Building Inclusive Businesses for Shared Prosperity

Empowered lives. Resilient nations.

A UNDP African Facility for Inclusive Markets Report United Nations Development Programme This report was produced under the leadership, coordination and funding of the UNDP African Facility for Inclusive Markets (AFIM). AFIM is a regional private-sector and inclusive market development programme of UNDP’s Regional Bureau of Africa. Its objective is to accelerate progress towards achievement of the Millennium Development Goals (MDGs) by supporting the development of inclusive, pro-poor markets across Africa. AFIM works to build capacities within regional economic communities (RECs), governments, UNDP country offices and other stakeholders so as to support inclusive market and inclusive business development in the region. The initiative facilitates knowledge sharing, access to finance and the dissemination of best practices in seeking private-sector-led, market-driven solutions to problems of poverty reduction, environmental sustainability, post-conflict recovery and gender equality.

In conducting this research, AFIM was supported by the UNDP Growing Inclusive Markets (GIM) Initiative. GIM built on its expertise in inclusive business research to provide conceptu- al input and feedback. Conceived in 2006, GIM is a UNDP-led global multi-stakeholder research and advocacy initiative that seeks to understand, enable and inspire the development of more inclusive business models around the globe, thus helping to create new opportunities and better lives for people within the world’s low-income communities. The research for this report built on the experiences and best practices established by the GIM’s previous research efforts. In partnership with local researchers, GIM has produced 166 in-depth case studies on inclusive business, and has published a number of global, regional and national reports, including “Creating Value for All: Strategies for Doing Business with the Poor” and “The MDGs: Everyone’s Business”.

The UNDP Regional Bureau for Africa Strategic and Advisory Unit provided guidance and technical backstopping. Invalu- able expertise and feedback were provided by the Advisory Board with representatives from regional institutions (African Union Commission, African Development Bank, NEPAD – Comprehensive Africa Agriculture Development Pro- gramme) as well as leading advocates in the field of inclusive business (Alliance for a Green Revolution in Africa, Ashley Insight, Business Fights Poverty, Business Unity South Af- rica, Gordon Institute of Business Studies, NEPAD Business Foundation, Pan African Agribusiness & Agro-Industry Consortium, Southern Africa Trust, TechnoServe). s

2 Realizing Africa’s Wealth Realizing Africa’s Wealth Building Inclusive Businesses for Shared Prosperity

A UNDP African Facility for Inclusive Markets Report 2 Realizing Africa’s Wealth Foreword

Mr. Babacar Cissé Deputy Director of the Regional Bureau for Africa United Nations Development Programme

Dear Reader,

Africa has seen strong economic growth over the past dec- Our research shows that more public-private collaboration ade. Indeed, some of the world’s fastest-growing economies and coordination efforts are required in order to bring togeth- are in Africa, and they have expanded despite ongoing un- er the different ecosystem players. Companies and entrepre- certainty in the global economy. This has brought a renewed neurs need support with information, incentives, investment sense of optimism and has helped reduce poverty in the con- and implementation in order to successfully implement and tinent. Nonetheless, rapid economic progress in Africa has scale inclusive businesses. The power of each individual con- not brought prosperity to all. Inclusive business, as a feature tribution is magnified when the others are also in place. of inclusive market development, represents a promising approach to bringing the benefits of economic growth directly More importantly, we need more action! We need young en- to low-income people by including them within value chains. trepreneurs and innovators as drivers of inclusive businesses. We need organizations that are willing to take the roles of The case studies underpinning this report illustrate how in- catalysts, supporters and funders of inclusive businesses. We novation and entrepreneurship within companies and entre- also need more concerted action by the private sector, Africa preneurs of all types and sizes can foster business and human Union, the Regional Economic Communities, governments, development by realizing Africa’s greatest wealth: its people, development agencies and banks, civil society organizations, a young and growing population. The scope of the present research institutes and foundations to realize the potential of report is rather ambitious. It aims to understand not only the inclusive business. state of inclusive business, but also the support landscape, which we refer to as an ecosystem. UNDP’s Regional Bureau for Africa (RBA) has played a key role here through the African Facility for Inclusive Markets (AFIM). Previous research by UNDP has shown the potential of inclu- As a platform, AFIM brings together the public and private sive business in contributing to poverty alleviation and achiev- sectors on regional and national levels to advance inclusive ing the Millennium Development Goals. This research has also market development. In summary, inclusive business can turn revealed the important role of other actors in supporting en- poverty into prosperity and thereby contribute to inclusive trepreneurs and companies in their endeavours. This report is growth and sustainable development. Our hope is that this re- the first step in mapping the landscape of existing support for port will inform and inspire readers to take action in fostering inclusive business in Africa. It provides initial insights into the more inclusive business in Africa. different players and roles required to make inclusive business a widespread reality in realizing Africa’s wealth.

Mr. Babacar Cissé

Realizing Africa’s Wealth 3 Table of Contents

The Inclusive Business Ecosystem Diamond is the framework for the report. Chapter one provides an overview of businesses that include low-income people into their value chains in sub-Saharan Africa. There are four Ecosystem Functions supporting these businesses: information, incentives, investment and implementation support. Chapters 2–5 take a close look at each of these four functions by identifying challenges, high- lighting current achievements, and pointing to opportunities for further support. The final chapter offers suggestions on how to build inclusive business ecosystems.

1 2 3 About the Patterns and Providing Creating report prospects information incentives page 6 page 12 page 30 page 38

EXECUTIVE SUMMARY Case Study Case Study Case Study page 8 L’Occitane en Provence Ecotact Aspen Pharmacare page 13 page 31 Holdings Ltd. page 39

Interview Interview Interview Sagun Saxena, Daniel Annerose, Liban Egal, CEO of CleanStar CEO of Manobi CEO of First Somali Bank Mozambique page 34 page 45 page 23

4 Realizing Africa’s Wealth stem Investment

osy Ec

information inclusive business

incentives

support stem implementation osy Ec

4 5 6 Making Implementation Building inclusive Annexes investments support business ecosystems page 71 page 48 page 56 page 62 Endnotes

Case Study Case Study Case Study page 72 GADCO Mondelēz M-Pesa Acronyms page 49 page 57 page 63 page 74

Case study summaries Interview Interview Interview page 76 Dr. James Mwangi, Gerry Van Den Houten, Gerhard Coetzee, Head of CEO of Equity Bank Director of Enterprise Inclusive Banking Strategic Useful resources page 55 Development, SAB Miller Initiatives, Absa Consumer page 100 page 61 Banking page 68 Further reading page 105

Acknowledgements page 106

Realizing Africa’s Wealth 5 About the report

This report is the first UNDP study to look specifically at -in The research was grounded in a strictly empirical approach. It clusive businesses in sub-Saharan Africa and the region’s in- builds on insights generated in previous UNDP research, start- clusive business support systems, which will be referred to as ing with a solid understanding of the broad constraints com- “ecosystems” throughout this report. Methodologically, the panies and organizations face within low-income markets, the report draws on four streams of data: generic solutions they use to address these constraints and the broad categories of support they receive.1 Against this frame of • Case studies: A total of 43 in-depth enterprise case studies reference, all data was analyzed to identify patterns character- written between 2008 and 2012, drawing on experiences izing inclusive businesses and their supporting institutions in within 16 sub-Saharan African countries, were analyzed for sub-Saharan Africa. In particular, the research team sought to this report. Summaries are available in the annex. understand the challenges related to developing inclusive businesses, the scope of existing support structures, and the means • Interviews: Between May and October 2012, a total of 30 by which the support landscape might be improved. Results in-depth interviews were conducted with experts from re- were reviewed by and discussed with the members of the advi- gional companies and support institutions, along with other sory board (see acknowledgements for the full list of members). high-level experts. Note that this report focuses on sub-Saharan Africa.

• Survey: A database of 600 support institutions active in Finding data on a broad range of inclusive business support sub-Saharan Africa was compiled, and an online survey on functions for all of sub-Saharan Africa proved to be a chal- the issue resulted in 100 detailed responses from interested lenging task. Rather than claiming to be comprehensive, this parties. Contact information for the most important support report comprises a starting point in what is expected to be a institutions is provided in the annex. continuous process of mapping, understanding and improving local support for inclusive business. It can thus serve as a • Desk research: Existing reports on inclusive business in basis for communication and coordination among actors from sub-Saharan Africa and related themes were analyzed. different sectors working to support inclusive businesses in sub-Saharan Africa.

6 Realizing Africa’s Wealth Figure 1: Countries and Regional Economic Communities (RECs) in sub-Saharan Africa

tunisia

Morocco x x x sub-Saharan countries

algeria eritrea libya egypt Djibouti x x x somalia sub- Saharan countries mauritania mali niger chad sudan burkina faso nigeria Côte South Ethiopia cape d’Ivoire central african Sudan verde republic

kenya democratic uganda senegal ghana republic of congo rwanda gambia togo tanzania burundi seychelles guinea-bissau benin guinea malawi

sierra leone angola comoros liberia zambia

São Tomé namibia and Príncipe mauritius botswana

cameroon Madagascar equatorial Guinea south mozambique gabon africa zimbabwe congo swaziland lesotho

COMESA ECOWAS

EAC IGAD

ECCAS SADC

Realizing Africa’s Wealth 7 Executive summary: Building inclusive businesses – realizing Africa’s wealth Africa’s wealth lies primarily in its people – a young and growing population in search of opportunity. By enabling these individuals to engage in business, the private sector unleashes people’s potential. Inclusive businesses integrate low-income people into their value chains, thus creating opportunities for this group in a targeted way. There has been considerable innovation and entrepreneurial drive in creating inclusive business in Africa. Yet manifold constraints in the business environment mean these businesses often struggle to reach a larger scale. Supportive ecosystems that provide appropriate information, incentives, investment and implementation support can stimulate the development of more inclusive businesses with greater impact.

This report describes the status of inclusive business in sub-Sa- Sub-Saharan Africa is growing, but not everyone haran Africa and the ecosystems underlying the enterpris- is sharing the benefits es and entrepreneurs driving such approaches. It identifies promising opportunities in strengthening these ecosystems, Sub-Saharan Africa is today among the fastest-growing re- enabling enterprises and entrepreneurs to build more – and gions in the world. Though market conditions remain chal- stronger – inclusive businesses. lenging in many places, regulatory frameworks and capital availability are improving, fuelling significant economic While enterprises are the drivers of inclusive businesses, entre- growth. However, many people remain excluded from the preneurship is required of all societal actors if the surrounding benefits of this growth, without access to basic goods and ecosystems are to be developed. Local support institutions are services or opportunities for employment and regular income. largely absent, and building them will make it considerably easier for inclusive businesses to flourish. By building inclusive business ecosystems, Africa’s wealth can be realized, creating Inclusive business creates profits and shared prosperity. unleashes potential

Inclusive businesses integrate low-income individuals into value chains in various capacities, be it as consumers, producers, employees and entrepreneurs. Thus, they bring the benefits of growth directly to low-income communities. This is not charity. Inclusive businesses create a strong foundation for profit and long-term growth by bringing previously excluded people into the marketplace.

