• SERVICES
  • INDUSTRIES
  • PERSPECTIVES
  • ABOUT
  • ENGAGE

TECHNOLOGY

by EOS Intelligence EOS Intelligence No Comments

Ethiopia’s Half-Hearted Push to Telecom Privatization Finds Limited Success

Ethiopia’s telecom sector has been considered as the last frontier for telecom players, since the country is one of just a few to still have a state-run telecom industry. However, this is due to change, as the Ethiopian government has finally opened up the sector to private investment. Privatization of the telecom sector has been on the prime minister Abiy Ahmed’s agenda since he first took office in 2018, however, it was initially a slow process, mostly due to bureaucracy, ongoing military conflicts, and COVID-19 outburst. Apart from that, the privatization terms have not been very attractive for private players, making the whole process complicated.

With a population of about 116 million and only about 45 million telecom subscribers, Ethiopia has been one of the most eyed markets by telecom players globally. The telecom sector has immense potential as Ethiopia has one of the lowest mobile penetration rates in Africa.

To put this in perspective, Ethiopia has a mobile connection rate of only 38.5%, while Sub-Saharan Africa has a mobile connection rate of 77%. Moreover, 20% of Ethiopian users have access to the Internet and only about 6% currently use social media, which is much lower than that in other African countries. That being said, about 69% of the country’s population is below the age of 29, making it a strong potential market for the use of mobile Internet and social media in the future.

This makes the market extremely attractive for international players, who have for long been kept at bay by the Ethiopian government. Thus, when the government expressed plans to open up the sector, several leading telecom players such as MTN, Orange, Etisalat, Axian, Saudi Telecom Company, Telkom, Vodafone, and Safaricom showed interest in penetrating this untapped and underserved market.

Currently, state-owned Ethio Telecom, is the only player in the market. Lack of competition has resulted in subpar service levels, poor network infrastructure, and limited service offerings. For instance, mobile money services, which are extremely popular and common across Africa have only been introduced in Ethiopia in May 2021.

Moreover, as per UN International Telecommunication Union’s 2017 ICT Development Index (IDI), Ethiopia’s telecom service ranked 170 out of 176 countries. To correct this, in June 2019, the government introduced a legislation to allow privatization and infuse some competition and foreign investment into the sector. The privatization process is expected to rack up the country’s foreign exchange reserves, in addition to facilitating payment of state debt. It also aims to improve the overall telecom service levels and help create employment in the sector.

As a part of its privatization drive, the government has proposed offering two new telecom licenses to international players as well as partially privatizing Ethio Telecom by selling a 40% stake in the company. The sale of the two new licenses will be managed by the International Finance Corporation, which is the private sector arm of the World Bank.

Ethiopia’s Half-Hearted Push to Telecom Privatization Finds Limited Success by EOS Intelligence

While this garnered interest from several international telecom players, with 12 bidders offering ‘expression of interest’ in May 2020, the process has not been very smooth, owing to bureaucracy, ongoing military conflicts in the north of the country, and the proposal of an uneven playing field for international players versus Ethio Telecom. This last challenge appears to be a major obstacle to a smooth privatization process.

As per the government’s initial rulings, the new international players were not to be allowed to provide financial mobile services to their customers, while this service was only to be reserved for Ethio Telecom. Mobile money is a big part of the telecom industry, especially in Africa, where it is extremely popular and profitable as banking infrastructure is weak. This made the deal much less attractive for foreign bidders as mobile money constitutes a huge revenue stream for telecom players in African markets.

However, post the bidding process in May 2021, the government has tweaked the ruling to allow foreign players to offer mobile money services in Africa after completing a minimum of one year of operations in the country. However, since this ruling came in after the bidding process was completed, the government missed out on several bids as well as witnessed lower bids, since companies were under the impression that they will not be allowed to offer mobile money services. As per government estimates, they lost about US$500 million on telecom licenses because of initial ban on mobile money.

Another deterrent to the entire process has been the government’s refusal to allow foreign telecom tower companies to enter the Ethiopian market. The licensed telecom companies would either have to lease the towers from Ethio Telecom or build them themselves, but they would not be allowed to get third party telecom infrastructure players to build new infrastructure for them, as is the norm in other African countries. This greatly handicaps the telecom players who will have to completely depend on the state player to provide infrastructure, who in turn may charge high interconnection charges that may further create an uneven playing field.

These two regulations are expected to insulate Ethio Telecom from facing fierce competition from the potential new players, and in turn may result in incumbency and poor service levels to continue. Moreover, even with regards to Ethio Telecom, the government only plans to sell 40% stake to a private player (while 5% will be sold to public), thereby still maintaining the controlling stake. With minority stake, private players may not be able to work according to their will and make transformative changes to the company. It is considered a way to just get fresh capital infused into the company without the government losing real control of it.

In addition to these limitations, the overall process of privatization has faced delays and complications. The bidding process has been delayed several times over the past year owing to regulatory complexities, the COVID crisis, and ongoing military conflict in the northern region. The process, which was supposed to be completed in 2020 was completed in May 2021, with the final bidding process taking place in April 2021 and the government awarding the bids in May 2021.

During the bidding process, the government received only two technical bids out of the initial 12 companies that had shown interest. These were from MTN and a consortium called ‘Global Partnership for Ethiopia’ comprising Vodafone, Safaricom, and Vodacom. While the Vodafone consortium partnered with CDC Group, a UK-based sovereign wealth fund, and Japanese conglomerate, Sumitomo Corporation, for financing, MTN group teamed up with Silk Road Fund, China’s state-owned investment fund to finance their expansion plans into Ethiopia. The other companies that had initially shown interest backed out of the process. These include Etisalat, Axian, Orange, Saudi Telecom Company, Telkom SA, Liquid Telecom, Snail Mobile, Kandu Global Communications, and Electromecha International Projects.

In late May 2021, the government awarded one of the licenses to the ‘Global Partnership for Ethiopia’ (Vodafone, Safaricom, and Vodacom) consortium for a bid of US$850 million. While it had two licenses to give out, it chose not to award the other license to MTN, who had made a bid of US$600 million. As per government officials, the latter bid was much lower than the expected price, which was anticipated to be close to a billion by the government.

Moreover, the government seems to have withheld one of the licenses as currently the interest in the deal has been low, considering that it only received two bids for two licenses. Given that they have somewhat altered and relaxed the guidelines on mobile money (from not being allowed to be allowed after minimum one year of operations), there may be some renewed interest from other players in the market. That being said, the restriction on construction of telecom infrastructure is expected to stay as is.

In the meanwhile, Orange, instead of bidding for the new licenses, has shown interest in purchasing the 40% stake in Ethio Telecom, which will give the company access to mobile money services right away. However, no formal statement or bid has been made by either of the parties yet. If the deal goes through, it will give Orange a definite advantage over its international competitors, who would have to wait for minimum one year to launch mobile money services in the market. In May 2021, Ethio Telecom launched its first mobile money service, called Telebirr, and managed to get 1 million subscribers for the service within a two-week span. This brings forth the potential mobile money holds in a market such as Ethiopia.

EOS Perspective

While several international telecom companies had initially shown interest in entering the coveted Ethiopian market, most of them have fizzled out over the course of the previous year, with the government only receiving two bids. Moreover, the bid amounts have been much lower than what the government initially anticipated and the government chose to accept only one bid and reject the other. Thus the privatization process can be deemed as only being partially successful. Furthermore, the opportunity cost of restricting mobile money services has been about US$500 million for the government, which is more than 50% of the amount they have received from the one successful auction.

This has occurred because the government has been focusing on sheltering Ethio Telecom from stiff competition by adding the restrictions on mobile money and telecom infrastructure. While this may help Ethio Telecom in the short run, it is detrimental for the overall sector and the privatization efforts.

Restrictions on using third-party infrastructure partners, may also result in a slowdown in rolling out of additional infrastructure, which is much needed especially in rural regions of Ethiopia. Other issues such as ongoing political instability in the northern region have further cast doubt in the minds of investors and foreign players regarding the government’s stability and in turn has impacted the number of bids and bid value.

It is expected that the government will restart the bidding process for the remaining one license soon. However, the success of it depends on the government’s flexibility towards mobile money services. While it has already eased its stance a little, there is still a lot of ambiguity regarding the exact timelines and conditions for the approval. The government must shed clarity on this before re-initiating the bidding process. MTN has also mentioned that it may bid again if mobile money services are included in the bid.

However, with Vodafone-Safaricom-Vodacom consortium already winning one bid and expecting to start services in Ethiopia as early as next year, the company definitely has an edge over its other competitors. Considering that the first bid took more than a year and faced several bureaucratic delays, it is safe to say that the second bid will not happen any time soon, especially since this time it is expected that the government will give a serious thought to the inclusions/exclusions of the deal and the value that mobile money brings to the table for both the government and the bidding company.

by EOS Intelligence EOS Intelligence No Comments

COVID-19 Outbreak Boosts the Use of Telehealth Services

Telehealth is one of the few sectors that have benefited from the coronavirus outbreak. Telehealth services have been around since 1950s, however, they were perceived as a nice-to-have alternative to conventional delivery of healthcare services and thus largely underutilized. COVID-19 pandemic has proved to be a game changer for the industry. Since social distancing became a necessary measure to curb the risk of COVID-19 transmission, telehealth emerged as a viable option to offer uninterrupted healthcare without physical contact. Towards the end of 2020, Deloitte predicted that virtual consultations would account for 5% of total visits to doctor in the world in 2021, up from 1% in 2019. To put this into perspective, in 2019, doctor’s visits in OECD-36 countries totaled 8.5 billion, worth approximately US$500 billion. 5% of this would result in about 400 million teleconsultations and over US$25 billion in value (if doctors earn the same for teleconsultations as for in-person visits).

