Elmar Dimpl, GATE-Small-Scale Project Fund | Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH | elmar.dimpl@gtz.de | www.gtz.de
The Information Service of GTZ's GATE programme has been providing information on appropriate technologies since 1977. Since 1986, its Small-Scale Project Fund has supported over 300 small-scale projects to disseminate innovative technologies and methods in Africa, Asia and Latin America. Priority areas are construction technology for low-cost housing, renewable energy, water and waste recycling, processing of agricultural products and sustainable land use. During the last years about 20 % of the projects were on Solar Energy.
GATE is currently carrying out a cross-sectoral ex-post survey of these small-scale projects. The ex-post evaluations - conducted some years after project termination - analyse the reasons for success or failure. These were found to be similar in all sectors and countries: technology, finances and organisation. So these general conclusions are also representative for the small-scale projects for the dissemination of solar energy systems
The Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH (German technical cooperation) is a government-owned corporation for international cooperation with worldwide operations. GTZ's aim is to positively shape political, economic, ecological and social development in partner countries, thereby improving people's living conditions and prospects. Through the services it provides, GTZ supports complex development and reform processes and contributes to global sustainable development.
GTZ functions similarly to a consultancy. The German Federal Ministry for Economic Cooperation and Development (BMZ) is its main financing organisation. GTZ also undertakes commissions for other government departments, for the governments of other countries, for international clients such as the European Commission, the United Nations or the World Bank, and for private-sector corporations. GTZ operates on a public-benefit basis.
GTZ has more than 10,000 employees in some 130 countries in Africa, Asia, Latin America, in the Eastern European countries in transition, and in the Newly Independent States of the former USSR. Around 8,500 are locally-contracted nationals ("national personnel"). GTZ maintains its own field offices in 63 countries. Some 1,000 people are employed at Head Office in Eschborn near Frankfurt am Main. (For further information see: www.gtz.de)
GATE is a GTZ working unit. Its responsibilities include several projects in two main areas:
While most GTZ-supported projects cooperate with governmental organisations, GATE works mostly with NGOs. GATE's objectives are to improve the technological competence of NGOs and other groups active in self-help-oriented poverty reduction and to generate information and knowledge management systems for them. GATE supports the transfer to and exchange of technological information through regional partners, a question-and-answer service, testing and dissemination of innovative technologies and networking and professionalising of information services.
The GATE Information Service, GATE-ID, can provide information about any type of technological question that is relevant for its clients, including information about:
The numerous publications and technical briefs provided by GATE-Information service can be found on the website
The GATE Small-Scale Project Fund (GATE-SSPF) makes funds available to enable self-help groups to test and apply small-scale innovations. It keeps them informed about technological options and passes on experience with proven technologies.
Its key areas are:
The fund provides financial assistance for smaller-scale innovations, and provides information about technological options. It passes on experience already gained with proven technologies.
The GATE Small-Scale Project Fund (GATE-SSPF) has seen more than 300 microprojects to completion since its founding in 1986. In recent years, it has conducted not only conventional monitoring but also ex-post evaluations of small-scale projects.
Based on the project reports, project visits and the ex-post evaluations, GATE is conducting a cross-sectoral survey of Small Scale Projects over a period of several years. The survey should help to identify the factors affecting the success or failure of the projects, major constraints and challenges, and promising approaches.
The objectives and approaches of small-scale projects vary, so it is difficult to compare them with one another. However, all aimed to introduce or disseminate a new or modified technology or measure. So the main criterion for these projects' success is the sustainability of the innovation. The main questions seek to determine whether or not the technology is still working now that some years have passed and whether or not the respective technology is being maintained, accepted and further disseminated independent of external financing.
Appropriate technologies are indispensable to poverty reduction. Even basic needs can be satisfied only with the use of small-scale technologies to provide drinking water, sanitation, low-cost housing, food storage, food production, etc. Appropriate household energy (in the form of solar home systems, solar lanterns and solar cookers) is also indispesable. Light is an important factor to enhance education. Appropriate solar technology may be also essential for promoting income-generating activities such as food production (by irrigation) food processing or small-scale crafts and trades.
