Practice cases: Africa
Three full cases: pay-as-you-go solar in Kenya, power for a mine in South Africa, and a national program to bring more adults in Nigeria into financial services.
Key takeaways
- Worked case: Jikaro Solar: more systems sold, less margin.
- Worked case: Tlhakodi Chrome: should a mine build its own solar plant?
- Worked case: Bringing 10 million more adults in Nigeria into financial services.
Three full cases: pay-as-you-go solar in Kenya, power for a mine in South Africa, and a national program to bring more adults in Nigeria into financial services.
Cover the solution and run each case out loud, ideally with a partner playing the interviewer. Ask your own clarifying questions, state a hypothesis, build a structure, and do the math on paper before you look. Then compare your synthesis with the one given, and read the strong and weak candidate notes. Each case is labeled Starter, Standard, or Stretch.
Case 1: Jikaro Solar: more systems sold, less margin
Worked case
Starter: Jikaro Solar: more systems sold, less margin
The prompt
Jikaro Solar sells solar home systems in Kenya on a pay-as-you-go basis. It sold 50 percent more systems this year, but its total margin fell. The exhibit shows the key figures. What happened, and what should it do?
Difficulty: Starter. Format: interviewer-led, with an exhibit. Industry: Off-grid energy and consumer finance. Region: Kenya. Interview length: about 25 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- How do customers pay?Answer: They pay a small deposit, then daily or weekly by mobile money over 12 months, KES 24,000 in total. If they stop paying, the system switches off remotely.
- What happens when a customer stops paying?Answer: On average, customers who stop have paid about half the price. In this case, we do not resell used systems.
- What changed this year?Answer: Sales teams moved into new rural areas where many customers are farmers whose income comes mostly at harvest.
A hypothesis to say out loud: Sales grew 50 percent, so the fall must come from the margin on each system. My hypothesis is that more new customers stopped paying, and that serving remote areas cost more.
The structure
- Margin = systems sold x (cash collected per system - cost per system)
- Systems sold
- Key: Cash collected: full payers and customers who stop
- Cost per system: product, sales, delivery
The exhibit
| Measure | Last year | This year |
|---|---|---|
| Systems sold | 40,000 | 60,000 |
| Full price paid over 12 months (KES) | 24,000 | 24,000 |
| Customers who pay in full (%) | 90 | 75 |
| Share of the price paid by customers who stop (%) | 50 | 50 |
| Cost per system, including sales and delivery (KES) | 15,000 | 16,000 |
Working it through
1. Cash collected per system, last year
90 percent pay the full KES 24,000; the other 10 percent pay about half.
Cash per system last year (KES):24,000 × (0.9 + 0.1 × 0.5) = 22,8002. Cash collected per system, this year
Only 75 percent pay in full.
Cash per system this year (KES):24,000 × (0.75 + 0.25 × 0.5) = 21,0003. Margin per system, last year
Cash collected minus KES 15,000 of cost.
Margin per system last year (KES):24,000 × (0.9 + 0.1 × 0.5) - 15,000 = 7,8004. Margin per system, this year
Cost rose to KES 16,000 as sales moved to remote areas.
Margin per system this year (KES):24,000 × (0.75 + 0.25 × 0.5) - 16,000 = 5,0005. Total margin, last year
40,000 systems.
Total margin last year (KES):40,000 × (24,000 × (0.9 + 0.1 × 0.5) - 15,000) = 312,000,0006. Total margin, this year
60,000 systems.
Total margin this year (KES):60,000 × (24,000 × (0.75 + 0.25 × 0.5) - 16,000) = 300,000,0007. Curveball: payments that follow the harvest
Interviewer: "A pilot let farmers pay more after harvest and less in the months before. In the pilot, 85 percent paid in full." Candidate: "Margin per system would be:"
Margin per system with harvest plans (KES):24,000 × (0.85 + 0.15 × 0.5) - 16,000 = 6,2008. Total margin with harvest plans
On this year's 60,000 systems.
Total margin with harvest plans (KES):60,000 × (24,000 × (0.85 + 0.15 × 0.5) - 16,000) = 372,000,000
What the exhibit shows
Sales grew, but fewer customers paid in full and each system cost more to sell, so total margin fell.
The recommendation
Total margin fell from KES 312 million to KES 300 million because each system now earns KES 5,000 instead of KES 7,800. First, the share of customers who pay in full fell from 90 to 75 percent, cutting cash collected per system from KES 22,800 to KES 21,000. Second, cost per system rose KES 1,000 as sales moved to remote areas. Third, selling 20,000 more systems was not enough to make up for this. Jikaro should roll out payment plans that follow the harvest in farming areas: if 85 percent then pay in full, margin per system recovers to KES 6,200 and total margin rises to about KES 372 million. It should also check each area's repayment record before sending more sales staff there.