Telehealth services uptake during the pandemic varied by region

While the adoption of telehealth services has increased across the globe, the growth rate varied by region depending upon factors such as technology and infrastructure, consumer awareness and willingness, government regulations, insurance policies, etc.

In the USA, world’s largest telehealth market which accounted for 40% of the global share in 2019, the growth over the years was steady but incremental mainly because of regulatory constraints and stringent insurance policies.

In response to the pandemic, the US government health insurance plans (Medicare, Medicaid, etc.) as well as private insurers expanded their coverage for telehealth services. As a result, telehealth accounted for 43.5% of all US Medicare primary care visits in April 2020, compared with just 0.1% before the pandemic. US Centers for Disease Control and Prevention indicated that the number of telehealth visits increased by 154% during the last week of March 2020, compared with the same period in 2019, primarily due to policy changes and public health guidance on telehealth during the pandemic. Considering unprecedented rise in demand for telehealth services during the times of pandemic, in April 2020, Forrester (a research and consulting firm) revised their estimation for virtual general medical care visits in the USA from 36 million to 200 million for the year 2020.

UK and France have been the dominating countries in the European telehealth market. Telehealth services’ growth momentum due to COVID-19 pandemic in these countries is likely to continue because of conducive environmental factors such as established ecosystem, favorable regulatory framework, reimbursement policies, and consumer readiness. UK’s National Health Service revealed that 48% of GP consultations in May 2020 were carried out remotely over the telephone, compared with 14% in February of the same year. Teleconsultations in France increased from 40,000 in February 2020 to 611,000 in March 2020.

Growth of telehealth market in Switzerland, Germany, and Austria has been comparatively slow as these countries have more decentralized healthcare systems in contrast to UK or France. For instance, McKinsey’s survey of over 1,000 consumers from Germany, conducted in November 2020, showed that only 2% respondents started or increased usage of telehealth services since COVID-19 outbreak.

In countries such as Greece and Czech Republic, telehealth platforms were launched for the first time during the pandemic. Ireland had telehealth platforms before COVID-19, but the adoption of the telehealth services even after pandemic remains moderate because of lack of favorable regulatory framework.

COVID-19 Outbreak Boosts the Use of Telehealth Services

China and India are among the fastest growing telehealth markets in Asia. The number of telehealth providers in China increased from less than 150 to nearly 600 between late 2019 and early 2020. Telehealth platforms in India are witnessing increased interest from both patients as well as doctors. India’s leading health-tech firm, Practo, reported that 50 million people opted for teleconsultations through its platform between March 2020 and May 2020, representing 500% growth in teleconsultations during this time. 1mg Technologies, another telehealth service provider in India, indicated that between March 2020 and July 2020 nearly 10,000 doctors showed interest in signing up with the platform to offer teleconsultations. The company had only 150 doctors onboard until March 2020.

Japan, which is one of the largest healthcare markets, lagged in remote healthcare services because of stringent legislative policies. Remote consultations were allowed only for recurring patients and for limited number of ailments. Following the spike in COVID-19 cases, Japan temporarily eased restrictions on telehealth by allowing doctors to conduct first-time consultation online. Japan health ministry indicated that about 15% or 16,100 Japanese medical institutions (excluding dentists), offered telehealth services by July 2020. This shows phenomenal growth as in July 2018 only 970 of such Japanese healthcare institutions offered telehealth services.

In South Korea, telehealth was banned before COVID-19. This ban was lifted temporarily during the pandemic, but the long-term growth of telehealth in South Korea will depend on how the regulatory framework is shaped in the post-COVID era.

Vietnam also joined the telehealth upsurge as the country’s first telehealth app (developed by the Vietnamese multinational telecommunications company, Viettel) was launched amidst corona virus outbreak in April 2020.

Industry stakeholders seek to capitalize on telehealth boom

Healthcare providers have turned to telehealth to compensate for cancelled in-person consultations due to COVID-19 outbreak. This has encouraged providers to scale up their telehealth capabilities. For instance, over 56,000 doctors in France started teleconsultations by July 2020, as compared with only a few thousands at the beginning of the year.

Healthcare providers are not the only players looking to capitalize on the increase in demand for telehealth services. Other industry participants such as insurers and pharmacies are also exploring this segment.

In the USA, leading insurers such as Cigna, United Health, Aetna, Anthem, and Humana are partnering with telehealth providers to capitalize on the spurt in virtual healthcare demand. For instance, in February 2021, Cigna announced plans to acquire MDLive, Florida-based telehealth firm serving 60 million people across the USA, with a view to bring telehealth services in-house and reduce the patient-provider accessibility gap. Pharmacy giants Walgreens and CVS also extended access to telehealth services during COVID-19 crisis. In March 2021, a US-based digital retail pharmacy NowRx expanded into telehealth to provide care for HIV patients in California.

Since telehealth primarily encompasses delivery of healthcare services through digital and telecommunications platforms, telecoms and cable operators are uniquely positioned to organically expand in to telehealth space. Telecoms have the opportunity to expand in healthcare space by delivering telehealth as a value-added service. In October 2020, CommScope, an infrastructure solutions provider for communications networks, estimated that telehealth has the potential to create US$50 billion per year revenue opportunity for internet and telecom service providers in the USA.

Moreover, leading technology firms including Amazon, Microsoft, Salesforce, Tencent, Alibaba, and Alphabet are also investing in or considering to invest in telehealth. For instance, in January 2020, Alibaba launched an online coronavirus clinic, to offer remote assistance to patients across China.

Telehealth startups are mushrooming across the world and raking in millions in investment. Mercom Capital Group indicated that, in 2020, telehealth attracted nearly US$4.3 billion in venture funding. This represents 139% year-on-year increase compared to US$1.8 billion in 2019 implying that COVID-19 outbreak was the key driver behind the increased investment in telehealth.

Since everyone is trying to grab a piece of the growing telehealth market cake, this has led to flurry of M&A deals. Mercom Capital Group recorded 23 M&A transactions in telehealth space in 2020, up from 14 transactions in 2019.

EOS Perspective

COVID-19 outbreak worked as a catalyst resulting in dramatic increase in telehealth services utilization; whether this growth will continue in the long term, remains a question. This growth of telehealth market is primarily demand-driven. Thus, to sustain the growth momentum it would be imperative to overcome the challenges faced by the industry before the pandemic.

Ambiguous and often changing regulatory framework remains one of the biggest hindrances to telehealth. In order to tackle the spread of coronavirus, many countries temporarily relaxed their regulations for telehealth. However, it remains unknown whether countries will pull back the relaxations once the pandemic is over. Moreover, telehealth opens up doors for cross-border provision of healthcare services. This calls for development for a universal law for telehealth which is acceptable worldwide.

Further, the market will also largely depend on how the reimbursement policies evolve in the future. Historically, in many countries, reimbursement for teleconsultations has been lower than for in-person consultations. During the pandemic, the reimbursement amount was leveled in order to encourage adoption of telehealth. This proved to be a strong incentive driving the surge in telehealth. Post the pandemic, if the policies are changed again offering lower reimbursement for teleconsultations as compared with in-person visits, this could impact the growth momentum.

Data security and privacy concerns have long been debated as some of the biggest barriers for telehealth worldwide. Development of more secure platforms using technologies such as blockchain, AI, and Secure Access Service Edge (SASE) networks could potentially address these issues in future. Further applications of blockchain are being explored to improve operational transparency, increase protection of health records, and detect fraud related to patients’ insurance claims as well as physician credentials.

It is believed that the risk of misdiagnosis increases with telehealth as compared to in-person visits. This risk can be significantly reduced by integration of remote patient monitoring technologies with teleconsultations. IoT-enabled remote care monitoring technologies have been evolving by leaps and bounds. Teleconsultations carried out in conjunction with data collated from smart wearable devices can potentially help to cut down misdiagnoses.

Telehealth has become the new normal amidst coronavirus outbreak. While the telehealth market growth in the next 2-3 years could be attributed to pandemic crisis, the future will depend on how the regulatory framework will shape up and whether the industry will be able to tackle the challenges related to the technology implementation.

by EOS Intelligence EOS Intelligence No Comments

EdTech’s Growth Fueled by Coronavirus

584views

For years, tech adoption has been relatively slower in the education sector than in many other sectors. This has considerably changed when COVID-19 hit in early 2020 and triggered the closure of educational institutions all over the world. With classroom doors closed and conventional methods of education taking a setback, e-learning gained momentum like never before. From virtual classes to tutoring and conducting meetings online to learning new skills, the pandemic propelled EdTech into the spotlight, putting it on a growth trajectory.