8 Realizing Africa’s Wealth Figure 2: Inclusive Business Ecosystem Diamond

Inclusive businesses offer a concrete means of Inclusive businesses need a achieving inclusive, green growth supportive ecosystem

Inclusive businesses provide low-income people with access To overcome the challenging market conditions characteristic to opportunities for income, basic goods and services, and of low-income communities, inclusive businesses need a sup- choice. In addition, inclusive businesses are often associated portive environment. An inclusive business ecosystem refers with “green” business practices that conserve resources and to a network of interconnected, interdependent actors whose protect the environment. Several prominent examples in actions make it possible for inclusive businesses to succeed sub-Saharan Africa demonstrate not only that this paradigm and generate impact at increasingly large scales.6 The Inclusive shift is possible, but that it can be both profitable and benefi- Business Ecosystem Diamond (see Figure 2) outlines the four cial for a wide range of stakeholders. M-Pesa’s mobile money primary functions required to support inclusive businesses. services, for instance, reach 15 million people in Kenya alone, and similar mobile money services have provided millions of • Information provides businesses with the awareness, Africans around the continent, including those in rural are- knowledge, technology and know-how required to operate as, with access to financial services.2 Equity Bank provides 8 in low-income markets; million customers in Kenya, Uganda, Tanzania, Rwanda and South Sudan with banking and credit services.3 South African • Incentives provide businesses with the impetus to engage brewer SAB Miller sources ingredients from around 50,000 with low-income communities by rewarding positive exter- smallholders in Zambia, Zimbabwe, South Sudan, Uganda, nalities and reducing the cost of doing business; Mozambique and Tanzania.4 • Investment provides the financial backing that enables Local entrepreneurs are creating significant positive change. businesses to venture into challenging low-income markets; Nancy Abeiderrahmane created Mauritania’s dairy industry essentially from scratch. Today, Tiviski Dairy sources camel milk • Implementation support provides the logistics, transac- from more than 1,000 herders. In Kenya, David Kuria founded tion, marketing and communication, and micro-business Ecotact as a social enterprise providing sanitation services. Eco- support services that allow inclusive businesses to function tact’s Ikotoilets today serve nearly 50,000 slum dwellers. South in a variety of dynamic environments. Africa’s Eduloan, founded by Johan Wasserfal and Jan Kitshoff, aims to “unlock potential” among its client base, and has over Companies, governments, development partners, civil society time provided study loans to more than 600,000 tertiary-level organizations (CSOs), research institutions and intermediar- students. Dozens of other examples of such inclusive business- ies all can contribute to strengthening each of the diamond’s es have been documented by the UNDP’s Growing Inclusive four functions. This report calls on supporting institutions Markets Initiative and are available in its online database.5 to step up innovation and entrepreneurship in enhancing inclusive businesses environments. Moreover, it demonstrates that this type of investment pays off in terms of poverty alleviation and sustainable development.

Realizing Africa’s Wealth 9 Executive summary

MSMEs drive Africa’s inclusive business, Ecosystem-building initiatives show and strong economies lead the way great promise

There are many examples of inclusive businesses in Africa to- Creating the ecosystems that nurture inclusive businesses is day. Whereas successful examples can be found in all sectors, a complex task. Various functions have to complement each most are found in the agribusiness, energy, financial services other, and various actors need to collaborate in order to pro- and ICT sectors. And whereas the activities of large companies vide them. Enterprises are the fundamental drivers of inclu- in low-income communities often attract the most attention, sive business, but innovation and entrepreneurship is required micro, small and medium-sized enterprises (MSMEs) in fact at all levels, from multilateral organizations to local CSOs, to comprise the majority of successful cases identified in this re- enable and support enterprise efforts. Collaboration and co- port. operation are important if individual players’ actions are to be effective. Building inclusive business ecosystems requires “col- A relatively larger number of inclusive businesses can be found laborative entrepreneurship” in order to truly set competition in countries that have shown sustained economic growth and within low-income markets free. solid governance systems. South Africa and Kenya emerge as leaders in the area of inclusive business, with entrepreneurs Ecosystem-building initiatives have been particularly suc- benefiting from dense support ecosystems. cessful in creating inclusive business ecosystems. These initiatives coordinate an ecosystem’s diverse actors at multiple levels so as to ensure that individual activities build on and More local support institutions are needed reinforce each other. The three examples of ecosystem initiatives featured in this report’s final chapter have each been In general, international actors are the dominant players in able to reach millions of people. The Competitive African providing support to inclusive businesses in sub-Saharan Af- Cotton Initiative (COMPACI) brings agribusiness and textile rica. This is hardly surprising, as the approach has been de- companies, development partners, and smallholder cotton veloped and strongly promoted on the international level. farmers together to create sustainable and inclusive cotton Public and private development partners in particular have supply chains. Kenya’s Financial Sector Deepening Initiative advanced the inclusive business approach by providing fund- works with various government bodies, banks, micro-finance ing, conducting research, raising awareness and providing institutions, and educational and research institutions to ground-level support. In most countries, a local ecosystem of deepen access to financial services, especially for low-in- actors is only beginning to emerge. National governments are come groups. Lighting Africa provides a platform enabling increasingly recognizing the potential held by inclusive busi- lighting solution companies to have their products quality ness to contribute to inclusive growth, and are consequently checked and certified, and works to improve the conditions seeking to reward the resulting social and environmental ben- for sale of these products in several countries, in the process efits. Business schools and think tanks are popularizing these enhancing access to lighting for low-income consumers. new concepts within society, while research into and develop- These examples show that ecosystem-building initiatives are ment of new solutions is increasingly taking place within local promising approaches in helping inclusive businesses grow. institutions. Recognizing the challenges they face, companies themselves often nurture their own supporting environment by encouraging entrepreneurship and spinning off new organizations, for instance to help build the capacities of small businesses and producers. Photo: Ashden Awards Ashden Photo: Nevertheless, potentially valuable local support institutions such as market research firms, credit bureaus, value chain facilitators, incubators and venture capital firms are largely absent at all levels. Building local support institutions could do much to facilitate the creation of inclusive businesses, and would reduce the cost for established enterprises when venturing into low-income markets.

This young girl uses a reading light to draw in the dark hours. Lighting Africa helped to create access to modern lighting for millions of Africans.

10 Realizing Africa’s Wealth All actors can contribute to improving inclusive Intermediaries can identify and showcase good examples of business ecosystems inclusive business, thus encouraging others to follow. They can coordinate various actors, performing tasks such as organiz- Companies and entrepreneurs can pioneer inclusive strat- ing functional value chains, harmonizing standards and labels, egies by investing in new business approaches, conducting establishing joint market-research platforms, and supporting quantitative and qualitative market research, testing the de- the aggregation of producers and products. They can channel livery of innovative services and products at affordable prices, support to those who need it and create spaces where inclu- building technical skills, implementing strategies for integrat- sive businesses can grow. ing low-income communities into value chains, and providing logistical and other services that support other companies. The companies and entrepreneurs driving inclusive business- They can cooperate in the initial stages of a business venture es also need to shape and drive the development of support- by helping to conduct market research or develop innova- ive ecosystems. They can do this by being transparent with tive business models. They can also innovate by purchasing respect to their own challenges, by managing support rath- goods or services from informal enterprises owned by peo- er than being influenced by it, and by engaging in dialogue ple in low-income communities, and by increasing the locally with governments and other support institutions in order to sourced content of raw materials and other supplies. co-create effective solutions. In effect, companies and entrepreneurs need to become ecosystem entrepreneurs. Governments can play a major supporting role by creating enabling conditions and providing incentives for inclusive businesses. They can remove regulatory barriers and create A call to action regulation conducive to economic activity. They can invest in infrastructure, information and education. They can reward In order to advance the inclusive business approach, innovation businesses’ positive social and environmental externalities and entrepreneurship is required on the part of all actors, es- and directly create incentives for inclusive business, for in- pecially given the potential of millions of young people as key stance by procuring preferentially from businesses that inte- drivers of inclusive businesses. Furthermore, mechanisms are grate low-income communities into their value chains. needed to facilitate cooperation and coordination. In addition to its recommendations for individual actors, this report there- Development partners, both public and private, as well as pri- fore calls for the creation of broader support mechanisms de- vate foundations, can stimulate the creation of currently lacking signed to create inclusive business ecosystems: local support institutions. They can document and analyze best practices, share insights and facilitate public-private dialogues. • New ecosystem-building initiatives should be developed They can also promote the inclusive business approach as they at the national and regional levels, focused tightly on creat- provide assistance to governments and support the developing inclusive business ecosystems. ment of enabling policies. • Finance vehicles able to support ecosystem-building initia- Civil society organizations can help local entrepreneurs set tives should be created on regional and national levels. up inclusive businesses. They can facilitate access for enterprises to low-income communities, act as watchdogs for the • Centres of excellence for inclusive business and markets interests of low-income communities, and support the devel- should be set up at the regional and national levels to build opment of inclusive businesses, above all through awareness and share knowledge on the inclusive business approach. raising and capacity-building. By working together we can realize Africa’s wealth – its Research institutions can collect and analyze detailed and people and their potential – and create shared prosperity. context-specific information about what works for inclusive business in sub-Saharan Africa. They can build and share information about inclusive business models and advocate for an inclusive business approach. They can educate and train current and future entrepreneurs and leaders. They can also develop better measures of how inclusive a business is and what results have been achieved, thus providing the necessary data for both policy makers and impact investors.

Realizing Africa’s Wealth 11 1 Patterns and prospects Inclusive business creates opportunities for enterprises and low-income people. L’Occitane en Provence sources shea butter from 15,000 women in Burkina Faso. This activity provides just one example among many of a company that explicitly addresses low-income people’s needs in such a way as to bolster its own commercial success. The example also shows how actors can often be involved at multiple levels of the ecosystem as they foster inclusive business.

This chapter introduces the concept of the inclusive business ecosystem and the Inclusive Business Ecosystem Diamond – the guiding framework of this report. It highlights inclusive business ecosystem patterns in Afri- ca by country, sector and actor.

12 Realizing Africa’s Wealth Inclusive businesses are extremely diverse. Though they vary greatly from country to country and sector to sector, some patterns have begun to emerge. Photo: @YamPhoto Photo:

Case Study: L’Occitane en Provence

L’Occitane en Provence fosters cooperatives in Burkina Faso

L’Occitane en Provence is a highly successful multinational cosmetics firm, recognized worldwide for luxury products based on natural ingredients. For decades, one of the firm’s signature ingredients has been shea butter. After travelling in Burkina Faso in 1982, L’Occitane’s founder Olivier Baussan committed to procuring shea butter for his products while supporting local communities. However, sourcing from

women directly proved to be a difficult task. In order to help @YamPhoto Photo: preserve traditional knowledge, women were encouraged Improved stoves reduce or completely eliminate the need for firewood in shea nut processing. L’Occitane helped create an to use artisanal techniques. Yet this approach presented environmental fund to make such equipment affordable. challenges for quality control, as did complicated transport issues, which resulted in the product often arriving in France development agency SNV, and support for the protection of in quality conditions that did not reach European standards. shea resources from the Swiss Development Cooperation.

Over the years, L’Occitane has established close links with five Thanks to these efforts, L’Occitane has improved its stages of cooperatives that together consist of 15,000 members. The production and now delivers nearly 100 different shea butter company has helped to set up and strengthen these coop- cosmetic products of unparalleled quality. Representative eratives, and has invested in building the capacities of local of this success is the company’s best-selling product, L’Occi- women; both tasks were performed with the help of the Ca- tane’s shea butter hand cream. One unit of the product sells nadian CSO Centre d’Etude et de Coopération Internationale every three seconds in more than 2,000 shops worldwide. (CECI). L’Occitane also installed local packaging and logistics The business model established by L’Occitane in Burkina systems that prevent the product from losing quality in the Faso helps shea butter-producing women there benefit di- course of handling. In 2009, the company began to have its rectly from their trade. suppliers certified as organic and fair trade. In addition, cooperatives have learned to create their own ecosystems. For ex- In 2012, L’Occitane bought more than 500 tons of shea but- ample, one cooperative has received training from Dutch CSO ter from Burkina Faso. This generated approximately $1.2 ICCO, improved stoves from German development agency million in revenues for the cooperatives and their members, GIZ (enabling shea butter to be produced in a more environ- and included a 2% fair trade premium that was invested in mentally friendly way), strategic advisory service from Dutch community projects.

