Solar Powered Irrigation
Business Model Description
Construct and maintain solar powered irrigation systems for farmers in order to increase the length of the growing season and improve productivity and income. The target group is mostly agricultural processors who would provide the systems to farmers in order to secure and improve their supply and thus generate revenue, but farmers could potentially buy their own systems as well if they had access to microloans or could get the systems on a pay as you go basis or similar.
Expected Impact
Increase farmer productivity and income, mitigate against the negative impacts of climate change, and achieve a positive result on renewable energy availability within the country.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Sierra Leone: Countrywide
Sector Classification
Food and Beverage
Development need
Food security is a significant challenge in the country with 25-50% of the population facing some level of food insecurity (1). Despite the availability of fertile arable land, 75% remains uncultivated, and the country relies heavily (80% of foodstuffs consumed) on import (2). Farmers suffer from low yield and high cost of transport, as well as lack of access to financing. At the same time, agriculture is a critical part of the economy - providing many jobs and the largest portion of GDP (3). The fishery industry also suffers from overfishing, and illegal, unreported, and unregulated (“IUU”) fishing particularly by foreign fleets leading to sustainability challenges (4).
Policy priority
Food security and agriculture are a major focus for the government. Improvements have been made by development partners, national policies, and Apex Bank. The stated objective in the Mid Term National Development Plan includes policy interventions for improving financial access, better inputs, improved mechanization, promotion of research, and others (3). Environmental protection and sustainability are also considered. The Ministry of Agriculture and Forestry is focused on rice self-sufficiency, livestock development, crop diversification, and forestry management from a policy level.
Gender inequalities and marginalization issues
While women are proportionally more employed in agriculture, and there was a recent positive development with land reform so that women can now own land (5), there are significant inequalities in the value chain of higher value agricultural activities and women overall benefit less economically from this sector while also facing more challenges, such as lack of access to information and resources (6). Women are also more affected by malnutrition compared to men (6). In addition, agriculture is a major focus for all regions of Sierra Leone apart from the urban Freetown - which is far more developed than other regions. Rural areas are more marginalised overall with respect to food security, employment and health outcomes, despite being the main places where agricultural activities take place.
Investment opportunities introduction
Improving productivity and commercialization of the agricultural sector is a priority. The Agricultural Transformation Strategy plans to double production of rice, forestry, and livestock, as well as to increase the budgetary allocation to 10% to align with the Maputo Accord and attract external investment. Furthermore, in 2021 several policy shifts were announced by the Ministry of Agriculture and Forestry, aimed at increasing land under cultivation and improving yields through measures such as establishing a US$10 million agriculture credit fund to expand access to finance; e-wallet input delivery; mechanization promotion including through establishment of machine ring centers; and addition of e-extension services. The main opportunities seem to be in value added activities in processing, as well as various technological and mechanisation support activities to improve efficiency, yields, transport, market access and so forth (3).
Key bottlenecks introduction
Farmers suffer from low yield and high cost of transport, as well as lack of access to financing and insurance services. There is a low level of mechanisation and access to tools and equipment, such as irrigation (3). There have also been challenges with land ownership, especially for women (6). The fisheries industry also has a lack of infrastructure and value chain development (4). In terms of agro-processing, the level is low in the country, and there are only a few successful examples (3).
Food and Agriculture
Development need
Agriculture faces many challenges, including lack of mechanization and a high cost of production, lack of access to finance and insurance services, and lack of adequate storage facilities and processing, leading to more post-harvest losses. There is also a lack of access to improved seed, and the linkages between the manufacturing sector and primary sectors, such as agriculture, have been weak (3).
Policy priority
Agriculture is clearly stated as a major priority for the government in the Mid Term National Development Plan (3). In addition, the National Agricultural Transformation Strategy 2019-2023 includes more detailed plans, such as to double production of key crops (7). The Ministry plans for capacity building as well as a USD 10 million agriculture fund (3). There is also significant development agency support, such as from the FAO (8). The Government of Sierra Leone, through the Ministry of Trade and Industry (MTI), is implementing the Sierra Leone Agro-Processing Competitiveness Project with financing from the International Development Association (IDA) of the World Bank Group.
Agricultural Products
Pipeline Opportunity
Solar Powered Irrigation
Construct and maintain solar powered irrigation systems for farmers in order to increase the length of the growing season and improve productivity and income. The target group is mostly agricultural processors who would provide the systems to farmers in order to secure and improve their supply and thus generate revenue, but farmers could potentially buy their own systems as well if they had access to microloans or could get the systems on a pay as you go basis or similar.
Business Case
Market Size and Environment
> USD 1 billion
Sierra Leone has approximately 5.8 million smallholder farmers, constituting 70% of the population, with minimal existing irrigation penetration.
