Assessment of Business ideas for the productive use of RE in South Africa

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Assessment of Business ideas for the productive use of RE in South Africa
Integrated Southern Africa Business Advisory
(INSABA)

Assessment of Business ideas for
the productive use of RE in South
Africa
Report for Deliverable 3.2 and 3.3

Prepared by OneWorld Sustainable Investments

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.
Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

Table of Contents

Table of Contents ........................................................................................................1
1.         Identifying Business ideas for productive use of RE in South Africa.................2
     1.1     Process of identifying project ideas: ...............................................................2
     1.2     Preliminary list of projects for consideration ...................................................2
     1.3     Short listed projects........................................................................................4
2.         Description of Business ideas...........................................................................4
     2.1     Kazuko Game Lodge Project, Solar Water Heaters, Eastern Cape ...............4
     2.2     Cut Flowers Farm: Solar pumps for irrigation, Eastern Cape .........................7
     2.3     Dried Fruit Project, Solar Drying, Western Cape ............................................9
     2.4     Green Energy Plant, Biomass, KwaZulu-Natal.............................................23
     2.5     Laundromat, Solar Water Heater, Western Cape.........................................24
     2.6     Austin Evans Abattoir, Biogas, Eastern Cape ..............................................48
     2.7     Solar Cinema ...............................................................................................52

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

1. Identifying Business ideas for productive use of RE in
   South Africa

1.1 Process of identifying project ideas:
A number of projects were considered and evaluated at the preliminary stages of
INSABA and some of these were short listed for in depth evaluation. A few projects
developed much later in the lifecycle of INSABA as other market drivers emerged. Of
note is the waste to energy conversion proposal for the Eastern Cape, which will
require significant technology investment. The business case for this project has only
started to make sense once the impacts of South Africa’s energy crisis were realised
and this project is now set to go ahead.
OneWorld spent some time in the initial stages of INSABA on developing and
evaluating the biofuels project proposed for the Eastern Cape. Much work has
been done on this project, including Jatropha curcas trials in different parts of the
district, market up take analysis for biodiesel, technical evaluation through meetings
with the Automobile Manufacturers association and with manufacturers in terms of
their technical specifications for biodiesel inclusion in fuel blends in their vehicles
(Volkswagen SA and Daimler Chrysler SA, both based in the Eastern Cape).
OneWorld, through the INSABA project also made inputs to the development of
South Africa’s Biofuel Strategy (now under consideration by the South African
Cabinet). The strategy in its present form focuses on the demand side of the biofuels
industry and almost ignores supply side issues, which are significant. The Eastern
Cape is believed to be the primary supply province in a South African industry and
the province is evaluating its position, food security and food price issues, its
agricultural practices, its related natural resource base and a policy for responding to
foreign interest (at the moment particularly Europe and China) and investment in
securing scale of supply of biofuels. Europe is set to introduce a law that provides for
the inclusion of 17% biofuel fuel blend by 2014, an undoubted key market driver for
Africa, should the law be promulgated. Food security and food prices and the
relationship with biofuels development in Africa needs to be carefully explored and
considered and the industry has a way to go in terms of reaching a level of
coordinated implementation and maturity. Whilst this development continues, it
was decided relatively early on in the project to exclude the biofuels project as
the timelines do not fit with INSABA timeframes and because the direct link to
productive use is not easily made.
This report presents projects considered at the various stages of the selection
process in both regions. Section 5.1 is a preliminary list outlining those projects
considered (not all chosen as projects that were viable from a productive use point of
view). Section 5.2 lists projects that went ahead and Section 5.3 outlines the project
mentioned above which has recently come on stream. The renewable energy
resources considered were solar energy, biofuels and biogas.

1.2     Preliminary list of projects for consideration
      1. Internet Cafes – Transkei (Eastern Cape)- Solar power for computers and
         lighting.

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

     2. Television centres (rural areas – Malawi example) – Eastern Cape and
        Transkei powered by solar panels.
     3. Aquaculture – (Somerset East, Eastern Cape) A local farmer wished to
        establish an aquaculture business on their farm in partnership with farm
        labourers. SWH and solar pumps are the identified technologies for energy
        supply. WP 3&4 – as described in projects above. The technology economic
        evaluation was completed, the market analysis (for the fish production and
        market take up thereof) is not. This is a lengthier exercise and previous SC
        experience in the aquaculture market is that rural markets can be difficult to
        establish. WP6 Solardome (system provider) has met with IAT and technology
        discussions been held.) A Nigerian based well-established aquaculture
        company (Durante Fish) met with the IAT and the entrepreneur and SC in the
        first week of December 2006. The objective was to share knowledge and
        expertise on tried and tested aquaculture systems as well as on market
        considerations.
     4. Guest Lodge in Paternoster (West Coast, Western Cape) using SWH. This
        is a 10 bed roomed guest lodge and SWH is proposed for all bathrooms. The
        Entrepreneur and the System Provider (Solardome) have met (WP6) and the
        market analysis is underway. In this case, the IAT and the RET provider are
        the same entity and are receiving training in terms of WP 3&4.
     5. OneWorld is working with Restio Energy on developing a Videocine project.
        The pre feasibility is complete and Restio and OneWorld will invest in the pilot.
        Feasibility study indicates that the project is viable in the peri-urban areas of
        Cape Town where there are no cinemas and where people have to travel
        distances in dangerous circumstances for this form of entertainment. The use
        of RETs will only become viable with subsidisation and in rural areas
        (replication opportunity) where grid access does not exist. The objective of the
        pilot will be to test the assumptions made and to learn the answers to some of
        the questions we have about the proposed business model before seeking
        investment in expensive renewable energy technology. The financials for this
        project can be found in Appendix 1, 10.1.1.)
     6. Waste to energy conversion (Somerset East, Eastern Cape) - A waste
        management solution is urgently required for the district and OneWorld has
        identified a waste to energy conversion opportunity for the area. Municipal
        waste management practices do not comply with legislation and the district’s
        waste sites are a health hazard. In addition, the municipality has an energy
        deficit and thus cannot facilitate local economic growth. Significant investment
        opportunities have not materialised in the area as a result, for example the
        establishment of a substantial dairy facility in Somerset East. The waste
        management solution identified by OneWorld is to use both Municipal Solid
        Waste (MSW) and the local abattoir waste (blood and intestinal) – the latter
        could feed into an anaerobic digester along with livestock manure from the
        local pig farm and livestock farms. The proposed project combines productive
        use and a waste to energy solution and would secure an energy resource for
        the local municipality. The productive use component is in enabling a secure
        and reliable energy supply for the abattoir. WP 3&4: The market analysis (i.e.
        assessment of the demand for energy in the district has been completed by
        OneWorld with the BCDA. As already indicated, energy for further economic

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

          development is urgently required. The technology options are currently being
          evaluated (at the time of releasing this draft report) and include technology
          economic evaluation. WP 7: Funding for the waste management solution
          (municipal side) is available as a direct result of policy roundtable meetings
          with the stated local and provincial authorities.
      7. Biofuels Project, Eastern Cape – as discussed in the overview to this section
         (section 5).