The results of the cross-sectoral analysis bear this out. In most cases, the target groups invested in the innovative technology themselves. This is an important indicator that the members of the target group are convinced that the innovations will have a positive impact. They either purchased the technology - e.g., solar lantern, solar dryers - or they paid skilled workers, either in cash or kind. For example, for the installation of solar systems for hospitals or shools.
Small and medium-sized enterprises are nearly always integrated into these activities, either as users of this technology - such as subsistence farmers who have a chance to grow cash crops and thus become small-scale entrepreneurs - or as producers of the small-scale technology, such as stove manufacturers or metal-working shops that build thermal solar collectors or solar dryers.
A number of obstacles must be overcome on the way to a positive impact, however. GATE-SSPF finances only innovative projects: funds are made available only if the proposed activity includes a new technology or approach in the project region. The basic idea is not to subsidise machinery or equipment but to minimise the risk of innovation by financing additional expenditure. Thus the innovative character of the projects examined made them intrinsically challenging: a certain risk of failure was inevitable and the road to ultimate success difficult.
Most of the small-scale projects were integrated into the general activities of the respective NGOs, so that the sum of experience was not based on these small-scale interventions alone but rather on the overall programmes of which they were a part.
Cross-sectoral analysis revealed a number of different factors and constellations with a positive or negative impact on success. However different, though, these factors can be systemised and assigned to larger problem complexes. This kind of generalisation results in a loss of specific information, but it does allow us nevertheless to draw certain generally valid conclusions.
The most important obstacles leading to set-backs and only a limited measure of success were:
Projects were successful, and the technology or processes became sustainable if:
However banal or obvious these considerations may appear, under real conditions in everyday project life they are often forgotten. Weakness in project design can spawn obstacles to future sustainability.
It is easy to arouse enthusiasm for a new technology. Using only sunlight to cook with a solar cooker, for instance, will fascinate poor people who are used to walking long distances to fetch firewood. However, functionality alone is not enough to ensure the successful dissemination of a technology. Functionality was never a problem in the projects examined. However, there were many examples of attempts to disseminate technologies that had not been thought through, or did not work under everyday conditions, or caused more problems than expected.
The mechanism of solar cookers to line them up to the sunlight were weak, the batteries of solar home systems were used up sooner than anticipated, unnecessary complicated constructions of solar driers : these are common examples. These breakdowns are none of them insurmountable. However, they do result in unexpected costs. It is often very difficult to get spare parts, so substitutes are found that reduce efficiency and increase operating costs. For example, battery chargers with poor regulation of charging limits shorten battery life; this can increase the running costs of a solar home system by as much as 20%.
Furthermore, users who are unaccustomed to the new technology will probably put more of a strain on it than was planned for. Batteries were not handled or deep discharged. All such misuse reduces the lifetime of the technology and increases costs.
It is thus clear that the technology must be perfected in terms of functionality, long service-life and low production costs. This development is expensive and calls for time and know-how, yet it must be achieved within the project implementation period. Later on, it will be too late to solve these problems.
At this point, a relevant question is whether perhaps these technologies already exist in other parts of the world and require only dissemination. In other words, are development and further technological innovation really needed in the first place?
The answer to this question is obvious: we need both technology transfer and local adaptation and development. Opportunity costs will be the crucial factor in determining which alternative is more likely to reduce poverty.
Well-proven instruments, machinery and equipment exist in great numbers all over the world. In many cases one need only transfer them to other places. Articles made in India may be sold in Africa, those made in South Africa sold in Tanzania. This happens every day. However, most projects try to build up local production, in many cases with a modified or adapted technology. There are good reasons for this approach. Local production ought to be cheaper and appears to be one way to create jobs. This concept of high local input exists all over the world and appears to prevent negative trade balances and promote a more equitable international division of labour. However, this approach also has its disadvantages. Local production can be expensive: if there is no mass market, mass production cannot pay. With no mass production, lower costs often mean poorer quality.
