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Africa ignores the sun: Local context drives biofuel companies in Africa
Tuesday, Jul. 26, 2011
Each year at Santa Clara University’s Center for Science, Technology, and Society, we review hundreds of applications from social entrepreneurs who wish to participate in our fully subsidized capacity development program, the Global Social Benefit Incubator (GSBI™).The GSBI is designed for entrepreneurs in the field - including many from Africa, India, South America, and the Philippines – to access an actionable business model curriculum in just eight months.
During this year’s discovery process, we found the large number of biofuels ventures out of Africa striking. There isn’t enough arable land to feed the growing population there, distribution and other challenges aside. So why are so many field-based social entrepreneurs growing fuel in Africa instead of using the sun?
Could economics be the reason? It is well known that corn-based ethanol production in the United States has resulted in increased food costs for the developing world. In fact, the IMF reported that in 2007, almost half of the increase in production of major food crops was related to biofuels. And, European energy companies may pay for source materials, as evidenced by the Agroils model, a social enterprise that produces sustainable biofuels from non-edible forestry species.
But we do not believe that economic reasons alone are driving African biofuel social enterprises. Our experience with more than 40 ventures in the sector reveals that a large majority of social entrepreneurs are delivering power directly to the communities they serve, not supplying power to the developed world.
An advantage of our practice orientation is that we can ask the social entrepreneurs naïve questions, and they give us great latitude, as well as deep insights. Why grow biofuels in an environment that is much better suited to technologies such as solar power generation? The answer is in the context: many African governments impose enormous tariffs on the importation of solar panels. Solar thus becomes an untenable technology solution for local energy production.
In an informal discussion, one of our professors at Santa Clara, Alexander J. Field, Ph.D., the Michael and Mary Orradre professor of economics and author of the book A Great Leap Forward, proposed two alternative drivers for the governmental tariffs:
1. Corruption: a known factor in African politics. Just this week,Omidyar Network announced $5 million to fund organizations that foster government accountability and transparency in Africa. But is corruption the entire rationale behind the development of biofuels?
2. Innovation stimulation: could the local governments be driving innovation by making solar panels cost prohibitive? Again, this contextual factor may contribute to the implementation of tariffs in Africa, and may work well for some needs of the underserved (such as agriculture) but have unintended negative consequences for technology diffusion in cases of extreme economies of scale, e.g., solar panel manufacturing.
The answers are not black and white. In a recent New York Times article, Anand Giridharadas poses a hypothesis that ‘Real Change Requires Politics.’ We’ve experienced this first hand at the GSBI. The bottom line is that in order to effectively help social entrepreneurs solve issues for those living at the base of the pyramid, we need to better understand the contextual factors, including politics, which influence the successful adoption of optimal technology solutions and business models.