Considering that the overall GDP of Sierra Leone is approximately 4 billion USD (10) and approximately 60% of that is agriculture (3), the approximate size of the agriculture market overall is around 2.4 billion USD. Since 67% of the total agriculture value is crops, the crop market is roughly 1.6 billion USD in value. Solar irrigation could be used by Sierra Leone's 5.8 million smallholder farmers with minimal existing irrigation potential (9) at scale, thus potentially accessing the entire agriculture market.
The global solar water pump market was estimated at USD 2.38 billion USD by Power for All (13).
Indicative Return
15% - 20%
Although data from Sierra Leone itself is limited with respect to solar irrigation investments, due to the nascent nature of the ecosystem, information from other Sub-Saharan African countries shows a case for IRRs of 20-50% (11, 12).
Data from investments in Sierra Leone and nearby countries in PayGo as well as solar pumps show IRRs at ranges of 9 to over 30% (15). Additionally, the blended cost of borrowing for a typical PayGo company in Africa is often as high as 18% or more (14).
Investment Timeframe
Medium Term (5–10 years)
Although Sierra Leone specific data is limited, data from similar contexts shows that returns have been created in as little as 2 years at individual farmer level (11) while at the startup / facilitator level these have been mostly in the 5-10 year range for a range of solar investments (15), including in the Sierra Leone context although not for this exact model.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - Volatile
Impact Case
Sustainable Development Need
70% of households in Sierra Leone are farming households, with 40% of households getting at least 30% of their total income from farming. Farmer income figures are limited but the median household income in Sierra Leone is USD 765, and farmers have the lowest incomes on average (15).
Farmers' livelihoods are particularly vulnerable to changes in rainfall due to climate change (4) and irrigation is underdeveloped in Sierra Leone (3), including since high upfront costs can be prohibitive (16).
The generation of clean energy in Sierra Leone is currently limited at 30% (3).
Gender & Marginalisation
Women in Sierra Leone are more often the farmers, yet see less financial gain, and also suffer disproportionally from malnutrition (6).
Expected Development Outcome
Solar powered irrigation can lead to increased crop rotations and yields that improve agricultural productivity by 30-50% (12, 17, 20).
Solar powered irrigation through deferred payment models such as PAYGO and lease-to-own can reduce cost barriers for farmers looking to add solar irrigation capacity to their farming operations (12, 16). It can also help mitigate the impacts of climate change directly through predictable water supply as well as indirectly, though not relying on diesel powered irrigation.
Solar powered irrigation increases the overall supply of clean energy in Sierra Leone, and in the future farmers could potentially sell spare capacity back into the grid or use it for other purposes and household power needs (21, 22).
Gender & Marginalisation
Primary SDGs addressed
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.1.1 Prevalence of undernourishment
National average income is USD 1,004 USD while median income is USD 765 in 2023 (23).
In 2020, the prevalence of undernourishment in Sierra Leone was 27% (30)
N/A
N/A
7.2.1 Renewable energy share in the total final energy consumption
The percentage of clean energy production is 30% (3).
According to the Medium Term National Development Plan, the government targets to increase the country’s capacity for renewable energy (solar and hydro) contribution to 65% by 2023 from the current 30% level (3).
9.4.1 CO2 emission per unit of value added
Sierra Leone emitted 1.3 million tonnes of CO2 in 2021 (31), while its GDP in 2021 was 4.25 billion USD (32), resulting in a CO2 emission per unit value of 0.000306.
Sierra Leone is targeting a 10% reduction in GHG emissions by 2030, and 25% by 2050 (4).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Outcome Risks
Improper management of water sources for irrigation can lead to challenges with water depletion, especially as concerns groundwater (24). However, it should be noted that Sierra Leone has abundant surface water sources, which should help mitigate this risk (28).
If not managed well, irrigation schemes have been shown to have negative impacts on inequality as women have less access to water, information and credit (24).
Impact Risks
Lack of proper ownership and training of the solar irrigation systems may result in improper maintenance and lack of sustainable use and results (16).
Poor access to replacement parts may result in solar irrigation systems stopping working (20).
If other agricultural productivity constraints are not addressed, such as limited training, poor infrastructure, limited inputs, and so forth, the benefits of irrigation alone may be limited.
Impact Classification
What
Solar powered irrigation, especially via deferred payment approaches, can result in increased farmer productivity and income, as well as mitigation against the negative impacts of climate change, and a positive result on renewable energy availability.
Who
Smallholder farmers and the communities they live in benefit from improved incomes, food security and reduced negative impacts of climate change.
Risk
Failing to plan for proper training and maintenance may limit the usefulness and sustainability of solar irrigation systems. In addition, if other productivity constraints are not addressed, impact may be limited.
