This week I was in Cape Town, South Africa to attend AfricaCom and present what Hitachi Vantara is doing in IoT. It was very eye opening for me to see the localization that would be required for IoT in this part of the world. While the Sub-Saharan region of Africa is composed of many countries with varying rates of employment, the average unemployment rate for the region is 12.4 percent. This doesn’t sound bad, but the African region has the world’s highest rate of working poverty – people who are employed but earning less that $2 a day.
How do you deliver IoT solutions like Hitachi’s Train as a Service in the UK when most people here cannot afford a ticket and only 20% of the fares are collected?
An example of how one company has adapted to this market is M-Kopa in East Africa. M-Kopa is a company that was launched in 2012, and has connected over 500,000 homes in East Africa to solar power. This is in an area where many houses are off-the-grid, and lighting is done through the use of kerosene lamps. How can people afford these solar systems? Unlike the solar system on my home in California, which requires several square meters of solar panels, the systems in this market only needs to have enough solar power generation and battery capacity to power three LED lights and charge a mobile phone, so the requirements are much lower.
Customers only have to pay a deposit of $35 to take the system home and then pay $.50 per day for a period of one year to own the solar system. 50 cents a day is less than the household would pay to buy kerosene for their lamps and for mobile phone charging at a kiosk. It also provides a healthier environment and better quality of light than the kerosene lamps. This makes it affordable for low income families and opens up the opportunity for adults to work at night producing more goods and services and for children to study.
This also introduces many people to their first experience with financial services. For M-Kopa this means deferred revenue, but this works in East Africa due to the availability of M-Pesa, a mobile phone-based money transfer, financing and microfinancing service, launched in 2007 by Vodafone for Safaricom and Vodacom, the largest mobile network operators in East Africa. If the customer does not pay his 50 cents a day, the battery is shut down remotely until he pays up. The customer is usually “unbanked” so M-Pesa fills this void for deferred payments. Towards the end of the one year payment period, M-Kopa sales people take the opportunity to upsell the customer to larger systems that can support a TV or even a refrigerator or a stove.
It turns out that the founders of M-Kopa, also worked for Vodafone in the development of M-Pesa. M-Kopa has drawn investment funds from the likes of Richard Branson and Al Gore and is expected to be a billion-dollar business by selling to the long tail of small households.
Similar approaches must be taken to develop IoT in this type of market and make it profitable while creating social innovation. The solutions must be affordable, where affordability must be in relation to the local level of wages. It must be simple and not over-engineered for the needs of the market. The normal ways of financing must be changed, and there must be a motivating factor, such as the need for lighting and the charging of mobile phones.
Applying this to the “train as a service concept”, one of the ideas that my colleagues came up with was to give everyone a free mobile phone. With a mobile phone we could tell who is using the train and be able to collect fares. If there is a payment method like M-Pesa, mobile phones would make it easier for people who would like to pay the fare but have no means to do so. This would increase fare collection and make the fares more affordable. On the train they could have access to wifi and mobile services that are only available on the train to make it more enjoyable or be more productive while they use the train.
I guess one has to first understand why the people above are risking life and limb to ride the train above. Are they just train surfing for fun or are they in need of transportation to get somewhere for employment to support their families. Maybe this market does not need a sleek 200KM/Hr train like we have serving the UK commuter market. It may be a train that is less about speed and comfort and more about affordability, slower speeds, more frequent stops, Much like the difference in solar panels between my home in California and M-Kopa in East Africa.
IoT can benefit both environments, but it must be tailored to the market requirements.