Realizing Africa’s Wealth 13 1Patterns and prospects

Sub-Saharan Africa is growing quickly, but benefits are unequally distributed

The economic landscape in many parts of sub-Saharan Africa billion in 2008. This figure has remained comparatively strong is changing quickly for the better. GDP growth for the African throughout the global economic crisis, reaching $54.4 billion continent as a whole is expected to reach 5.4% in 2013, mak- in 2011.10 Indeed, since 2005, Africa has attracted more investing it one of the fastest-growing regions in the world.7 Every ment than aid. The African diaspora is an increasingly impor- country in sub-Saharan Africa, with the exception of South tant source of capital. Remittances have continuously risen, Sudan, saw positive economic growth rates in 2007–2012, as reaching almost $50 billion in 2012. shown in Figure 3.8 Over the past decade, six of the world’s 10 fastest-growing countries have been in the African continent, Household incomes are rising, partly as a result of these trends. with this trend expected to continue in the short to medium Consumer spending on the African continent is expected to term.9 grow to $1.4 trillion by 2020, $520 billion more than in 2008.11 Low-income market segments account for a significant share Capital is also flowing into the African continent, as Figure 4 of this spending. In 2007, total spending by people earning illustrates. Over the past decade, foreign direct investment less than $3,000 per year in Africa was estimated at $429 bil- targeting the continent has grown steadily, peaking at $73.4 lion, on a purchasing power parity (PPP) basis.12

Figure 3: GDP growth rates 2007–2012 by country

Real GDP Growth (Annual percent change), Sub-Saharan 2007—2012 average tunisia Africa (Region), 5.20 –27.00 to 0.00 Morocco 0.00 to 0.75

0.75 to 1.50 algeria libya eritrea 2.32 1.50 to 2.25 egypt Djibouti somalia 2.25 to 3.00

cape verde 5.52 mauritania 3.00 to 3.75 mali 2.97 niger 6.09 3.75 to 4.50 chad sudan 3.78 4.50 to 5.25

nigeria 5.25 to 6.00 south Ethiopia 7.05 car 2.97 sudan 9.25 6.00 to 6.75 –26.77 6.75 to 7.50 Côte kenya d’Ivoire 4.42 2.24 democratic 7.50 to 8.25 republic of uganda 6.44 senegal 3.52 ghana 8,24 congo rwanda 7.39 8.25 to 9.00 gambia 4.04 burkina 6.07 tanzania 4.25 faso 5.32 burundi 9.00 to 9.75 guinea-bissau 2.57 6.77

guinea 2.83 togo 3.68 malawi 6.99 angola sierra leone 8.20 benin 3.63 8.83 zambia liberia 7.98 6.49 seychelles 4.04

São Tomé namibia and Príncipe 4.83 3.96 comoros 1.67 botswana 3.16

cameroon 3.29 mauritius 4.35 south equatorial Guinea 8.28 africa Gabon 4.30 2.71 Madagascar 2.23 congo 4.76 mozambique 7.06 zimbabwe 1.35 swaziland 1.06 Source: IMF lesotho 4.64

14 Realizing Africa’s Wealth Figure 4: Capital inflows into Africa, 2000–2012

USD billions FDI ODA Remittances Total external flows (right axis) % GDP 80 12 70 11 60 10 50 40 9 30 8 20 7 10 0 6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: AfDB, OECD, UNDP, UNECA (2012). African Economic Outlook 2012

A young and growing population eager for opportunities Who are the “low-income” people? Sub-Saharan Africa has a total population of about 800 million people. The continent’s average age is the lowest of any re- More than 800 million people live in sub-Saharan Africa. According gion in the world. By 2015, 75% of its population will be below to World Bank data for 2008, 47.5% lived on less than $1.25 (PPP) the age of 30.13 Moreover, the number of young people is ex- per day, the international standard for extreme poverty. Similarly, pected to double by 2045.14 This young, growing population 68.8% lived on less than $2 per day, another international poverty holds great potential as consumers, producers, employees benchmark. Almost all Africans (97%) fall into the segment earning and entrepreneurs. less than $8 per day, a measure used by the World Resources In- stitute (WRI) and International Finance Corporation (IFC) to define Nevertheless, a large part of this population is struggling with the low-income market.26 To be sure, the precise level of income elementary existential challenges, including extreme poverty, deemed “low” will always remain arbitrary, and $2 per day means hunger, disease and unemployment: different things for a smallholder farmer and an urban worker. • Almost half of sub-Saharan Africa’s population lives on incomes of less than $1.25 per day (PPP).15 This report refers to low-income people not as defined by a par- • Around 239 million people in sub-Saharan Africa are mal- ticular income level, but rather using the understanding that peo- nourished.16 ple in low-income communities face significant barriers to engag- • Of the 31 countries worldwide recording an under-five mor- ing in formal markets and larger value chains. Most low-income tality rate of at least 100 deaths per 1,000 live births in 2009, people transact mainly in the informal market. They lack the legal 30 were in sub-Saharan Africa.17 Average life expectancy documents, financial services, education, skills and information to across sub-Saharan Africa is 52.5 years, compared to 69.2 access formal markets. This makes it difficult for enterprises to en- worldwide.18 gage with them on a formal basis. Many of the challenges related • Out of a total African workforce of 382 million, only 107 mil- to developing inclusive businesses have to do with bridging the lion people were engaged in formal employment in 2010.19 formal-informal divide. Two-thirds of the working-age population hold vulnerable, informal jobs such as subsistence farming, informal self-em- Low-income communities can be both urban and rural. About 70% ployment or work for a family member.20 Youth account of sub-Saharan Africa’s population lives in rural areas, where the for more than one-third of Africa’s workers, while the 2009 incidence of poverty is higher.27 Cities also have pockets of poverty youth unemployment rate was nearly 12% in the continent difficult for enterprises to reach due to the lack of an enabling mar- as a whole.21 ket environment. Smallholders in search of a market, micro-entre- • About 38% of Africa’s adult population, or 153 million adults, preneurs looking for income opportunities, mothers seeking nu- lacks the basic literacy and numeracy skills needed in every- trition and health care for their children, and young women who day life. Women account for more than 60% of the region’s want a job all can benefit from being integrated into value chains. adult illiterate population.22 Youth literacy rates, at 72%,23 are Thus, this report’s overarching theme – which informs its con- the lowest of any region in the world. More than 31 million ception of low income – is that people previously excluded from African children – mostly girls – do not attend school. 24 traditional markets, whether underserved, unemployed or under- employed, can find access to opportunity by being integrated into Other key areas of human development are also character- formal business ecosystems. s ized by significant challenges. Only 66% of the population has access to safe drinking water, only 40% has proper sanitation facilities, and only 30% has access to electricity.25

Realizing Africa’s Wealth 15 1Patterns and prospects

What is inclusive business? What is inclusive growth?

Inclusive businesses include low-income people on the demand side as customers, and on the supply side Inclusive business creates profits as employees, producers and entrepreneurs serving at and social value various points within the value chain. They build bridges between business and the poor for mutual benefit. Inclusive businesses can create opportunities for Africa’s young and growing population, unlocking the region’s hid- Inclusive growth is economic growth that results in den wealth. They can create value by solving development wider access to sustainable socio-economic opportu- challenges. Innovative business approaches integrate low-in- nities for a broader number of people, countries or re- come people into their value chains in various capacities, as gions, while protecting the vulnerable, all being done consumers, producers, employees and entrepreneurs. They in an environment of fairness, equal justice and politi- create a strong foundation for profit and long-term growth cal plurality. This is precisely what inclusive businesses by bringing previously excluded people into the marketplace. seek to achieve. s Low-income people in turn are provided with opportunities to improve their incomes, while gaining access to basic goods, Sources: UNDP (2008) Creating Value for All; services and other choices. Finally, inclusive business is often AfDB (2012) Briefing Notes for AfDB’s Long-Term Strategy; associated with “green” business practices that conserve re- Briefing Note 6: Inclusive Growth Agenda). sources and protect the environment. Inclusive business can therefore represent a concrete solution to achieving inclusive and green growth.

A number of prominent African examples demonstrate that Inclusive business unleashes potential this paradigm shift is both possible and beneficial to a wide variety of stakeholders. M-Pesa mobile money services, for ex- Low-income people can play various roles in business value ample, reach 15 million people in Kenya alone, and similar mo- chains, as customers, producers, employees and entrepre- bile money services have provided access to financial services neurs. Often, they are integrated in more than one role. Hav- to millions of Africans around the continent, including those in ing access to formal value chains can enable people to fully rural areas.28 Equity Bank provides banking and credit services use their potential, to express their choices, to make their most to 8 million customers in Kenya, Uganda, Tanzania, Rwanda of their talent, and to gain access to goods and services for a and South Sudan.29 South African brewer SAB Miller sources better life. ingredients from about 50,000 smallholders in Zambia, Zim- babwe, South Sudan, Uganda, Mozambique and Tanzania.30 As customers, low-income people benefit from access to goods and services that increase their well-being and produc- Local entrepreneurs are also creating significant positive tivity, while companies expand their markets. ToughStuff, for change. Nancy Abeiderrahmane set up Tiviski Dairy, which example, sells solar-powered lamps in communities that have essentially created Mauritania’s dairy industry from scratch. no access to electricity. Its micro-franchise distribution mod- Today, the company sources camel milk from more than 1,000 el also stimulates local entrepreneurship. In addition, Tough- herders. In Kenya, David Kuria founded Ecotact as a social en- Stuff’s products, which rely on clean and renewable energy, terprise to provide sanitation services, with the company’s present significant health and environmental benefits com- Ikotoilets today serving almost 50,000 slum dwellers. South pared to alternatives such as paraffin and batteries. Africa’s Eduloan, founded by Johan Wasserfal and Jan Kit- shoff with the goal of “unlocking potential” among its client As producers, smallholder farmers or small manufacturers base, has provided study loans to over 600,000 tertiary-level can find stable buyers and provide formal enterprises with students. And even in Somalia, entrepreneurship is thriving new sourcing channels. Businesses also transfer skills, create again. Entrepreneur Liban Egal not only created the country’s employment and increase productivity. Heineken and SAB- first bank after the war, but also a printing company, a market Miller, two global brewers, for example, have both been stead- research company and a mobile money service (see interview ily increasing the local content of their production in recent in chapter 3). There are dozens more examples of inclusive decades. Thousands of small producers in East and West Africa business documented by the UNDP’s Growing Inclusive Mar- provide these companies with the cassava, barley, sorghum kets Initiative.31 and hops needed for the production of beer.

16 Realizing Africa’s Wealth Photos: Adam Rogers/UNCDF Adam Photos:

Businesses can include low-income people in different capacities – as entrepreneurs, like this shop-owner in Madagascar and the artisans in Tanzania, or as clients and customers, like those in this Tanzanian health facility.

As employees and entrepreneurs, low-income people offer Inclusive businesses often integrate low-income people in enterprises a source of labour, local knowledge and connec- more than one capacity. Cooking stove producer Toyola, for tions. In particular, Africa’s entrepreneurial young people, a example, reaches out to low-income people along its entire large number of whom are seeking opportunities for jobs and value chain. The Ghanaian company contracts with 200 local income, can benefit from improved incomes and new skills. artisans in its home country to build cooking stoves. Local As one example, South Africa’s cell phone giant Vodacom has market vendors then sell the pots, earning a 10% commission. created over 90,000 community phone shops across the coun- To allow even the poorest access to their products, the compa- try. Entrepreneurs operate these telecommunication services ny sometimes allows barter financing. outlets in low-income communities.32

Figure 5: Number of GIM case studies from Africa that include low-income people, by role (total 43)

Consumer 24

Producers 16

Employees 13

Entrepreneurs 12

Analysis of 43 GIM case studies from sub-Saharan Africa (see annex for details). Note: Low-income people are sometimes integrated into more than one role within a business value chain.

Realizing Africa’s Wealth 17 1Patterns and prospects

Inclusive businesses can be owned and driven by a diverse set of actors

These actors range from MSMEs to large corporations, from local to global players, and from not-for-profit to for-profit -or ganizations. The balance between commercial and social objectives will vary based on the ownership of the business, and small non-profit organizations can often experiment with new models in a way large multinationals cannot. Overall, however, the defining feature of any inclusive business is that commercial and developmental objectives are complementary to one another.

Inclusive business is firmly grounded in the basic tenet of all business: value creation

Business creates value by making people better off.T he largest untapped resource in sub-Saharan Africa is its people. By helping them to realize their potential, businesses can activate this wealth and create shared prosperity. Table 1 outlines the added value that inclusive business can provide for companies, low-income people and other actors within the ecosystem.

Table 1: Benefits from inclusive business for all parties

Added value Added value Added value for companies for low-income people for other ecosystem actors

Building new markets: Strong growth Meeting needs: People can gain access Governments can leverage private within low-income markets and oppor- to needed goods and services such as investment to achieve social objectives, tunities represented by unmet needs food and nutrition, energy, clean water in particular creating jobs for youth, in- can translate into long-term profits and and sanitation, housing and financial creasing incomes, and improving access increased revenues. services. to basic goods and services. Strengthening supply chains: By Increasing income: People can find Development partners can support working with smallholder farmers or jobs, increase their incomes and im- sustainable solutions able to continue manufacturers, companies gain access prove their livelihoods. Lower product even after the development funding to new sourcing channels. prices can increase relative consumption stops. power. Enhancing reputation: Tangible Enhancing productivity: Access to Civil society organizations can create social benefits can improve company electricity, financial services, health opportunities for their constituencies reputation, increase the value of brands, services, telecommunications, inputs, within low-income communities. and make it easier to secure licenses to technology and capacity-building operate locally. makes people more productive. Retaining and motivating employ- Enlarging choices: Being integrated Research institutions can collaborate ees: A commitment to social goals mo- into formal markets gives people new on applied research with businesses, tivates employees and helps a business choices and the ability to make their which may also provide funding. attract talent. own decisions. Driving innovation: Challenges in Instilling self-confidence: People with Intermediaries increase their relevance low-income markets drive innovation more choices gain in self-confidence by providing concrete benefits to their that could also be applicable to other and develop a sense of control of their members. markets. lives.