Contribution
Solar irrigation has a net positive benefit on two sectors at the same time - namely both agriculture and renewable energy - helping both develop with resulting positive economic benefits.
Impact Thesis
Increase farmer productivity and income, mitigate against the negative impacts of climate change, and achieve a positive result on renewable energy availability within the country.
Enabling Environment
Policy Environment
Medium Term National Development Plan (2019) (3) has both agriculture and energy as key policy areas. Within agriculture, there is mention of development of agricultural value chains as well as mechanisation and value chain improvements more broadly. For energy, there are targets to increase the country’s capacity for renewable energy.
National Agricultural Transformation Strategy 2019-2023 (7) plans to put agriculture at the centre of economic development and improve value chains and supporting mechanisation and technology.
Renewable Energy Policy (2016) (38) and National Energy Strategic Plan (2009) (39) have objectives to increase access to modern energy supplies in off-grid areas for reduction of poverty. They also prioritize small-scale decentralized solar power supplies to meet the basic needs of lighting, refrigeration and media and information technology in rural areas, and calls for the development of a strategy, plan and mechanisms for rural electrification.
Financial Environment
Financial incentives: The renewable sector in Sierra Leone is heavily supported by donors. Several grants are available to invest in alternative energy in Africa: The Sustainable Energy Fund for Africa (SEFA) is a multi-donor fund managed by AfDB that provides catalytic finance to unlock private sector investments in renewable energy and energy efficiency (including in green power systems that shift away from fossil fuel based power, such as irrigation normally would be) (35). The GEF Small Grants Programme also supports various solar projects, and has already funded a solar drip irrigation project in Sierra Leone (36).
Financial incentives: The Apex Bank and its Community Banks established in key rural areas targets smallholder farming groups, and micro and small-scale entrepreneurs, including women and youths, for financing (34). This is part of the IFAD supported Rural Finance and Community Improvement programme and helps ensure better access to finance for farmers including for mechanisation elements such as solar irrigation. Many other international grants and funds are focused on agriculture in Sierra Leone, with a key example relevant to solar irrigation being that of the Smallholder Commercialization and Agribusiness Development Project (SCADeP) run by GoSL but supported by World Bank (37).
Regulatory Environment
Sierra Leone’s Income Tax and Finance Acts include income tax exemptions from import duty on farm machinery, which solar irrigation systems are (33).
The National Water Resources Management Law 2017 introduced regulatory controls over water activities, in order to promote sustainable use of Sierra Leone’s water environment (including springs, streams, rivers, estuaries and groundwater resources) (40).
The Finance Act 2017 provides duty exemptions on the importation of solar equipment that meets International Electrotechnical Commission (IEC) standards (27). Finance Act of 2022 added the supply of solar power to the list of Goods and Services Tax zero-rated supplies. (28).
Marketplace Participants
Private Sector
Auto Smart Irrigation, Aptech Africa, Solar Era Holdings, Easy Solar.
Government
Ministry of Agriculture and Forestry, Ministry of Trade and Industry, Ministry of Labour and Social Security, Ministry of Lands, Country Planning and Environment, Ministry of Finance and Economic Development, Ministry of Energy, The Electricity and Water Regulatory Commission, Environmental Protection Agency.
Multilaterals
World Bank, Sustainable Energy for All, European Union (EU), UNOPS, African Union Development Agency, International Water Management Institute.
Non-Profit
Foreign, Commonwealth and Development Office (UK), Africa Clean Energy Technical Assistance Facility, Deutsche Gesellschaft für Internationale Zusammenarbeit / Energising Development, Millennium Challenge Corporation (US), Welthungerhilfe, Barefoot College, Oxfam, Njala University.
Public-Private Partnership
Power Africa (USAid led partnership) brings together companies, development partners and the US government to spur increased investment in the energy sector in Africa.
Target Locations
Sierra Leone: Countrywide
References
- (1) International Monatery Fund. 2022. Sierra Leone: 2022 Article IV Consultation and Fifth Review. Accessed from: https://www.imf.org/en/Publications/CR/Issues/2022/07/29/Sierra-Leone-2022-Article-IV-Consultation-and-Fifth-Review-under-the-Extended-Credit-521569
- (2) International Trade Administration. 2021. Sierra Leone - Country Commercial Guide. Accessed from: https://www.trade.gov/country-commercial-guides/sierra-leone-market-overview
- (3) Government of Sierra Leone. 2019. Sierra Leone’s Medium-Term National Development Plan 2019 - 2023. Accessed from: https://www.slurc.org/uploads/1/0/9/7/109761391/sierra_leone_national_development_plan.pdf
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