Assessment of Business ideas for the productive use of RE in Botswana
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Integrated Southern Africa Business Advisory (INSABA) Assessment of Business ideas for the productive use of RE in Botswana Report for Deliverable 3.2 and 3.3 Prepared by BOTEC and Gerrit Jacobs, Solar International Botswana Disclaimer: The sole responsibility for the content of this report lies with the authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein. The authors endeavour to supply reliable analysis and believe that the material it presents is accurate, however, they will not be liable for any claim by any party acting on such information.
Business ideas for productive use of RE in Botswana Table of Contents Table of Contents ........................................................................................................1 1. Identifying Business ideas for productive use of RE in Botswana ....................2 1.1 Process of identifying project ideas:..............................................................2 1.2 Development of business plans ....................................................................2 1.3 Financing of business ideas..........................................................................3 1.4 Implementation of business plans .................................................................3 1.5 RE Technologies in business ideas ..............................................................4 1.6 Replication ....................................................................................................4 2. Business Plans 2.1 Mobile photo & printing shop - 2.2 Payphone charging - 2.3 Vegetable farm with irrigation - 2.4 Barber shop - 2.5 Khutse lodge with SWH - 2.6 Mobile fruit juice vendor INSABA Business ideas 1
Business ideas for productive use of RE in Botswana 1. Identifying Business ideas for productive use of RE in Botswana 1.1 Process of identifying project ideas: Some of the initial business ideas had to be abandoned because they did reveal not to be financially or technically feasible. For example the possibility of installing a solar water pump in a horticulture project operated by a women’s group was considered. Unfortunately this was not pursued further as CEDA, the then the only financing partner in the project (as a member of IAT), does not finance projects owned by cooperative organizations. Another ideas followed was an Ostrich farm in Molepolole. However, it has been established that the energy demand for this project is beyond the capability of solar energy. The farm uses an incubator for hatching eggs. The farm has no electricity (it would cost about 375K to connect to the grid) and as a result the incubator is kept in the nearest village, Molepolole which is about 5km away. It has been noted that INSABA services need to be marketed rigorously in the country for entrepreneurs to consider RETs as useful alternatives to conventional power. Although INSABA-BOTSWANA was advertised in both the media, responses received were quite low. New partners like the Board of Trade and other vocational training institutions should be involved. 1.2 Development of business plans After some of the initial business ideas had to be abandoned for reasons as those mentioned above, business plans have been developed with support if the IA Gerrit Jacobs from Solar International Botswana. In order to systematically assess the potential of business ideas, BOTEC developed project descriptions on business ideas like barber shop, pay-phone charging, vegetable farm with irrigation, tourist lodge with SWH, battery charging station, chicken farm lighting and PV pumping for cattle farm. These business ideas were then discussed with potential SME-GS and data were collected from existing businesses such as horticulture, barber shop, pay phone. From this information complete business plans have been prepared for the productive use of renewable energy in: INSABA Business ideas 2
Business ideas for productive use of RE in Botswana - Mobile photo & printing shop - barber shop - payphone charging - vegetable farm with irrigation - Khutse lodge with SWH - Mobile fruit juice vendor The development of business plans was considered a breakthrough. The plans indeed support the concept of productive use of RETs. 1.3 Financing of business ideas Many of the potential businesses assessed during the project would have been involved in INSABA related projects if funding to purchase RETs systems was readily available, particularly for very small businesses that require loans less than €1000. It is understood that financial support is vital for any economic activity and that is why there are banks and other financial institutions in place. This is mainly true, however, for small and even medium enterprises because most of them start economic activities for the first time (Start ups). Generally in most developing countries no financial institutions are ready to give loans to small and medium sized start-up enterprises. That is why financial considerations are generally part of RE-strategies. 1.4 Implementation of business plans From all the INSABA-Botswana accepted business, only one i.e. the “Photoshop” was realized in time e.g. before the official end of the INSABA-projects. The mobile photo business, which is operating from the bus rank, has been Botswana’s INSABA success story. The entrepreneur has now started to pay back the loan he acquired to purchase the photo and solar PV equipment. It can be stated however, that all projects are very likely to be put in action still 2008 or latest 2009. The irrigation project could not be realized, because solar pumping presented physical barriers to the project, but this, by no means, does not mean that Solar INSABA Business ideas 3
Business ideas for productive use of RE in Botswana Irrigation will not applied when better conditions are present e.g. a ground-water table below 100 m. The INSABA Fresh Fruit Juice Business was stopped by municipal authorities, as sale of fresh food produced in the street for public consumption is not allowed for health reasons. Though that type of business is quite frequent in other countries, it can not be realized in Botswana for the time being. 1.5 RE Technologies in business ideas One can observe a certain concentration by INSABA-Botswana on Solar-Energy applications. This can be explained by the fact that solar applications are currently the most supported and mature renewable energy applications in Botswana. From the group of IATs, INSABA-Botswana worked closely together with the enterprise Solar International Botswana (SIB) (Pty.) Ltd. The circumstances are relatively obvious because Botswana is a relatively dry country where Solar Energy applications have a fair chance in the local energy market. Furthermore SIB advised INSABA-Zambia as consultant. This intervention is understood by InWEnt as one of the INSABA success-stories. Additionally a very fruitful cooperation between Botswana and Namibia started on the Solar-Energy field as one further positive element in the South-South Cooperation. Botswana has started investigations in the Biomass-sector1. Jatropha is a topic, but might have few chances due to high water demand. Probably other autochthones oil- containing plants may have a better chance to be used as bio-fuel. 1.6 Replication Replication is important for INSABA type of projects. This could be possible if there are several businesses that are running that other entrepreneurs can copy from. Entrepreneurs should be encouraged to advise other entrepreneurs. It is very difficult for individuals and organisations that do not, for instance, have vested interest such as suppliers or manufacturers, to mentor entrepreneurs. 1 The Feasibility study for the production and use of Biofuels in Botswana, EECG, Box 402339, Gabarone, Botswana, E-Mail: pzha@global.bw INSABA Business ideas 4
