Challenges and recommendations for the private energy sector 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 and income 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 their own ICS with a support mechanism, such as PAYGO; the poorest population in rural areas still struggle to afford a cookstove. ICS are also perceived more positively in urban areas due to the cost saving effects from recued 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 maintenance support causes low customer confidence in ICS products. 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, and the possibilities to keep ICS at a low price.

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 credit lines for energy but the requirements are too high and stringent such that even bigger ICS companies do not quality for it.

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 adaptability of 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.

Further Information

• Mozambique- Country Information
• Mozambique Electricity Situation

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