental economically attractive to customers.Miss Randrianasolo is relatively well off, and in a high socio-economic category according to Madagascar standards. She and her husband already own a small hotel in Anketa and she has funded the solar business herself. She was a university student, but did not graduate. Her home contains facilities such as water and a flush toilet. She eats meat and fish every day, and her income is high enough to provide for her family and still save a little money.


Village entrepreneur 2: Mister Elias in Ifaty

Mr. Elias has been a village entrepreneur for 3 months. He has 28 solar panels to charge 60 lamps and 4 plugs to charge phones. He set up his business without any external funding, and is well organised. Because of the lack of street lighting there is little activity at night. Mr Elias believes he could rent out more lamps if he can make villagers more familiar with them. He wants to do a lot of promotion and also to expand his business to the nearby village of Mangily.

Together with operatives from ToughStuff he built a shed where he keeps the lamps while charging them, to protect them from the sun and sand. He rents out lamps for 200 Ar. (€0.07) per night. On average he rents out 50, providing him with a daily income of €3.50.

He also offers the possibility to charge phones in his shop for 300 Ariary (€0.11). Since Ifaty is a remote village, this business is likely to give him a good income. Customers usually pick up lamps around 6 pm and bring them back next morning before 9. One problem is that not all customers bring the lamps back every day. Some bring them back after 2 or 3 days once the battery is empty. Most customers use the lamps at home.

Mister Elias’s other businesses make it clear he is one of the richest people in Ifaty. He was a university student, but did not finish his study. He has a large house with multiple rooms and a well. He is able to eat meat more than once a week and is one of the few people in the village that owns a fridge and a generator.

Village entrepreneur 3: Mister Tahiry in Sakay

Mr. Tahiry has been running his business for 4 weeks. He has 72 solar panels and 62 lamps, 28 batteries and 40 plugs to charge phones. He bought these with a 50% subsidy. On average he rents out 60 lamps per night at 200 Ar. On average he also rents out 4 charged batteries combined with the cell phone plug per night, also for 200 Ar. This gives him a return of €4.50 a day. He employs two friends to take lamps to customers and pick them up next morning. For this they each receive 10% of the price per lamp per day.

Socio-economically, this entrepreneur is also well off. He is still a student at the University of Antananarivo. Besides studying he works as a teacher. In Sakay he has bought a large plot of land where he is building houses for himself, his brother and his sister. His current home has several rooms and facilities such as water and a flush toilet. He eats meat on a daily basis, evaluates his economic independence as ‘good’, and is able to save some money.

The customersIn total 130 ToughStuff customers were asked about their situation and the products they used. All used the lamps, while other products were only used by a small percentage.

For all the products that were used, 93% of consumers said the solar-powered solutions have

replaced the installations they used before. The lamp is used most commonly, which means that the most-replaced products are candles and kerosene lamps. Of the consumers 88% are satisfied with the products they rented. The vast majority (94.6%) of users said the products could be easier to use. When asked to evaluate the price of products, 47.8% valued them as ‘too expensive’ or ‘a bit expensive’.


Looking at MDG1, the conclusion is that becoming an entrepreneur does not directly lead to newly created jobs, as every one of them already had other sources of income. They are also highly educated and financially stable. It appears to be that the possibility of starting a new business is currently feasible only for the wealthier sections of the population. This is due to the start-up financing that is needed

However, the project does indirectly provide new jobs, such as the job of delivering lamps to customers.

Another way to contribute to MDG1 is by offering cheaper energy, in this case a source of lighting to the poor. This would decrease the part of income spent on lighting, enabling households to spend

more on other essentials. However, the analysis showed the lamps are rented out at the same price as paid for candles. Therefore they do not decrease costs. Thus they cannot be considered to contribute to the reduction of extreme poverty.

Determining whether the project contributes to MDG7 is more complex. This report does not take into account the issue of polluting emissions from kerosene lamps or discarded batteries in relation to those from the production of solar panels. The report however does take into account the potential of replacing non-renewable energy sources by solar energy and the ToughStuff products. Of all customers 64.6% said that renting a solar lamp could replace the use of a candle and 51.5% said that a solar lamp can replace a kerosene lamp.