Changing face of EdTech market

To control the spread of coronavirus, nearly 190 countries had implemented temporary school closures by the end of March 2020, disrupting education of more than 1.5 billion students. Over the coming days, as the count of people affected by the virus multiplied hourly, all educational institutions (including schools, colleges, universities, vocational training centers, and skill development institutions) were directed to remain shut until the situation improved, driving students to shift to online learning. This sudden change away from classroom learning has led to the adoption of online learning on a large scale.

Before the coronavirus pandemic, EdTech sector was estimated to reach a value of US$ 342 billion, growing at a CAGR of 13.1% between 2019 and 2025. The forecast revisions accounting for the impact of COVID-19 pandemic predict the global EdTech market to reach US$ 404 billion, with a CAGR of 16.3% by 2025. The sudden adoption of e-learning across educational institutions as well as an increasing need for upskilling courses by working-class individuals are driving the tech embracement in the COVID-19 pandemic scenario.

Moreover, with uncertainty still looming on reopening of educational establishments, technology will need to play a critical role across all aspects of education – content generation, knowledge consumption, and assessments. This is expected to intensify the pace at which digitization happens in the education sector.

Investment at an all-time high

Over the last decade (from 2010 to mid-2020), global EdTech venture capital funding stood at US$ 36.8 billion, of which more than 50% occurred since 2018. Investment in EdTech has sky-rocketed over the last few years – the sector witnessed investment of merely US$ 0.5 billion in 2010 but reached a striking figure of US$ 7 billion in 2019, 14 times more in a span of nine years. Even during COVID-19 pandemic, companies globally attracted US$ 4.5 billion in funding between January and July 2020, which is the highest ever funding raised during a comparable period in the last decade. It is expected that the trend will follow and the investments will grow further, anticipated at US$ 87 billion over the next decade.

During the coronavirus outbreak, the demand for e-learning increased manifold accelerating the investment spree in EdTech. While the USA is home to nearly 43% of the world’s EdTech companies’ (followed by India – 10%, Brazil – 9%, UK – 8%, and China – 3%), as of 2020, the companies that received the high value funding deals during COVID-19 period were situated elsewhere.

India-based online tutoring firm Byju’s raised more than US$ 1 billion from January through September 2020 (US$ 200 million in January from Tiger Global Management, USA-based investment firm; US$ 200 million in February from General Atlantic, USA-based equity firm;  US$ 23 million in June from Bond Capital, USA-based investment firm; US$ 122 million in August from DST GLobal, Hong Kong-based investment firm; US$ 500 million in September from Silver Lake, USA-based equity firm) to become the first company in the EdTech domain to reach a valuation of US$ 10.8 billion.

The second company was China-based Yuanfudao, an online live course platform, which raised US$ 1 billion in March 2020 from Hillhouse Capital (China-based private equity firm) and Tencent Holdings (China-based technology conglomerate).

Another noteworthy deal was also scored by China-based Zuoyebang, an online education tutoring provider, which received US$ 750 million funding from FountainVest Partners (private equity firm based in Hong Kong) and Tiger Global Management.

Moreover, mergers and acquisitions are also likely to grow in the near future considering many small players will not have the necessary finances and expertise to revamp their business model to the changing market needs and are likely to merge with or acquired by larger players.

EdTech’s Growth Fueled by Coronavirus by EOS Intelligence

Increased adoption of advanced technology

Short-term rush in additional demand for EdTech solutions brought by COVID-19 is also expected to give headway to increased adoption of advanced digital technologies in the future. Solutions based on technologies such as artificial intelligence (AI), augmented and virtual reality (AR/VR), and blockchain (we wrote about the role of blockchain in virtual education in our article Blockchain Scores Well in the Education Sector) are likely to gain more momentum and be integrated into core education delivery.

It is expected that by 2025 AR/VR market in EdTech will reach US$ 12.6 billion from US$ 1.8 billion in 2019, growing at a CAGR of 38.3%. AI is expected to observe CAGR of 40.29% between 2019 (from US$ 0.8 billion) and 2025 (to US$ 6.1 billion). Other technologies that will see a spike include robotics (expected to grow from US$ 1.3 billion to US$ 3.1 billion during the six-year period) and blockchain being increasingly incorporated into learning processes (expected to grow at a CAGR of 34.8% from US$ 0.1 billion to US$ 0.6 billion).

EOS Perspective

COVID-19 has proved to be a turning point for the EdTech industry and acted as a push for change that was already underway in the education sector. The pandemic downrightly disrupted the education system making online learning an essential part of the way we learn; however, it is unlikely that digital learning will become the new norm. Now, whether e-learning becomes the sole mode of education or blends with physical classes, the EdTech market has growth potential and the investment angle also looks bright.

Whilst a large number of players in EdTech sector were able to capitalize on the need for education during the pandemic, not all digital learning platform providers will stick around. In the long term, players with a clear-product concept and a well-defined monetization policy will emerge winners. They must also be thoughtful of the fact that the unforeseen growth the sector witnessed during the pandemic is only transient and once educational institutes reopen, the demand for online learning is likely to shrink (even if by a small percentage).

In terms of user adoption, EdTech companies saw significant growth by offering free access to their platforms. However, this is not a sustainable strategy that firms can adopt in the long run. Once things get back to normal and the free trials end, companies will need to attune their product pricing and come up with more affordable plans. Nevertheless, emerging on the winning side of the pandemic will not be easy for the players as they walk a very thin line in between offering innovative learning models and meeting market demands, while still being able to generate revenue and remain profitable.

Moreover, while the new users multiplied quickly, retaining them is easier said than done. Emphasis on service quality and overall delivery experience would be crucial to convert current free subscribers into paying customers.

Bearing in mind that the current momentary spike in demand for online tools is not directly proportional to increased business, EdTech companies need to revisit their business strategies to achieve long-term growth. As the competition increases, companies must tweak their commercial business model to adapt to changing customer requirements and to fulfil the need for on-demand educational lessons.

Additionally, the importance of collaborative partnerships with educational institutions (for their need of customized curriculum, creating teaching modules, and courses to train teachers) and corporates (need for upskilling employees on technical competencies) cannot be underestimated. Business models based on such partnerships are likely to open new avenues of revenue generation. This will also negate the per student acquisition cost for EdTech players.

Nevertheless, though the growth path for EdTech sector may have a few roadblocks, in the hindsight, the overall outlook towards the sector’s growth in the near future appears to be optimistic.


Read our other Perspectives on coronavirus here


 

by EOS Intelligence EOS Intelligence No Comments

Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture

1.1kviews

In the first part of our series on agritech in Africa, we took a look into how IT and other technology investments are helping small farmers in Africa. In the second part, we are exploring the impact that potential application of advanced technologies such as blockchain can have on the African agriculture sector.

Blockchain, or distributed ledger technology, is already finding utility across several business sectors including financial, banking, retail, automotive, and aviation industries (click here to read our previous Perspectives on blockchain technology). The technology is finding its way in agriculture too, and has the potential to revolutionize the way farming is done.


This article is the second part of a two-piece coverage focusing on technological advancements in agriculture across the African continent.

Read part one here: Agritech in Africa: Cultivating Opportunities for ICT in Agriculture


State of blockchain implementation in agriculture in Africa

Agricultural sector in Africa has already witnessed the onset of blockchain based solutions being introduced in the market. Existing tech players and emerging start-ups have developed blockchain solutions, such as eMarketplaces, agricultural credit/financing platforms, and crop insurance services. Companies, globally as well as within Africa, are harnessing applications of blockchain to develop innovative solutions targeted at key stakeholders across the food value chain.

Blockchain to promote transparency across agriculture sector

The most common application of blockchain in any industry sector (and not only agriculture) is creating an immutable record of transactions or events, which is particularly helpful in creating a trusted record of land ownership for farmers, who are traditionally dependent on senior village officials to prove their ownership of land.

Since 2017, a Kenyan start-up, Land LayBy has been using an Ethereum-based shared ledger to keep records of land transactions. This offers farmers a trusted and transparent medium to establish land ownership, which can then further be used to obtain credit from banks or alternative financing companies. BanQu and BitLand are other examples of blockchain being used as a proof of land ownership.

This feature of blockchain also enables creation of a transparent environment where companies can trace the production and journey of agricultural products across their supply chain. Transparency across the supply chain helps create trust between farmers and buyers, and the improved visibility of prices further down the value chain also enables farmers to get better value for their produce.

In 2017, US-based Bext360 started a pilot project with US-based Coda Coffee and its Uganda-based coffee export partner, ​​Great​ ​Lakes​ ​Coffee. The company developed a machine to grade and weigh coffee beans deposited to Great Lakes by individual farmers in East Uganda. The device uploads the data on a blockchain-based SaaS solution, which enables users to trace the coffee from its origin to end consumer. The blockchain solution is also used to make payments to the farmers based on the grade of their produce in form of tokens.

In 2017, Amsterdam-based Moyee Coffee also partnered with KrypC, a global blockchain, to create a fully blockchain-traceable coffee. The coffee beans are sourced from individual farmers in Ethiopia, and then roasted within the country, before being exported to the Netherlands.

This transparency can help food companies to isolate the cause of any disease outbreak impacting the food value chain. This also allows consumers can be aware of the source of the ingredients used in their food products.

Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture by EOS Intelligence

Blockchain-based platforms to improve farmer and buyer collaboration

Blockchain can also act as a platform to connect farmers with vendors, food processing, and packaging companies, providing a secure and trusted environment to both buyers and suppliers to transact without the need of a middleman. This also results in elimination of margins that need to be paid to these intermediaries, and helps improve the margins for buyers.

Farmshine, a Kenyan start-up, created a blockchain-based platform to auger trade collaboration among farmers, buyers, and service providers in Kenya. In January 2020, the company also raised USD$250,000 from Gray Matters Capital, to finance its planned future expansion to Malawi.

These blockchain platforms can also be used to connect farmers to other farmers, for activities such as asset or land sharing, resulting in more efficiency in economical farming operations. Blockchain platform can also enable small farmers to lease idle farms from their peers, thereby providing them with access to additional revenue sources, which they would not be able to do traditionally.

AgUnity, an Australian-start-up established in 2016, developed a mobile application which enables farmers to record their produce and transactions over a distributed ledger, offering a trusted and transparent platform to work with co-operatives and third-party buyers. The platform also enables farmers to share farming equipment as per a set schedule to improve overall operational and cost efficiency. In Africa, AgUnity has launched pilot projects in Kenya and Ethiopia, targeted at helping farmers achieve better income for their produce.

A Nigerian start-up, Hello Tractor uses IBM’s blockchain technology to help small farmers in Nigeria, which cannot afford tractors on their own, to lease idle tractors from owners and contractors at affordable prices through a mobile application.

Smart contracts to transform agriculture finance and insurance

Less than 3% of small farmers in sub-Saharan Africa have adequate access to agricultural insurance coverage, which leaves them vulnerable to adverse climatic situations such as droughts.

Smart contracts based on blockchain can also be used to provide crop-insurance, which can be triggered given certain set conditions are met, enabling farmers to secure their farms and family livelihood in case of extreme climatic events such as floods or droughts.

SmartCrop, an Android-based mobile platform, provides affordable crop insurance to more than 20,000 small farms in Ghana, Kenya, and Uganda through blockchain-based smart contracts, which are triggered based on intelligent weather predictions.

Netherlands-based ICS, parent company of Agrics East Africa (which provides farm inputs on credit to small farmers in Kenya and Tanzania) is also exploring a blockchain-wallet based saving product, “drought coins”, which can be encashed by farmers depending on the weather conditions and forecasts.

Tracking of assets (such as land registries) and transactions on the blockchain can also be used to verify the farmers’ history, which can be used by alternative financing companies to offer loans or credits to farmers – e.g. in cases when farmers are not able to get such financing from traditional banks – transforming the banking and financial services available to farmers.

Several African start-ups such as Twiga Foods and Cellulant have tried to explore the use of blockchain technology to offer agriculture financing solutions to small farmers in Africa.

In late 2018, Africa’s leading mobile wallet company, Cellulant, launched Agrikore, a blockchain-based digital-payment, contracting, and marketplace system that connects small farmers with large commercial customers. The company started its operations in Nigeria and is exploring expansion of its business to Kenya.

In 2018, Kenya-based Twiga Foods (that connects farmers to urban retailers in an informal market) partnered with IBM to launch a blockchain-based lending platform which offered loans to small retailers in Kenya to purchase food products from suppliers listed on Twiga platform.


Read our previous Perspective Africa’s Fintech Market Striding into New Product Segments to find out more about innovative fintech products for agriculture and other sectors financing in Africa


And last, but not the least, blockchain or cryptocurrencies can simply be used as a mode of payment with a much lower transaction fee offered by traditional banking institutions.

Improving mobile internet access to boost blockchain implementation

While blockchain has shown potential to transform agriculture in Africa, its implementation is limited by the lack of mobile/internet access and technical know-how among small farmers. As of 2018, mobile internet had penetrated only 23% of the total population in Sub-Saharan Africa.

However, the GSM Association predicts mobile internet penetration to improve significantly over the next five years, to ~39% by 2025. Improved access to internet services is expected to boost the farmers’ ability to interact with the blockchain solutions, thereby increasing development and deployment of more blockchain-based solutions for farmers.

EOS Perspective

Agritech offers an immense opportunity in Africa, and blockchain is likely to be an integral part of this opportunity. Blockchain has already started witnessing implementation in systems providing proof of ownership, platforms for farmer cooperation, and agricultural financing tools.

Unlike Asian and Latin American countries, African markets have shown a relatively positive attitude towards adoption of blockchain, a fact that promises positive environment for development of such solutions.

At the moment, most development in blockchain agritech space is concentrated in Kenya, Nigeria, Uganda, and Ghana. However, there is potential to scale up operations in other countries across Africa as well, and some start-ups have already proved this (e.g. Farmshine was able to secure the necessary financing to expand its presence in Malawi). Other companies can follow suit, however, that would only be possible with the help of further private sector investments.

Still in the nascent stages of development, blockchain solutions face an uncertain future, at least in the short term, and are dependent on external influences to pick up growth they need to impact the agriculture sector significantly. However, once such solutions achieve certain scalability, and become increasingly integrated with other technologies, such as Internet of Things and artificial intelligence, blockchain has the capability of completely transform the way farming is done in Africa.

by EOS Intelligence EOS Intelligence No Comments

Agritech in Africa: Cultivating Opportunities for ICT in Agriculture

862views

Agriculture technologies in Africa have been undergoing significant development over the years, with many tech start-ups innovating information and communications technologies to support agriculture at all levels. While some technologies have been successfully launched, some are in initial stages of becoming a success. Private sector investments have been the key driving factor supporting the development of agriculture technologies in Africa. In the first part of our series on agritech in Africa, we are examine what impact and opportunities arise from the use of these technologies in Africa.

Agriculture plays a significant role in Africa’s economy, contributing 32% to the continent’s GDP and employing 65% of the total work force (as per the World Bank estimates). Nearly 70% of the continent’s population directly depends on agribusiness. Vast majority of farmers work on small scale farms that produce nearly 90% of all agricultural output.


This article is the first part of a two-piece coverage focusing on technological advancements in agriculture across the African continent.

Read part two here: Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture


Agriculture in Africa has been under the pressure of many challenges such as low productivity, lack of knowledge and exposure to new farming techniques, and lack of access to financial support, especially for the small-scale farmers. These challenges are prompting investments in newer technologies to enhance the productivity through smart agriculture techniques.

Lately, there have been an increased use of various technologies in agriculture in Africa, such as Internet of Things (IoT), Open Source Software, Cloud Computing, Artificial Intelligence, Drones/Unmanned Aerial Vehicles (UAVs), and Big Data Analytics. Many tech start-ups have developed solutions targeting various aspects of agriculture, including finance, supply chain, retailing, and even delivering information related to crops and weeds. These solutions are accessible to farmers through front-end devices such as smart phones and tablets, or even SMS.

Agritech in Africa - Cultivating Opportunities for ICT in Agriculture by EOS Intelligence

Start-ups lead agritech development in Africa

Many agritech start-ups in Africa have come up with solutions that have led to a rise in productivity of the farms. Drones have been a breakthrough technology, helping farmers oversee their crops, and manage their farms effectively. Drones use highly focused cameras to capture picture of crops, soil or weeds. This, coupled with big data analytics and Artificial Intelligence (AI), provides insights to farmers, saving their time and effort, while also helping them find potential issues which could impact the productivity of their farms.

There are various agritech start-ups that are developing such drones, and providing them to farmers for rent or lease to analyse their crops and farms. A South African agritech start-up, Aerobotics, offers an end-to-end solution to help farmers manage their farms using drones, through early detection of any crop-related problems, and offering curative measures for the problems using an AI-based analytics platform. The company partners with drone manufacturing companies such as DJI and Micasense to deliver these solutions.

Acquahmeyer, another start-up based in Ghana, also provides drones to its farming customers to help them use a comprehensive approach to apply crop pest control and plant nutrition management for their farms.

Advent of advanced technologies such as IoT is also helping farmers to adopt smart farm management through the use of smart sensors connected in a network. This helps every farmer to get granular details of the crops, soil, farming equipment, or livestock, enabling the farmers to devise appropriate farming approaches.

Kenya-based UjuziKilimo provides solution for analyzing soil characteristics using electronic sensor placed in the ground. This helps farmers with useful real-time insights into soil conditions. The solution further utilizes big data analytics to guide the farmers, by offering insights through SMS on their connected mobile phones or tablets.

Hello Tractor, a Kenyan start-up, provides an IoT solution, through which farmers can have access to affordable tractors which are monitored virtually through a remote asset tracking device on the tractor, sharing data over the Hello Tractor Cloud. Farmers, booking agents, dealers, and tractor owners are connected via IoT. The company is also collaborating with IBM to incorporate artificial intelligence and blockchain to their solutions.

AI has also witnessed a rapid growth in adoption across agriculture sector in Africa. Agrix Tech, based in Cameroon, has developed a mobile application that requires the farmers to capture the picture of diseased crop, which is then analyzed via AI to detect crop diseases, and helps the farmers with treatment solution to save their crops.

AI is also helping Kenyan farmers with the knowledge on planting the right crops at the right time. Tech giant, Capgemini, has teamed up with a Kenyan social enterprise in Kakamega region in Western Kenya to use artificial intelligence to analyze farming data, and then send insights about right time and technique of planting crops to the farmers’ cell phones.