Source: Adapted from UNDP (2008). Creating Value for All.

18 Realizing Africa’s Wealth How inclusive businesses can contribute to achieving the MDGs

The Millennium Development Goals (MDGs), which trans- 5 Millennium Development Goal 5: late the concept of human development as a multidimen- Improve maternal health sional challenge into actionable objectives, give all United In Kenya, the 66 Child and Family Wellness (CFW) Nations agencies an overarching framework to measure shops, micro-drugstores and clinics offer safe drugs and progress in improving people’s lives. Targets are set to be health care to low-income communities. CFW operates achieved by 2015, with many African countries having as a franchise system. The foundation recruits qualified considerable distance yet to make up despite the positive nurses, trains them regularly, and has processes in place to progress that has been achieved in many of the goals. The control product and service quality. In 2012, the franchise private sector can make an important contribution to- reached nearly 400,000 patients and customers. Pregnant ward achievement of the MDGs. In fact, as the following women and mothers thus have better access to health care examples from the Growing Inclusive Markets case studies and preventive products such as mosquito nets. show, inclusive businesses can contribute to each of the eight goals. 6 Millennium Development Goal 6: Combat HIV/AIDS, malaria and

1 Millennium Development Goal 1: other diseases Eradicate extreme poverty and hunger Textiles company A to Z Textiles in Tanzania set up a joint Fair trade cotton generated additional income venture with Japanese chemical company Sumitomo for 23,000 farmers in 194 producer organizations in West- Chemicals to produce long-lasting, insecticide-treated ern and Central Africa, creating revenue of more than $5.2 mosquito nets. These were distributed widely in Africa million in 2005 – 2006, almost $2.6 million more than what and beyond to help prevent malaria. The joint factory has would have been achieved on the conventional market. a production capacity of 30 million nets per year and employed 7,500 people in 2011.

2 Millennium Development Goal 2: Achieve universal primary education 7 Millennium Development Goal 7: In Uganda, members of the Association of Pri- Ensure environmental sustainability vate Water Operators deliver clean water to 500,000 peo- Senegalese company Du Vent, de L’Eau pour la ple. This means that residents, particularly young girls, no Vie (VEV) uses wind pumps to bring ground water to the longer have to spend time fetching water, and can thus surface, where it is sold by local women. The business pro- concentrate more fully on schooling. vides access to clean water and reduces the amount of time women spend in fetching water.

3 Millennium Development Goal 3: Promote gender equality and 8 Millennium Development Goal 8: empower women Develop a global partnership Multinational cosmetics company L’Occitane en Provence for development has provided some 15,000 rural women in Burkina Faso A company called Inova provides mobile money services with additional income totalling $1.2 million in 2011 from to 60,000 people in Burkina Faso, providing them with a selling shea butter. In addition, it empowers women by safe and low-cost way to make transactions. This frees up helping them to set up cooperatives, providing them with time and increases transaction security. training, more environmentally friendly production meth- ods, and giving them access to microloans. For more examples of how various companies contribute to the eight MDGs, and of how other institutions support

4 Millennium Development Goal 4: them, see the UNDP Growing Inclusive Markets report, Reduce child mortality “The MDGs: Everyone’s Business”. In Mali, CSO Pesi-Net has helped reduce child mortality by training local nurses to weigh children and As the year 2015 approaches, the international communi- text the information to doctors. If a child is underweight, ty is already developing a post-MDG framework. There is nurses receive information on how to improve the child’s wide agreement that the private sector will have to play a health. More than half of all child deaths can be avoided strong role both in the consultation process leading to the through this simple intervention. new framework and in its implementation.33 s

Realizing Africa’s Wealth 19 1Patterns and prospects

Inclusive business ecosystems enable larger scale and impact

Inclusive businesses operate in a challenging environment. In order to harness the potential of inclusive business in Afri- Low-income markets lack many of the conditions that enable ca, entrepreneurs require ecosystems conducive to this type functioning markets, as the GIM research in 2008 reconfirmed of activity. (See box below). Reliable market information is often absent, the regulatory environment is often inadequate, physical infra- An inclusive business ecosystem is made up of a network of structure is dismal in many places, low-income people initially interconnected, interdependent players, whose actions help lack the knowledge and skills required to participate in value inclusive businesses succeed, generate impact and grow to a chains productively, and access to financial services is frequent- larger scale.34 These ecosystems can include all types of actors, ly minimal. When enabling conditions are absent or fall short, including companies, governments, development partners, transaction costs rise, as businesses have to fill the gaps them- CSOs, research institutions and intermediaries. selves. Despite the enormous potential awaiting inclusive business endeavours in Africa, the obstacles are often daunting.

Insights from the Growing Inclusive Markets (GIM) Initiative

Since 2006, the UNDP’s GIM Initiative has been dedicat- The regional report for Emerging Europe and Central Asia, ed to creating insight and awareness about the inclusive “Business Solutions to Poverty”, illustrated in 2010 that business approach. Based on an analysis of 50 of its own the conditions required to support inclusive business and case studies, the initiative’s first report, C“ reating Value for hence the models used by enterprises and the kind of sup- All – Strategies for Doing Business with the Poor”, showed port necessary differed substantially by region. Whereas in 2008 that companies struggled with five primary market most countries in Emerging Europe and Central Asia have a constraints when trying to work with low-income people socialist history that has left them with both substantial in- as business partners: a lack of market information, a reg- frastructure and a crushed entrepreneurial culture, the sit- ulatory environment that was not conducive to economic uation is completely different in sub-Saharan Africa. Here, activity, dismal physical infrastructure, a lack of knowledge entrepreneurial ingenuity has to make up for a widespread and skills within the target group, and limited access to fi- lack of infrastructure. nancial services. The report also identified five strategies for overcoming these constraints: adapting products and The present report builds on the research of the GIM Ini- processes, investing in the removal of constraints, lever- tiative, and continues the search for concrete, region-spe- aging the strengths of the poor, combining resources and cific solutions able to help inclusive business approaches capabilities with other actors, and entering into a dialogue grow.s with governments. These strategies showed that enterprises often need the collaboration and support of other actors to establish inclusive businesses.

Building on these insights, the initiative’s second report,

“The MDGs – Everyone’s Business” highlighted in 2010 the Rogers/UNCDF Adam Photo: ways that different types of enterprises – multinationals, large domestic companies, SMEs and CSOs – could contribute to each of the eight goals. This report also outlined how other actors, in particular policy-making institutions, research and advocacy bodies, financial institutions and other institutions with complementary capabilities, could

provide support. GIM’s mission is to create greater clarity around inclusive business models and the impact they have on millions of people, such as this man in Niger.

20 Realizing Africa’s Wealth Figure 6: Gaps in the inclusive business ecosystem in sub-Saharan Africa

0 10 20 30 40 50 %

Incentives

Investment

Very big gap

Information Large gap

Small gap Implementation support No gap at all

Source: Survey of 100 support institutions in Africa.

How the UNDP supports inclusive market development

with governments, lead firms and other development stakeholders. Implementing IMD thus involves the facilitation and strengthening of integrated value chains and sectors that expand opportunities for smallholders and

Photo: Adam Rogers/UNCDF Adam Photo: MSMEs while developing their capacity.

The UNDP’s strategy for inclusive market development combines private sector development (PSD), seeking to increase the contribution made by MSMEs to growth and poverty reduction; and private sector engagement (PSE), fostering development-oriented partnerships with a wide range of companies ranging from multinationals (northern and southern) to SMEs.

Inclusive market development intervenes at three levels. On the micro level, this takes place by building the capacities of small producers and traders, and by providing support services in the focus sector’s value chain. On the meso level, value chain linkages are strengthened and Inclusive market development creates opportunities for public-private dialogue and cooperation are facilitated. On smallholders and MSMEs by building inclusive business ecosystems. the macro level, the development of market infrastructure is supported, and sectoral policies for inclusive economic Inclusive market development (IMD) refers to the devel- growth are promoted. Thus, inclusive market development opment of markets that expand choices and opportuni- supports inclusive business by stimulating and enhancing ties for the poor and other excluded groups in their role inclusive business ecosystems. s as producers, consumers, entrepreneurs and employees. IMD is a holistic approach targeting the improved productivity and participation of smallholders and MSMEs (including informal business and small family-owned business) as suppliers and distributors in partnerships

Realizing Africa’s Wealth 21 1Patterns and prospects

Figure 7: Inclusive Business Ecosystem Diamond

Four types of inclusive business support

Entrepreneurs rely in particular on four enabling functions to Incentives are the drivers of business. In Africa, the cost of start and implement a business. They need information about doing business is often high, particularly within low-income, business opportunities and other market characteristics; they informal markets. Regulatory conditions are poor, and admin- need commercial incentives to provide a reason to engage istrative processes burdensome. Negative social or environ- in the business activity; they need access to financial invest- mental externalities associated with business activities are ment; and they need technical support during implementa- rarely priced into the cost of doing business, while positive tion. A survey of 100 participants from various organizations externalities generally receive no financial reward. By improv- reveals that the gaps in Africa’s inclusive business ecosystem ing the business environment, enabling low-income people are enormous, as shown in Figure 6. More than half of the to participate in markets, and creating rewards for social and survey’s respondents saw big or very big gaps across all four environmental benefits, the incentives motivating entrepre- categories, and few respondents believe that no gap exists in neurs to seek and implement market-based solutions to social any of these categories. The biggest improvements appear to problems can be augmented. Public policy plays a critical role be needed in the area of investment, where more than half of here, but private policies and public-private ordering can also respondents see a very big gap. make a difference.

Information and relevant knowledge provide the foundations Investment is the fuel of business. Although capital flows into of business activity. However, collecting data and putting data Africa are increasing, debt and risk capital either remains com- in context are often significant challenges within low-income paratively scarce or is ill-adapted to local needs. In general, markets. Solid market data is often absent, as are market in- inclusive business projects can have difficulty fitting into- es termediaries such as consultancies or research institutes. In tablished financing frameworks, as they can take longer than addition, knowledge on how inclusive business works is often traditional projects to break even and are often considered to difficult to access in Africa, especially for local companies and be risky or insecure. Development partners both on the public entrepreneurs. Academic institutions, market intermediaries and private side have developed targeted impact investment such as consultancies, think tanks or market research institutes (see box on next page) mechanisms designed to tackle these as well as development agencies and their local private-sector issues. Banks are stepping up efforts to serve SMEs. Finally, programmes can play an important role here. micro-finance can ease some of the financing needs of inclusive businesses by serving entrepreneurs and producers directly.