1.3     Short listed projects
The projects listed below were selected for further consideration and are described in
detail in section 2.
      1. Kazuko Game Lodge Project using renewable energy, Eastern Cape
      2. Cut Flowers Project using solar pumps and irrigation, Eastern Cape
      3. Dusseldorf Dried Fruit, using solar drying, Western Cape
      4. Green Energy Plant, converting biomass (wood waste and forest residue) to
         electricity, KwaZulu-Natal.
      5. Laundromat using solar water heaters, Western Cape
      6. Austin-Evans Abattoir and livestock waste to methane conversion, Eastern
         Cape.

2. Description of Business ideas

Three of the six INSABA supported projects are located in the Eastern Cape, two are
based in the Western Cape and one is in KwaZulu-Natal. The projects under
discussion harnessed solar energy for heating water, drying fruits, pumping water
and irrigating farmland. The biomass energy plant will convert wood waste and forest
residues, using a steam turbine, into “green” electricity. The biogas project will
harness methane and convert this to an energy supply for both the abattoir producing
waste feedstock as well as for the local municipality. This project has been a late
developer in the INSABA ‘suite’. It was not viable when evaluated in 2005, but the
South African energy crisis has since established the business case for the project.
The projects below have been ranked in terms of their success in relation to the
INSABA project. The existence of the project, its closeness to completion and ability
to complete were the key criteria used for ranking the projects.

2.1     Kazuko Game Lodge Project, Solar Water Heaters, Eastern Cape
A UK investor, Mr Kim Tan who, along with a group of Transformational Leaders and
Investors in Europe has interests in sustainable development projects in sub-
Saharan Africa and Southeast Asia. Mr Tan decided to develop a ‘high-end market’
game farm in the Eastern Cape and sought co-finance from the Development Bank
of South Africa (DBSA). The DBSA financing was for the game farm development
and was contingent on a black empowerment (BEE) partner being secured. Disabled
Peoples Concern (DEC) is the BEE partner and the DBSA have, after much
bureaucracy and delays, invested their portion of the money. Kim Tan and his
investor group have become disillusioned with investing in South Africa as a result of

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

their dealings with the DBSA and are unlikely to consider other investments in the
country anytime soon.
The IAT for this project is Ron Begbie who is the Project Developer, through his
organisation, Ingo Properties.
Kazuko is an upmarket game farm situated approximately 160km from Somerset
East and bordering on the Addo Elephant Park, a large game reserve that is State
owned in the Eastern Cape. It has an area of 15 000 hectares. The World Bank
Board approved a grant of US$ 5,5 million from the Global Environment Facility to
assist with the expansion and conservation of the Addo Elephant National Park. Part
of this initiative is the proposed removal of the boundary fence between the Addo
Elephant Park and Kazuko. This entire area is a dedicated tourism development
area, focusing on local beneficiation. The development of small- medium- and micro-
enterprises (SMMEs) in local communities around the Addo Elephant National Park
is beginning to benefit both the local economy and the conservation of biodiversity.

Figure 1: Kazuko Game Lodge, Solar Water Heaters, Eastern Cape

The Kazuko Lodge comprises a main building including a restaurant, conference
centre and 24 brick and thatch luxury chalets (some of which are equipped for
handicapped visitors) situated on a hillside offering views of the mountains,
indigenous bush and birdlife. Also located on this reserve is the original farmhouse
(occupied by the manager) and labourers residences.

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

The farm was not linked to the National grid due to it being in a fairly remote rural
area. The process for bringing electricity to the farm buildings involved 2 stages –
firstly Eskom would have to bring the KVA line to the entrance gate of the farm and
then secondly the developers would have to pay for the KVA connection to the
reserve facilities.
Three alternatives were evaluated:
     1. Renewable energy as the only energy supply: This option was rejected on
        the basis that the reserve financiers and developers insisted on security and
        reliability of constant energy supply 24 hours per day, 365 days per annum.
     2. Electricity supply from the grid: Eskom would run a KVA line to the reserve
        gate and the Developer to then install the on site connection line and points at
        their own cost. The lodge is situated a fair distance from the entrance gate.
        The cost to connect it to the main Eskom supply was estimated at the
        considerable cost of R8,000,000, subsequently deemed to be economically
        unviable.
     3. A hybrid solution: Renewable energy used for specific purposes such as
        water heating and lighting, with gas for cooking and diesel generators as
        backup supply. Solar photovoltaic panels have been installed for lighting and
        solar water heaters in each chalet for water heating. Air conditioners run on
        diesel generation capacity.

Figure 2: View over the Kazuko Game Farm

OneWorld conducted market and economic analyses on these alternatives resulting
in the selection of the hybrid model.
The following has been implemented and also therefore completes the planned
INSABA aspects of the project:

     1. 24 chalets have each been fitted with solar water heaters and solar PV panels.
     2. Gas has been installed for cooking.
     3. Diesel generators have been installed for air-conditioning and back up supply
        for lights and water heating.

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

Further work entailed training of the IAT as well as the farm manager in both
technical and economic aspects of utilising solar energy on the reserve1.

2.2     Cut Flowers Farm: Solar pumps for irrigation, Eastern Cape
OneWorld Sustainable Investments established collaboration with an IAT in the area,
the Blue Crane Development Agency (BCDA). The Blue Crane Development
Agency, located in Somerset East enables entrepreneurial development and
emerging businesses in the district.
The Cut Flower project, an already established business is situated approximately six
kilometres outside Somerset East. Flowers grown in polytunnels in covered
structures are primarily roses, michaelmas daisies and crysanthemums. Supply is to
the local markets of East London and Port Elizabeth. The increasing demand for the
flowers necessitated expansion and the INSABA project considered renewable
energy for expanded productive use on this flower farm.

Figure 3: Cut Flowers Farm, Solar Pumps for Irrigation, Eastern Cape

1 WP 4 & WP6: Business and Technical Advisory / Training and Coaching of SME-SP and IATs and
matchmaking

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

Research and economic evaluation demonstrated that solar pumps were an efficient
alternative option for irrigation in the polytunnels. The first phase was established in
2004 and the second in 2005/2006. The pre-feasibility study was completed and a
brief market analysis conducted. This focused on technology economics as the
flower market was well established. The analysis was done with the BCDA who
received training2 on the application of the pre-feasibility toolkit and were trained on
the market analysis and technology economics evaluation3.