Another reason for the high cost of adapting technologies from other parts of the world to local production is documented unreliability. Numerous publications about appropriate technology describe the advantages and potential of various technologies; however, data on the limitations and obstacles involved are hard to find. Many of these publications were produced during pilot projects, without the benefit of experience on a long-term basis. Ex-post evaluations are rare. Organisations usually do not document the setbacks they experience. So the publications tend to reflect a too positive version of the reality. Difficulties and draw-backs are often stored only in the minds of experienced experts. This lack of reliable information leads to the repetition of failures and new draw-backs. Data on technologies and technological performance and impact must be documented openly, sincerely and accurately.
So in each case a balance must be found between the use of supra-regionally produced mass products and local contributions. In many cases, a combination of mass production - often by foreign industry - and local small-scale business for repair and maintenance, financing, and retail trade has turned out to be a good solution. Thus the concept of high local input should be interpreted not only in terms of hardware production but in respect to the entire dissemination system. For example, pumps, lamps or mills might well be produced in a foreign country for a mass market. But retailing, maintenance and financing services could at the same time provide valuable job- creating local potential with opportunities for small and medium-sized enterprises.
The dissemination of known technological solutions is very important. But since not every solution is actually available, there can be no doubt that small-scale technological innovation is necessary as long as the difficulties and costs involved are not underestimated. Hence technological in situ innovation should be restricted to activities with foreseeable costs and good chances of success.
As stated above, the new technologies have often proved too expensive to survive market pressures. In many cases, executing organisations had calculated the pure hardware costs quite realistically. They know the price of metal sheeting, of irrigation pumps, of solar dryers or solar home systems. However, the survey showed that maintenance and transaction costs were often grossly underestimated. Reasons for the unexpectedly high costs of a technological system are often expensive transportation and communication, supply shortfalls and the need for external know-how and extensive infrastructure.
Running costs are often neglected, and there are always at least some of these. Even a solar home system or a solar cooker needs some repair and maintenance. Running costs may increase dramatically if spare parts are hard to procure. The transaction costs, too - transport, financing including service for repayment and advisory assistance - are often very high. This might be due to project design. During project implementation, a committed executing organisation will try to avoid shortfalls in supply and inadequate infrastructure; it will try to provide all of the technical know-how at its disposal. Almost inevitably, therefore, difficulties will arise when the project terminates that can undermine its sustainability.
Nearly every project leads to investment in buildings, installations and machinery. However these investment costs, which are covered by the project budget, incur depreciation costs later on. It was often found that no plans had been made for how to cover these costs. Sometimes there was no possibility of saving money. In many cases a certain project mentality had gained a foothold: instead of a focus on economic sustainability, new funding was anticipated from donors.
Thus, if it is to have sustainable impacts, a project must, as early as the design stage, anticipate the difficulties that will arise later on. A project must be at pains during implementation not to create artificial conditions; and it should simulate post-project market conditions right from the start.
High costs raise the question of financing. Executing organisations found a number of different ways of confronting this problem.
Often a project subsidises the technology. For example, a solar lamp is sold at a price that is lower than its production costs. This solution is not econimically sustainable if there are not long term national programmes. Subsidies might be justified at the start of a development and dissemination process. Of course, the production of the first few devices is very expensive, yet they must be offered to people at an affordable price. Otherwise, it would not be possible to test and adapt them. So the very first prototypes might even be given for free. However, when the dissemination process begins in earnest, subsidies should never support a price that is lower than a mass production price that can be achieved within the short or medium term.
Another method of making a new technology available to the poor is payment through the instalment system or rental. Experience shows that two main challenges have to be met: the cost of these systems and their flexibility. Rural people often have trouble paying a fixed amount on a regular basis. When they have money by selling their produce, they can buy some kerosene and store it or they can buy even an expensive device. Payments for a solar system on the instalment plan should be similarly flexible. Sometimes even poor people find it easier to pay a considerable down payment all at once than to have to make regular payments as part of an instalment scheme.
