Support for SMEs can help tackle the most pressing development challenges

Gaia News | 05.11.2019

Small and medium-sized enterprises have an ever-increasing role in the global south. Businesses make the much-needed innovations, improve people’s access to basic services and products, create jobs and contribute to equitable economic growth. Clean cooking business in Africa is an example of a sector that can significantly contribute to some of the most urgent development challenges the world is facing. However, they cannot do it alone.

One of the questions of fate when it comes to mitigating climate change while promoting gender equality in the global south, is cooking. In Sub-Saharan Africa, a significant majority of people still cooks with firewood and charcoal. The impacts are multidimensional. Cooking contributes to deforestation while generating smoke that harms health, not to mention the gender aspect – it is often the girls and women who collect the firewood and cook with charcoal.

“Despite of policymakers’ efforts, the use of charcoal has only continued to increase. With the fast-growing and urbanizing population in Africa, demand for sustainable cooking solutions will also continue to increase. Thanks to existing efforts such as consumer incentive schemes or funding for pilots, there are potential solutions that with the right kind of support can be scaled up to create lasting impacts,” says Pasi Rinne, Chairman of the Board at Gaia.

Despite for the huge demand for cleaner fuels and technologies, a widespread rollout of clean cooking solutions is still lacking in Africa. Culture and habits, high costs of cleaner fuels and new technologies and uncertainty related to their availability are just some of the barriers that consistently hinder development. There is a need for increased efforts on awareness raising, supporting policies and sustainable business development. Importantly, businesses providing the most viable alternatives to the unsustainable use of charcoal need access to affordable funding.

The issue of clean cooking is a great example of a complex development problem that requires new approaches and cross-sectoral partnerships. While private businesses have an important role in the development of the sector, they are often limited in their capacity and require support from development partners. Addressing the existing market gaps requires that donors step up their efforts and improve their capabilities in supporting sustainable business development.

Over the years, Gaia has supported the EU Delegation in Tanzania in developing a results-based financing mechanism for the local clean cooking sector. Most recently, Gaia worked with the EU Delegation in structuring a thematic trust fund that focuses on clean cooking. The Fund aims to increase access to clean cooking solutions, while promoting employment of men and women across the value chain. It targets to enhance availability and affordability of clean cooking solutions in the urban areas of Tanzania.

“What the businesses in Tanzania need is a long-term partner on their journey towards sustainability. In addition to strong commitment from the private sector, this requires inputs and expertise from donors and the government. With carefully designed support, companies can create positive impacts that last longer than any development project. It is great donors have raised this issue and are prepared to support private sector development instead of mere financing for projects,” says Paula Tommila, Senior Advisor at Gaia.

A measure of the EU plan’s success ultimately lies in its ability to provide growth financing for companies that provide the best clean cooking solutions. Ideally, the fund succeeds in producing a pipeline of bankable projects. This means that after graduating, the projects become either self-sufficient or eligible for additional commercial or semi-commercial financing.

In order to succeed, the fund needs to support projects with not only high impact potential but with real potential for commercial viability and long-term sustainability. It is only by acting this way that the Fund will succeed in bringing about lasting changes and positive impacts.

 

MORE INFORMATION

  • Pasi Rinne, Chairman of Gaia Group, Partner, firstname.lastname@gaia.fi
  • Paula Tommila, Senior Advisor, firstname.lastname@gaia.fi