Business ideas for productive use of RE in Botswana Organisations such as the Local Enterprise Authority should be lobbied to integrate INSABAs way of business analysis in their functions. This would go a long way in marketing the use of Renewable in businesses. BOTEC and Solar International Botswana could lead this task. BOTEC will also lead production of a manual with tools, who entrepreneurs can contact for advice and where the advisors can be located. This will require advising institutions to commit themselves that they will be available to assist entrepreneurs. INSABA Business ideas 5
Mobile Photo Shop Business Proposal Business Description Draft: 31 August 2007 Mobile Photo Shop business Proponent Arnold Tshwaranang Moleofi is a young motivated entrepreneur who is interested in running a mobile photo shop business. He has undergone a Business Studies course and has started a car wash financed through own resources, which is run by family members. He does not have a bank account but is considering opening one. Mr. Moleofi has no experience with formal loans but is well acquainted with cost calculations and marketing since this was part of his professional training. Location The photo shop business is mobile and can be located at shopping malls, bus ranks, train stations, public and sporting events and other locations where there is a likely market for selling photos. Business Factors In Botswana there are no mobile photo shops. Photo Mobile photo shop services shops operate from fixed locations in town centres. Taking photos However, there are people with instant cameras that Printing photos A4, A5 and A6 size mainly take passport photograph size photos. Laminating photos Making copies The proposed mobile photo shop consists of a digital Scanning documents camera and a printer/copier/scanner, which are located in a mobile stall. Photos are taken and are printed at the spot. The camera connects directly to the printer, so there is no need for a computer. Other services that are provided are indicated in the box on the right. Since the business operation is entirely mobile, it can be situated at a location where the market potential is highest. The equipment is powered from a solar panel and battery. Measurements of the printer show that the power consumption when printing is approximately 300W and when on standby it is approximately 25W. One 50Wp panel and one 100Ah battery are sufficient to power the printer. The photos are laminated using plastic foil, rather than a thermal process because of the limited energy that is available from the solar system. The primary business activity is taking photos. However, the printer has copying and scanning capabilities, therefore these services are also offered. The photographer will offer different backgrounds for photos such as the Eiffel Tower and Statue of Liberty when taking photos. There will also be life size cut-out pictures of popular soccer and movie stars. 1
Pre-Assessment The general feasibility of the business idea is established in a pre-feasibility assessment. An estimation of business requirements and costs is given in the following sections. Inventory: P1,310 Stall on wheels, chair, umbrella, stand, studio curtains, life size cut-outs Equipment: P2,770 Camera and printer/copier, memory card, camera stand Solar system: P3,660 1x 50Wp solar panel, 1x100Ah battery, Regulator, AA Battery charger, Inverter Advertising P1,200 Advertising display, price list, business cards material: Total equipment cost is P8,940. Furthermore, there are variable costs such photo paper, photocopying paper, laminating foil, and printing ink. Production: A quick estimation of the required number of photos is based on the following parameters. Operator income 1,000 P/month Payback 750 P/month Income to be generated 1,750 P/month Days working per month 25 Days/month Profit to be made per day 70 P/day Selling price per photo 15 P/photo Expenses per photo 10 P/photo Profit per photo 5 P/photo Photos to be made 14 Photos/day The highlighted parameters are variables. The expense per photo is an estimate. Based on the above figures, the operator has to sell 14 photos per day (300 days per year) to cover expenses and pay back the investment. Operational expenses: Variable costs that are accounted for in the unit cost. Storage space is rented for the equipment. Estimated costs P50/month. The salary of the operator is P1000/month. Insurance of equipment is P110/month. Investment live span is taken as 5 years. The solar panels have an estimated life span of 20 years but the other equipment such as the camera and printer have a life span which is considerably less. Table1 (pre-assessment) contains all above data. Sensitivity analysis using data in Table 1 shows the impact of the various cost factors. Most sensitive elements are price per unit and cost per unit. A sensitivity analysis has been carried out using the goal seek function in Excel. When selling 10 photos per day, the payback period is 1 year with ROI of 80%, whereas selling 15 photos per day gives a payback period of ½ year and ROI of 180%. However, selling 9 photos per day gives a ROI of 30% and a payback period of 2 years. It can be concluded that the proposed business has the potential of being profitable. 2
Market Assessment There are currently no mobile photo shops operating in the country. Having a mobile photo shop has a great advantage over a shop that has a fixed location since a market can be established at a place where it has the highest potential for success e.g. near the National Stadium during popular football matches. The entrepreneur has interviewed owners of photo shops to obtain an idea of possible turnover and selling prices of photos. He has also interviewed persons that take photos with instant cameras and it appears that producing 10 photos per day with an average selling price of P15 per photo is achievable. Apart from being mobile, it is believed that this business format has another positive edge compared to a business at a fixed location. Taking photos of people next to a life size cut-out of a movie star or soccer player will attract the attention of people and form a crowd, boosting the number of photos that are taken. Table 2 shows a comparison between the photo business using a solar system and the same business recharging the battery from grid electricity through a commercial operator. In this situation there is a reduced investment capital since there is no solar equipment required. Also there is less equipment to insure and therefore the insurance cost goes down (P600/year). However, due to the deeper discharge of the battery and the higher boost charge from grid electricity, the battery lifetime is reduced. This has been accounted for (annual replacement cost P500, instead of P350). The cost of charging the battery, including transportation is estimated at P20 per charge. The comparison shows that it is more cost effective to charge the battery from grid electricity through a commercial operator. The higher ROI is caused by the reduced cost of charging the battery. The cost of the solar technology is much higher compared to the recurrent cost of charging the battery and therefore has a negative impact on the ROI. However, it should be noted that charging the battery every two days is very cumbersome since the battery has to be dropped off in the evening and collected in the morning. If not, two batteries are required. Also there are few places where batteries can be charged and transportation costs will be high and there is an opportunity cost associated with the time that it takes to charge the batteries. Operational Plan The business strategy relies on the mobility of the business and the ability of printing photos instantly. The business should be run in a professional manner in order to succeed. The operator should wear a branded uniform and the stall should look neat. Table 3 gives the cash flow during the first three years of operation. The cash flow analysis indicates clearly, how much financing would be required. Under the prevalent conditions, capital infusion of P8,940 would be sufficient. The graphs visualize this business development for the first year, and for three years, respectively. Note that making copies has been added as a second income stream. Finally, Table 4 gives the profitability forecast and balance for the business start-up. 3
From the Sensitivity Analysis below it becomes clear that the average selling price of a photo, number of photos sold, as well as the variable cost, being the cost of photo paper, photocopy paper, laminating foil, and printing ink, are the most critical success/failure factors. Sensitivity Analysis 150% Capital Investment 100% percentage change of ROI Investment Lifespan 50% Units/annum 0% Price/unit -20% -10% 0% 10% 20% Variable cost of sale/unit -50% Cost of energy/unit -100% total fixed costs -150% percentage change of parameter 4
Table 1: Pre-Assessment of the Mobile Photo Shop business described above INSABA Preassessment of Project Proposals Country: Botswana Pilot Region: Gaborone / Main Mall RE Technology: Solar PV Electricity Mobile photo, copying and laminating Business Idea: busines Proponent name, contact Mr. Arnold Tshwaranang Moleofi Years of experience as owner of business 1 Number of employees w/contract 1 Proponent uses bank acount (yes=5, No=0) 0 Experience with formal loan (received=5, applied=3, no=0) 0 (no=0, several=5) Experience in cost calculations, business plans 5 Practice in maintaining/operating equipment (RET) (none yet=0, regularly=5) 3 Total 10 Calculation of ROI Photo Shop BWP Determination of parameters Definitions Stall on wheels, chair, umbrella, stand, studio Investment Capital 1,310.00 Inventory curtains, life size cut-outs Camera and printer/copier, memory card, camera Investment Capital 2,768.90 Equipment stand 1x 50Wp solar panel, 1x100Ah battery, Regulator, Investment Capital 3,659.95 PV solar system AA Battery charger, Inverter Investment Capital 1,200.00 Advertising material Advertising display, price list, business cards Investment Capital 8,938.85 Total of stall, inventory, equipment and PV Total cost of investment Investment Life of the investment - i.e. period before it must 5 Conservative average life Lifespan be replaced Photos 10 Photos per day Production 3000 Photos per year Operational 300 days per year Price/unit 15.00 Average sales price per photo Revenue 45,000 BWP This is net revenue Cost per unit produced e.g. material, processing Variable cost/unit 7.20 Average cost per photo packaging Cost of energy/unit 0 No other energy Costs of power, fuel added to variable cost Rent for storage space to store the table, chair Fixed cost 600 Rent and umbrella 1320 Insurance of equipment Fixed cost 350.00 Battery replacement Battery replaced once every 2 years 0.00 Salary for employee Wages Fixed cost 12,000.00 Salary for owner/operator Wages Annual indirect costs such as rent, telephones, Total fixed costs 14,270.00 salaries Amount needed per unit to cover investment in Amortization/unit: 0.60 1,788 lifetime Direct costs per Variable costs plus amortization plus cost of 7.79 23,376 unit: energy Gross Margin/unit 7.21 Sales price per unit less the direct costs per unit Total fixed costs divided by the number of units Fixed costs/unit 4.76 produced Total costs 12.55 37,646 Direct costs plus fixed costs Net Margin 2.45 7,354 Revenue less total costs Return on Investment = net margin divided by ROI 82% capital investment Payback period capital investment divided by cash flow until intial 0.98 years expenses are compensated by the net margin 5
Table 2: Competitive Analysis: Comparison between the mobile photo shop business using solar PV electricity and the same business recharging the battery from grid electricity INSABA Verification & Market-Assessment of Project Proposals Country: Botswana Pilot Region: Gaborone RE Technology: Solar PV Electricity Business Idea: Mobile photo, copying and laminating business Market Context : describe Market Size & Potential There are no mobile photo shops in Gaborone. Due to the mobility of the shop the entrepreneur can go to places where the likelyhood of a sufficient market is highest. This model can be replicated for any locations in Botswana, where there is sufficient market. If more photos per day are required, an additional solar panel may be added to supply the energy. Market Need, Risk There is a risk that the Town Council will not allow the photo shop to operate at plublic places. Competitor There are a number of people operating with instant cameras. There is also cometition from people working from fixed locations. Competing Technology See above Appropriateness of RET Because the photo shop is powered by solar energy, it makes it mobile. Shop can operate in villages where there is no grid electricity. Market Segment Photo shops with grid electricity may operate cheaper. Risk of RE system being stolen. Main Differentiator Ease of operation since there is no need for recharging the battery using grid electricity. The shop is mobile. Sustainable Production Battery needs recycling but this also applies to system that does not use RE. Photo shop charging on grid electricity Calculation of Competitiveness Compared to photo shop with solar Photo shop Alternative: no solar Description of Alternative Investment Capital 8,939 5,279 Photo shop charging battery with grid electricity Investment Lifespan 5 5 Lifespan of equipment Production 3,000 3,000 Production is not effected by energy source Price/unit 15.00 15.00 Revenue 45,000 45,000 BWP Variable cost/unit 7.20 7.20 Cost of energy/unit 0 1.00 Battery is charged once every 2 days at a cost of P20 per charge, including transportation Wages, rent and replacement costs are not Fixed costs 13,700 13,700 effected by how the battery is charged Total fixed costs 13,700 13,700 Total fixed costs Amortization/unit: 0.60 1,788 0.35 1,056 The higher ROI is caused by the reduced cost Direct costs per of charging the battery. The cost of the solar 7.79 23,376 8.55 25,644 technology is much higher compared to the unit: recurrent cost of charging the battery and Gross Margin/unit 7.21 6.45 therefor has a negative impact on the ROI. However, it should be noted that charging the Fixed costs/unit 4.57 4.57 battery every two days is very cumbersome since the battery has to be dropped off in the Total costs 12.36 37,076 13.11 39,344 evening and collected in the morning. If not, Net Margin 2.64 7,924 1.89 5,656 two batteries are required. Also there are few 89% 107% places where batteries can be charged and ROI transportation costs will be high and there is an opportunity cost associated with the time that it Payback period 0.92 0.79 takes to charge the batteries. years 6