22 Realizing Africa’s Wealth interview Sagun Saxena CEO, CleanStar Mozambique

CleanStar Mozambique is an integrated food, energy and forest-protection busi- Photo: Sagun Saxena Photo: ness. The company works with smallholder farmers in Mozambique to produce food and energy crops Implementation support helps to translate inclusive busi- that are processed and sold in urban centres to replace im- ness models into a ground-level reality. Businesses require ported food and charcoal. efficient transaction systems, distribution and sourcing channels, marketing and communication services, and small busi- Mr. Saxena, what makes it difficult as an entrepreneur to ness support in order to operate. In low-income communities, create an inclusive business in sub-Saharan Africa? these services are often initially provided by CSOs, develop- There is little reliable market data on the consumption pat- ment agencies or other intermediaries. terns of low-income urban communities in Africa. So it is challenging for inclusive businesses like ours to understand Together, these functions can propel entrepreneurs towards market needs or to develop strategies. As a result, we have solutions that combine sustainable and commercial develop- had to invest heavily in our own field-based market research ment. The guiding framework of this report brings them to- and analysis. gether in the Inclusive Business Ecosystem Diamond pictured “We have had to There is no formal com- in Figure 7. invest heavily in mercial activity among the our own smallholder farmers from whom we buy agricultural field-based products, so we must also market research invest in building basic phys- and analysis.” ical and financial infrastruc- What is impact investment? ture for commerce. With regard to running the business, there is poor capacity Impact investments are investments made in com- in Mozambique in fields such as accounting and compliance. panies, organizations and funds with the intention Finally, there are no clear regulations (on value-added tax, for of generating measurable social and environmental example) to support the transition of informal economic ac- impact alongside a financial return. Impact investing tivities like charcoal distribution into formal inclusive business occurs across asset classes, and includes private equity models. and venture capital as well as debt. Impact investment is important for inclusive businesses, as their often-in- You have not mentioned investment as a challenge. Is novative models and challenging market conditions there enough money for inclusive businesses? typically result in comparatively long periods of activity Finance is available for compelling commercial ventures that before a profitable return can be expected. s can show how inclusion reduces risk, rather than just adding complexity. Proof-of-concepts are useful in adjusting risk perceptions by validating key business-model assumptions and demonstrating execution capacity. Many inclusive business entrepreneurs do not have a track record with commercial fi- nanciers, so they struggle to access such capital. Donor funding can create delays and dependence, which are both deadly for any new business. Photo: Adam Rogers/UNCDF Adam Photo: Impact investing combines classic investment know-how with social objectives. These women in Madagascar are doing the bookkeeping for their savings and credit group to advance their personal and social ends.

Realizing Africa’s Wealth 23 1Patterns and prospects

All societal actors can strengthen the inclusive tions and intermediaries. Obviously, not every organization can business ecosystem be easily assigned to one of these categories, and examples of hybrids – such as companies that provide intermediation ser- Inclusive business ecosystems are made up of a variety of ac- vices or CSOs that provide research services – abound in the tors, often collaborating within a dense task-sharing network. real world. However, this rough typology is useful in identifying We categorize these actors into six general types: companies, broad patterns within Africa’s inclusive business ecosystems, governments, development partners, CSOs, research institu- and can serve as a basis for concrete recommendations.

Table 2: Actor type with examples of contributions to each of the inclusive business ecosystem support functions

Type Includes Example role in: Symbol

Information Incentives Investment Implementation support Companies MNCs, large national Conduct market Self-regulation, Provide venture Provide logistics and companies, state-owned research, provide standards and capital and private marketing services, companies, SMEs, start- consulting services certification, good equity payment systems, ups and entrepreneurs, corporate govern- financial infrastruc- social enterprises, mar- ance standards ture (including credit ket research companies, registries) consultancies, financial and micro-finance institutions, investors Governments National governments, Make economic data Create legal and Provide investment Enable cooperation public agencies, region- available, provide regulatory frame- guarantees with public services, al economic communi- proper identification works, procure from improve infrastruc- ties (RECs), international system, gather data inclusive businesses, ture, provide good organizations reward positive social quality education and and environmental extension services, externalities set up small business support agencies, support business incubators Development Bilateral and multilateral Document and ana- Promote inclusive Provide patient Provide technical partners public development lyze good practices, business approach capital support, advisory partners, private foun- facilitate public-pri- in country strategies services, capaci- dations vate policy dialogue, and assistance ty-building advise governments on policies conducive to inclusive business Civil society CSOs, NGOs, NPOs Facilitate market Act as watchdogs for Facilitate access to fi- Support awareness research in low-in- low-income commu- nance for low-income raising and capaci- come communities, nities’ interests communities ty-building in low- promote inclusive income communities business approach Research Universities, think tanks, Generate and dissem- Inform the design Assess the effective- Inform inclusive institutions research institutes inate knowledge on of business models, ness of new invest- business’ approach to inclusive businesses, evaluate incentive ment vehicles implementation intellectual leadership, systems, make recom- influence inclusive mendations business debate Intermediaries Business associations, Facilitate integration Set, monitor and Pool funding to im- Share implemen- standards-setting between ecosystem evaluate standards prove infrastructure, tation experiences bodies, topic platforms, elements, share invest in research among companies media information among constituencies, advocacy

In the following sections, elements that relate in particular to one of these types of actors will be marked with the appropriate symbol. This will enable a more focused reading for each target group.

24 Realizing Africa’s Wealth Patterns of inclusive business in sub-Saharan Africa

A survey of sub-Saharan Africa’s inclusive business ecosystem Figure 8: landscape reveals a number of patterns, in terms of the types Examples of inclusive business in Africa by type of enterprises involved, the types of actors providing support, of organization and the countries and sectors where the business activity is taking place. SMEs are the primary owners of inclusive busi- MSME 195 nesses, although large companies do demonstrate some impressive results in terms of scale. Support services are today provided primarily by international actors, but local support Large domestic 62 networks are emerging as well. Opportunities for inclusive business exist in a wide variety of sectors.

MSMEs are strong drivers of inclusive business

While inclusive businesses run by multinationals tend to receive the most publicity, many of sub-Saharan Africa’s inclusive busi- TOTAL nesses are in fact run by MSMEs. In our own sample of 400 case 400 studies, almost half are owned by MSMEs, as shown in Figure 8.35 Large domestic companies have also begun integrating low-income people more purposefully into their value chains. Large and multinational companies have the capacities to reach scale quickly, with M-Pesa’s 15 million customers in Kenya serving as an impressive example. CSOs are often responsible for some of the most innovative models, especially in sectors that have not traditionally been dominated by market-based solutions but CSO 55 are critical for poverty alleviation, such as health and education. Cooperatives also play a role, especially when it comes to inte- Foreign MNC 57 grating producers into value chains.

Support comes mainly from international actors; Cooperative 18 local actors are emerging

Developing country MNC 13 International actors, particularly development partners, impact investors and CSOs, have been a driving force behind the creation of inclusive businesses in sub-Saharan Africa. These Source: 400 case studies identified in sub-Saharan Africa through desktop research organizations are often directly involved in providing funding and technical support to entrepreneurs, but have also funded and implemented other inclusive business ecosystem elements, including coordination platforms and capacity-building services. Research is often performed by international research institutes or consultancies, while international CSOs, business associations, development partners and universities provide training, additional research and peer-to-peer ex- changes.

Realizing Africa’s Wealth 25 1Patterns and prospects

The international character of this trend is natural. The inclu- Inclusive business ecosystems track economic sive business concept first gained prominence in the Unit- development ed States, with the writings of C.K. Prahalad, Stuart Hart and others.36 It has since had a strong influence on development Sub-Saharan Africa’s inclusive business landscape is quite un- partners and multinational companies, both of which view it even – an unsurprising finding, given the region’s enormous as a strategic approach to business and development. In many differences in economic development, governance and history. developing countries, by contrast, the concept remains unfa- Overall, the available empirical evidence suggests a correlation miliar or poorly understood. between a country’s economic development and governance capacity levels and the state of its inclusive business ecosys- As a result, local actors are frequently new to appreciating the tems. Figure 9 lists examples from the 400 case studies in our value of the inclusive business model. This process is taking a database, itemized by country. More than one third of these number of forms. National governments are increasingly rec- examples are located in South Africa or Kenya, countries that ognizing the benefits of market-based approaches, and are have explicitly embraced and encouraged inclusive business looking for ways to support them through policies and pro- approaches, while most of the others are located in economies grammes. Multi-stakeholder initiatives such as the Compre- that are stable and growing. The link between solid economic hensive Africa Agriculture Development Programme (CAADP) development and governance and the presence of inclusive create platforms for alignment and joint progress that im- businesses is natural, as the factors that encourage mainstream prove the enabling environment for inclusive business. A local business activity also facilitate business within low-income inclusive business support ecosystem is evolving in parallel communities. A higher rate of economic development produc- with the policy environment, and today includes research and es a larger number of actors able to build inclusive businesses. training programmes conducted by business schools, finan- An increase in inclusive business activity means in turn that cial services provided by commercial banks, and investment more actors will be present to support these activities. and technical support offered by local impact investors and

incubators. Local micro-finance institutions provide financ- Figure 9: ing to low-income consumers and producers. However, local Examples of inclusive business in intermediaries remain largely absent; this gap ranges from sub-Saharan Africa, by country market research institutes to consultancies, incubators, credit bureaus, rating agencies, certification agencies, value-chain South Africa 73 facilitators and executive education providers. Kenya 69 Ghana 35 Despite recent growth, these ecosystems need to be much Regional 33 more robust if they are to enable local entrepreneurs to ad- Tanzania 31 dress developmental challenges through business-based ap- Uganda 28 Senegal 18 proaches, particularly on a large scale. Recommendations in Nigeria 18 this report’s final chapter will point out what each kind of actor Madagascar 13 can do to strengthen these ecosystems. Mali 9 Ethiopia 8 Burkina Faso 8 Rwanda 7 Zambia 6 Namibia 6 Cameroon 5 Malawi 4 Liberia 5 Mozambique 3 Angola 3 The Gambia 4 Sudan 3 Mauritania 2 Zimbabwe 1 Swaziland 1 Sierra Leone 1 Niger 1 Somalia 1 Côte d’Ivoire 1 DRC 1 Botswana 1 Source: 400 case studies identified in sub-Saharan Africa Benin 1 through desktop research

26 Realizing Africa’s Wealth South Africa is by far the most developed economy in the Most inclusive business activity is found in agri- region, with per capita GDP of $11,000 in purchasing power culture, energy, financial services and ICT parity terms; well-developed financial, legal, communications, energy and transport sectors; and a modern commercial infra- Virtually every economic sector in Africa offers opportunities structure that supports an efficient logistics system.T he coun- to work with low-income people as business partners. How- try’s Black Economic Empowerment (BEE) policies have given ever, an analysis of the Growing Inclusive Markets Initiative’s companies strong incentives to integrate the populations 43 in-depth African case studies shows that various sectors of- disadvantaged under apartheid into their operations, nota- fer differing potential for the inclusion of low-income people bly through preferential procurement strategies. As a result, a (see Figure 10). Sectors such as consumer products, energy, whole ecosystem of consultancies, market research institutes, finance, health care, housing and construction, ICT and water research centres and other organizations has evolved. Kenya is sanitation mainly address the poor as customers. Most low-in- also making great strides in integrating its low-income citizens come people in Africa work at least partially in the agricultural into mainstream commercial activity, in part by explicitly ac- sector; here, inclusive business models also offer opportuni- knowledging the importance of the informal sector. The counties for producers. Inclusive businesses in all sectors create op- try’s Vision 2030 programme, an integrated policy programme portunities to serve as employees and entrepreneurs. Agricul- aimed at aligning economic and human development, as well ture and energy demonstrate the greatest potential to create as initiatives such as the Financial Sector Deepening Initiative opportunities for low-income people in all four roles – that is, (see profile in chapter 6), have successfully created inclusive as consumers, producers, entrepreneurs and employees. business ecosystems. To be sure, dramatic influence on people’s lives can stem from On the other end of the spectrum, countries such as Soma- a number of sectors. ICT and the availability of mobile tele- lia, the Democratic Republic of Congo and Sudan have been communications, for example, have improved the lives of mil- trapped in civil war and political turmoil for many years. Here, lions of low-income consumers and entrepreneurs. However, even the formal market is rudimentary, rendering the inclusive some sectors have seen more inclusive business activity than business approach difficult in the extreme. Yet even in such others. Based on our dataset of 400 cases, the highest share of challenging circumstances, businesses sometimes manage to inclusive businesses in Africa is seen in the agriculture, energy, thrive and bring significant benefits to local residents. InS u- financial services and ICT sectors, as Figure 11 shows. dan’s war-torn Darfur province, for example, blacksmiths have created a cooperative that produces tools for the local market and creates badly needed employment. In Somalia, Liban Egal opened the First Somali Bank (see interview in chapter 3).

