BasiGo hopes to slash toxic air pollution in some of Africa’s busiest cities through the introduction of electric buses. But with the vehicles carrying a much higher price tag than traditional diesel vehicles, how can they be financed? GTR speaks to Jit Bhattacharya, BasiGo co-founder, about the creative financing solutions needed for long-term growth.
GTR: Tell us about BasiGo.
Bhattacharya: ‘Basi’ means ‘bus’ in Swahili. The mission of the company is to create the future of clean, electric public transport in Sub-Saharan Africa. Here in Africa, public transport remains the primary mode of transport for the vast majority of people, because it’s the most affordable and most accessible option. For example, a recent study here in Nairobi found 70% of the people living in the city use a bus every single day.
However, these buses are also problematic because they’re dependent on diesel fuel imported in US dollars, which puts direct stress on the economy, and they emit a lot of toxic air pollution and CO2.
The opportunity my co-founder, Jonathan Green, and I saw is that East Africa is in a unique position to electrify public transport. In Kenya, 90% of electricity already comes from renewables – mainly geothermal and hydro power. There’s also a huge surplus of renewable energy at night, between 10pm and 6am.
We found that an electric bus here can compete against a diesel bus on total cost of ownership, even without subsidies. But the barrier is the high upfront cost. Most buses here are privately owned, so high capex is a real problem, especially because the operators are cash-sensitive.
BasiGo was founded in 2021 and our innovation is a mileage-based leasing model. Operators don’t buy the bus. We lease it, and the lease includes charging, service and maintenance. That eliminates the upfront cost while letting them benefit from the economics of electric. We currently have around 86 buses on the road across both Kenya and Rwanda, and we expect to hit 100 very soon. Altogether, they’re driving over 500,000 kilometres a month and mitigating over 200 tonnes of CO2.
GTR: Where do the buses come from, and how does the leasing model work?
Bhattacharya: We import the buses and charging technology from China – which leads the way in electric bus technology – as a complete knockdown kit. The market cost of a typical e-bus imported from China is between US$100,000 and US$120,000, which is about double the cost of a diesel bus. Then we locally assemble it at a factory here in Kenya, which is the most tax-efficient way to do e-buses.
Under the mileage-based leasing model, operators pay for every single day they use it. It also includes the cost of charging, service and maintenance. That makes it as simple as possible for a private operator to be able to add an e-bus to their fleet. The buses can do about 250 kilometres on one charge, and always come back to our depot to do that, at which time they also get inspected.
GTR: How have you financed the business so far?
Bhattacharya: An electric vehicle has high capital expenditure (capex), but low operational expenditure (opex), as opposed to a combustion engine vehicle, which typically has much lower capex, but high opex because of the fuel. The reason that’s a challenge in Africa is obviously the high cost of capital and high cash sensitivity. Our pay-as-you-drive leasing model is designed to address this for bus operators, however we still have to capitalise the leases. I think this is one of the key questions for the industry. Nobody is arguing anymore that e-mobility is the future of Africa. The question is, how does it get financed? What is the role of global banks? What’s the role of international capital? What’s the role of development finance institutions?
To date, we have raised a combination of venture capital, equity as well as development finance debt. British International Investment (BII), for example, is one of our most important investors. They have provided us with concessional debt to be able to scale initially in both Kenya as well as in Rwanda, and that’s been great to get us to a fleet size of 100 buses. But how do we go from 100 up to 1,000 buses? Where does that capital come from? This is a first-of-its-kind for Africa, so it’s going to need a lot of capital market innovation. Nobody has fully put together the financing solution yet.
GTR: What is it that you think you’ll need in terms of financing?
Bhattacharya: To grow to 1,000 buses, which is our goal over the next three years, we’ll need over US$100mn in capital. Of that, we expect about 60% will be debt and 40% equity. That’s the capitalisation problem that we’re looking to solve in the next 12 months.
The approach we’re taking is to talk to infrastructure investors – those who’ve funded the scale-up of commercial and industrial solar, or utility-scale renewables. We believe we’re creating a capital structure for this new asset class of e-mobility where investors can see long-term asset-backed returns with the same low level of risk that you’ve come to expect from renewable energy projects. But it will be a vehicle asset that’s going to provide a return within 10 years, rather than 20. That’s the premise and the approach that we are taking, and we’re having very good conversations.
GTR: Is it purely commercial investment that you’re hoping to get from infrastructure investors? Or is there an opportunity to get some additional development finance backing?
Bhattacharya: This business can stand commercially on its own two legs and compete. It doesn’t need concessional finance. It doesn’t need grants. It doesn’t need government subsidies. That being said, it is also the first-of-its-kind for the continent, and I think we know that the capital markets always see a degree of risk within Africa , for issues like currency and policy stability. For that reason, we think development finance still plays a very important role here, as we work to pave the way for commercial investors to eventually take on this sector fully.
GTR: Do you have relationships with commercial banks? And if so, are they mainly banks based in Kenya, or also global banks?
Bhattacharya: Who’s financed the growth of diesel public transport in Kenya’s private sector? The local commercial banks. Long term, we need to find a pathway to get them to help finance the e-bus sector. They’re very keen, but it requires creativity. They want to come in with an asset finance loan for the entire asset, because that’s how diesel buses have been funded. But now the asset value is so much higher. On top of that, there’s the charging infrastructure, and that creates barriers for them as well. They’re eager, but it just requires a degree of creativity and risk tolerance at this early stage, where I think the combination of development finance institutions and international capital is helping to de-risk so commercial banks can step in in a much bigger way over the long term.