Figure 4: Rows of flowers inside the polytunnels

Training on the pre-feasibility study tool also included an additional IAT identified by
the BCDA. This was a team of 3 consultants that comprise an ex-municipal manager
and 2 ex Eskom engineers interested in doing further energy development work in
the region.

2 WP 3: BCDA (Nico Lombard and Zola Skiwiya attended the workshop in Gobabeb, Namibia, October 2005 (pre-
feasibility toolkit). Nico Lombard received further training in Cape Town in July 2006. OneWorld visited the district
and the project to finalise the market study the week commencing 6 November 2006 where further market
analysis training and actual market analysis on the project took place.

3 WP4: IATs received coaching and interaction on project developments. IATS (BCDA) have started
disseminating training to their SMEs – particularly on pre feasibility assessments and RET knowledge and
awareness.

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Assessment of Business ideas for the productive use of RE in South Africa
Business ideas for productive use of RE in South Africa

Figure 5: Polytunnels

The following has been implemented:
      1. The World Bank provided funding for all the flower farm expansion
         infrastructure costs including the solar pumps and irrigation equipment
      2. Eastern Cape Development Corporation (ECDC) provided funding for the
         operational costs.
      3. The INSABA / OneWorld project financed the renewable technology and
         economic viability analysis and the training for the IATs.

2.3     Dried Fruit Project, Solar Drying, Western Cape

Dusseldorf Dried Fruit (DDF) is a dried fruit producing operation in Oudsthoorn in the
Western Cape. The operation produces dried pears and apples for the export market.
DDF purchases fruit from local growers and sun dry and prepare dried fruit for the
export market. Sun drying is done in wooden trays with plastic covers for five months
of the year. DDF is therefore a seasonal business, operating between May and
September and closing for the remaining seven months of the year. DDF identified
the need to improve the quality of their dried fruit and to increase the quantity of the
fruit they export.
The fruit produced by sun drying is of a lower quality limiting the selling price of the
fruit. In order to increase the selling price, the quality would have to be improved and
hence alternate fruit drying technologies are being evaluated.
Drying, using solar technology can improve the quality of dried fruit. An economic
analysis was therefore completed in order to evaluate the viability of using solar
dryers as the preferred technology. Below is the technology economic analysis,
demonstrating solar drying as a viable option, provided that the technology can be
procured and supported locally.

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Business ideas for productive use of RE in South Africa

Figure 6: Dried Fruit Project, Solar Drying, Western Cape

It is expected that solar dryers, currently being built by a technology provider in the
Western Cape, will be installed for the May – September 2008 season.

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Business ideas for productive use of RE in South Africa

Dried Fruit Project, Solar Drying, Western Cape
INSABA Pre-assessment of Project Proposals                                                                              This tool is designed to help in the basic assessment of a proj
                                                                                                                        It is very simple as it does not consider interest, depreciation y
Country:                                                             RSA                                                Fill in the white fields, the rest will be computed
Pilot Region:                                                        Western Cape
RE Technology:                                                       Solar Drier
Business Idea:                                                       produce apple chips at higher value

Proponent name, contact                                              Rob de Clerk, Somerset                             In this tool, we determine the profile of the proponent entrepre
Years of experience as owner of business                                                                         5      and the characteristics of the proposed business
Number of employees w/contract                                                                                   4      The figures in this examples are assumption based on intervie
Proponent uses bank account                     (yes=5, No=0)                                                    5      They need to verified during the market assessment Tool 2
Experience with formal loan                     (received=5, applied=3, no=0)                                    5
Experience in cost calculations, business plans (no=0, several=5)                                                5
Practice in maintaining/operating equipment (RET) (none yet=0, regularly=5)                                      3      The influence of these data on the ROI can be seen in the sen
Total                                                                                                            27     Optimization can be done e.g. With the goal-function like "wha

 Calculation of ROI
                                    Apple Drier           Determination of parameters                            Definitions
 Investment Capital                     9,957             Estimated, then computed for ROI0,3                    Total cost of technology investment
 Investment Lifespan                      5               Estimated for solar dryer                              Life of the technology - i.e. period before it must be replaced
                                                          Daily 2 kg dried apple-chips sold 5 days per week 52
 Production                              520                                                                     Units produced per year
                                                          weeks/year= 520 kg p/a
 Price/unit                             19.50             The current market price                               Sales price per unit produced and sold
 Revenue                               10,140             Euro                                                   Sales price multiplied by number of units sold

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Business ideas for productive use of RE in South Africa

                                                          Costs for fresh apples: 10 * 0,55 €/kg = 5,5 €/kg (sales
                                                          price of 0,55 €/kg is relevant as this is the opportunity
 Variable cost/unit                      8.00             cost of the farmer);Costs for packaging: 0,5                Cost per unit produced e.g. material, processing packaging
                                                          €/kg;Costs for preparation: 10 kg fresh apples can be
                                                          prepared in 15 minutes and hourly wage is 8 €: 2 €/kg
 Cost of energy/unit                                      no other energy                                             costs of power, fuel added to variable cost
 Total fixed costs                      1,000             Cost for display, handling                                  Annual indirect costs such as rent, telephones, salaries

 Amortization/unit:                    3.83      1,991                                                                Amount needed per unit to cover investment in lifetime

 Direct costs per unit:              11.83       6,151                                                                Variable costs plus amortization plus cost of energy

 Gross Margin/unit                     7.67                                                                           Sales price per unit less the direct costs per unit
 Fixed costs/unit                      1.92                                                                           Total fixed costs divided by the number of units produced
 Total costs                         13.75       7,151                                                                Direct costs plus fixed costs
 Net Margin                            5.75      2,989                                                                Revenue less total costs
                                                                                                                      Return on Investment = net margin divided by capital
 ROI                                    30%
                                                                                                                      investment
 Payback period                                                                                                       capital investment divided by cash flow until initial expenses
                                         2.00
 years                                                                                                                are compensated by the net margin

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Business ideas for productive use of RE in South Africa

    80%
                                                               Sensitivity Analysis
                                                                                                 Capital Investment

    60%
                                                                                                 Investment Lifespan
    40%
                                                                                                 Units/annum
    20%

                                                                                                 Price/unit
      0%
                     -20%                   -10%          0%           10%            20%
   -20%                                                                                          Variable cost of sale/unit

   -40%                                                                                          Cost of energy/unit

   -60%
                                                                                                 total fixed costs
   -80%                                 percentage change of parameter

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Business ideas for productive use of RE in South Africa