Table 3: Cash Flow Analysis Month-1 Month-2 Month-3 Month-4 Month-5 Month-6 Month-7 Month-8 Month-9 Month-10 Month-11 Month-12 Cash Flow Analysis Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Products Sales Photos 3000 250 250 250 250 250 250 250 250 250 250 250 250 Copies 1500 125 125 125 125 125 125 125 125 125 125 125 125 Product 3 0 0 0 0 0 0 0 0 0 0 0 0 Cash Inflow Turnover Price Photos 15.00 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 Copies 2.00 250 250 250 250 250 250 250 250 250 250 250 250 Product 3 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL Turnover 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 TOTAL Cash Inflow 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Cash Outflow Material Cost Photos 7.20 1,799 1,799 1,799 1,799 1,799 1,799 1,799 1,799 1,799 1,799 1,799 1,799 Copies 1.00 125 125 125 125 125 125 125 125 125 125 125 125 Product 3 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL Material 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 1,924 Overhead Cost Staff A share 12,000.00 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Staff B share 0.00 0 0 0 0 0 0 0 0 0 0 0 0 Storage rent 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 Repairs&replacement 350.00 29.17 29.17 29.17 29.17 29.17 29.17 29.17 29.17 29.17 29.17 29.17 29.17 Insurance 1320 110.00 110.00 110.00 110.00 110.00 110.00 110.00 110.00 110.00 110.00 110.00 110.00 Marketing 0 0 0 0 0 0 0 0 0 0 0 0 Investment 8,939 0 Investment Lifespan 5 TOTAL Overhead 10,128 1,189 1,189 1,189 1,189 1,189 1,189 1,189 1,189 1,189 1,189 1,189 Capital cost interest, redemption 16% 310 310 310 310 310 310 310 310 310 310 310 310 TOTAL capital 310 310 310 310 310 310 310 310 310 310 310 310 TOTAL Cash Ouflow 12,362 3,423 3,423 3,423 3,423 3,423 3,423 3,423 3,423 3,423 3,423 3,423 Operating Result -8,362 577 577 577 577 577 577 577 577 577 577 577 /accumulated -8,362 -7,785 -7,209 -6,632 -6,055 -5,479 -4,902 -4,325 -3,749 -3,172 -2,595 -2,018 Capital input 8,939 Cash Flow 577 1,153 1,730 2,307 2,884 3,460 4,037 4,614 5,190 5,767 6,344 6,920 7
Cash Flow Analysis: First Year 60,000 8,000 6,000 50,000 4,000 40,000 2,000 0 30,000 -2,000 20,000 -4,000 -6,000 10,000 -8,000 0 -10,000 Month-1 Month-2 Month-3 Month-4 Month-5 Month-6 Month-7 Month-8 Month-9 Month-10 Month-11 Month-12 TOTAL Cash Inflow, acc TOTAL Cash Outflow, acc Operating Result Operating Result, acc Cash Flow 8
Cash Flow Analysis: 1st - 3rd Year 60,000 25,000 50,000 20,000 40,000 15,000 30,000 10,000 20,000 5,000 10,000 0 0 -5,000 Year 1 Year 2 Year 3 TOTAL Cash Inflow TOTAL Cash Outflow Operating Result Operating Result, acc Cash Flow 9
Table 4: Profitability and Balance Forecast Profitability Preview Balance Year 1 Year 2 Year 3 Year 1 Sales 48,000 48,000 48,000 Assets Liabilities Cost of Sales 23,088 23,088 23,088 fixed assets 7,151 shareholders equity 8,112 Gross profit 24,912 24,912 24,912 current assets 6,920 liabilities 5,959 other operating income 0 0 0 S 14,072 S 14,072 personnel costs 12,000 12,000 12,000 hire charges 0 0 0 Year 2 communication 350 350 350 Assets Liabilities vehicle 1,320 1,320 1,320 fixed assets 5,363 shareholders equity 16,225 marketing 0 0 0 current assets 13,841 liabilities 2,980 office 600 600 600 S 19,204 S 19,204 interest 742 742 742 depreciation 1,788 1,788 1,788 Year 3 other expenses 0 0 0 Assets Liabilities TOTAL Expenses 16,800 16,800 16,800 fixed assets 3,576 shareholders equity 24,337 annual surplus/deficit 8,112 8,112 8,112 current assets 20,761 liabilities 0 /accumulated 8112.31 16224.61 24336.92 S 24,337 S 24,337 10
Business Proposal Barber Shop Business Description Payphone Business Draft: 1 April 2007 Proponent Mr. Moshe Makhweni has two years experience as the owner of the payphone business. He operates as the proprietor/operator and works part-time in the business. He has one employee who works most of his time in the business. The business has a hawker’s license from the Gaborone City Council. As such, the business obtained a free space that is registered with the Council. Mr. Makhweni has completed form five at Masunga Senior Secondary School. He does not hold a bank or savings account and does not have experience in obtaining loans. Location The payphone business is locates at the Main Mall in front of the Lewis store, in the centre of Gaborone. There is no mains electrical connection. Business Factors The payphone business provides national and international phone services to the general public. A payphone is a telephone that operates on the cellular network and of which the operating cost is monitored on a digital display. The customer that makes the phone call is charged per unit. The payphone operator buys the units from a representative of the cellular network provider. Since there are two cellular network providers in Botswana (Mascom and Orange), the operator has two different sets of payphones. This is necessary since phoning from one network to the other is more costly than phoning within the same network. Modern payphones have Mascom, as well as Orange simcards incorporated that are accessed automatically, depending on which network is dialed. The business is strategically located with high exposure to people shopping at the Main Mall. The business is situated under an umbrella that is provided by Masom. Apart from providing shade, it advertises the business, since Mascom is a strong brand in Botswana. The system uses a 45Ah car battery to supply power to the two payphones. Large crocodile clips are used to connect the payphones to the battery, which allows for reversing of the polarity. The uncovered battery is potentially dangerous and should be placed in an appropriate box. The battery is very much oversized for the system and is old and badly maintained. The battery is charged once every two weeks at a 230VAC mains battery charging station, at a cost of P5.- (approx. US$0.90) per charge. The business does not have lights or a radio connected to the battery, although this may attract additional customers. 1