Risks: A poor harvest would hurt repayment in the same areas at the same time; Longer payment plans tie up more cash.
Next steps: Compare repayment by area and by customer type; Extend the harvest-plan pilot to two more farming counties.
A strong candidate
Looked past the sales growth to cash collected per system, sized both causes, and tied the fix to how customers earn their income.
A weak candidate
Recommended more sales staff to sell even more systems, which would add more customers who do not pay in full.
Case 2: Tlhakodi Chrome: should a mine build its own solar plant?
Worked case
Standard: Tlhakodi Chrome: should a mine build its own solar plant?
The prompt
Tlhakodi Chrome runs a chrome mine in South Africa. It is considering building its own solar plant with batteries. Should it?
Difficulty: Standard. Format: candidate-led, with interviewer dialogue. Industry: Mining and energy. Region: South Africa. Interview length: about 30 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- How much power does the mine use, and at what price?Answer: About 200 GWh a year, bought from the national utility at about ZAR 2.00 per kWh.
- How much do power cuts cost?Answer: National load-shedding has become rare, but outages on the local network still stopped production for about 10 days last year (illustrative). Each lost day costs about ZAR 5 million of margin.
- What would the solar plant cost and produce?Answer: A 50 MW solar plant with batteries costs ZAR 1.2 billion (ZAR 1,200 million), produces about 100 GWh a year, costs ZAR 20 million a year to run, and would avoid about 60 percent of the lost days.
- How should I compare options over time?Answer: Use 15 years and 10 percent. At 10 percent, ZAR 1 a year for 15 years is worth about ZAR 7.606 today.
A hypothesis to say out loud: The plant saves on the power bill and on lost production. My hypothesis is that it pays back well within its life, but that a cheaper option without an upfront cost may exist.
The structure
- Compare the value of each power option over 15 years
- Today: the power bill and the cost of outages
- Key: Own plant: savings, running cost, investment
- Other options: buying solar power from a developer
- How many outage days change the answer
Working it through
1. Power bill today
Candidate: "200 GWh is 200 million kWh, so at ZAR 2.00 the bill is, in ZAR million:"
Power bill (ZAR million a year):200 × 2 = 4002. Cost of outages
Candidate: "10 lost days at ZAR 5 million each."
Outage cost (ZAR million a year):10 × 5 = 503. Yearly benefit of the own plant
Candidate: "100 GWh no longer bought, plus 60 percent of outage costs avoided, minus running costs."
Yearly benefit (ZAR million):100 × 2 + 0.6 × 10 × 5 - 20 = 2104. Payback
Candidate: "ZAR 1,200 million divided by the yearly benefit."
Payback (years):1,200 ÷ (100 × 2 + 0.6 × 10 × 5 - 20) = 5.715. NPV of the own plant
Candidate: "Yearly benefit times 7.606, minus the investment."
NPV own plant (ZAR million):(100 × 2 + 0.6 × 10 × 5 - 20) × 7.606 - 1,200 = 3976. Curveball: a power purchase agreement
Interviewer: "A private developer offers to sell the mine 100 GWh a year of solar power through the national grid at ZAR 1.40 per kWh, with no upfront cost. Because the power comes through the grid, it does not help during outages. The mine can use only about 100 GWh of solar power a year, because much of its load is at night, so it is one option or the other." Candidate: "The yearly saving is:"
Yearly saving (ZAR million):100 × (2 - 1.4) = 607. NPV of the agreement
Candidate: "No investment, so the value is the saving times 7.606."
NPV of the agreement (ZAR million):100 × (2 - 1.4) × 7.606 = 4568. Outage days that make the own plant win
Candidate: "The own plant wins only if the outage savings close the gap. Each lost day avoided is worth 60 percent of ZAR 5 million."
Break-even outage days a year:(100 × (2 - 1.4) + 1,200 ÷ 7.606 - 100 × 2 + 20) ÷ (0.6 × 5) = 12.59
The recommendation
Sign the power purchase agreement unless outages are expected to rise above about 12.6 days a year. First, the own plant is a good project on its own: it saves about ZAR 210 million a year, pays back in under 6 years, and has an NPV of about ZAR 397 million over 15 years. Second, the agreement is worth more, about ZAR 456 million, because it needs no upfront capital, even though it does not protect the mine during outages. Third, the own plant wins only if outages cost more than about 12.6 days of production a year, against 10 days last year. The mine should sign the agreement, keep its ZAR 1.2 billion for mining, and buy a smaller battery or backup system sized only for critical equipment during outages.
Risks: Grid charges for moving power through the network could rise; Outages could return at a higher level than expected.