 Sensivity Analysis
                                                                           Variable                  total
            Capital         Investment                                      cost of      Cost of     fixed
 ROI      Investment         Lifespan        Units/annum      Price/unit   sale/unit   energy/unit   costs
    -
 20%           42.52%            25.02%              18.00%      9.65%      38.37%         30.02%    32.02%
    -
 10%           35.57%            27.79%              24.01%     19.83%      34.19%         30.02%    31.02%
  0%           30.02%            30.02%              30.02%     30.02%      30.02%         30.02%    30.02%
 10%           25.47%            31.83%              36.02%     40.20%      25.84%         30.02%    29.01%
 20%           21.68%            33.35%              42.03%     50.38%      21.66%         30.02%    28.01%
    -
 20%           41.66%           -16.66%             -40.02%    -67.86%      27.84%          0.00%    6.69%
    -
 10%           18.51%            -7.40%             -20.01%    -33.93%      13.92%          0.00%     3.35%
  0%                0                 0                   0          0           0              0         0
 10%          -15.15%             6.06%              20.01%     33.93%     -13.92%          0.00%    -3.35%
 20%          -27.77%            11.11%              40.02%     67.86%     -27.84%          0.00%    -6.69%

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Business ideas for productive use of RE in South Africa

INSABA Verification & Market-Assessment of Project Proposals                                                                   This tool is designed to verify the assumptions of the basic a
                                                                                                                               The economic comparison considers cost of energy, in case of
Country:                                            RSA                                                                        Fill in the white fields, the rest will be computed
Pilot Region:                                       Western Cape
RE Technology:                                      Solar Drier
Business Idea:                                      produce apple chips at higher value

Market Context : describe                                                                                                      In this field, we determine the market context of the business id
                                                    naturally dried fruit are increasingly popular, domestic demand
                                                    justifies the investment, international market survey might justify
Market Size & Potential                             further expansion                                                          State whether the market allows a scaleable, replicable use. S
                                                    market does not need dried fruit and may reject if contamination
                                                    happens. For producer important for surplus harvest, which else will
                                                    rot or go to juice. Risk is cheap import from Eastern countries,
Market Need, Risk                                   extended bad weather                                                       who really needs the product and which assumptions, barriers
                                                    Du Plessis with sun-drier is much cheaper, with electric stove still
Competitor                                          can produce cheaper                                                        Describe direct, indirect competition
Competing Technology                                Electricity (subsidized)                                                   What is current technology, which technology might take over
                                                    natural production and natural processing go together. "Sun-dried"
Appropriateness of RET                              gives better aroma, sells higher                                           Why would RET be preferred, by whom
                                                    competition goes for bakery market, drier targets small package
Market Segment                                      consumer market                                                            Where is the strategic focus of competition, vs. Ours
                                                    solar dries faster than open air, less risk, environmentally superior to
Main Differentiator                                 electric                                                                   What is the striking difference in strategy
Sustainable Production                              increased production might require chemical/radiative stabilization        Are there environmental influences in enhanced production sta
Calculation of Competitiveness
                                          Apple Drier                   Alternative            Description of Alternative                                  Definitions
Investment Capital                          6,215                           500                Dry apples in electric stove                                Total cost of technology investmen

Investment Lifespan                             5                             5                stove lifetime                                              Life of the technology - i.e. period b

  INSABA Business Ideas                                                                                         15
Business ideas for productive use of RE in South Africa

Production                                  520                    520             20 kg fresh apples per day can also go in stove          Units produced per year
Price/unit                                 19.50                  19.50            The current market price                                 Sales price per unit produced and s
Revenue                                    10,140                 10,140           Euro                                                     Sales price multiplied by number of

Variable cost/unit                           8.00                  8.00            see tool 1
                                                                                                                                            Cost per unit produced e.g. materia

                                                                                   drying of 10 kg lasts 10 h, stove needs 1 kW, price of
Cost of energy/unit                                                2.20            power is 0,22 €/kWh, therefore costs for power are 2,2   costs of power, fuel added to varia
                                                                                   €/kg
Total fixed costs                           1,000                 1,000            Cost for display, handling                               Annual indirect costs such as rent,

Amortization/unit:                       2.39           1,243    0.19       100                                                             Amount needed per unit to cover in

Direct costs per unit:                 10.39            5,403   10.39      5,404                                                            Variable costs plus amortization plu
                                                                                   Although the ROI for solar drier is good, the
Gross Margin/unit                        9.11                    9.11              competition with electric stove can produce cheaper.     Sales price per unit less the direct c
                                                                                   If we are satisfied with the same margin, the solar
Fixed costs/unit                         1.92                    1.92              drier may not cost above 6.215 Euro, if we want to       Total fixed costs divided by the num
                                                                                   achieve the same ROI, the goal-seek function tells us
Total costs                            12.31            6,403   12.32      6,404   the drier may not cost above € 649. Production           Direct costs plus fixed costs
                                                                                   considerations are: The solar drier may be able to
Net Margin                               7.19           3,737    7.18      3,736   produce more than the stove, but it may fall back        Revenue less total costs
                                                                                   during bad weather.                                      Return on Investment = net margin
ROI                                           60%                  747%                                                                     investment
Payback period                                                                                                                              capital investment divided by cash
                                              1.25                 0.13                                                                     are compensated by the net margin
years

  INSABA Business Ideas                                                                             16
Business ideas for productive use of RE in South Africa

                                                 Mon      Month-       Month-   Mont    Mont    Month-                               Month-       Month-       Month-
    Cash Flow                       Month-1      th-2       3            4       h-5     h-6      7      Month-8       Month-9        10           11           12          Total    T
                                                 Yea                            Year    Year
     Analysis                        Year 1       r1          Year 1   Year 1     1       1     Year 1   Year 1        Year 1        Year 1       Year 1       Year 1       Year 1   Ye
Products                Sales
Applechips                 kg             20       60            60       60      70      80       90             80            50       40           60           60         730
Bananachips                kg             20       20            20       20      20      20       20             20            20       20           20           20         240
Product 3                                  0        0             0        0       0       0        0              0             0        0            0            0           0

Cash Inflow
Turnover                Price
                                                  1,17
Applechips               19.50            390        0         1,170    1,170   1,365   1,560    1,755       1,560          975         780         1,170        1,170      14,235    9
Bananachips              22.00            440     440            440      440    440     440       440         440          440         440          440          440        5,280    4
Product 3                                    0       0             0        0      0       0         0             0             0            0            0            0       0
                                                  1,61
TOTAL Turnover                            830        0         1,610    1,610   1,805   2,000    2,195       2,000         1,415       1,220        1,610        1,610      19,515   14
TOTAL Cash                                        1,61
Inflow                                    830        0         1,610    1,610   1,805   2,000    2,195       2,000         1,415       1,220        1,610        1,610      19,515   14