Sales of Mascom and Orange scratch cards, and selling sweets and cigarettes generate additional income. The business is open 6 days per week from approximately 9am to 18.00am Pre-Assessment The payphone business is an existing and operational business. It has proven to be feasible and sustainable. This exercise serves as an assessment to determine if similar payphone businesses may be feasible in other areas and to determine what the most important success and failure factors may be. From the operational experience, the following facts are known: Cost of: Inventory: P600 Chairs, table, umbrella with stand Equipment: P3,500 Payphone systems Solar system: P530 7Wp solar panel and battery Production: The average number of phone calls per day is estimated by the operator to be 50. Price per phone call national: P1.- per unit, international P3.50 per unit. No detailed records are kept of units sold and bought. However, it is known that the average profit on the sale of units is P78 per day. Working backwards this gives an average income per phone call of P3.56. Operational expenses: The average cost per phone call is P2.-. Storage space is rented for the chairs, table and umbrella. This costs P50/month. The cost for repairs of the payphone system, handset, and bi-annual replacement of the battery is estimated at P550 per year. The salary of the employee is P750/month. The owner does not work fulltime in the business. His salary is determined using the goal seek function. His salary can be P950 per month for a ROI of 30%. However, this amount generates a negative cash flow in tool 3 since the cost of interest and redemption is taken into account in this tool. Therefor the salary of the owner is taken as P750/month in tool 3. The pre-assessment table1 contains all above data. Sensitivity analysis with table 1 shows the impact of the various cost factors. Most sensitive elements are the cost per unit for the telephone calls and the number of phone calls per annum. Market Assessment The payphone business is operated in a sustainable way, since it has been in operation for two years. However, over the last years there has been a considerable increase in similar businesses and competition is fierce. About six more payphone businesses operate at the vicinity, over a stretch of 500 meters at the Main Mall. It appears that the market in villages is under served. While most villages in Botswana have cellular network reception, there are not many payphones operational. The reason could be the lack of charging facilities for the battery. This is easily overcome by using a small solar panel. Operating in villages has two benefits: due to less competition there are more clients per payphone operator and the charges for the phone calls can be higher. From the financial analysis it can be observed that profitability is highly sensitive to these factors. Since the payphone business if very mobile, operators can easily move to places where there is a better market potential. The payphone operator also sells for approximately P400 scratch cards per day. The profit is 10% per card, which results in an additional income of P40.- per day. Profit on the sales of sweets and cigarettes is approximately P10.- per day. Additional income may be generated by charging cellphones and small rechargeable NiMeH batteries. 2
Table 2 shows a comparison between the payphone business using an RE system and the same business recharging the battery from 230VAC mains electricity. The higher ROI for the latter is caused by the reduced cost of charging the battery. The cost of the RE technology is much higher compared to the recurrent cost of charging the battery and therefor has a negative impact on the ROI. Operational Plan It appears that awareness regarding the possibility of charging batteries using a solar panel is lacking with many payphone operators. Most entrepreneurs use a car battery that they charge every number of days. What is required is a product package that offers a the payphone system together with one or two 12VDC lights, a 10Wp solar panel and a 20Ah battery with regulator, that can be offered to the potential users. Therefor what is necessary is: awareness creation technology package Table 3 gives the cash flow during the first three years of operation. The cash flow analysis at the bottom of the table indicates clearly, how much financing would be required. Under the prevalent conditions, capital infusion of US$1000 would be sufficient. The graphs 4a and 4b visualize this business development for the first year, and for three years, respectively. Table 4 finally, gives the profitability forecast and balance for the business start-up. Photos of Payphone Businesses Payphone business operating between Mogoditshane and Gaborone Note that this business is connected to the electric grid but could equally well operate from solar power. 3
Payphone business operating in Mogonye village 4
Table 1: Pre-Assessment of the existing payphone business described above INSABA Preassessment of Project Proposals Country: Botswana Pilot Region: Gaborone / Main Mall RE Technology: Solar PV Electricity Payphone shop shop using Solar Business Idea: Energy Proponent name, contact Mr. Moshe Makhweni tel: 71241813 / 71451105 Years of experience as owner of business 2 Number of employees w/contract 0 Proponent uses bank acount (yes=5, No=0) 0 Experience with formal loan (received=5, applied=3, no=0) 0 Experience in cost calculations, business p(no=0, several=5) 2 Practice in maintaining/operating equipment (RET) (none yet=0, regularly=5) 2 Total 6 ROE BW Pula to US$ 6 Calculation of ROI Payphone Shop US$ Determination of parameters Definitions The payphone shop operates from under a shade, Investment Capital 100.00 Inventory 2 chairs, table Investment Capital 583.33 Equipment Payphone system 1x 7Wp solar panel, solar panel stand, 1x50Ah Investment Capital 88.33 PV solar system battery Investment Capital 771.67 Total of shop, inventory, equipment and PV Total cost of investment Investment Life of the investment - i.e. period before it must 10 Conservative average life Lifespan be replaced Phonecalls 50 Phonecalls per day Production 15000 Phonecalls per year Price/unit 0.59 Average sales price per phonecall Revenue 8,900 US$ This is net revenue Cost per unit produced e.g. material, processing Variable cost/unit 0.33 Average cost per phonecall packaging Cost of energy/unit 0 no other energy costs of power, fuel added to variable cost Rent for storage space to staore the table, Fixed cost 100 Rent chairs and umbrella Repairs of system, handset, replacement of the Fixed cost 91.67 Repairs and replacements of the battery battery 1500.00 Salary for employee Wages Fixed cost 1899.67 Salary for owner/operator Wages Annual indirect costs such as rent, telephones, Total fixed costs 3,591.33 salaries Amount needed per unit to cover investment in Amortization/unit: 0.01 77 lifetime Direct costs per Variable costs plus amortization plus cost of 0.34 5,077 unit: energy The salary of the operator was obtained by Gross Margin/unit 0.25 using the goalseek function for a ROI of 30% Sales price per unit less the direct costs per unit However, when adding interest and redemption Total fixed costs divided by the number of units Fixed costs/unit 0.24 in Tool 3, this will lead to a negative cashflow. produced Therefore monthly salary for the Total costs 0.58 8,669 owner/operator in Tool 3 is taken as Direct costs plus fixed costs Net Margin 0.02 232 US$1500/yr. Note that the owner only operates Revenue less total costs the business part-time. Return on Investment = net margin divided by ROI 30% capital investment Payback period capital investment divided by cash flow until intial 2.50 years expenses are compensated by the net margin 5