There are other agritech solutions that include mobile applications which use digital platforms such as cloud computing to reach out to farmers, and provide them with apt agriculture solutions. Ghana-based CowTribe offers a mobile USSD-based subscription service which enables livestock farmers to connect with veterinarians for animal vaccines and other livestock healthcare services using cloud-based logistics management system. The company focuses on managing the schedules, and delivering the right service to the livestock farmers, to help them safeguard their animals from any health-related problems.

Several agritech investments are also impacting the financial side of agriculture. Kenya-based Apollo Agriculture provides solutions related to financing, farm inputs, advice insurance and market access through the use of agronomic machine learning, remote sensing, and mobile technology using satellite data and cloud computing.

Another Nigerian start-up Farmcrowdy has developed Nigeria’s first digital agriculture platform that provides financial support to the farmers by allowing those outside the agriculture industry to sponsor individual farms.

Several other agritech start-ups across the continent, such as Ghana-based Farmerline and AgroCenta, and Nigeria-based Kitovu have also launched data-driven mobile application for farmers. These technology solutions are proving to be a boon for agriculture sector in Africa, helping improve the overall efficiency and productivity.

Agritech in Africa - Cultivating Opportunities for ICT in Agriculture by EOS Intelligence

Agritech development is concentrated in Kenya and Nigeria

But, when it comes to first adopting the newest technologies and starting an agritech business in agriculture, Kenya and Nigeria have been leading in the adoption of new agritech solutions, accounting for a significant share of agritech start-up across Africa. Kenya has played a pioneering role in bringing agritech in Africa since 2010-2011, when the first wave of agritech start-ups began to bring new niche innovations. Currently, Kenya accounts for 25% of all the agritech start-ups in Africa, and the development is progressing rapidly, thanks to the country’s advancement in technology, high smartphone penetration, and relatively widespread internet access.

Similarly, Nigeria too has sailed the boat of success in agritech start-ups since 2015, and now it accounts for 23.2% of total agritech start-ups in Africa, with include major players such as Twiga Foods, Apollo Agriculture, Agrikore, and Tulaa. The growing inclination amongst Nigerian farmers towards using digital tools in agriculture sector has further pushed the rapid development in agritech sector in the country.

Other countries have also shown potential for agritech development, though it is still in the initial stages of becoming mainstream in their agriculture sectors. Ghana has encouraged several start-ups to launch different technology innovations for making agriculture more sustainable, while South Africa, Uganda, and Zimbabwe have also witnessed the rise in agritech start-ups over the years with newer technologies for agriculture sector.

Recent investments highlight the agritech potential

The agriculture technologies in Africa got the boost from the increased private funding. According to a report by Disrupt-Africa released in 2018, there has been a total investment of US$19 million in agritech sector since 2016. These investments have largely focused on funding agritech start-ups working on bringing innovative agriculture technologies. Also, according to the same report, the number of agritech start-ups rose by 110% from 2016 to 2018.

Some of the recent investments in the agritech sector include Kenya’s Twiga Foods, a B2B food distribution company, which raised US$30 million from investors led by Goldman Sachs in October 2019. The company aims to set-up a distribution centre in Nairobi to offer better supply chain services, while also expanding to more cities in Kenya, including Mombasa.

In December 2019, Kenya-based agritech start-up Farmshine, also raised US$25 million in funding from US-based Gray Matter’s Capital coLabs (GMC coLabs), to expand its operations in Malawi. GMC coLabs also invested US$1 million in another Kenyan B2B agritech start-up Taimba in July 2019. Taimba provides a mobile-based cashless platform connecting smallholder farmers to urban retailers. The investment was focused on strengthening Taimba’s infrastructure and increase the delivery logistics to cater to new markets.

Cellulant, a leading pan-African digital payments service provider that offers a real-time payment platform to farmers, also raised US$47.5 million from a consortium of investors in May 2018, which is the largest investment in the African tech industry till date. Cellulant also plans to channel a significant portion of funds into its Agrikore subsidiary, an agritech start-up dealing with blockchain based smart-contracting, payments, and marketplace system.

EOS Perspective

African agritech is expected to witness high growth in future. According to a CTA report on Digitalization for Agriculture (D4Ag) published in 2018, digital agriculture solutions are likely to reach 60-100 million smallholder famers, while generating annual revenues of nearly US$320- US$470 million by the end of 2020.

Adoption and use of innovative technologies such as remote sensing, diagnostics, IoT sensors for digitalization of agriculture is steadily moving from experimental stage to full-scale deployment, contributing to the data revolution in agriculture, while also unlocking new business models and opportunities.

Apart from these, blockchain is gaining prominence, and finding applications in the agriculture sector in Africa. This technology has the potential to significantly impact the agriculture sector, which we will discuss in the second part of our series on Agritech in Africa.

However, lack of affordability and knowledge to access such technologies, especially by small-scale farmers, has restricted the growth and reachability of these solutions. With the need to educate farmers and make such technology affordable and viable, it is likely that it may take at least 5-7 years before these technologies become truly mainstream in the continent.

A disparity of investments has been observed among the countries in the region. Over the years, countries such as Kenya, Nigeria, and Ghana have experienced a strong growth in terms of private investments, while other countries are left wanting. Investors have prioritized easy-to-reach markets in Africa, leaving behind the lower-income markets, resulting in agritech becoming less sustainable and scalable in these markets. However, several other African countries have shown the appetite to adopt agritech solutions, and offer significant potential.

This requires an intervention and participation from both governments and private investors, which can help improve scalability of agriculture technologies in the region. Implementation of farming digital literacy, public-private partnerships, and increased private sector investments in agritech enterprises can help the agritech industry experience a consistent and higher success rate, thus bringing the agriculture technology to a mainstream at faster pace.

by EOS Intelligence EOS Intelligence No Comments

Decarbonization of Steel Industry: A Rocky Road Ahead

489views

Continuously rising carbon dioxide (CO2) emission is a leading cause of climate change which is considered to be one of the most pressing issues the world is facing today. Being one of the biggest contributors to CO2 emission, steel industry has garnered wide-spread criticism over the years. Several alternatives to conventional steelmaking process have been developed in an effort to reduce CO2 emission, however, the question is whether the producers of this shining grey alloy are ready to face the challenges in implementation of cleaner technologies.

Steel industry strives to move towards a low-carbon future

Global crude steel production increased from 1,808.6 million tons in 2018 to 1,869.9 million tons in 2019, registering 3.4% year-on-year growth. World Steel Association indicated that, on average for 2018, for every ton of steel produced, 1.82 tons of CO2 were emitted. In the same year, steelmaking accounted for 7% of the total CO2 emissions globally.

UN Paris agreement on climate change, inked in 2015, outlines a global framework to ensure global temperatures do not rise above 2 degrees Celsius compared to pre-industrial levels. To align with the goals set out in the Paris agreement, the steel industry will be required to reduce its CO2 emissions by 65% by 2050, as compared to 2014 emission levels.

Leading steel producers along with other stakeholders in the value chain, including automotive giants, banking and financial institutions, raw materials suppliers, and environmental organizations, came together in 2016 to establish ResponsibleSteel, an initiative to develop global standards and certification program aimed at reducing carbon emission in the steelmaking process and improve sustainability. Besides ArcelorMittal, the biggest steel producer in the world and one of the founding members of the ResponsibleSteel initiative, other steel producers such as Aperam, BlueScope Steel, Outokumpu, VAMA, and Voestalpine have also joined the initiative.

Alternative technologies to reduce CO2 emission at every stage of steelmaking process

Steel is produced either from iron ore or scrap. Conventionally, ore-based steel is produced in blast furnace-basic oxygen furnace (BF-BOF) which is undoubtedly the most carbon-intensive steelmaking process. This is because BF-BOF route uses coking coal as reducing agent as well as source of energy. World Steel Association indicated that, in 2018, coal accounted for about 90% of a BF-BOF’s energy input, while 7% energy input came from electricity, and remaining from natural gas and other sources. Overall, for every ton of steel produced through BF-BOF route, about 2.3 tons of CO2 is emitted.

To reduce CO2 emission in BF-BOF route, it has been proposed to substitute coking coal with biofuel. Biofuel is also carbon-based but it does not contribute to greenhouse gases upon combustion. Hence, its impact on the environment is comparatively lower. By using biofuels in BF-BOF, the CO2 emissions can be almost halved.

Moreover, combining BOF route with Carbon Capture and Storage (CCS) technology can also help to reduce CO2 emission

by almost 60%. CCS technology allows to capture the CO2 emissions pro­duced from the use of fossil fuels in steelmaking process, thus preventing the CO2 from entering the atmosphere. CCS technologies are quite advanced and can be retrofitted with the existing infrastructure used for BF-BOF production processes.

Direct reduced iron (DRI) is another steelmaking technology in which the metal is reduced directly from the ore in solid state without the need to melt it. DRI route generally uses natural gas as reducing agent, which reduces the carbon emission by about 50% as compared to BF-BOF route. About 5% of the global steel production is done through DRI route.