One of the most important problems is still the recovery of initial investment - how to earn and save enough money to cover the depreciation of the original infrastructure. Finding ways to save some capital for future investment and to cover depreciation remains a challenge. Solutions must be found for building up capital, even if it is not in monetary form.
Frequently, management know-how was also lacking. In many instances, small enterprises sold their products at prices that covered only variable production costs, so that they were unable to set aside money for future investment or for pre-financing of raw materials. It is truly astonishing how often people say that they would indeed have been able to sell much more of their product, but that they could not buy the raw materials they needed or repair their machinery. This shows that people are selling their products too cheap, and that they need advice on business management.
This raises once again the issue of high transaction costs and the need for considerable amounts of know-how input.
Innovative technology is nearly always accompanied by the need for new organisational structure - especially for users, but also for producers. As already shown above, appropriate technology improves productivity and lowers production or running costs, but it is also accompanied by high initial costs. This situation calls for new strategies for management, cooperation and savings. The chances for success depend to a large degree on the capability of micro-, small- and medium-sized enterprises to manage the new technologies. Training and on-going advisory services on business management are therefore as necessary as technological support. The support of institutions such as universities, NGOs and extension services must therefore be enlisted.
At the same time, it is very important to integrate the private sector and entrepreneurs as well, as retailers, trades- and craftsmen, workshops and farmers. In several cases, NGOs started a project to introduce a new technology. They had both the necessary knowledge and the contacts. But at a certain point - just when the dissemination of the technology should have started to take off - the process slowed down. An organisational change was necessary, and the private sector had to take over. However, many NGOs had a hard time "letting go" and withdrawing from the process. The people who work for NGOs usually do not have the kind of "mind-set" needed to run an enterprise that earns its money through production, trade and services under market conditions. But sustainability depends upon just this sort of "mind-set". The upshot is that different kinds of actors are needed in each phase of a project.
Private entrepreneurs will only be interested in the new technology if a sufficient quantity is at hand to generate income. Production must be cheap, know-how must be purchased, and spare parts must be available. All this is only possible at a certain market volume. A certain quantity of disseminated technology is also important for users, who will become comfortable with the new technology only if their neighbours and colleagues use it, too, so that a certain amount of know-how at peer-to-peer level builds up.
Thus projects must aim for a critical mass of disseminated technology right from the start. There must be enough mass to create sufficient income for private enterprises, to allow experience among users to grow, and to give supporting organisations such as universities, NGOs and extension services a chance to build up the know-how that is needed.
In some rare cases, projects failed completely or turned out to be useless. This was in every case the result of external factors and unfavourable conditions. A small local renewable energy system was not able to compete with a new electrical power supply system built by an international company. A new town mayor ordered the destruction of a recycling centre because he considered the garbage useless. Flooding or drought have sometimes entirely destroyed plantations or infrastructure. In many cases, these external factors are beyond all influence. Still, in many other cases, too, they might have been foreseen, and they could have been avoided through foresighted planning.
However, we must simply accept the fact that small-scale technological innovation will not have a chance to reduce poverty unless general conditions are favourable, with fair prices for local mass-produced products, good terms of trade, a favourable policy of foreign aid, rule of law and a modicum of justice.
Appropriate technology is an important factor for poverty reduction. New technologies and methods must be reliable in terms of everyday operation. A number of technologies have already been developed. Scrupulous documentation is important to avoid repetition of effort and failure. Not only the production but also the transfer of technologies offers opportunities to small enterprises to generate income. The "local content" should be seen as part of a larger system and not exclusively in terms of hardware. New technology usually requires new forms of organisation. A critical mass must be reached, with quantities large enough to provide income at levels interesting to the private sector, to merit the provision of advisory services to organisations, and for user-to-user multiplication of experience with the technological innovation. Future high transaction costs should be minimized already by the project design. Project conditions must approximate real life as closely as possible. An excess of support can nurture dependence and inhibit future sustainability.