Table 2: Competitive Analysis: Comparison between the payphone business using a RE system and the same business recharging the battery from 230V mains electricity INSABA Verification & Market-Assessment of Project Proposals Country: Botswana Pilot Region: Gaborone RE Technology: Solar PV Electricity Business Idea: Payphone business using Solar Energy Market Context : describe Payphone businesses operate at almost every streetcorner in the centre of Gaborone. Most often they use a car battery that is charged from the grid. Often operators are not connected to the grid and charge the battery at a charging station. Competition in the main centres is high. Large market available in villages. The same business model is replicable for different parts of the country. Market Size & Potential There is a risk that more and more people well own cellphones, reducinng the market Market Need, Risk for payphone operators. See above Competitor Competing Technology See above A smaller battery can be used, which is easier transportable. Also using RE a radio can be operated and light, so that working hours are extended. Appropriateness of RET Payphone operators without RE system may operate cheaper, although the difference Market Segment is marginal. Risk of RE system being stolen Main Differentiator Better end result, faster, more comfort due to ventilation Sustainable Production Battery needs recycling but thsi also applies to system that does not use RE Payphone charging on grid electricity Calculation of Competitiveness Compared to payphone with solar Payphone Alternative: no solar Description of Alternative Investment Capital 772 683 Simple barber shop with hand clipper Investment Lifespan 10 10 equipment Haircuts per year is reduced because hair Production 15,000 15,000 cutting is manual > slower and less service Price/unit 0.59 0.59 Cheaper rates for hair cutting Revenue 8,900 8,900 US$ Variable cost/unit 0.33 0.33 Battery is charged once every 2 weeks at a Cost of energy/unit 0 0.0017 cost of P5 per charge Wages, rent and replacement costs are not Fixed costs 3,591 3,591 effected by how the battery is charged Total fixed costs 3,591 3,591 Total fixed costs Amortization/unit: 0.01 77 0.00 68 Direct costs per 0.34 5,077 0.34 5,093 unit: Gross Margin/unit 0.25 0.25 The higher ROI is caused by the reduced cost of charging the battery. The cost of the RE Fixed costs/unit 0.24 0.24 technology is much higher compared to the Total costs 0.58 8,669 0.58 8,685 recurrent cost of charging the battery and therefor has a negative impact on the ROI Net Margin 0.02 232 0.01 215 ROI 30% 32% Payback period 2.50 2.41 years 6
Table 3: Cash Flow Analysis Month-1 Month-2 Month-3 Month-4 Month-5 Month-6 Month-7 Month-8 Month-9 Month-10 Month-11 Month-12 Total Total Total Cash Flow Analysis Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 1 Year 2 Year 3 Products Sales Phonecalls 15000 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 15,000 15,000 15,000 Product 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Product 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash Inflow Turnover Price Phonecalls 0.59 742 742 742 742 742 742 742 742 742 742 742 742 8,900 8,900 8,900 Product 2 0.00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Product 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL Turnover 742 742 742 742 742 742 742 742 742 742 742 742 8,900 8,900 8,900 TOTAL Cash Inflow 742 742 742 742 742 742 742 742 742 742 742 742 8,900 8,900 8,900 Cash Outflow Material Cost Phonecalls 0.33 417 417 417 417 417 417 417 417 417 417 417 417 5,000 5,000 5,000 Product 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Product 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 TOTAL Material 417 417 417 417 417 417 417 417 417 417 417 417 5,000 5,000 5,000 Overhead Cost Staff A share 125.00 125 125 125 125 125 125 125 125 125 125 125 125 1,500 1,500 1,500 Staff B share 125.00 125 125 125 125 125 125 125 125 125 125 125 125 1,500 1,500 1,500 Storage rent 8.33 8.33 8.33 8.33 8.33 8.33 8.33 8.33 8.33 8.33 8.33 8.33 8.33 100 100 100 Repairs&replacement 7.64 7.64 7.64 7.64 7.64 7.64 7.64 7.64 7.64 7.64 7.64 7.64 7.64 92 92 92 Vehicle 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Marketing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Investment 917 0 0 917 0 0 Investment Lifespan 10 6 TOTAL Overhead 1,183 266 266 266 266 266 266 266 266 266 266 266 4,108 3,192 3,192 Capital cost interest, redemption 16% 35 35 35 35 35 35 35 35 35 35 35 35 416 416 416 TOTAL capital 35 35 35 35 35 35 35 35 35 35 35 35 416 416 416 TOTAL Cash Ouflow 1,634 717 717 717 717 717 717 717 717 717 717 717 9,525 8,608 8,608 Operating Result -892 24 24 24 24 24 24 24 24 24 24 24 -625 292 292 /accumulated -892 -868 -844 -819 -795 -771 -746 -722 -698 -673 -649 -625 -625 -333 -41 Capital input 1,000 1,000 Cash Flow 108 132 156 181 205 229 254 278 302 327 351 375 375 667 959 7
Cash Flow Analysis: First Year 12,000 600 400 10,000 200 8,000 0 6,000 -200 -400 4,000 -600 2,000 -800 0 -1,000 Month-1 Month-2 Month-3 Month-4 Month-5 Month-6 Month-7 Month-8 Month-9 Month-10 Month-11 Month-12 TOTAL Cash Inflow, acc TOTAL Cash Outflow, acc Operating Result Operating Result, acc Cash Flow 8
Cash Flow Analysis: 1st - 3rd Year 9,600 1,200 1,000 9,400 800 9,200 600 9,000 400 8,800 200 0 8,600 -200 8,400 -400 8,200 -600 8,000 -800 Year 1 Year 2 Year 3 TOTAL Cash Inflow TOTAL Cash Outflow Operating Result Operating Result, acc Cash Flow 9
Table 4: Profitability and Balance Forecast Profitability Preview Balance Year 1 Year 2 Year 3 Year 1 Sales 8,900 8,900 8,900 Assets Liabilities Cost of Sales 5,000 5,000 5,000 fixed assets 825 shareholders equity 534 Gross profit 3,900 3,900 3,900 current assets 375 liabilities 667 other operating income 0 0 0 S 1,200 S 1,200 personnel costs 3,000 3,000 3,000 hire charges 0 0 0 Year 2 communication 92 92 92 Assets Liabilities vehicle 0 0 0 fixed assets 733 shareholders equity 1,067 marketing 0 0 0 current assets 667 liabilities 333 office 100 100 100 S 1,401 S 1,401 interest 83 83 83 depreciation 92 92 92 Year 3 other expenses 0 0 0 Assets Liabilities TOTAL Expenses 3,366 3,366 3,366 fixed assets 642 shareholders equity 1,601 annual surplus/deficit 534 534 534 current assets 959 liabilities 0 /accumulated 533.67 1067.33 1601.00 S 1,601 S 1,601 10
Vegetable Farm using Drip Irrigation Business Proposal Business Description Draft: 6 August 2007 Vegetable farm using drip irrigation Proponent Mrs. Sibanda has only one year experience as the owner of the vegetable farm named “Khoda Agencies”. She is assisted by a team from the National Masterplan for the Arable Agriculture and Dairy (Nampaad), who also developed the business plan for the vegetable farm. Mrs. Sibanda is chairlady of the Glenvaley farmers association. She managed to develop the farm and turn it into a profitable business within one year. She was a paid employee before she started the vegetable farm and has a diploma in marketing. The farm is financed through the Citizen Entrepreneurial Development Agency (CEDA) and has 6 employees. Location The vegetable farm is located on the outskirts of Otse (55km from Gaborone), South-East of the village centre. Business Factors The vegetable farm consists of three distinct areas: Open field with drip irrigation Net house with drip irrigation Covered area with hydroponics The open field (see photo on the right) consists of 3 hectares and different crops are grown such as onion and cabbage. There are two boreholes at the farm which are approximately 160m deep. The water is pumped into a reservoir (see photo on the right). The net house has an area of 1 hectare. A wide range of vegetables are grown in At the left of the field are onions, at the back are cabbages and the drip irrigation the net house such as bell peppers, system can be seen at the right lettuce, spinach, broccoli, beetroot, eggplant and cauliflower. The covered area totals 0.5 hectare, where tomatoes are grown using hydroponics. Most hydroponics systems comprise of beds or pots that are filled with an inert substrate, or growing medium such as vermiculite or sawdust, which replaces soil to hold plant roots and moisture. A liquid nutrient solution runs through the beds to feed the roots. The roots are always kept moist, but are aired periodically so they do not rot. Water is circulated and nutrient levels are closely monitored and added as required for optimum plant growth. Water storage of 185.000 litres 1
