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Wednesday, February 26, 2014

Power Sector Opportunities For SMEs– Lessons from Telecommunications Deregulation by Bukky Imoyo

Introducing Bukky Imoyo, our guest blogger for today; She shares insights on how SMEs can tap into the opportunities in the power sector.


About 15 years ago, the likes of MTN took the risk and paid huge, (what some referred to at that time, as overvalued) sums for GSM licenses in Nigeria. Today, the rest history. The risk paid off not just for the initial investors but many others. The hitherto dead industry took flight on a scale that was unprecedented in Nigerian history and unimaginable at the time.

Let’s just think about it, the industry has birthed all sorts of service providers to the telcos, recharge card sellers, trade partners, mobile phone sellers and repairers, bulk SMS businesses. The list is endless. It has also provided access and opportunities in other sectors like banking through mobile banking and we are yet to see the end of value added services in telecoms.

Since we are always told to learn from history, the question is “What can we copy from that experience to our newly deregulated power sector? What are the opportunities for an SME in this sector? In my opinion, here are a few that small businesses should be thinking about.

Scratch / Recharge Cards: Nigerians are very comfortable with recharge cards. It is strongly believed that Distribution Companies (DISCOs) may go this route eventually. Postpaid billing which requires meter reading and generation of bills, often leading to unpaid bills, dispute over bills, and other time and money wasting effort, will definitely be a thing of the past. Given the huge amounts sunk into and still to be sunk into the power sector in the nearest future, no operator would wait to collect his money after providing services. Though electricity credit which is currently bought at former PHCN offices and at agents and are tied to specific meters, the scratch card model will eventually hold sway because power is required on the go. Consumers must be able to top up even at 10 pm in the night. This is possible through readily available scratch cards. Scratch card printing and selling are services that can easily be outsourced to small enterprises. There won’t be tolerance for the days of no MTN scratch cards because there will be competition.

Branding, Marketing & Communications: I recently read that operators will not be focusing on Marketing/Communications in the nearest future. The thinking is that power is a necessity that we have all been deprived of for so long. Since distribution is also localised to a particular area it is thought that all consumers around the area can have only one provider. Therefore, it is believed that consumers will always be available in abundance and no marketing per se will be required. While this thinking may be true for some time, eventually, the competition will become intense and the war will be fought via marketing communications. The truth is that competition, no matter how minimal is an integral part of a deregulated market. Also, National Integrated Power Project (NIPPs) and other private independent power projects will spring up all over the landscape. So, while there will always be consumers for electricity, they will not always be shackled to one provider. In the end, we may see a scramble for consumers and the media will be a key vehicle to use to woo consumers. We all know how our advertising landscape has been taken over by the telcos.

Meter Sales & Installation: This is a lesson from the DSTV model. Recent publication of the Federal Ministry of Power released recently shows that about 25 million Nigerians still require prepaid meters. These meters are the only conduit for DISCOs to secure payment. While the DISCOs are busy with their core business, which is distribution of power, meter sales and installation will be an opportunity for SMEs. Even if capital constraints make it difficult for an SME to sell meters, installation is definitely a low cost, low entry barrier business.

Sundry Services: Like every other business, the DISCOs and Generating Companies (GENCOs) will require a myriad of services. Of course, technical services will require technical expertise and all the big boys that invested in the companies will get a large chunk of the contract for technical services, but what about the non-technical services? For instance security and surveillance of assets, whether manual or automated, will be required as well as asset auditing and revalidation especially in the remote parts of Nigeria. I understand that there is currently an urgent need for people to help clear bushes and grass in order to create access to some assets.

Link to ICT: I haven’t quite worked this out but I believe there must be a link between ICT and the Power Sector, which can lead to big businesses. Consumers of power will definitely have GSM lines. What is the connection? Electronic recharges, customer interaction via the phone, social media, etc. Also, utility providers have always been carriers of big data including customer details. Somehow, all this data can be used to create some business for power sector operators and you. Figure it out and let me know.

I believe the opportunities are endless. Let us tap into it.

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