Challenges and Recommendations for the Private Sector in the Clean Cooking Market in Mozambique

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Challenges for the Private Sector

The main challenges for private sector when entering the clean cooking market are majorly related to a business environment and has a large room for improvement. Some of the challenges are highlighted below:

Weak demand from end-users: A weak demand is mostly due to two reasons. The first one is a lack of information and knowledge about ICS stoves and their benefits. Appropriate promotion of ICS depending on the location, income and cooking needs of the population still remains a challenge. The second one is due to lack of affordability of the potential consumers. While people living in urban and peri-urban areas could afford ICS with a support mechanism, such as PAYGO; the poorest population in rural areas still struggle to afford a cookstove. ICS is also perceived more positively in urban areas due to the cost saving effects from reduced fuel usage as compared to rural areas where firewood is collected at no cost.

Impact of donated and subsidised stoves in the market: Donations and subsidies lacking fitting business models for the stoves may cause market distortion. Additionally, without an appropriate market analysis, the introduction of a new subsidised ICS in a community where there is already an existing ICS in the market, could impact the market development.  Secondly, the ICS introduced to a specific location do not always fit to the household conditions, the dietary needs of the population or their household size, impacting the perception of ICS. Thus, a coordinated effort between the donor programmes is required for joint collaboration towards ICS market development.

Lack of clear policy framework: Policy strategies need a clear and straightforward focus on ICS markets. Existing policies direct their focus on general energy access support or an adjacent component for the market, such as ECUSEB’s focus on the market for biomass itself, but not particularly for ICS.

Quality in manufacturing and maintenance: Insufficient quality standards and maintenance support causes low customer confidence in ICS products. For e.g guarantees/warranties and can range from 3 months to 3 years, depending on who is supplying the stoves and where it is manufacture. A lack of locally available qualified workforce as well as a lack of established and accessible industry standards and certification systems weakens the quality of the end-product.

Keeping competitive and affordable prices: Several factors hinder the possibility make ICS affordable. One of them are the unfavourable import duties and high VAT imposed on clean cooking technology. On average, cooking appliances including appliances for solid fuel pay an import tariff of 20% and cookstoves pay a tariff of 7.5% when imported from countries outside Southern African Development Countries (SADC). Another factor is the high cost for transportation, due to the dispersity of rural population. Finally, a lack of a sustainable value chain causes manufactured units to be produced at a slow rate, thus wasting resources and increasing production costs.

Financing for private sector: There is little awareness about ICS among financial institutions and thus, they are not interested in funding ICS companies. Hence, the financing opportunities are limited to donor funded donor subsidies and programmes. KfW/BoM offers energy credit lines but the requirements are too high and stringent such that even bigger ICS companies do not quality for it.

Covid related impacts: Covid-19 has disrupted the global supply chain and reduced the purchasing power of customers worldwide. There are many restrictions related to people's movement and this greatly hampers the sales of cookstoves for which market demonstration is key.

Conclusion and Recommendations

The introduction of ICS to the market requires business models tailored to the needs of the targeted consumers for sustainable market penetration and development. Additionally, a strong market penetration could be supported by the following considerations. First of all, introducing ICS that is well suited to the local context (in terms of households’ fuel choice, food preference and ability/willingness to pay). Second, marketing and awareness campaigns should be tailored to the end-user. For rural households, community meetings, by door-to-door visits and ICS demonstration in market place is very effective; for urban population with a higher access rate to communication technology, radio and television advertisement can ensure larger reach. In both cases, it is essential to offer training and clear instructions on the use and maintenance of the ICS. Having repair and maintenance centres nearby also increases the continuous use of the ICS as it enables easy repair and maintenance.

One of the most important priorities in the ICS sector is the improvement of the policy framework. One recommendation is the inclusion of ICS technologies in the ECUSEB and other policy strategies, to ensure the creation and continuation of a sustainable ICS market. Other Research and Development (R&D) facilities, such as the BECT, are needed to drive local production and to ensure quality by using recognised standards. These facilities need to be consulted and taken into account while writing new reforms and policies.

Since the sector is still as an early stage and is greatly impacted by the ongoing COVID crisis, there is a need for innovative funding programmes such as carbon credits and RBF. Companies such as Carbonsink and Mozcarbon are already exploring carbon financing where the customers received a subsidised stoves and transfer their carbon credits back to the companies. The companies then sell the carbon credits to third parties. However, the process of applying for carbon credits is quite complex and smaller cookstoves companies would need more assistance/capacity building to quality for carbon financing. Energy programmes such as EnDev and BRILHO are offering RBF funding to cookstoves companies which has helped many companies to reach customers in rural Mozambique who otherwise would not be able to afford the stoves. Also, during the peak Covid impact (in 2021), there were also many financial support programmes like COVID+ from GIZ Endev which were crucial to keep many stove companies afloat.

Along with appropriate financing, exception from import duties and VAT is also needed to accelerate the sector.

For the end-user side, innovation financing like PAYGO or buying in installment offers financial flexibility. Many stove producers such as MozCarbon, Pamoja, Carbonsink have already been offering cookstoves on installments to their end consumers.

Further Information

• Energy Access Situation in Mozambique
• ICS in Mozambique: Market Landscape
• ICS in Mozambique: Market Size
• ICS in Mozambique: Consumer Insights
• Webinar: Clean Cooking in Mozambique: Market Status and Opportunities for Private Sector
• Case studies from the sector
  • Carbonsink Moçambique Lda
  • KULIMA, Boane
  • KULIMA, Moamba
  • Mozambique Carbon Intiatives LDA
  • Pamoja Mocambique LDA