Figure 10: Overview of potential for inclusion by sector and roles Inclusion of low-income people as

Consumers Producers Entrepreneurs Employees

Agriculture/Forestry

Consumer goods

Energy

Financial services

Health care

Housing/Construction

ICT

Waste

Water/Sanitation

High Medium Low Source: Analysis of 43 in-depth GIM case studies from sb-Saharan Africa

Realizing Africa’s Wealth 27 1Patterns and prospects

Figure 11: Examples of inclusive business in sub-Saharan Africa, by sector

Water and sanitation 26 Agriculture and forestry 106

Waste 15

Tourism 12

ICT 44

TOTAL 400

Housing and construction 11 Consumer goods 22

Health care 27 Education 5

Financial services 47 Energy 77

Extractive industries 8

Source: 400 case studies identified in sub-Saharan Africa through desktop research

Agriculture still provides a livelihood for about 60% of Afri- mostly informal retailers trading in South Africa’s townships. ca’s active labour force. The sector also accounts for 34% of the Mobile money services have connected millions to the finan- continent’s gross GDP.37 According to the World Bank, growth cial system. Sixteen percent of adults in sub-Saharan Africa originating in agriculture is often much more effective in rais- report having used a mobile phone in the past 12 months to ing incomes of extremely poor people than is GDP growth pay bills or send or receive money.40 Yet 80% of the 406 million originating from other sectors.38 Many examples show that adult population in sub-Saharan Africa did not have access to smallholders can be successfully integrated into supply chains banking services by the end of 2009.41 as producers. Local retailers such as Nakumatt in Kenya and South Africa’s Shoprite are increasing the share of their fresh The ICT sector has been a key driver of change in the lives of produce sourced locally. Other enterprises sell inputs to small- low-income communities, linking them to financial services, holders, helping them to increase productivity while devel- information and markets. Esoko, a data service provider, sends oping a new market. For example, IDE, an international CSO, market prices, trading information and weather warnings via provides low-cost irrigation systems to farmers across Africa. mobile phone; this helps smallholder farmers decide when to Finally, some companies provide nutritious foods to low-in- plant which crops, and which markets will offer them the best come consumers. Start-up company GADCO, for example, sells prices for their produce. The company already operates in 16 branded, affordable rice to local markets in Ghana. African countries. Phone credit and related services are often provided by local entrepreneurs as part of a larger franchise Low-income households spend around 7% of their income system. on energy, in sum producing a market worth $26.6 billion in Africa.39 Off-grid solutions such as solar home systems or effi- Sectors with many examples of inclusive business also tend to cient cook stoves provide clean energy even to remote pop- develop more elaborate ecosystems of support institutions. ulations. Local entrepreneurs often produce, distribute and A variety of platforms established in recent years link actors service these products. Toyola Energy manufactures and sells at various levels of the agricultural value chain, thus helping energy-efficient cook stoves in Ghana. EDF has built mini-grids to include smallholders in the market. Many investors and in Mali. investment funds today support the development of energy solutions for low-income households. Separately, many coun- Access to financial services for consumers and micro-entre- tries have implemented new policies intended to reflect and preneurs has improved significantly in recent years. In addi- facilitate financial inclusion and the spread of mobile-phone- tion to the offers of micro-finance institutions, traditional based solutions. banks have expanded their reach into the low-income market through branchless banking. In South Africa, for example, Standard Bank has built up a network of 10,000 “AccessPoints”,

28 Realizing Africa’s Wealth A closer look at inclusive business ecosystems

The inclusive business model holds great potential for trans- lating Africa’s rapid growth into opportunities for low-income communities. Many actors can help to create the ecosystems that enable inclusive businesses to succeed and grow. The following four chapters take a closer look at each of the Inclusive Business Ecosystem Diamond’s four support functions – information, incentives, investment and implementation support. Each chapter is structured similarly (see Figure 12): first, challenges relating to the support functions are described, followed by an analysis of achievements to date. Each chapter closes by identifying opportunities for further action.

Figure 12: A closer look at the inclusive business ecosystem functions: chapter structure

Challenges

achievements

opportunities

Realizing Africa’s Wealth 29 2 Providing information Acquiring reliable information, a foundational element in starting and operating any business, can be a significant challenge for organizations working with low-income communities. Take the example of Ecotact, which provides sanitation services to slum dwellers in Kenya. To develop a workable business plan, the social enterprise had to answer some difficult questions: How big were markets in low-income communities? What were people’s needs and preferences? Once it gained a sense for its potential market, Ecotact also had to change perceptions about the topic of sanitation itself among decision makers. Drawing on this and similar experiences, this chapter looks at how information is created through research, and how it is shared through advocacy.

Research builds the knowledge base necessary for an in- Advocacy promotes inclusive business approaches to all clusive business’ success. This includes quantitative and societal stakeholders and shares best practice examples. qualitative market data, which enables the development In this way, advocates help to spread vital know-how and of market strategies, as well as information on new prod- build capacities, assisting in the implementation and sup- ucts and processes that companies can use to build their port of such businesses. own inclusive businesses.

30 Realizing Africa’s Wealth Esoko provides information to smallholders to help them make better business decisions. Photo: Louis Jouve, Esoko Jouve, Louis Photo:

Case Study: Ecotact Photos: KamauPhotos: Kuria

Ecotact provides clean sanitation facilities for urban dwellers. To formulate a compelling service offering, it began by researching its target group. Changing perceptions on sanitation

Ecotact, a social enterprise founded in Kenya in 2007, cham- slums. Each Ikotoilet mall is run by a local entrepreneur, pions an innovative and sustainable approach to providing who charges the equivalent of six U.S. cents to use the toilet access to basic sanitation. More than 40% of Kenya’s pop- and 12 U.S. cents for a hot shower. ulation of 41 million lacks access to improved sanitation.42 In slums such as Kibera, outside of Nairobi, the majority of Ecotact partnered with Water and Sanitation for the Urban residents have no access to proper sanitation. Pit latrines Poor (WSUP) to carry out research on sanitation in urban are inadequate and subject to overflow during periods of and peri-urban areas in Kenya. This research provided vital heavy rain. The few public toilets that do exist are usually information about people’s needs and expectations. It laid inaccessible, unhygienic, and lack privacy and security. the groundwork for the Ikotoilet’s design, and ensured that Around 30% of Kenya’s disease burden is sanitation-relat- it was tailored to meet local needs. Further assistance was ed, and thousands of children die each year from diarrheal provided in the form of joint advocacy efforts performed by diseases.43 the local and national governments and the company itself, encouraging awareness about sanitation and changing tra- In response to the massive demand for sanitation services, ditional thought patterns among policy makers and local Ecotact has constructed 60 modern facilities in the last five community residents. years, serving more than 48,000 people, mostly in urban

Realizing Africa’s Wealth 31 2providing information

Figure 13: ICT penetration rates for Africa 2005–2011

70% Fixed-telephone subscriptions Mobile-cellular subscriptions 60% Active mobile-broadband subscriptions Fixed (wired)-broadband subscriptions 50%

40%

30% 3

20%

10% K

2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: ITU 2012 www.itu.int/ITU-D/ict/statistics/at_glance/keytelecom.html

Challenges

Building even a small-scale inclusive business requires a large The lack of connectivity presents a particular challenge in amount of information. This begins as the overall approach is today’s environment. To be sure, the “mobile revolution” has being conceived, and over time a new business will need de- certainly reached Africa, with mobile phone penetration tailed information on existing models and solutions, market rates soaring from less than 2% in 2000 to more than 60% in data, technical information about products and practices that 2013 (see Figure 13).44 However, regular Internet connectivity, might be integrated into the business, and more. This informa- which enables quick access to a vast amount of information, tion derives from many different sources, and it is difficult to was limited to an estimated 13.5% of Africans at the end of assess its overall availability, as environments differ across the 2011.45 Mobile broadband subscriptions are on the rise and region. However, it is clear that access to information in Africa will certainly change the information landscape dramatically remains constrained by a lack of communications connectivi- over the next years.46 ty, and that data specifically related to the low-income market is limited. Enterprises also find it difficult to get information about low-income markets. Most African countries have limited capacity to produce or compile usable macro- and microeconomic data, and what is available may be out of date or difficult to access.47 This is problematic: to set up a business successfully, companies typically require detailed, specific and current information about their intended market, including target group characteristics, market environment descriptions, economic trends and more.

32 Realizing Africa’s Wealth Photo: Louis Jouve, Esoko Jouve, Louis Photo:

Esoko informs African smallholders

Esoko is a cell-phone based messaging service aimed at smallholder farmers in 16 African countries. It provides farmers with the latest market prices in real time, preventing opportunity-cost losses resulting from outdated information. To obtain reliable information, Esoko employs a large group of market agents who collect local market prices. Farmers can also trade via Esoko. Enterprises can use the information to understand production levels and purchase directly from Esoko puts an array of up-to-date information – such as market prices farmers. s and production levels – in the hands of smallholder farmers and the enterprises that buy from them. Source: www.esoko.com

Achievements

Research and advocacy focusing specifically on the inclusive Few research initiatives analyze low-income business approach is primarily performed by international ac- market sizes in Africa tors, including universities, development partners and foun- The World Resources Institute (WRI) and the International Fi- dations. However, detailed technical information can often nance Corporation (IFC) have made a first attempt to map the be provided by local players. Agricultural research institutes size of emerging markets by country, region and sector in their provide know-how on agricultural practices, ICT hubs devel- 2007 report, “The Next 4 Billion”.48 This work is based on national op new mobile-phone-based applications and other relevant income and consumption surveys in 110 countries, 22 of which technologies, and local universities can assist in assessing the are in Africa. More in-depth research is available in certain sec- characteristics of value chains or product functionality. African tors. FinScope, a FinMark Trust initiative funded primarily by the business schools are emerging as influential local intermediar- U.K. Department for International Development (DFID), studies ies, bringing international concepts such as impact investing financial services in 14 African countries from both a supply and and social entrepreneurship into local leadership cultures. demand perspective. The University of Cape Town uses financial diaries in rural and peri-urban areas of South Africa to track incomes and expenses in low-income communities.49 To date, however, such efforts remain scattered and do not provide a complete picture of Africa’s low-income markets. Jana collects data for airtime Relatively few market research companies provide Jana is a Boston-based company that enables organ- specialized support for low-income markets izations to connect directly to their intended target The majority of market research companies focused on the groups via mobile phone. Survey participants are African market are based in South Africa. Field Africa and compensated with mobile-phone airtime. Jana works Eighty20, for instance, are South African-based research agen- in partnership with a network of 232 mobile opera- cies that collect data and conduct quantitative and qualitative tors. The company buys airtime in bulk to incentivize research in low-income communities. Consumer Insight Ltd., end-users to complete a survey, provide data, or some- operating in Kenya, Tanzania, Nigeria, Uganda and Ethiopia, times even purchase a product. This model has allowed also conducts market research on African consumers, but Jana to spread rapidly to 85 countries, eight of which does not specialize in low-income markets. Research Africa is a are in Africa. s Source: www.jana.com market research agency based in Uganda and the Netherlands focused on “social impact” businesses. In most sub-Saharan Af- rican countries, however, companies gathering business data have to rely on support from CSOs. Photo: Alec Babala Photo:

Mobile applications offer a huge opportunity for gathering data Mobile phones enable companies to ask their target group With Jana, customers can participate in for information directly, or reach out to producers or con- surveys and receive sumers to share information. A number of services, auch as free airtime. Esoko and Jana, offer this opportunity.