Cash
Outflow
Material                Cost
Applechips               8.00             160     480            480      480    560     640       720         640          400         320          480          480        5,840    4
Bananachips             10.00             200     200            200      200    200     200       200         200          200         200          200          200        2,400    2
Product 3                                   0       0              0        0      0       0         0           0            0           0            0            0            0
TOTAL Material                            360     680            680      680    760     840       920         840          600         520          680          680        8,240    6
Overhead
Cost

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Staff A share                              70      70            70     100      100     100     100             100     100     100     100     100 1,110       1
Staff B                                                                                                                                                  0
Office share                             10        10            10       10      10      10       10      10             10      10      10      10   120
Communication                             0         0             0        0       0       0        0       0              0       0       0       0     0
Vehicle                                   0         0             0        0       0       0        0       0              0       0       0       0     0
Marketing                                 5         5             5        5       5       5        5       5              5       5       5       5    60
Investment                            6,215                                0                                                                       0 6,215
Investment
Lifespan                                   8                               6
TOTAL Overhead                         6,300        85           85      115     115     115      115      115            115     115     115     115    7,505   1
Capital cost
interest,
redemption                16%             208     208           208      208     208     208      208      208            208     208     208     208    2498    2
TOTAL capital                             208     208           208      208     208     208      208      208            208     208     208     208    2498    2
TOTAL Cash
Ouflow                                 6,868      973           973    1,003    1,083   1,163   1,243    1,163            923     843   1,003   1,003   18,243   9

Operating
Result                               -6,038 637                637      607      722     837     952      837            492     377     607     607 1,272       4
                                                     -
                                                  5,40                              -       -
/accumulated                          -6,038         1        -4,764   -4,158   3,436   2,599   -1,647    -810           -318      58     665   1,272    1,272   5
Capital input                         6,000                                                                                                             6,000
                                                                                2,56    3,40                                                                     1
Cash Flow                                -38 599              1,236    1,842       4       1    4,353    5,190         5,682    6,058   6,665   7,272 7,272

     Investments in the 2nd year                                                                  Investments in the 3rd year
     Amount                                                                                       Amount
     Investment Lifespan (≥3)                                                                     Investment Lifespan (≥3)
     Month (between 1-12)                                                                         Month (between 1-12)

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Depreciation                                  64.7         64.7     64.7     64.7     64.7     64.7     64.7    64.7    64.7    64.7    64.7    64.7 776.9

Tool 3a
TOTAL Cash Inflow, acc                          830        2440     4050     5660     7465     9465    11660    13660   15075   16295   17905   19515
TOTAL Cash Outflow, acc                        6868        7841     8814     9818    10901    12064    13307    14470   15393   16237   17240   18243

Operating Result, acc                        -6,038       -5,401   -4,764   -4,158   -3,436   -2,599   -1,647    -810    -318      58     665   1,272
Cash Flow                                       -38          599    1,236    1,842    2,564    3,401    4,353   5,190   5,682   6,058   6,665   7,272
Operating Result                             -6,038          637      637      607      722      837      952     837     492     377     607     607

Tool 3b                                     Year 1        Year 2   Year 3
TOTAL Cash Inflow                            19515        14,150   16,540
TOTAL Cash Outflow                           18243         9,978   11,198

Operating Result, acc                         1,272        5,444   10,786
Cash Flow                                     7,272       11,444   16,786
Operating Result                              1,272        4,172    5,342

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                                                 Cash Flow Analysis: First Year

  25,000                                                                                                                            8,000

                                                                                                                                    6,000

  20,000
                                                                                                                                    4,000

                                                                                                                                    2,000
  15,000

                                                                                                                                    0

  10,000
                                                                                                                                    -2,000

                                                                                                                                    -4,000
    5,000

                                                                                                                                    -6,000

        0                                                                                                                           -8,000
             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

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                                                          Cash Flow Analysis: 1st - 3rd Year

                  25,000                                                                                                            18,000

                                                                                                                                    16,000

                  20,000
                                                                                                                                    14,000

                                                                                                                                    12,000

                  15,000
                                                                                                                                    10,000

                                                                                                                                    8,000
                  10,000

                                                                                                                                    6,000

                                                                                                                                    4,000
                   5,000

                                                                                                                                    2,000

                        0                                                                                                           0
                                             Year 1                        Year 2                              Year 3

                            TOTAL Cash Inflow         TOTAL Cash Outflow     Operating Result   Operating Result, acc   Cash Flow

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Profitability Preview                                                                         Balance
                                                 Year 1             Year 2        Year 3      Year 1
Sales                                              19,515             14,150        16,540    Assets                  Liabilities
Cost of Sales                                             8,240         6,000         7,000   fixed assets      5,438 shareholders equity 8,710
Gross profit                                        11,275             8,150         9,540    current assets    7,272 liabilities          4,000
other operating income                                        0             0             0   Σ                12,710 Σ                   12,710
personnel costs                                           1,110         1,200         1,400
hire charges                                                  0             0             0   Year 2
communication                                                 0             0             0   Assets                  Liabilities
vehicle                                                      0             0             0    fixed assets      4,661 shareholders equity 14,105
marketing                                                   60            80           100    current assets   11,444 liabilities          2,000
office                                                     120           200           200    Σ                16,105 Σ                   16,105
interest                                                   498           498           498
depreciation                                               777           777           777    Year 3
other expenses                                               0             0             0    Assets                  Liabilities
TOTAL Expenses                                            2,565         2,755         2,975   fixed assets      3,884 shareholders equity 20,670
annual surplus/deficit                               8,710             5,395         6,565    current assets   16,786 liabilities              0
     /accumulated                            8710.125284          14105.25057   20670.37585   Σ                20,670 Σ                   20,670

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2.4     Green Energy Plant, Biomass, KwaZulu-Natal

Biotech Energy (BE) is a company specialising in the development of biomass
pellet fuel using sawmill residue and agricultural waste and was formed to pursue
projects involving converting biomass into fuel for energy.
The company is currently finalising the construction of a pellet manufacturing
facility in Howick (near Pietermaritzburg), KwaZulu Natal. Howick is a small town
in the uMgungundlovu District of KwaZulu-Natal Province and is situated on a
key tourist route, the Midlands Meander. The facility is for producing biomass
pellets for the export market. The environmental Impact Assessment (EIA) is
complete, with a Record of Decision (RoD) received from the KwaZulu Natal
Department of Environmental Affairs and Tourism, dated 31 January 2008.

