Implementing a Productive Use Grant Scheme in Uganda
Implementing a Productive Use Grant Scheme for Grain Millers in Uganda
In support of the KfW/EU-funded grid extension in the West Nile region of Uganda, GIZ has undertaken a set of activities for mobilizing households, social institutions and SMEs for getting connected to electricity. Through this support consumers should be enabled to tap the various benefits of electricity usage and furthermore contribute to the long-term economic viability of the new grid infrastructure. This GIZ project was called "Electricity Access Impact Maximization" project and received funding through the KfW/EU grid extension fund.
E-AIM and Productive Use
Obviously, productive use aspects could not be left out here. This is why E-AIM raised general awareness on productive use of electricity (PUE) on the ground and conducted PUE trainings and coaching sessions in twelve trading centres along the new grid lines.
Furthermore, a PUE grant scheme was designed in order to encourage the usage of very economic but also cost-intensive electric appliances in the highly active local milling sector. The scheme should provide a 60% subsidy to grain mills and maize/rice hullers of different performance levels (15, 20 and 30 horse powers).
Funds were limited to 30.000 EUR and regarded to be sufficient for creating exemplary electric milling showcases dispatched all over the region, hence stimulating the adoption of electric milling by other millers.
How the PUE Grant Scheme was Implemented
Identification and Mapping of Millers and Milling Sites
Interested millers were identified, informed about the grant scheme and then pre-selected to a group of approximately 30 potential beneficiaries.
Pre-selection criteria were set in order to obtain a higher probability of participation and minimize the risk of abuse of the grant scheme. Therefore, the milling business should feature
- a fixed location within reach of a three-phase connection option, that would not overstretch the respective transformer capacity. This was cross-checked by the local electricity supplier.
- an economic track record and business plan for their existing business
- a business license and preferably also a Tax Identification Number (TIN)
- a solid physical business structure in place (covered, orderly workshop)
Organizing "Millers Seminars"
As next step, the pre-selected millers were invited to "millers seminars", where GIZ presented the PUE grant scheme and the milling systems in detail. In addition the local electricity supplier walked them through a cost-benefit analysis for changing from diesel to electricity-driven systems. Equally important, the technicalities of three-phase connections and appliances were discussed with the participants
Millers signed a cost-sharing agreement and deposited their 40% contribution. The cost-share agreements specified the type of equipment to be ordered, list price as well as terms&conditions of participation and payments.
The beneficiaries and their orders were treated on a first-come-first-serve base. The procurement process was only launched, once the beneficiary deposited his/her contribution completely.
Procurement, Delivery and Installation
GIZ procured, delivered and installed the milling equipment via a qualified supplier. Occasional calls of the millers were done after delivery for receiving information about functionality and savings that arise from using the electric mills and hullers.
In total, 18 electric mills and hullers where delivered and installed at 13 different milling sites in the project area.
Challenges During Implementation
- millers were initially hesitant to join the scheme, as electricity supply situation was not the best in the beginning of its implementation.
- temporary lack of funds due to seasonal reasons (waiting for harvesting seasons) delayed the payment of contributions by the beneficiaries. Few millers got hold of micro-loans.
Positive Aspects During Implementation
- Once first-movers got their systems delivered and installed, many others followed immediately, exhausting the budget within two months.
- Good cooperation with the local electricity supplier, who could provide valuable technical extra-information to the millers.
Recommendations for Similar Undertakings
- Take into account cash-flow problems of beneficiary in await of the harvesting season. School fee payment is a recurrent cost factor too.
- The 60% cost take-over by GIZ E-AIM was on the higher end - could also be reduced in other cases.
- A micro-loan-scheme developed alongside this activity and in cooperation with local microfinance-institutions would further increase the ability of beneficiaries to raise their contribution.
- If economically reasonable, concentrate search for PUE equipment suppliers in the area of intervention. This enables PUE beneficiaries to walk into the stores and inspect the equipment in person before deciding to join such a scheme.
- Highligh limited liability of GIZ regarding damages that are not covered by the warranty/guarantee of the supplier. This should be explicitely mentioned in the joint purchase agreement.
- If possible, choose a supplier that provides guarantee on equipment and not only servicing warranty. Guarantee on equipment is difficult to get in some countries (e.g. in Uganda), but would be worth considering.
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