Realizing Africa’s Wealth 33 2providing information

interview Business Action for Africa advocates Daniel Annerose for inclusive business CEO of Manobi Business Action for Africa is a network of companies, Manobi, one of Africa’s foremost data pro- business organizations and development partners. viders, was founded in Senegal 10 years ago Partners join the platform to support development in

and has since expanded to Mali, Côte d’Ivoire, Daniel Annerose Photo: Africa by engaging in advocacy, action and knowledge Burkina Faso, Niger and Benin. Its services focus primarily on sharing. A recent group report, “The New Africa: Emerg- smallholder farmers, but are expanding to other sectors, such ing Opportunities for Business and Africa”, for example, as access to water and sanitation, basic local government ser- featured leaders from business and other sectors shar- vice delivery quality, health and the environment, and child ing their insights on the benefits of business-based protection. solutions to African challenges. s Source: www.businessactionforafrica.org What is your assessment of the current situation regarding data and the availability of market information in Africa? Things have clearly accelerated very much over the last few years. Thanks in a big way to technology and the growing penetration Research and advocacy on behalf of inclusive businesses of mobile phones even in remote corners of the continent, it is is mainly performed by international actors becoming far easier to collect and process data and market infor- Inclusive business is a new approach, and many questions mation in real time. This has uses in many economic sectors. remain with respect to identifying opportunities, building successful business models, cooperating with others, un- How can data and information further encourage the devel- derstanding results and managing growth. A number of in- opment of inclusive businesses? ternational actors have advanced the state of this research, In our case, we rely on several sources of data: individual farm- including development partners such as the UNDP Growing ers, groups of farmers and agents in the field.T hese sources feed Inclusive Markets (GIM) Initiative and the Practitioner Hub (a into a giant database that then has a variety of uses: farmers use project funded by the Swedish International Development the applications we have developed to request how much fertil- Cooperation Agency (Sida) and DFID); consultancies funded iser they need for a given crop by public and private development partners; and universi- “Our data allows in given conditions, then record ty-based programmes such as the Base of the Pyramid (BOP) banks, to grant the quantities of crops planted, Initiative at the University of Michigan’s William Davidson In- loans to farmers at yields, prices, etc. Our applica- stitute, the Corporate Social Responsibility (CSR) Initiative at tions and data provide farmers the Harvard Kennedy School, and the Centre for Sustainable far better conditions with access to strategic informa- Global Enterprise at Cornell University’s Johnson Graduate than would other- tion, land management, product School of Management. For the most part, this research is not wise be the case.” marketing, supplier relationships specific to the situation in sub-Saharan Africa, though many and operational management. case studies from the region have been documented. The in- Beyond the operational support that information provides to stitutions mentioned here are also among the most active the farmers, the data also gives banks and credit providers real-time worldwide in advocating for an inclusive business approach information and tangible numbers on crops, yields, climatic conditions, etc. This allows them, for instance, to grant loans to farmers at Local actors assess the performance of products far better conditions than would otherwise be the case. or value chains Universities, local service providers and CSOs often have the In your view, what is the biggest impact of real-time informa- expertise enabling them to conduct performance assess- tion? ments locally. In Sudan, international CSO Practical Action The cost of collecting and processing information has been re- and the University of Al Fashir carried out experiments to as- duced considerably. It is very expensive to conduct baseline sur- sess the performance of the pot-in-pot refrigerator system in veys or quantitative studies manually, and by the time informa- terms of food conservation. Agricultural CSOs and public re- tion is processed, it’s already outdated. The very nature of data search institutes have experience in value chain assessments: and information is that it’s not static but dynamic. Systems such The Ethiopian Agriculture Transformation Agency (EaTA), for as Manobi allow us to seize opportunities immediately and in a far example, assessed the country’s chickpea value chain and more accurate way. For instance, we can easily gather data from developed a five-year road map allowing project partners several million households in a country like Senegal, our home including PepsiCo, the World Food Programme (WFP) and market, or anywhere else in the world. Such information is crucial USAID to plan well-targeted interventions. to understanding the size of the market, the needs of people, their expense patterns, and so on. s

34 Realizing Africa’s Wealth Product and technical innovations can be developed Local business schools are facilitating the transmission locally of social innovation Kenya is at the vanguard of this development, and already Business schools such as those at Kenya’s Jomo Kenyatta Uni- boasts a busy and talented IT development scene that cre- versity of Agriculture and Technology, Tanzania’s University ates mobile solutions for low-income markets. Technology of Dar es Salaam, and South Africa’s University of the Wit- hubs are now spreading to a number of other major African watersrand offer masters-level courses in entrepreneurship cities, exemplified by Dar Es Salaam’s TanzICT centre (Tanza- and innovation. Other schools offer even more specialized nia), Kigali’s kLab (Rwanda), or JokkoLabs in Dakar (Senegal). training for inclusive business, usually in the form of certificate courses for executives. The Gordon Institute of Business Agricultural research is largely carried out by public Science in South Africa offers a Social Entrepreneurship Cer- institutions tificate Programme, the University of Cape Town Graduate National agricultural research centres provide information School of Business offers a Sustainable Business Programme, on best practices for growing crops and managing livestock and the Makerere University Business School in Kampala, under local conditions. In addition, a number of internation- Uganda, offers a post-graduate diploma in micro-finance. In al agronomic research centres are based in Africa. Three re- addition, some business schools such as those at South Afri- search centres associated with the respected Consultative ca’s North-West University and Kenya’s Strathmore University Group on International Agricultural Research (CGIAR) are support business development within small and medium based on the continent: the International Institute of Tropical enterprises (SMEs). The Rockefeller Foundation is funding Agriculture (IITA) in Nigeria, the Africa Rice Centre in Benin, research on impact investing in several African countries, a and the World Agroforestry Centre in Nairobi. The Ethiopian project that aims to understand policy barriers and recom- Agricultural Research Institute, a research wing of the coun- mend national policies that could encourage the growth of try’s Ministry of Agriculture, provided research support the the impact investing industry. PepsiCo-USAID chickpea sourcing project, identifying two high-potential locations for implementation of the project. The new paradigm of business with social benefits is The EIAR has also worked closely with farmers to improve increasingly being discussed in major media outlets their productivity through the introduction of better seeds. International outlets with a focus on Africa, such as CNN’s Marketplace Africa and BBC’s Africa Business Report, as well as home-grown business magazines such as Pan-African Business Magazine, Africa Investor, African Business and the African Business Review, or Jeune Afrique, Afrique Maga- zine and Afrique Expansion in francophone Africa, regularly report on businesses that engage with low-income populations in sub-Saharan Africa.

iLabAfrica develops ICT for development

Photo: James Quest Photography and Alkira Australia James Quest Photography Photo: iLabAfrica is a research centre operating under the Faculty of Information Technology at Nairobi’s Strath more University. The project is intended to spearhead ICT innovations assisting in the attainment of the MDGs and in realization of Kenya’s Vision 2030, the national economic policy framework. In collaboration with ICT company Hewlett Packard, for example, iLab is currently developing a monitoring and evaluation system to track patients within a South African programme seek- Young people gather at iLabAfrica to carry out projects ing to prevent mother-to-child transmission of HIV/ in the fields of education, health and technology. AIDS. s Source: www.ilabafrica.ac.ke

Realizing Africa’s Wealth 35 2providing information

Opportunities

While much research has been done on the inclusive business concept per se in the last decade, to date the field has lacked a closer look specifically at the situation in sub-Saha- ran Africa. Companies in need of detailed market information are usually forced to conduct relevant research themselves or in conjunction with partners that are not specialized in this task or region. Interest in inclusive business as a new approach to business is increasing in Africa, but many local business leaders and entrepreneurs remain unfamiliar with the concept. These gaps present a number of opportunities for intervention.

International development partners and companies can Capacity-building can enable local entrepreneurs to support the development of local research and advoca- found inclusive businesses cy capacities Local entrepreneurs in sub-Saharan Africa today have little First steps are already being taken in this direction. The Ger- recourse to sources able to teach them how to combine man Investment and Development Corporation (DEG), for social and commercial goals. Development partners could example, has entered a partnership with leading German collaborate with local universities, chambers of commerce, market research institute GFK to build market research capac- or business incubation centres to provide information about ities within sub-Saharan African universities. The Rockefeller this approach. International impact investors or local busi- Foundation has provided a grant to various African universi- ness schools could create mentoring and coaching pro- ties to do research on impact investing. Google, the Meltwa- grammes for local entrepreneurs. Chambers of commerce ter Group and other software development firms are collab- and other business associations could also offer seminars orating with university IT departments, especially in Kenya, and awareness-raising events. or even setting up schools and universities themselves, with the aim of nurturing local IT capacities. The Academy of Man- Platforms can promote shared R&D costs agement, the most important organization of management Early-stage market research and pilot projects are often too researchers globally, held its first meeting in Africa in Johan- expensive and risky for one company or organization to per- nesburg in January 2013. International research centres and form alone. Platforms are needed that enable companies to universities can certainly collaborate more closely with local engage with one another, articulate their interests, pool their partners and build stronger bridges, however. resources, and conduct joint research and innovation. For- mats familiar from the venture capital world, such as acceler- Showcase good examples to inspire replication ators or incubators, can be adapted to the needs of inclusive Many companies and entrepreneurs have no idea what business development. forms inclusive business can take. Awards and other forms of public recognition could highlight successful business models and motivate others to follow in their predecessors’ foot- steps. Some international award schemes already exist and have recognized African examples. These include the World Business and Development Awards, the G-20 Challenge on Inclusive Business Innovation, and the SEED Awards for En- trepreneurship in Sustainable Development. Business plan competitions such as the BID Network and the New Ventures programme also provide access to funding and technical support. Governments, intergovernmental organizations and business associations would all be well placed to run similar schemes with a focus on sub-Saharan Africa or even on individual countries in the region.

36 Realizing Africa’s Wealth Photo: @YamPhoto Photo:

L’Occitance sources shea butter from thousands of entrepreneurs, particularly in Burkina Faso. Improved access to information can help entrepreneurs build inclusive businesses and access new markets.

Realizing Africa’s Wealth 37 3 Creating incentives Commercial or policy-based incentives provide prospective inclusive businesses with the motivation to invest by offering commercial prospects that may otherwise be lacking within low-income markets. The example of Aspen Pharmacare Holdings Ltd., which produces many of the medicines used to treat people with HIV/AIDS in South Africa, demonstrates the value of this approach. The company was induced to invest in this sector through clear incentives by the government of South Africa, in the form of investment tax breaks and a guaranteed market. Incentives can be created by corporate-driven policies as well as through public policy.

Public policies include laws and regulations, as well as Corporate-driven policies can be divided into two broad associated funding priorities and implementation activ- categories: policies that define internal guidelines within a ities. They can be put in place by national governments, company, and policies that set guidelines and aspirations development partners or by multilateral institutions. They within a broader set of actors. These actors may be oth- create incentives for inclusive business in three ways: by er companies, but can also include CSOs, intermediaries, removing barriers and creating an enabling environment public and private development partners, and govern- for companies to build their businesses; by empowering ments. Standards and certification schemes are particular- low-income people to participate in markets; and by cre- ly relevant here. ating direct rewards for companies that integrate low-income people into their operations.

38 Realizing Africa’s Wealth Aspen Pharmacare was drawn by tax reliefs and a secure market to start producing ARVs. Incentives spur the entrepreneurial spirit to overcome the challenges often present in low-income markets. Photo: Peter Morey Peter Photo:

Case Study: Aspen Pharmacare Holdings Ltd Photo: Peter Morey Peter Photo: Aspen Pharmacare produces high-quality, affordable medicines while providing jobs and training to locals, such as in these centres in Tax benefits Port Elizabeth and East London in South Africa. enabled growth

Aspen Pharmacare Holdings Ltd (Aspen) is a major phar- ti-retrovirals (ARV) locally, partly as a result of a decade of maceutical manufacturer headquartered in Durban, South sustained activism from civil society organizations. By offer- Africa. It supplies affordable medicines for the treatment ing tax incentives, it induced Aspen to invest in manufac- of life-threatening diseases such as HIV/AIDS, tuberculo- turing facilities for this purpose. The government also stood sis and malaria. Founded in 1997, the company grew into ready to purchase large amounts of ARVs for the national the largest producer of tablets and capsules in Africa. It has HIV/AIDS programme. That investment and the promise of now diversified its product line and markets its products in a secure market enabled Aspen to gain voluntary licenses nearly 100 countries worldwide (including in Latin America, from a number of multinational patent-holders, allowing it the Asia-Pacific region and Australia). In the process, it has to produce a broad array of ARVs. created thousands of jobs in its manufacturing facilities in South Africa, Tanzania and Kenya. Today, South Africa has a free, universal, public-sector HIV/ AIDS treatment programme, thanks in large part due to the Aspen’s success was enabled in the beginning through consistent, locally produced supply of cheap, generic ARVs incentives provided by government. Given the high prev- from Aspen and several other companies. alence of HIV/AIDS in the country, the South African government recognized the need to produce generic an-

Realizing Africa’s Wealth 39 3Creating incentives

Figure 14: Strength of legal institutions and complexity and cost of regulatory processes, by region

Region, GDP in current US$ and average ranking on ease of doing business

Stronger legal institutions but more complex Stronger legal institutions and simpler and and expensive regulatory process less expensive regulatory process

stronger OECD high income Eastern Europe & Central Asia $43.89 trillion (2011) / Rank 29 $3.624 trillion (2011) / Rank 73

South Asia $2.271 trillion (2011) / Rank 121

East Asia & Pacific $9.313 trillion (2011) / Rank 86 strength of of strength

Sub-Saharan Africa Latin America Middle East & legal institutions legal $1.263 trillion (2011) / Rank 140 & Caribbean North Africa $5.646 trillion (2011) / Rank 97 $1.202 trillion (2010) / Rank 98

Weaker legal institutions and more complex and Weaker legal institutions but simpler and less expensive regulatory process expensive regulatory process weaker

complex and expensive complexity and cost of regulatory process simple and inexpensive

Source: World Bank (2012). Doing Business 2013.