Figure 7: Green Energy Plant, Biomass, KwaZulu-Natal

This pellet plant is critical within the context of this project as it is expected to
require approximately 1.8MWe per year from the national grid. A business plan
for a 6MWe power plant (consisting of a combination of a wood pellet
manufacturing plant and a green energy plant component) was developed in

INSABA Business Ideas                                                                   23
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August 2007 and was presented to potential investors. Variations to the size of
the power plant were considered and the decision was taken to optimise the
opportunity presented, at 6MWe.

Figure 8: Sawdust feedstock for the pellet plant

Financing for the pellet plant has been agreed with Standard Bank plc, London in
two tranches. The first amount of ZAR90 million was for the pellet plant. The
second amount of ZAR176 million was agreed last year in November. This
tranche included an amount of ZAR33 million for the green energy plant, which
will supply energy to the pellet plant on site. The project objective is to deliver 6
MWe of electricity obtained from a renewable resource of biomass material
consisting of mainly wood waste and forest residue sourced from local timber
operations. The biomass will be processed through high pressure superheated
steam and a steam turbine driven generator to generate 6 MWe of power. The
steam will be condensed using cooling water from a cooling water system and
will be re-circulated to the steam generation cycle for reuse. The 6 MWe will
exceed the entire site’s electrical demand (approximately 1.8 MWe including the
biomass pellet manufacturing plant on site) and the remainder of the electricity
will be supplied via appropriate switchgear and equipment onto the local grid.

2.5     Laundromat, Solar Water Heater, Western Cape

The Laundromat is now located in a densely populated peri-urban area,
Khayelitsha, in Cape Town. Almost all homes in Khayelitsha have access to
electricity but this is mainly used for lighting. Few homes and facilities have
access to hot water.

INSABA Business Ideas                                                                   24
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Figure 9: Laundromat, Solar Water Heater, Western Cape

The business case for the laundromat was based on the fact that most of the
local laundry in the area concerned is done by hand using cold water, mostly at
communal taps located on ‘street’ corners resulting in substantial water wastage.
The activity is time consuming and is mostly done by the women of the house
who are also often the breadwinners. The more affluent homes utilise
Laundromats that are situated close to their place of work (primarily outside of
Khayelitsha) and this constitutes competition to the local laundromat. Pricing is
therefore cognisant of this issue and the pricing model developed aims to offer a
cheaper and accessible local service that can save time and money for the
customer. The laundromat business model includes tailor services to the local
community.
Energy is required for the running of the washing machine and for heating the
water, as well as for lights, ironing and sewing machine(s). Grid based electricity
is available, but water heating was considered to be a significant cost
component and thus solar energy was proposed as an alternative to an electric
geyser.
A pre feasibility study, market analysis and technology economic analysis were
conducted on this business proposal, through the INSABA project. These are
available below.

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The local entrepreneur was assisted by the IAT, the Development Action Group
(DAG).
Business Status:
The following are the outcomes of the INSABA evaluation on this project:
     •    The economic evaluation demonstrated marginal viability. Grid electricity
          continues to be a cheap option in South Africa and the capital cost of the SWH
          equipment required is considerably higher than electric geyser equipment. Solar
          water heater ready washing machines are however available at insignificant
          additional cost.

     •    The Entrepreneur (Lulama Mqikela) who had identified this business opportunity
          had ZAR 10,000 to invest in starting this business. This is money she had saved
          over years of domestic employment. Her objective is to have a business that can
          earn her and her family a living income as well as provide the basis for future
          retirement funding. Her business goal is to open a chain of these laundromats in
          Khayelitsha should the model prove successful.

     •    The evaluation demonstrated a significantly higher rate of return (44% as
          opposed to 21%) with a significantly lower initial capital outlay on the grid based
          option. This coupled with the entrepreneur’s life and business objectives, the
          limited amount of capital at her disposal and the cheap electricity alternative,
          resulted in her decision to utilise her investment in a conventional electricity
          based operation for the initial phase of her business. She will consider SWH for
          expansion and the rising electricity prices and the fact that her business has
          suffered in the recent energy crisis engulfing South African businesses will add to
          the argument for such a decision.

     •    Eskom are in the process of launching their Solar Water Heating subsidy scheme
          and subsidised SWHs are slowly starting to enter the market4.

     •    OneWorld is making an application with the Entrepreneur to try and secure one
          of these pilot SWHs for her business. This decision has been delayed as the pilot
          has seen significant delays.

Further work entailed training of the IATs and whilst the work was largely
conducted directly with the entrepreneur concerned, the Development Action
Group (DAG) has participated in the IAT training on economic analysis tools
(WP 3&4).

4 WP7: OneWorld continued to work with Cape Town City Council and the Western Cape Department of
Environmental Affairs and Development Planning as well as local Counsellors (Saliem Muaser) on the Solar
Water Heater by-law, which is now in its 10th draft. Four meetings and presentations have been attended
and given. The by-law cannot be passed until an amendment is made to the building regulations by the
Department of Trade and Industry (DTI). It is now anticipated that the by-law will be passed in December
2009.

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DAG is a Cape Town based NGO that works primarily in peri-urban areas to
support SME development to achieve poverty alleviation objectives. The skills
base in DAG comprises SME support, community development and participation
and public awareness. DAG has been interested in RETs for some time and has
developed substantial knowledge as a result.
A further IAT has been identified, RAPS, a Cape Town based organisation that
seeks finance solutions for rural energy applications. Training (WP4) commenced
with this IAT in July 2006.
Figure 10: Pellet Plant

The proposed biomass energy plant site is to be situated adjacent to the pellet
plant (see photograph above). The area is home to significant forestry plantations
and timber industry and the site is therefore in close proximity (less than 50km) to
the biomass material, namely sawmill residue (for the pellet manufacturing plant
component) and forestry residue for the power plant, which will be used as the
consistent and sustainable fuel source. An added benefit is that the fuel
feedstock would normally be left in forest or sent to landfill where it would
generate greenhouse gases (mainly Methane) through decay and not provide
any added value to local communities whilst also contributing to greenhouse gas
emissions.
Biotech Energy is expected to conclude supply contracts with all three entities by
the end of May 2008. The energy plant requirement is between 11 000 and 12

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  000 tonnes per month to power the 6MW plant. Contracts for 12 000 tonnes are
  being negotiated. Figure 1 below shows the location of the proposed site and
  surrounding land uses.