Electric Arc Furnace (EAF) is a dominant technology used to produce recycled steel from scrap. EAF are smaller and less expensive than BF-BOF. Moreover, in case of EAF route, coking coal is not consumed as a reducing agent, and thus the CO2 emission is much lower. Further, as per World Steel Association estimates, in 2018, for EAF route, electricity was the main source of energy accounting for 50% of the total energy input, followed by natural gas which accounted for 38% of energy input. In the same year, coal represented only for 11% of the total energy input for EAF route. EAF emits only about 0.4 ton of CO2 per ton of steel produced. The CO2 emission can be further reduced in the EAF route by using zero-carbon sources for electricity.

There are a few other technologies which are still in the research phase, but have the potential to provide a breakthrough in future. For instance, research is ongoing on use of hydrogen in place of coking coal, as reaction of hydrogen with the iron ore generates water vapor as a by-product instead of CO2. Several leading steel companies including SSAB, ArcelorMittal, and Thyssenkrupp Steel are exploring and conducting feasibility studies to test this new concept. Another technology being explored involves reduction of iron ore through direct electrolysis at temperatures of about 1,600 degrees Celsius. This technology is already being widely used in aluminum production, but it is still in early phase of research for steel production.

Challenges in implementation

Eco-friendly steelmaking process is technically achievable but there are several challenges in implementation at commercial scale. Thus, steel industry lacks the incentive to adopt environment-friendly low-carbon technologies in the current business environment.

Even though a number of alternatives to BF-BOF route have been developed for ore-based steel production, about 95% of the ore-based steel is still being produced through BF-BOF route. The industry has been making constant efforts to make changes and improvement in BF-BOF process with a view to reduce carbon emissions. For instance, the replacing of coking coal with biofuel in BF-BOF route is a mature technology, but feasibility to implement this on large-scale depends on availability of biofuel, which varies from region to region. Thus, countries such as Brazil that have large biofuel resources have commercial-scale biofuel-based BF-BOF steel production, but it is not feasible for countries that do not have sufficient biofuel resources.

Similarly, DRI technology uses mainly natural gas as input and as the natural gas availability varies significantly from region to region, the feasibility of implementing DRI technology depends on the location.

CCS seems to be a promising alternative but it demands a large investment in construction of infrastructure for storage and transportation of CO2. A study released by Global Carbon Capture and Storage Initiative (GCCSI) in 2017 indicated that costs for capturing CO2 from steel furnaces could be estimated around US$65-US$70 per ton of CO2. For steel producers operating on competitive margins, this is a significant cost; thus, they seek strong incentives or policy reforms from their governments to support their investment in CCS. At present, only a handful of countries including, the USA, UK, Canada, Australia, and Denmark have CCS-specific policies and these policies vary significantly from country to country. Since steel is a globally traded commodity, the difference in government policies and framework may impact the competitiveness of the steel producers. Thus, lack of global regulatory framework for CCS is a major barrier in wide-scale implementation of the technology.

Scrap-based steel produced using EAF technology accounts for over one-fourth of the total global steel production and it is less carbon-intensive than ore-based steel. Hence, in order to keep the CO2 emissions in check, it is essential to increase the contribution of scrap-based steel in fulfilling the overall steel demand. But the quality of recycled steel is low compared to primary steel produced directly from iron ore, which makes it unsuitable for some specific applications such as construction. Moreover, steel scrap generally has high copper content which becomes problematic during the recycling process because it causes cracks. Application of such type of recycled steel is extremely limited. In order to give a boost to production of recycled steel over ore-based steel, it is important to overcome these downcycling problems.

Decarbonization of Steel Industry A Rocky Road Ahead by EOS Intelligence

EOS Perspective

While there are several challenges in implementation of alternative technologies in steelmaking process to reduce CO2 emission, steel producers are under pressure to act in wake of rising carbon prices. 86% of the industry’s production comes under the purview of existing or planned carbon pricing markets.

A study published in July 2019 by CDP, a non-profit environmental advocacy group, pointed out that the world’s 20 largest publicly-listed steel companies, which together account for over 30% of the global steel production, could suffer an average loss of 14% if the carbon price rise to US$100 by 2040. The report also indicated that about 60% of the companies have set some target for carbon emission reduction, of which, target of only two companies align with the Paris agreement goals. The 20 companies under study are expected to cumulatively reduce the CO2 emissions by less than 50% by 2050, which is much less than the target of 65% reduction in CO2 emission required to meet the Paris agreement goals. This clearly shows that the steel producers are underprepared to align with the global climate change goals. The need of the hour is to embrace radical technology changes, but high cost, limited resources, and lack of unified and global policy framework are the main barriers disincentivizing the steel industry to move towards low carbon future.

However, with the support of the governments, technology innovators, and other stakeholders, some steel giants are working on several green initiatives to reduce the CO2 emissions. Most pilot projects are concentrated in Europe, as companies in this region are receiving immense support from the European Commission in view of its goal to make EU carbon neutral by 2050. The table highlights key projects undertaken by the leading steel companies to move towards low-carbon future.

Decarbonization of Steel Industry A Rocky Road Ahead - projects by EOS Intelligence

Currency Conversion as on 26 March:
€1 = US$1.10
SEK1 = US$0.10

 

 

by EOS Intelligence EOS Intelligence No Comments

Nigerian Power Woes Cripple Businesses

444views

Achieving efficient generation and distribution of electricity in Nigeria has over the years remained a sore point and a major threat to growth of the economy. Poor electricity supply has serious consequences for the businesses in the country, with several existing companies struggling to maintain profitability and new players shying away from entering the market. The government has undertaken several measures, including transferring majority of the power infrastructure from government to private hands, however, it has not managed to improve the situation. Ambitious policies and agreements with multinational energy companies might just be the key to solve Nigeria’s energy problems.

Nigeria is considered most abundant in natural reserves and is the largest economy in Sub-Saharan Africa. The country has the potential to generate about 11,000-12,000 MW of electric power from existing plants. Despite this, Nigeria is only able to generate about 4,000 MW on most days, which is less than one-third of what is required to provide for its more than 190 million citizens.

According to a 2014 World Bank survey, about 27% of Nigerian businesses identified electricity as the main hurdle in doing business. Also, IMF estimated per capita electricity production in Nigeria to be less than 25% of that of the Sub-Saharan Africa average. The gap between the electricity generation capacity and demand in the country is a result of poorly maintained electricity generation facilities and very little investment in new power plants as well as an outdated transmission and distribution infrastructure.

Government action or lack thereof

Nigeria’s power sector has suffered from mismanagement and corruption for many years. Since Nigeria’s independence from the British rule in 1960, the government set up a heavily subsidized grid, which was subject to high level of corruption and was never able to generate enough profits to finance new power plants or upgrade the transmission and distribution network to meet the needs of the growing population. In addition to its inability to upgrade, the electricity sector suffers from a huge range of issues, ranging from leakages in power transmission and distribution, to lack of maintenance, to theft and vandalism.

In an effort to combat the country’s energy poverty, the government liberalized the power sector in the early 2001 in hope to attract foreign investments. However, the plan didn’t work as expected. Instead, privatization increased corruption as the political members tried to appoint political allies and family members to head the new distribution companies.

According to a 2018 publication by the Istituto Affari Internazionali, an Italian non-profit think tank, Nigeria has been steadily generating 4,000 MW/h since 2005, with no increase in output over the past decade. This is costing the Nigerian economy a great deal as businesses and industries suffer due to regular power outages. Moreover, as per a 2018 estimate by A2EI (a Berlin-based collaborative R&D platform in the solar off-grid industry), Nigerians spend NGN4.3 billion (US$12 million) annually on small gasoline generators, of which NGN2.9 billion (US$ 8 million) is spent on fuel.

Nigerian Power Woes Cripple Businesses by EOS Intelligence

Nigeria’s energy poverty affecting businesses across industries and sizes

Manufacturing and trading industry

Poor electricity supply is affecting the manufacturing industry in an immense way. A typical Nigerian factory experiences power outage or voltage fluctuations approximately eight to ten times a week, with each power outage lasting about two hours. This adds to the cost of production through lost material, damaged products, and restarting the factory equipment. This makes the manufacturing business unattractive to investors since the overhead costs are high, return is low, and the business environment is largely uncertain.

To combat the power issue, companies depend on diesel generators for power backup, however, this significantly adds to the cost of the product, which in turn affects the competitiveness of the business since whatever is produced in the country is more expensive when compared with production costs in other regions.

In addition to electricity shortage, prices and availability of fuel for operating the generators also impact businesses. While small business generators are powered by price-capped gasoline, the larger generators that power big businesses, apartment complexes, and big homes can only be run on diesel, which in turn is volatile with regards to pricing and supply.

According to a market intelligence firm based in Lagos, SBM Intelligence, diesel is among the top three cost heads for many Nigerian firms. Moreover, with the price of diesel also being volatile, many businesses operate with a constant risk of increasing overhead cost, which may result in reduction in output, downsizing, or even business closure. This was seen in May 2015 when Nigeria was hit by fuel scarcity, which caused many traders and businesses to shut shop as they could not afford diesel for their generators.

One business sector most impacted by Nigeria’s energy poverty is the perishable food sector. Nigeria’s fuel scarcity in 2015, caused the loss of approximately NGN10 million (US$27,000) worth of food items. Similarly, as per members of the Ajeromi Frozen Foods Market Association in Lagos, a severe bout of power outage in March 2016 resulted in the decay (and thereby loss) of frozen food worth NGN20 million (US$55,000) in just five days.

