Figure Lower rates of solar diffusion in South Africa compared to Sri Lanka and Bangladesh cumulative installations

getting value for money: 'The level of subsidy cannot be supported by our budget process,' said the DME official in charge, 'and let's face it, solar home systems only provide four hours of electricity per day.'38

Of course, to blame the technology is absurd - South Africa could have implemented the programme very differently. As we have seen, in the absence of an electricity grid, rural homes do not hesitate to invest their hard-earned savings in a solar system and own it, rather than rent it. It was estimated in 2000 that South Africa already had a relatively mature solar industry, with two module assembly plants, several wholesalers of solar modules, and approximately 40 distributors and solar system providers.39 The question is why the Government did not simply encourage these entities to establish a market infrastructure and sell solar to rural customers directly, and in parallel, encourage the extensive banking network in South Africa and the MFIs to enter the rural markets and finance solar sales.

Of course, under a consumer finance approach a customer will pay more up-front than fee-for-service. This is a concept that may have been difficult for policymakers in post-apartheid South Africa. But as difficult as it may have been, it would have been far better for solar diffusion to have first enabled the growth of a viable, profitable market infrastructure, and then later to have built on that infrastructure with specific poverty-alleviating measures. In the end, the South African Government wanted to be able to get to the poorest elements from the outset, and so mandated a very tough business model and subsidized it heavily. But not only did this result in slower diffusion, but those who were signing up for the programme were still the relatively well off in rural areas, and not the poor.40

Given the extent of the grant the South African Government was willing to offer, it is hard to imagine they could not have coaxed the existing MFIs and banks to start to lend for solar in rural areas. But assuming that this was not possible, and there simply was no finance institution willing to lend for solar in rural South Africa, a more viable alternative to fee-for-service would have been to subsidize the sale of smaller solar systems on a cash basis.

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