  Figure 11: Map showing the surrounding land-uses of the proposed Green Energy
  Plant, and alternative sites of the proposed plant

                                               INFORMAL
                                              SETTLEMENT
                                                                          PETRONET
                                                                           PIPELINE

                                                               APPROVED PELLET
PROPERTY                                                            PLANT                   WOOD
                                                               DEVELOPMENT SITE          PROCESSING
BOUNDARIES                                                                                 FACILITY
                                                              WOOD DUMP
       N3                                                                                  TIMBER 24
    SERVITUDE

                                     ALTERNATIVE                                                       ACCESS
                                    SITINGS OF THE                                                      ROAD
                                    GREEN ENERGY
                                         PLANT

                                                       STEEL COMPANY
  The green energy plant will comprise the following:                           LUMBER
                                                                                 JACKS
       •    Biomass receiving and storage areas
       •    1 Biomass sizing plant (hammer mill, screening equipment etc.)
       •    Biomass transfer equipment (conveyors, mechanical handling plant)
       •    1 Surge storage for biomass storage before steam generator
       •    1 biomass fuelled steam generators to generate steam at 20 bar and 360-
            o
              C superheat temperature
       •    1 Steam Turbine Alternator to generate 6MWe of electricity at 11kV
       •    Ash handling plant
       •    Water treatment plant
       •    High efficiency grit arrestors on steam generator
       •    Electrical switching and protection equipment

  Once the fuel is delivered to site, it will be prepared in terms of ensuring it is
  appropriately sized and then stored. When required it will be combusted in the
  steam generator to generate steam. The steam generator will also require feed

  INSABA Business Ideas                                                                                 28
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water, which will require conditioning in terms of hardness and pH. This will be
undertaken using an ion exchange filter with a resin system.
This project will displace CO2 emissions associated with the electricity from fossil
fuels used by the pellet plant as well as the running of this propose plant.
Furthermore, renewable energy from the Biomass plant will be used by the local
communities (i.e. direct sales; PPA with municipality, Eskom etc) and will replace
the current and increasing use of fossil fuel derived electricity in the area.
The pellet plant (see photograph below) would otherwise continue to use fossil
fuel based electricity for its operation. The local grid would also continue to
receive its energy from coal-fired power stations using some of the worst low-
grade coal in the world.
Figure 12: Pellet Plant – inside

The project will reduce approximately 139 184 tonnes of CO2e per year (32 712
CO2 and 5070 NH4 [@ 25 times GWP]) from entering the atmosphere.
Therefore, the combined emissions from these will be approximately 139 184
CO2e each year over the 21-year period resulting in an estimated saving of 2
922 864 tonnes of CO2e.
The crediting period is seven years (with the expectation that an additional two
periods of seven years each will be allocated)
This project is expected to deliver a clean source of energy (through reducing
dependence on the coal based grid) to an area that is energy ‘short’ and thus has
an environmental and economic development benefit.
It is also expected to create 50 jobs, which can be filled from the local community
during the construction phase, and 152 jobs, 80% of which can be filled by the
local community, during operational phase. Decommission is expected to create

INSABA Business Ideas                                                                  29
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a further 18 jobs, bringing the total number of jobs to 220 during the life cycle of
this project. This contributes toward local job creation although the full socio-
economic benefit is anticipated from downstream project impacts. An additional,
secure, local energy supply is expected to support and stimulate local economic
development with further jobs and income generation opportunities emerging.
Associated Energy Services (Pty) Ltd (AES) were contracted to undertake all
technical and engineering related activities prior to the operation of the plant and
thereafter to be the operations and maintenance (O&M) contractor to Biotech
Energy for the plant.
OneWorld Sustainable Investments was contracted to develop the Clean
Development Mechanism (CDM) project for the plant and to manage the
validation and registration processes.
The planned green energy plant at Howick will be carbon neutral and will thus
make a significant contribution to reducing South Africa’s carbon footprint by
utilising a renewable energy fuel feedstock. It also presents an opportunity for
South Africa to increase its renewable energy generation capacity and contribute
to the country’s urgent generation capacity requirements. This project requires
Carbon Credit finance to be viable. South Africa’s low electricity prices make
competitive pricing of alternate electricity streams difficult. Furthermore, Eskom
have demonstrated little interest in paying any sort of premium for green
electricity. The CDM finance stream is expected to reduce the price of the
electricity produced from the plant to the consumer.
This project presents a number of environmentally beneficial opportunities.
Firstly, and the most obvious, is that it will displace 139 184 tonnes of CO2e
emissions of coal-based electricity.
Secondly, it will significantly reduce the risk of fires in the forestry areas by
removing the wood residue, which is a fire hazard. Reducing this risk has social
and health benefits for the local population.
Thirdly, the biodiversity is likely to be improved in the surrounding area as
removing the gleanings from forests will improve the soil quality, which forms a
critical basis for the forest ecosystems.
The following issues have been identified as potentially problematic and will,
amongst other issues, be investigated during the Basic Assessment Process:
     •    Noise impacts for neighbouring landowners;
     •    Potential impacts on air quality; and
     •    Impacts on traffic;

The need for public input and involvement is of critical importance. All I&APs
(neighbours, authorities, organisations etc.) are invited to comment on the
proposed development. As mentioned earlier, there was a public participation
event on the 14th of April in Howick. This was part of the EIA process and event
made it possible for interested parties to meet and discuss any issues with

INSABA Business Ideas                                                                  30
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Biotech Energy, AES and OneWorld. Comments have also been be solicited by
post, telephone and email.
This pellet plant is expected to begin production at the time of writing this report
(mid-April 2008). The biomass green energy plant has the funding to go ahead
and Biotech Energy are in discussions with Eskom, local companies and
consultants to begin its construction. The project is expected to be completed by
June 2009.

Pre Feasibility and Market Study for a SWH Laundromat in the peri-urban
area of Khayelitsha, Cape Town, South Africa
Executive Summary
Background

The proposed business is to establish a Laundromat in the peri-urban area of
Khayelitsha, which is situated on the Cape Flats in Cape Town. There is currently
no Laundromat in the area concerned. The area is densely populated with
shacks and some houses and is home to a range of income levels. Almost all the
homes have direct electricity access, although this is largely used for lighting only
– except in the more affluent households that can afford and have the space for
appliances. Water is provided although this is mostly via a street corner tap and
then carried to the home concerned.

The Entrepreneur knows Khayelitsha, is local and has ZAR 10,000 to invest in a
business. This she sees as an investment in a business that will generate more
wealth than she currently earns, will allow her to educate her children and which
should provide for her retirement.

Business offering

The proposed Laundromat will offer a range of services to include:

     ¾ Self service washing
     ¾ Ironing service
     ¾ Full washing and ironing service provided for the consumer
     ¾ Tailor
Currently, local clothes washing is done by hand using cold water. Frequently
this happens under a running street corner tap and a substantial amount of water

INSABA Business Ideas                                                                   31
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is wasted. The activity is time consuming and is often done by the women of the
house – who are also often the breadwinners. The more affluent homes utilize
Laundromats that are situated close to their place of work and this will provide
competition. Pricing will therefore need to be cognizant of this issue and the
pricing model developed aims to offer a significantly cheaper AND local service
that can save time and money for the customer at the same time as being
convenient.