Apart from this, small businesses are also severely impacted by Nigeria’s power shortage. Most small shops cannot afford complete generator back up and therefore suffer with limited working hours and sub-par working conditions. For the ones that can afford a generator, the cost of it is very high, squeezing out profits from their already limited setup. For instance, a small tailor shop with a daily income of about NGN4,000 (US$11) spends close to NGN3,000 (US$8.2) daily on fueling their generator to keep the business going, highlighting the disproportionately high cost of electricity to run a small business in the country.

According to a market intelligence firm based in Lagos, SBM Intelligence, diesel is among the top three cost heads for many Nigerian firms. Moreover, with the price of diesel also being volatile, many businesses operate with a constant risk of increasing overhead cost, which may result in reduction in output, downsizing, or even business closure.

Technology sector

Nigeria’s tech industry accords for approximately 14% of the Nigeria’s GDP in 2019 and is poised to be the next frontier for growth. However, constant power outages have become a serious problem for the booming sector. Most tech companies operate around the clock to provide a 24*7 service to their customers, however, in Nigeria, most app companies operate for only 8-9 hours a day as they cannot sustain generator costs for the entire 24 hours. This impacts the quality of service provided.

As per Chris Oyeniyi, owner of a smartphone app called KariGo, electricity cost (including generator cost) on a monthly basis is about US$800 for the bare minimum number of operating hours. The same electricity bill would be around US$100 if the public power grid was dependable. This hampers growth for tech start-ups, which have to allocate significant amount of their funds towards power supply instead of using them for expanding, both in terms of scale and staff.

In an attempt to overcome this challenge, several technology start-ups prefer to work in co-working spaces that allow them to pool their electricity bills. This concept is becoming very popular in the country, however, despite this, generator costs remain very high to provide around the clock services.

In addition to the high costs, technology firms also operate with a constant risk of losing all their digital work (that is not backed up) or hampering important software updates in case of a sudden blackout.

According to a survey of 93 Nigerian tech start-ups by the Center for Global Development conducted in 2019, 57% of start-ups found power outages to be one of the biggest challenges for their business. Moreover, one-third of the firms surveyed reported losing more than 20% of their sales due to power outages.

Other sectors

Just like the manufacturing and technology sector, most of the other industries are also impacted by irregular power supply and thereby rely on large generators to run their operations. This puts additional cost pressures on the business.

In 2019, Temi Popoola, the West Africa chief executive of investment bank Renaissance Capital, stated that diesel accounts for approximately 20-30% of banks’ operating expenses in Nigeria, which is significantly higher compared with other developing countries.

The telecom sector is also vulnerable to the power outages faced by the country. In 2015, MTN, a telecom giant, stated that it spends approximately NGN8 billion (US$22 million) annually on diesel to keep its network online. This is a huge cost and accounts for about 60% of its operating costs. Due to such heavy operating costs, the company is forced to focus more on sustaining its day-to-day activities rather than investing in any other area such as expanding its network.

The road ahead

Currently there does not seem to be any light at the end of the tunnel for Nigeria’s power woes. With high level of corruption paralyzing the sector and limited amount of new private investment, the sector is in a state of limbo.

Moreover, there are constant disagreements between the Nigerian Bulk Electricity Trading Company (NBET) and the private power generating companies, which further impact electricity supply. Recently, in September 2019, another issue came into the light, when NBET directed all thermal electricity generation companies (GenCos) to pay an administrative charge. To oppose this, the GenCos have threatened to shut down power production and supply and argued that there is no policy directive to that effect by the Nigerian Electricity Regulatory Commission (NERC). The two sides have not managed to reach any consensus as of now. However, such additional charges will further put financial pressure on already struggling GenCos, who have largely failed to improve their generation levels due to lack of capital for maintenance and operation. This will further negatively impact the already dismal grid supply levels.

Nigeria is dealing with another legal dispute over a hydro power project with a proposed capacity of 3,050 MW. In 2003, the Nigerian government awarded the build-operate-transfer (BOT) contract to a local company, Sunrise Power and Transmission Company Limited (SPTCL) and followed it up with signing a general project execution agreement with the company in November 2012. However, simultaneously, the government also awarded the bid to execute the hydro project to a JV between China Gezhouba Group Corporation of China (CGGCC) and China Geo-Engineering Group Corporation (CGGC) in 2006.

Moreover, in 2017, it signed another engineering, procurement and construction (EPC) contract with Sinohhydro Corporation of China, CGGCC and CGGC to form a joint venture but excluded SPTCL from the agreement. Following this SPTCL filed a legal suit against the federal government and its Chinese partners at the International Chamber of Commerce (ICC) in Paris for breaching the contract. The government risks approximately US$2.3 million in fines in this legal tussle. Moreover, the Chinese government refused to provide the required funding for the project (US$5.8 billion) until the legal dispute is settled. Thus, the project is on hold until any legal solution is reached.

However, that being said, the Nigerian government is ambitiously trying to revive the country’s electricity sector. In 2017, the government developed a National Renewable Energy and Energy Efficiency Plan, under which it aims to achieve 30,000 MW electricity by 2030, with renewable energy accounting for 30% of the overall energy mix (9,000 MW). The government plans to adopt ‘The Sustainable Energy for All Action Agenda’ (SE4ALL), which is a UN initiative to support sustainable energy in Africa, with targets of 90% Nigerians having access to electricity by 2030.

To this effect, in May 2019, Central Bank of Nigeria announced the disbursement of NGN120.2 billion (US$330 million) to different distribution companies, power generating companies, service providers, and gas companies in order to improve their liquidity situation. Furthermore, in 2018, the government secured a loan of US$485 million from the World Bank to upgrade the country’s electricity transmission network and infrastructure and is currently in talks about a US$2.5 billion additional loan to uplift the power sector.

The government has also signed a six year power deal with the German energy giant Siemens, with an aim to generate a minimum of 25,000 MW of electricity by 2025. As a part of this deal, Siemens will work alongside the Transmission Company of Nigeria to achieve 7,000 MW and 11,000 MW of reliable power supply by 2021 and 2023, respectively. Thus in addition to building new generation capacity, the government is also focusing on improving supply from the existing grids, which has been stagnant at around 4,000 MW over more than a decade.

Moreover, the country’s energy sector is receiving significant support from international bodies such as PowerAfrica, which is a wing of the United States Agency for International Development (USAID). Over the past few years, PowerAfrica has been assisting the government in agreements on solar projects that help Nigeria in diversifying its energy mix. In 2015, PowerAfrica supported Nigeria’s first private IPP Project (the Azura Edo Project) to reach financial close in 2015. It also assisted it in securing a US$50 million investment by the Overseas Private Investment Corporation (OPIC). The Azura plant (the first project initiated by Azura power) became operational in 2018 with 461 MW capacity. It is the first phase of the 1,500 MW IPP (Independent Power Project) facility that is being developed in Nigeria. In December 2019, Africa50 (a pan-Africa infrastructure investment platform) expressed its plans to invest in the Azura power plant.

Growing private investments, international support, and supportive government policies as well as investment may just lift up the Nigerian electricity sector, which has been in dire need for reform over several decades.

In 2017, the Nigerian government developed a National Renewable Energy and Energy Efficiency Plan, under which it aims to achieve 30,000 MW electricity by 2030, with renewable energy accounting for 30% of the overall energy mix (9,000 MW).

EOS Perspective

As per the International Centre for Investigative Reporting (ICIR), the Nigerian government has spent approximately NGN1.164 trillion (US$3.2 billion) on the power sector during 2011-2018 without any significant improvement in energy supply. Poor power supply has been crippling the country for many decades now.

Large businesses, especially in the technology sector, could help boost the economy but like any other business, they require electricity to run successfully. Nigeria lacks the basic business environment at the moment. Moreover, ongoing issues with the private generation players further hamper the sectors growth and performance.

Recently, the government has made several moves in the right direction (especially with regards to investment in renewable energy sources), but it is too early to comment if they could solve Nigeria’s decades-long energy problem. Moreover, the real issue is not about investment levels or government policies, but about the implementation of these initiatives. As seen previously at the time of privatization of the sector, the government failed to uplift the sector as it was plagued by corruption, favoritism, and bureaucracy.

Similarly, the government adopted a policy in 2010 called Vision 20:20, wherein it aimed to be featured in the top 20 economies globally by 2020. Within the power sector, Vision 20:20 aimed to increase generation capacity to 20,000 MW by 2015 and 35,000 MW by 2020. However, it failed to make significant investments or incentivize private players to invest in the sector and failed miserably in its goals. If the same is repeated now, the result will not be very different.

The government’s plans can only be implemented if there is substantial transformation of the entire sector, with the private sector participating equally in the upliftment. The government needs to provide significant financial incentives for new power projects and must also restructure the distribution companies to improve liquidity. Lastly it must counter the corruption and bureaucracy seeped into the sector and ensure that generating companies receive complete and timely cost-reflective tariff from the government. While these measures are difficult to achieve, they are the only way the sector can see any respite in the coming years.

by EOS Intelligence EOS Intelligence No Comments

Blockchain: a Frontline Warrior in Battling Coronavirus Pandemic

SARS-COV-2 has brought the world to a standstill. Technology and its creative uses have been playing a pivotal role in sustaining lives during the pandemic as well as combating the crisis. One such technology that has been in the forefront of the pandemic is blockchain. From mitigating supply chain issues with medicines and protection gear to facilitating transparency in donations to effectively tracking the spread of the virus and protecting patient privacy, blockchain technology is being applied across the spectrum to contain and manage the outbreak.