Mrs. Sibanda, the owner of the vegetable farm inside the net house The farm is connected to the mains electric grid and uses electricity for pumping water into a storage tank, operating booster pumps for drip irrigation and pressure pumps for the hydroponics system and for lighting. This case study compares the use of grid electricity with solar PV electricity for pumping water using drip irrigation to grow cabbage in the open field. Calculations for other vegetables are similar. Growing of vegetables in the net house and hydroponically were not considered due to lack of information regarding some of the parameters that are required for the calculations. These farming techniques are also not as easy to replicate due to the larger capital investment and complexity of operation, such as in the case of hydroponics. Pre-Assessment The vegetable farm is an existing and operating business. It has proven to be feasible. This exercise serves as an assessment to determine if similar vegetable farms may be feasible using solar PV for water pumping and to determine the most important success and failure factors. Only growing cabbage in open field using drip irrigation is considered for the case study. The growing season for cabbage is 3 months and 4 crops can be harvested during the year. For ease of comparison, calculations are carried out for one hectare. From working experience and records that were kept, the following parameters are known: Cost of equipping the borehole and irrigation system per hectare: P88,714 Cold room, office and office equipment: P14,250 Drilling of the borehole and pump: P49,120 Storage tank (370.000 litres). This is double the size compared to P42,500 pumping with grid electricity to cover for cloudy days: 3 Cost of solar PV array for solar pump with head of 50m, 90m /day P121,092 and P35/Wp: Small truck: P200,000 Average kg cabbages per year (20% production losses): 224,000 kg Average price of cabbage per kg: P1.62 Wages labourers and manager: P11,700 Insurance per year: P800 Ploughing per ha per year: P1,200 Vehicle maintenance cost per year: P10,000 2
Covered areas where tomatoes are grown using hydroponics Based on these figures a Pre-Assessment of the vegetable farm using drip irrigation with solar PV was carried out. Results are shown in Table 1. Also calculations were carried out comparing grid electricity with PV solar electricity. Results of this assessment are shown in Table 2. Table 3 below shows a comparison between the two sources of energy. Solar PV Electricity Grid Electricity ROI 44% 63% Payback period (yrs) 1.81 1.35 It can be observed that growing vegetables in both cases is highly profitable. The large investment for the solar panels has a limited impact on the ROI. The reason for this can be observed from the sensitivity analysis below Table 3. The cost of energy/unit has only a limited influence on the change of ROI. Market Assessment Most of the vegetables are sold to the supermarket chains in Gaborone. Limited amounts are sold from the farm to local customers. The vegetables are transported in a small truck (bakkie). Since Mrs. Sibanda resides in Gaborone, she drives backward and forward between Otse and Gaborone and takes loads of vegetables with her. There is not a planned marketing strategy and marketing is mostly done through word-of-mouth. The demand is currently higher than supply therefore there are no problems selling the vegetables the market. Late payments for the sales of vegetables sometimes cause problems. Seedlings are bought and readily available. To reduce costs, the farm will grow their own seedlings from seeds Harvested and packed cabbages for most vegetables in the future. ready to be marketed The cost of chemicals and fertilisers is perceived as very high and it was expressed that government should subsidise these items to help farmers. 3
Operational Plan The vegetable farm managed to develop into a successful business within a year, mainly due the energetic input from Mrs. Sibanda. Although she did not have any prior farming experience, she started the business, and through her background in marketing and good communication skills, she managed to access the market easily and obtain information from experts as required. Strategic choices have been made to spread risk. Farming is carried out using different technologies, e.g. open field with drip irrigation, net house with drip irrigation and covered area with hydroponics. Risk is further spread through growing different type of crops. With the feasibility and viability firmly established in Tables 1 to 3, table 4 gives the dynamic development of income and cost during the first three years of operation. The cash flow analysis shows how much financing is required, which is P511,000. The graphs visualize this business development for the first year and the first 3 years. Finally, Table 5 gives the profitability forecast and balance for the business. 4
Table 1: Pre-Assessment of vegetable farm using drip irrigation with solar PV electricity INSABA Preassessment of Project Proposals Country: Botswana Pilot Region: South East district, Otse RE Technology: Solar PV pump Business Idea: Vegetable Farm with drip irrigation Proponent name, contact Mrs Sibanda Years of experience as owner of business 1 Number of employees w/contract 6 Proponent uses bank acount (yes=5, No=0) 5 Experience with formal loan (received=5, applied=3, no=0) 5 Experience in cost calculations, business plans (no=0, several=5) 3 Practice in maintaining/operating equipment (RET) (none yet=0, regularly=5) 0 Total 20 Calculation of ROI BWP Determination of parameters Definitions Cost of equipping the borehole and irrigation Investment Capital 88,714 system per hectare Investment Capital 14,250 Cold room, office and office equipment Investment Capital 49,120 Drilling of the borehole and pump Depth of b.h. is 162 m Storage tank (370.000 litres). This is double the Investment Capital 42,500 size compared to pumping with grid electricity to cover for cloudy days. Cost of solar PV array for solar pump with head Investment Capital 121,092 of 50m, 90m3/day and P35/Wp Investment Capital 200,000 Small truck Total Investment 515,676 Total cost of investment Capital Investment 7 year loan period plus 2 years grace period for Life of the investment - i.e. period before it must 9 Lifespan CEDA loan be replaced Average kg cabbages per year (20% Production 