RESTRUCTURING

The global leader in pay-as-you-go solar power is downsizing to stay profitable

Obsession
Africa Innovators
Quartz africa
Obsession
Africa Innovators
Quartz africa

M-Kopa, the Kenyan pay-per-use solar power provider, is downsizing in a bid to improve its competitiveness, ensure long-term sustainability, and increase return for investors.

The Nairobi-headquartered company said it laid off more than 150 of its over 1,000 staff members as part of a company-wide restructuring that took place at the end of 2017. The reduction targeted almost all departments and management levels, and reduced the global headcount of staff, whose members are spread across Kenya, Uganda, Tanzania, and the United Kingdom, to 850. It also said it is outsourcing some of its business functions to “capable and cost-competitive partners” in order to concentrate on improving its own internal operations.

Describing the reduction as “regrettable,” chief executive officer Jesse Moore brushed off speculation that it is completely divesting operations from Kenya, a criticism that has surfaced online since the announcement. Most of the controversy is around the fact M-Kopa is outsourcing some of its operations to a British company Applicita, which was founded by its acting chief technology officer John Kattenhorn.

“Our acting CTO was seconded to us from one of our outsourcing partners when our previous CTO left the company,” said Moore. “Our board approved this and the individual is strictly recused on procurement decisions with companies where could be a potential conflict of interest.”

Moore said the staff reduction affected Kenya the least and was bigger per capita in the other two countries where the company operates, Uganda and Tanzania. Yet the company’s move is seen as controversial by some observers in the Kenyan tech space because the company is outsourcing to a British company while terminating local employees. It also highlights an existing tension about M-Kopa’s prominent status as a Kenyan company, even though a majority of its funding and many of its senior management come from outside Kenya.

As a leading pay-as-you-go energy provider to off-grid homes, M-Kopa is often listed as one of the most innovative companies in the world. Its key innovation, of using mobile money to provide energy on credit, reaches over 600,000 homes and proving that solar energy can be marketed at scale in Africa.

But as uptake and affordability increased, competition also arrived in the likes of Off-Grid Electric, Azuri Technologies, and Mobisol, all of whom are targeting the same low-income customers with payment plans that are less than the typical cost of kerosene. Besides lighting and phone charging, companies are also providing gadgets and home entertainment packages to lure in more households outside the power grid. In December, M-Kopa sued the revenue authorities in Kenya after it backtracked on a previous decision to exempt its digital TVs from taxation.

The latest downscaling also comes just months after the company raised $80 million in commercial debt funding to underwrite customer receivables in one million homes in East Africa. The committed financing was raised through Stanbic Bank, the UK government’s development finance institution CDC Group, the Dutch development bank FMO, and the Norwegian state fund Norfund. This was in contrast to its original lead equity investors most of whom are social impact and sustainability investors.

On Tuesday (Mar. 13), Canada’s newly-launched development finance institution FinDev Canada also announced its first ever transaction: a $10 million investment in M-KOPA. Unlike the previous round, the latest fund will be injected into operations.

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