The current pandemic has brought to light many inefficiencies and limitations of the existing global healthcare systems, wherein governments across the globe are grappling to control the outbreak, challenged by the lack of a unified interconnected and trusted network to share data and track cases. Blockchain has several inherent properties, such as decentralized ledger, transparency, immutability, that make it suitable for handling and managing various aspects of containing the pandemic.

Outbreak tracking

Global health authorities and governments across the globe are having a hard time gathering authentic data regarding tests and patient numbers, hospital beds, recoveries, etc. Currently, most of the data circulating is disparate, and comes from multiple sources, such as hospitals, labs, public, and media, instead of one authorized source. This is extremely damaging since this results in the creation of a great amount of inaccurate and duplicate data, which if trusted, makes the process of tracking and containment both time consuming and ineffective. This is counter-productive to the management of a disease that is as fast spreading as COVID-19.

Blockchain technology can come to play in effectively tackling this issue. Owing to its distributed and immutable nature, blockchain can provide a feasible solution for tracking the outbreak. Blockchain-based apps facilitate organizations across the globe to form a single connected network where data can be shared in real time and securely. Moreover, since data stored in blockchain is immutable, it is protected against unauthorized changes and its distributed nature ensures protection against fraudulent data (since each entry requires consensus algorithms and smart contracts). Lastly, blockchain efficiently manages high volumes of data (as in the cases of the COVID pandemic) in a real time basis, which cannot be managed using human resources.

However, in addition to these factors, the aspect that stands out the most and makes blockchain technology ideal for monitoring and managing outbreak-related information is the level of privacy it offers. People do not wish for their information to be shared publicly or be used for other purposes. Thus it is a challenge to get patients to collaborate with governments and healthcare institutions to share information regarding their condition and wellness. For instance, the Israel government recently permitted healthcare institutions to track citizens’ mobile phones to control the spread of coronavirus. This has raised concerns from human rights organizations as citizens are not comfortable with sharing their personal information.

Since blockchain uses a distributed ledger, which ensures accountability and transparency with regards to access to its stored data, the information shared through blockchain cannot be extracted or misused. Moreover, information stored in a blockchain cannot be hacked. This encourages patients to share information regarding their condition, symptoms, location, and underlying health conditions without fear of the information being misused or shared with any third-party.

Furthermore, information shared by patients in a blockchain network may not only be used for tracking the outbreak but also facilitate health centers study the disease characteristics and patterns to develop treatment and solutions.

For instance, WHO has been using a blockchain-based data streaming platform, called MiPasa, which facilitates the sharing of information amongst need-to-know organizations such as state authorities and health officials. The platform is built on top of Hyperledger Fabric and partners with IBM for blockchain and cloud platforms. The application cross-references siloed location data with health information to track and prevent the spread of the outbreak, all while protecting patient privacy.

In another example, Atlanta-based developer of blockchain-enabled healthcare applications, Acoer, developed an application called HashLog, which allows real time logging and data visualization of the spread of the infection. HashLog provides real-time updates on the spread of the disease by tracking movement of infected people to identify potential outbreaks and prevent further spread. The application uses the Hedera Hashgraph distributed ledger technology and each entry is recorded through a verified hash reference on the ledger, ensuring that the data is correct.

Donations

In addition to tracking and preventing outbreaks, blockchain also plays an important role in securing donations. From hospitals and state authorities with insufficient funds for medical supplies to economically-weaker sections of the populations losing source of income due to lockdown, the current pandemic has displaced a huge number of people across the globe. Thus in such times, donations play a critical role in sustaining livelihoods and providing healthcare supplies to the affected people. However, given fraud associated with donations in recent times, lack of trust is a common factor affecting success of donations. Several individuals want to help and donate, however, are discouraged due to fear of their money being misused.

For instance in India, the government and police warned citizens against several fake relief schemes that have been floating in the name of COVID-19 relief, some even mirroring the Prime Ministers Relief Fund. These kind of activities deter willing people from donating.

Blockchain technology can be used to effectively combat this issue. Since all transactions in blockchain are secure, transparent, and traceable, donors can track their funds and see where they are utilized. This gives confidence to donors that their funds are being used for the exact purpose that they intended.

One such example is Hangzhou-based blockchain startup Hyperchain, which built a blockchain-based donation tracking platform for supporting government and hospitals (such as Tangshan People’s Hospital, Jiayu People’s Hospital and Xiantao No. 1 People’s Hospital) in the donation process. The platform has attracted more than US$2 million in donations.

 

Blockchain a Frontline Warrior in Battling Coronavirus Pandemic by EOS Intelligence

Supply chain tracking

Blockchain technology has been deemed extremely useful in managing and tracing the supply chain in several sectors as retail (for more insights on this read our article Blockchain Paving Its Way into Retail Industry). However, given the current pandemic, the technology can also utilize similar functionalities and play a significant role in tracking of medical supplies.

Given the pace of spread of COVID-19, authorities and healthcare organizations across the globe have faced a shortage of medical supplies, such as masks, sanitizers, PPE kits, ventilators, testing equipment, as well as some medicines. This drastic increase in demand has resulted in distribution of large number of counterfeit and faulty products. Blockchain technology can play a significant role to combat this. Given the data provenance in blockchain and its immutable nature, it is possible to identify and trace back every touchpoint of the medical supplies to ensure its authenticity.

In addition to filtering counterfeit products, blockchain also helps streamline the supply chain process to ensure hospitals and doctors secure timely supplies to treat patients. Blockchain can provide real-time updates regarding demand so that medical manufacturers can adjust production levels accordingly. In addition, it can help fast-track supply chain contracts through the use of smart contracts, and facilitate faster payments, thereby improving the overall efficiency.

In February 2020, China-based AliPay, along with the Zhejiang Provincial Health Commission and the Economy and Information Technology Department, launched a blockchain-based platform to facilitate the tracking of medical supplies required for fighting SARS-COV-2. The platform has improved trust within the medical supply chain since it records and tracks the entire provenance of preventive supplies including masks, gloves, and PPE kits.

Apart from medical supply chain, blockchain can also help limit supply chain disruptions faced by several other industries due to lockdown in several parts of the world. However, companies that are using blockchain for managing their supply chain have an advantage as they have better visibility into their complete supply chain and thereby can identify points of disruption in a timely manner.

Avoiding future pandemics

Blockchain is on the front line for fighting the current pandemic, but it also has the potential to prevent future disease outbreaks. Most of current healthcare surveillance systems across the globe are outdated and lack the required timeliness and efficiency in sharing information with local as well as international health enforcement organizations. Moreover, sometimes there is a question of deliberate delay in sharing of critical information.

To this effect, blockchain-based health surveillance systems can help mitigate future outbreaks. Since they operate on a decentralized ledger, the surveillance data is transparently available to health organizations across the globe in a real-time manner, without the fear of any political disruptions. Timely knowledge of a potential outbreak is the first and most critical step in preventing a similar situation in the future.

In addition to the above mentioned applications, blockchain companies along with institutions are developing creative solutions that help reduce challenges faced by people due to COVID in their day to day living. For instance, Toronto-based blockchain company, Emerge, launched a public safety app called Civitas, which assists the citizens and local authorities across Latin America. This app matches one’s official ID to confidential medical records stored in the blockchain to identify whether the person is allowed to leave the house or not. Thus the app allows police to verify if the person has a travel permission just on the basis of their government ID and without gaining access to the person’s medical records. The app also determines the safest time and day for going out for essentials for people who are experiencing COVID-like symptoms.

Moreover, as discussed in our previous article (Blockchain Scores Well in the Education Sector) blockchain also is extremely useful in the virtual education scenario, which is now the new way of schooling for large part of students across the globe.

EOS Perspective

Blockchain technology has several inherent properties that make it ideal for helping to manage and combat the current pandemic. Its decentralized, traceable, and immutable properties make is especially desirable for managing contact tracing and outbreak tracking, which are critical in handling a pandemic efficiently. Moreover, the benefits of blockchain are further amplified when used alongside other technologies, such as artificial intelligence, cloud computing, and big data.

However, despite its several uses, the issue of scalability plagues blockchain adaption at a larger scale. Blockchain is still a nascent technology and lacks high-level scalability. With COVID affecting most of the world, the current blockchain companies do not have that level of scalability to provide all-encompassing global level solutions.

Furthermore, blockchain technology does not operate alone and it needs to be configured with the operating legacy system at companies and other stakeholders. However, most legacy systems are relatively old and therefore do not support blockchain technology. Updating or reconfiguring a legacy system is a tedious process (both in terms of time and money) and companies may not want to tie up resources for that at the current time.

Given these drawbacks, blockchain may not be deployed at a global-scale level during this pandemic, however, its inherent benefits have made companies, authorities, and global health organizations ponder, explore, and evaluate its potential in managing such situations in the future. While the COVID-19 pandemic has caught the world largely unprepared, organizations and companies across the globe are gearing up to ensure this history is not repeated and blockchain technology has emerged as a critical part of the solution.

Top