The Millennium Development Goals


Madagascar Madagascar is among the poorest nations on Earth. It is ranked 146th out of 177 countries on the UN Human Development Index, with an average family size of 5.4, life expectancy of 55.5 years and a per capita income of US$309 in 2005. More than 70% of the population lives below the poverty line and of its 15 million citizens, more than 10.5 million survive on $2 or less per day. Primary school enrolment rates are above 90% (although only 57% of the children complete primary school. Only 7% complete secondary school). Literacy was 63% in 2005, just above the Sub-Saharan African average of 61%. Child mortality rates declined from 159 deaths per 1,000 live births in 1997 to 94 in 2004. The maternal mortality ratio of 469 deaths per 100,000 live births is far better than the Sub-Saharan African average of 830. In despite of this, there are major regional inequalities. Access to safe drinking water is low.

Energy in MadagascarThe provision of energy throughout Madagascar is at a very low level. The country has made little progress in developing infrastructure such as electricity and water supply in rural areas. The country has no own oil or gas resources and is therefore entirely import dependent. Primary energy sources are wood and kerosene. Wood, either used directly or as charcoal for cooking, and kerosene for lamps are most commonly used. They are the only options in many places, but they cause problems including deforestation, air pollution due to the fumes. Also the vulnerability to the rising costs of kerosene poses a serious economic risk. Presently only 2% of the rural areas (where 70% of the population lives) is connected to electricity. However, mechanical problems cause regular power cuts.

Madagascar and the MDGsMadagascar still has a long way to go to reach the Millennium Development Goals. At current rates of progress they will not be met by 2015. Per capita gross domestic product growth is inadequate, and the high population growth rate of 2.7% a year makes it difficult to provide basic services and for poor households to escape poverty. MDG1 deals with the eradication of poverty and comprises of three sub targets. The first subtarget is to halving the proportion of people whose income is less than one dollar a day by 2015. According to a 2005 survey, 68.7% of the population fell into this category. The 34% target is unlikely to be met as the economy would have to grow over 8% a year. The second target, full and productive employment for all, also seems unrealistic as poverty rates differ widely per region. The third target, halving the proportion of people suffering from hunger, is difficult to reach in a country with areas of 80% poverty and where famine is an continuous problem.

Background information


MDG7, to integrate sustainable development into national policy and reverse the loss of environmental resources and biodiversity, is particularly relevant to Madagascar due to its unique ecosystem. Rapid population growth pressures the fragile environment, which can only support limited numbers of people, especially with current farming practices. These practices revolve around slash and burn cultivation. To contribute to MDG7, the government has committed to triple the size of protected areas to 10% of the total land area. But this also creates a need for alternative income generating activities for the local population. Another challenge will be the high incidence of illegal extraction of forest products that needs to be dealt with.

Baseline studies & impact assessmentsNL Agency wants to learn more about the impact of small-scale sustainable energy projects on social and economic development and the contribution of access to energy to achieving the MDGs.

The baseline studies aimes at providing a picture of the socio-economic situation and energy consumption in the target areas. The studies and subsequent follow-up research will focus on the extent to which the project contributes to achieving the Millennium Development Goals.

If you like to receive the full reports, please send an email to [email protected]

mailto:[email protected]

This is a publication of:

NL AgencyNL Energy and ClimateCroeselaan 15PO Box 8242 | 3503 re UtrechtT +31 (0)88 602 9200www.daeyouwensfonds.nlwww.agentschapnl.nl

© Agentschap NL | September 2011Publication number: 2DOFX1102

Original Author: M.Sc. S.G. van Dijk

NL Agency is a department of the Dutch ministry of Economic Affairs, Agriculture and Innovation that implements government policy for sustainability, innovation, and international business and cooperation. It is the contact point for businesses, educational institutions and government bodies for information and advice, financing, networking and regulatory matters.

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Baseline study: Madagascar ToughStuff, Energizing ......with what percentage of the BiaB cost should be subsidised. At first, the level was 80%. This has since dropped to 50%, and