224000 Units produced per year production losses) Price/unit 1.62 Average price of cabbage per kg Sales price per unit produced and sold Revenue 362,880 Pula/year Sales price multiplied by number of units sold Variable cost/unit 0.1714 Cabbage seedlings Variable cost/unit 0.0301 Fertiliser Variable cost/unit 0.0536 Pest control Variable cost/unit 0.0354 Transport cost Total Variable Cost per unit produced e.g. material, processing 0.29 cost/unit packaging Costs solar PV averaged over 20 yr, fuel for car Cost of energy/unit 0.00 Cost of electricity per kg produced added to variable cost Fixed costs 11,700 Wages labourers and manager Annnual Fixed costs 800 Insurance per year Annnual Fixed costs 1,200 Ploughing per ha per year Annnual Fixed costs 10,000 Vehicle maintenance Annnual Annual indirect costs such as rent, telephones, Total fixed costs 23,700 Total fixed costs per year salaries Amount needed per unit to cover investment in Amortization/unit: 0.26 57,297 lifetime Direct costs per Variable costs plus amortization plus cost of 0.55 122,349 unit: energy Gross Margin/unit 1.07 Sales price per unit less the direct costs per unit Note that all calculations are per hectare Total fixed costs divided by the number of units Fixed costs/unit 0.11 with the exception of the drilling and produced Total costs 0.65 146,049 equiping of the borehole Direct costs plus fixed costs Net Margin 0.97 216,831 Revenue less total costs 5
Table 2: Pre-Assessment of vegetable farm using drip irrigation with grid electricity INSABA Preassessment of Project Proposals Country: Botswana Pilot Region: South East district, Otse RE Technology: Grid Electricity Business Idea: Vegetable Farm with drip irrigation Proponent name, contact Mrs Sibanda Years of experience as owner of business 1 Number of employees w/contract 6 Proponent uses bank acount (yes=5, No=0) 5 Experience with formal loan (received=5, applied=3, no=0) 5 Experience in cost calculations, business plans (no=0, several=5) 3 Practice in maintaining/operating equipment (RET) (none yet=0, regularly=5) 0 Total 20 Calculation of ROI for Grid Electricity BWP Determination of parameters Definitions Cost of equipping the borehole and irrigation Investment Capital 88,714 system per hectare Investment Capital 14,250 Cold room, office and office equipment Investment Capital 49,120 Drilling of the borehole and pump Depth of b.h. is 162 m Investment Capital 21,250 Storage tank (185.000 litres) Total Investment 200,000 Small truck Capital Total Investment 373,334 Total cost of investment Capital Investment 7 year loan period plus 2 years grace period for Life of the investment - i.e. period before it must 9 Lifespan CEDA loan be replaced Average kg cabbages per year (20% Production 224000 Units produced per year production losses) Price/unit 1.62 Average price of cabbage per kg Sales price per unit produced and sold Revenue 362,880 Pula/year Sales price multiplied by number of units sold Variable cost/unit 0.1714 Cabbage seedlings Variable cost/unit 0.0301 Fertiliser Variable cost/unit 0.0536 Pest control Variable cost/unit 0.0354 Transport cost Total Variable Cost per unit produced e.g. material, processing 0.29 cost/unit packaging Costs of electric energy, fuel for car added to Cost of energy/unit 0.0321 Cost of electricity per kg produced variable cost Fixed costs 11,700 Wages labourers and manager Annnual Fixed costs 800 Insurance per year Annnual Fixed costs 1,200 Ploughing per ha per year Annnual Fixed costs 10,000 Vehicle maintenance Annnual Annual indirect costs such as rent, telephones, Total fixed costs 23,700 Total fixed costs per year salaries Amount needed per unit to cover investment in Amortization/unit: 0.19 41,482 lifetime Direct costs per Variable costs plus amortization plus cost of 0.51 113,734 unit: energy Gross Margin/unit 1.11 Sales price per unit less the direct costs per unit Note that all calculations are per hectare Total fixed costs divided by the number of units Fixed costs/unit 0.11 with the exception of the drilling and produced Total costs 0.61 137,434 equiping of the borehole Direct costs plus fixed costs Net Margin 1.01 225,446 Revenue less total costs Return on Investment = net margin divided by ROI 60% capital investment 6
Table 3: Competitive Analysis INSABA Verification & Market-Assessment of Project Proposals Country: Botswana Pilot Region: South East district, Otse RE Technology: Mains Electricity Business Idea: Vegetable Farm with drip irrigation Market Context : describe Market Size & Potential There appears sufficient potential for vegatable gardening using drip irrigation. The business is scalable to a certain degree. When more energy is required due to an increase of cultivated land area, solar panels may be added as long as the pump can handle the increased power, provided this has been considered when purchasing the pump. The same business model is replicable for different parts of the country. However, pumping head is an important parameter deteriming the Wp of solar panels required. Market Need, Risk The demand for fresh vegetables overrides the supply in Botswana and there is a large market for fresh vegetables. Presently fresh vegetables are imported from South Africa, where the conditions of growing vegetables may be better, due to better climatic and topographic conditions. Competitor There is competition from vegetable farms that are connedted to the mains electric grid. Also competition from imports from South Africa. Competing Technology Mains electricity (subsidized) and diesel/petrol pumping. Appropriateness of RET The water requirement matches the availability of solar energy. In Botswana irrigation is required almost throughout the year since rainfall is erratic. There is a limitation to the quantity and head that a solar pump is able to handle. Market Segment Pumping with grid electricity and diesel/petrol pump is on demand and therefore less storage of water is required. Main Differentiator Compared to diesel/petrol pump easier to operate since operation is automatic and no need for hauling fuel. Sustainable Production n.a. Irrigation with solar PV pump Calculation of Competitiveness Compared to irrigation with grid el. Solar PV Electricity Grid Electricity Description of Alternative Investment Capital 515,676 373,334 Pump that operates on grid electricity Investment 7 year loan period plus 2 years grace period for Lifespan 9 9 CEDA loan Average kg cabbages per year (20% Production 224000 224000 production losses) Price/unit 1.62 1.62 Average price of cabbage per kg Revenue 362,880 362,880 BWP Variable cost/unit 0.29 0.29 Cost of energy/unit 0.000 0.032 Cost of grid electricity per cabbage produced Fixed costs 11,700 11,700 Wages labourers and manager Fixed costs 800 800 Insurance per year Fixed costs 1,200 1,200 Ploughing per ha per year Total fixed costs 13,700 13,700 Total fixed costs Amortization/unit: 0.26 57,297 0.19 41,482 Direct costs per 0.55 122,349 0.51 113,734 unit: Gross Margin/unit 1.07 1.11 Due to the high cost of the solar panels the ROI Fixed costs/unit 0.06 0.06 is less compared to using grid electricity for water pumping. However, in both cases the Total costs 0.61 136,049 0.57 127,434 farming of vegetables is very profitable. Net Margin 1.01 226,831 1.05 235,446 ROI 44% 63% 7
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