The market potential is significant and growth of the business is anticipated
through expanding the proposed model and through replicating it in other parts of
Khayelitsha and further a field. The need for the service is established but
sensitive to price and to competing uses of disposable income – in particular food
and transport. Almost all employment opportunities are at some distance and
food prices have seen a sharp increase over the past 6 months.

Energy Source

Energy is required for the running of the washing machine and for heating the
water, as well as for lights, ironing and sewing machine(s). Electricity is available
to the Laundromat and therefore to the running of the washing machine(s) and
other equipment described. Water heating is a significant cost component and
solar energy can be used through a Solar Water Heater as an alternative to an
electric geyser. Assuming that there can be no extra charge can for “solar
laundering”, the value of solar energy is in the saving of electricity for the water
heating part. This is assumed to 4 kWh per load at 2,5 R/kWh=10 R

A SWH for 150 l/d can be computed to 2 m² costing ZAR 16,700 and at 1728
loads per year, this can save ZAR 17,280 and give an ROI of 30%

Investment analysis

An investment cost comparison has been done using a combined grid based
electricity and renewable energy model where a solar water heater (SWH) is
installed for water heating as against a model that solely uses grid based
electricity and the SWH is replaced by electric geysers. The Return on

INSABA Business Ideas                                                                   32
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Investment (ROI) is significantly higher in the electricity only model and this is
directly contributable to the cost of the technology coupled with cheap electricity.
The impact of the significantly higher cost of technology is mitigated by the
lifespan of the SWH, which is more than 3 times longer than the electric only
model.

Business model

The business will be driven by a single entrepreneur who has 40% of the capital
investment required to invest in the business. Her objective is to make this
investment based on the expectation of a higher monthly income and a
retirement annuity for her older age. She is interested in replicating the business
in other parts of Khayelitsha and is confident of the market need. She plans to
employ her daughter on a part time basis whilst she completes her education and
unemployed women in the area on a needs based contract basis so as to keep
overheads as relevant to turnover as possible.

Conclusions

The business case has merit but the case for the use of renewable energy
technology is not robust. The entrepreneur is however interested in the longer-
term lifespan of the SWH option and would like to see stronger data on the
savings in electricity costs in using a SWH. She is also cognisant of rising
electricity prices (Eskom have applied for a tariff increase of between 8 and 9%)
in South Africa and is aware of the energy issues in the country – in particular of
the costs an energy crisis such as the one experienced in May 2006 would have
on her business. She will install a SWH adaptable geyser and would prefer to
reconsider SWH is the growth phase of her business as more capacity is
required. At this stage she will have better knowledge of her monthly electricity
costs and the extent of hot water that will be heated.

INSABA Business Ideas                                                                  33
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Business model analysis: Feasibility Study

               Getting it right – Screening the SWH Laundromat business

The Business Concept and Case

Business Idea Description              A Laundromat in a peri-urban area using SWH technology for heating
                                       water in a washing machine (and a cold water machine) plus ironing
                                       and tailor and repair services on clothing.

List Key Business Factors              The business relies on clothes washing and ironing technology and hot
                                       water to differentiate the service from existing hand and cold water
                                       washing that takes place in the area considered. It is believed that the
                                       business model may be replicated and possibly franchised

Identify Renewable Energy              Solar Water Heating to displace some of the alternate electricity (grid
Resource / Technology &                based) costs. Note, this technology could provide hot water in
Capital Cost                           situations (rural) where there is no existing means of heating water in
                                       quantities

Justify RET Selection and              SWH have demonstrated an up to 40% saving on electricity in South

Identify the energy                    African markets. The technology is significantly more expensive than
alternative and the cost of            electric geysers, but with a substantially longer lifespan.
that alternative

Identify and state the key             The entrepreneur concerned is a domestic worker who seeks to earn a
objectives / goals of the              higher income plus invest her savings into a business that will provide
business and the                       in the longer term for her retirement. She expects to obtain as high as
Entrepreneur. I.e. what
                                       possible rate of return on her investment plus a steady income that
does the entrepreneur
                                       exceeds her present income by at least 100%.
expect from the business
and what does the business
want to achieve?

What does the entrepreneur
expect from the business?

         INSABA Business Ideas                                                                       34
Business ideas for productive use of RE in South Africa

 Evaluating Business Indicators

 Business Indicator                                         Status Statement                  Next Steps

                                                    The entrepreneur has 8 years
      The                                           experience working in debtors and
        entrepreneur/                               creditors for a medical insurance
 #1     management                                  company and then for an IT group.
        is qualified                                She manages a bank account and
                                                    owns property in Cape Town (thus
                                                    familiar with debt and has access to
                                                    credit)

      The                                                                                   Secure balance of
                                                    She is prepared to commit her           finance required –
 #2     entrepreneur
                                                    savings (90% thereof)                   loan/another equity
        is committed
                                                                                            partner

                                                    The market is expected to yield at
       There is a                                   least 5 loads per day, plus extra
 #3    clear market                                 services contributing to more than       Conclude market
                                                    70% of the business turnover             survey

                                                    R15 per load of washing; R 7 per
       The product/                                 item ironing; R 25 per item tailored.
#4     service     is                               Compares favorably (cheaper than)
       competitive                                  similar services in the City

       The cost of                                  The costs are for salaries / wages;
                                                    washing powder and water. These          Run   costing
       making sales
                                                    amount to approximately R 12 per         model
#5
       is known
                                                    load

          INSABA Business Ideas                                                                              35
Business ideas for productive use of RE in South Africa

 Business Indicator                                           Status Statement                  Next Steps

                                                      These are estimated at R3 per load
       The margins are                                (gross)
       attractive
#6

                                                      Rental, salaries, interest repayments
      The       business                              and operational costs
      demonstrates
#7
      ability to support
      an overhead

                                                      The environmental impact is positive
                                                      if the SWH technology is utilized.
#8    Positive                                        People will have access to a service
      environmental &                                 that   will   mean    less    water
      social impact                                   consumption & wastage.

                                                      The laundromat itself van grow in
                                                      capacity (more washing machines
#9    The      business                               and staff for greater market yield);
      model is scalable                               the model is easily replicated in other
      and replicable                                  peri-urban areas and rural environs

                                                      This is realistically achieved as the
                                                      entrepreneur has a significant
#10   Capital can be                                  investment in the capital costs. This
      sourced         on                              would not be the case without that
      realistic terms                                 deposit

            INSABA Business Ideas                                                                            36
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