Next steps: Check the grid and network charges in the developer's offer; Price a smaller backup system for critical equipment.
A strong candidate
Valued both options over the same period, saw that the agreement does not help during outages, and found the outage level that changes the answer.
A weak candidate
Chose the own plant because its payback is short, without comparing it with an option that needs no capital.
Case 3: Bringing 10 million more adults in Nigeria into financial services
Worked case
Stretch: Bringing 10 million more adults in Nigeria into financial services
The prompt
First, estimate how many adults in Nigeria use no formal financial service. Then: a national financial inclusion program wants 10 million more adults to use an account within three years, through local agents. How many agents are needed, and should the program support them?
Difficulty: Stretch. Format: market-sizing opener, then a business question. Industry: Public sector and financial services. Region: Nigeria. Interview length: about 35 minutes. The company is fictional and all figures are illustrative.
Clarifying questions, with the interviewer's answers
- How many adults are there, and what share uses no formal financial service?Answer: Use about 120 million adults and about 30 percent excluded (rounded and illustrative).
- What is the target?Answer: 10 million more adults using an account within three years, mostly in rural areas.
- How do agents work and earn?Answer: An agent is a local shop that takes cash deposits and pays out withdrawals for a bank or mobile-money provider. It earns about NGN 50 per transaction, and an active customer makes about 6 transactions a month.
- What does it cost to run an agent?Answer: About NGN 60,000 a month for cash float, security, and transport, and the owner needs about NGN 60,000 a month for their time to make it worthwhile. A mature agent serves about 500 active customers; a new rural agent has about 300 in its first year. There are 8,000 rural agents today; most serve few active customers, and together they have room for about 4 million more.
A hypothesis to say out loud: Agents are the main way to reach rural adults, but new rural agents may not earn enough at first. My hypothesis is that a time-limited support payment for new agents is the cheapest way to reach the target.
The structure
- Size the gap, then make new agents viable at the lowest public cost
- Adults x share excluded
- Agents needed = new customers / customers per agent
- Key: Agent income versus agent cost
- Support budget and cost per newly included adult
Working it through
1. Excluded adults
30 percent of about 120 million adults.
Excluded adults:120,000,000 × 0.3 = 36,000,0002. New agents needed
Today's 8,000 rural agents can take about 4 million of the 10 million new customers. The other 6 million need new agents at 500 customers each.
New agents needed:(10,000,000 - 4,000,000) ÷ 500 = 12,0003. Customers an agent needs to break even
Each customer brings 6 transactions at NGN 50 a month; costs are NGN 120,000 a month.
Break-even customers per agent:(60,000 + 60,000) ÷ (6 × 50) = 4004. Gap for a new rural agent
300 customers in year one.
Monthly result in year one (NGN):300 × 6 × 50 - (60,000 + 60,000) = -30,0005. Support budget
Close the gap for 12,000 new agents for 12 months.
Support budget (NGN):12,000 × 30,000 × 12 = 4,320,000,0006. Cost per newly included adult
Budget divided by 10 million adults.
Cost per adult (NGN):12,000 × 30,000 × 12 ÷ 10,000,000 = 4327. Curveball: social benefits through agents
Interviewer: "The government plans to pay some social benefits through agents. Each rural agent would pay out about 100 benefits a month and earn NGN 100 for each."
Monthly result in year one with benefits (NGN):300 × 6 × 50 + 100 × 100 - (60,000 + 60,000) = -20,0008. New support budget
The smaller gap for 12,000 agents over 12 months.
Support budget with benefits (NGN):12,000 × (120,000 - 300 × 6 × 50 - 100 × 100) × 12 = 2,880,000,000
The recommendation
I recommend that the program support about 12,000 new rural agents, paying support only for agents whose customers are active. First, about 36 million adults use no formal financial service, and reaching 10 million more needs 12,000 new agents. Second, a new agent with 300 customers is NGN 30,000 a month short in year one, against break-even at 400, so 12 months of support costs about NGN 4.3 billion, about NGN 432 per newly included adult. Third, paying social benefits through agents cuts the budget to about NGN 2.9 billion. Check activity data monthly to stop fake accounts.
Risks: Agents may open accounts that are never used, just to collect support; Cash shortages or security problems in some areas may keep agents from opening.
Next steps: Agree a definition of an active customer with banks and mobile-money providers; Start in three states and publish monthly activity data.
A strong candidate
Sized the gap with clear assumptions, then worked from the agent's own economics to a support budget and a cost per adult, and designed the support to reward real use.
A weak candidate
Proposed opening bank branches in every rural area, without checking cost or whether customers would use them.
Sources for this lesson (1)
- Recognized public explanations of case-interview concepts and frameworks
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