Challenges

In sub-Saharan Africa, where obstacles can be high, incen- Low-income people mostly make use of informal markets, tives for doing business are generally lower than in other since they often cannot afford the legal procedures, lack ac- world regions. Regulation and red tape in many of the region’s cess to legal identity documents or simply fail to perceive any countries make it costly to set up and run a business. Of the benefit associated with using formal structures.53 In Africa, as 48 countries in sub-Saharan Africa, only Mauritius and South many as nine in 10 workers have informal jobs.54 In many areas, Africa make it into the top 50 countries in the World Bank’s women and young people in particular lack the opportunity ease of doing business rankings, and only another four coun- to work in any other context than the informal market.55 In tries – Rwanda, Namibia, Seychelles and Zambia – are in the 2000, the average size of the informal economy as a percent- top 100. The remaining countries are mostly at the bottom of age of gross national income ranged from under 30% in the the list.50 This means that these countries typically have costly, continent’s largest economy, South Africa, to almost 60% in highly bureaucratic procedures for starting a business, obtain- Nigeria, Tanzania and Zimbabwe.56 Informality poses obsta- ing construction permits, registering property, conducting cles to the creation of useful business links, however. Formal cross-border trade and paying taxes. Survey data shows that companies find it difficult to procure products and services business managers in sub-Saharan Africa spend between 5% from informal organizations, while banks and other financial and 10% of their time dealing with regulators.51 In addition, services are often reluctant to provide banking services when weak institutions mean that regulations cannot be properly prospective clients are unable to document their identity or enforced and that changes in political regimes can have ma- produce financial records. jor effects on business, factors that significantly raise levels of insecurity.52 As a result, Africa has the most challenging regu- Corporate policy-making (e.g., in the form of standards-set- latory environment of any comparable region (see Figure 14). ting) also requires an institutional infrastructure. But certification agencies are available only in the larger economies, mak- This picture is by no means uniform, as demonstrated by the ing certification procedures rather expensive. time it takes to start a business in various locales (see Figure 15). While in some countries it takes more than 100 days to start a business, others have implemented reforms making business creation easy. In Rwanda, for example, this process takes just three days.

40 Realizing Africa’s Wealth Figure 15: Days to start a business for selected sub-Saharan African countries

161

135

90 84 68 66 62 61 58 39 36 34 33 32 22 19 17 17 15 13 12 12 8 6 6 5 3

CAR . Rep. mbia mibia Chad Niger Sudan Ivoire a Ghana Z mbique Liberia wanda EritreaAngolaNa Malawi NigeriaUganda thiopia R E Senegal ongo, Rep. Zimbabwe Botswana Mauritius C Equ. Guinea ôte d’ Moza C South Africa Sierra LMadagascareone ongo, Dem C

Source: World Bank (2012). Doing Business Database

Achievements

The general business environment in Africa is improving as Governments in many countries have improved governments make efforts to enhance business regulation business environments and regional economic communities (RECs) work to facilitate In 2010–2011, the Organization for the Harmonization of cross-border trade. However, few governments have created Business Law in Africa, which requires the consensus of its 16 explicit incentives for companies to integrate low-income member states for decisions, began work on harmonizing the people into their operations. Public procurement and smart region’s commercial laws.57 The World Bank finds that among subsidies have to some extent been used to reward social the 50 economies showing the biggest improvements in busi- benefits associated with business activities. International de- ness regulation since 2005, the largest share – a third – are in velopment partners have been more explicit in creating in- sub-Saharan Africa.58 Beyond enhancing general business reg- centives by providing grants to companies to develop inclu- ulations and institutions, however, specific regulations may be sive businesses. The development of the international carbon required to enable inclusive business. emissions market has also resulted in mechanisms rewarding inclusive businesses. Governments are opening up markets for inclusive business Companies themselves, in collaboration with other actors, Many governments acknowledge the contribution the private have developed standards that enable them to price social sector can make to development, and are opening markets tra- benefits into their products. Roundtables and platforms have ditionally dominated by the state such as energy, health care helped to develop these standards. and education. Supported by the World Bank, Mali’s government created regulation that allowed private operators to offer energy services. Immediately after the 2006 regulation was put in place, 50 small operators applied and received a license to operate small energy businesses. Sector-specific policies play an important role here. Kenya, for example, attracted investment in building renewable energy capacities and increasing access to modern energy services by improving the regulatory environment and creating incentives, such as feed-in tariffs.

Realizing Africa’s Wealth 41 3Creating incentives

Broad-Based Black Economic Empowerment: Addressing inequalities in South Africa

Governed by the Broad-Based Black Economic Empowerment Act of 2003, South Africa’s black economic empowerment programme is a set of public policy measures designed to accelerate economic transformation in South Africa while targeting the redress of long-standing economic inequalities. The policy aims to foster economic empowerment of historically disadvantaged individuals in key areas such as ownership, management control, employment equity, preferential procurement, enterprise development and socio-economic Photo: Arne Hoel/World Bank Arne Hoel/World Photo: development. All state companies, as well as busi- Regional integration means better logistical networks and reduced nesses tendering for government contracts, must tariffs and customs.T his Sudanese woman would benefit from improved access to markets where she could sell her cotton. comply with the broad-based BEE policy. To prevent the burden of compliance from stifling entrepreneurship, small businesses with an annual turn- Regional integration is improving conditions for busi- over of less than 5 million Rand ($550,000 at March ness generally and for inclusive business specifically 2013 exchange rates) automatically qualify as “BEE Regional integration is progressing in Africa, with RECs such as compliant”. Implementing BEE is voluntary and not the Common Market for Eastern and Southern Africa (COMESA), enforced through repressive tools such as fines and the East African Community (EAC), the Economic Community of legal sanctions; compliance is ensured by mutual West African States (ECOWAS) and the Southern African Devel- incentives, namely that businesses grant preference opment Community (SADC), among others, working to facilitate to suppliers and service providers who are them- regional trade and coordinating initiatives under the umbrella selves BEE compliant. A network of accredited cer- of the African Economic Community (AEC). Reduced tariffs and tification agencies measure progress towards BEE customs, faster processing times at borders, and better regional targets and issues annual BEE scorecard certificates. logistics networks have facilitated commercial activity. Econom- Source: ic communities also coordinate with one another to advance National Black Economic Empowerment Act, Act 53 of 2003, DTI Codes of Practice, www.info.gov.za/view/DownloadFileAction?id=68031 themes more specifically relevant to inclusive business.T he World Bank estimates that the gradual removal of regional trade barriers could generate an additional $20 billion in agricultural produce trade, boost production overall, reduce dependence on Photo: Tedcor Photo: imports from other continents and increase food security.59

International development partners provide vital incentives for companies starting inclusive businesses Most examples contained in our analysis have benefitted from donor funding and support in some form. Development partners usually provide funding to companies through Challenge Funds and similar funding mechanisms (see chapter 4 for further details). However, development partners further reduce risk by providing technical support and facilitating public-private dialogue, as well as by sharing information on policy intervention models that have supported inclusive business in other countries. Development finance institutions (DFIs) involved in financing businesses can also help mitigate political Tedcor creates entrepreneurial opportunities for its owner-drivers. risk using their preferred creditor status. DFIs are increasingly Compliance with BEE enables the waste management company to gain government contracts. pushing for compliance with strict environmental and social criteria as part of their additionality assessment criteria, thus implicitly rewarding inclusive business approaches.

42 Realizing Africa’s Wealth WFP’s Purchase for CAADP helps to improve Progress programme helps people like this smallholder integration policies Ethiopian woman make the transition from subsistence to commercial The Comprehensive Africa Agriculture Development farming. Programme (CAADP) works through regional economic communities and national roundtables to boost agricultural productivity across Africa. CAADP is the agricultural programme of the New Partnership for Africa’s Development (NEPAD), which in turn is a programme of the African Union (AU). Established by the AU assem- bly in 2003, CAADP focuses on improving food security and nutrition and increasing incomes in Africa’s largely farming-based economies. It aims to achieve these goals by raising agricultural productivity at least 6% per

year and by increasing public investment in agriculture WFP Judith Schuler, Photo: to 10% of annual national budgets. CAADP promotes WFP purchases for progress the integration of regional markets and works to raise the competitiveness of locally sourced products in The World Food Programme (WFP) sources directly these markets. It also works with development part- from smallholder farmers through its Purchase for Pro- ners. For example, the U.S. African Growth and Oppor- gress programme, which gives smallholder farmers in tunities Act has streamlined the rules governing Afri- 21 pilot countries the opportunity to sell to a reliable can exports to the United States. s buyer and receive a fair price for their crops. The pro- Source: www.nepad-caadp.net gramme has worked with more than 1,000 farmers’ organizations, representing more than 1.1 million farmers, since its launch in September 2008. More than 200 Public procurement creates direct rewards for of those farmers’ organizations have been contracted inclusive business to sell more than 200,000 metric tons of food to WFP, Public procurement accounts for a large portion of national and more than 116,000 farmers, warehouse operators budgets, representing around 25% to 30% of GDP in devel- and small and medium-sized trading firms have been oping countries.60 This can be used to reward businesses that trained in skills including organization management, work with low-income people as producers and employees. farming techniques, quality control, and post-harvest With its BEE programme, South Africa has the region’s most product handling.62 These investments directly contrib- extensive inclusive procurement scheme, under which all sup- ute to food security over the long term. s pliers have to demonstrate how they contribute to creating Source: www.wfp.org/purchase-progress opportunity for the historically disadvantaged population.

Governments and development partners are also building inclusive businesses’ capacities, making them eligible for public procurement. In Dar es Salaam, Tanzania, the local government aims to include low-income communities in its waste collec- International policies also establish payments for tion and municipal cleaning services. Since community-based conservation and ecosystem services organizations (CBOs) usually cannot afford to buy the vehicles Global ecosystem-balancing functions, such as those per- required to transport the waste to the main dump site, the mu- formed by the climate, the oceans or the rainforests, can only nicipality takes care of this task. The municipality also assists be maintained on a global basis. The United Nation’s Clean CBOs with capacity-building and fund management. Development Mechanism (CDM) is the first mechanism that rewards contributions to the maintenance of such functions, By acting as anchor buyers, governments and develop- in this case the climate. It enables companies in industrialized ment partners reduce risk and provide a secure market countries to realize some of their own emission reduction tar- for inclusive businesses gets by enabling emission-reduction activity in developing These purchases serve as a vetting process that signals qual- countries. Businesses that reduce or capture carbon emissions ity and reliability to other potential customers. Following the can thus generate additional revenues from the carbon mar- end of the conflict in the Democratic Republic of the Congo ket. Cook stoves distributed by Toyola, the Kuyasa retrofitting in 2004, the government used Celpay, a mobile payments ser- project in South Africa and ToughStuff solar lamps are just vice created by mobile phone operator Celtel (now airtel), to some examples that benefit from this new market. Similar sys- pay salaries to 150,000 combatants as part of a reintegration tems could be established for other activities that support or programme. In South Africa, Amanz’ abantu Services won a protect ecosystems such as coastal areas or rainforests.61 government tender to provide water services to rural populations in the Eastern Cape region. Users receive 25 litres per day for free, and pay for additional water with a smartcard.

Realizing Africa’s Wealth 43 3Creating incentives

The Gold Standard rewards inclusive carbon savings Photo: NicPhoto: Bothma, Kuyasa The Gold Standard is an independent standard applied to high-quality emission reductions projects in both the voluntary and regulated carbon markets. It is designed to ensure that carbon credits are not only real and verifiable, but that they make measurable contributions to sustainable development. The Gold Stand- ard for the regulated market was developed in 2003 by the World Wide Fund for Nature, SouthSouthNorth, and Helio International. The voluntary standard was added in 2006, again based on an extensive consulta- Gold Standard’s projects – such as Kuyasa, which provides solar water heaters for townships in South Africa – reduce carbon emissions and create further tive process. Companies that use Gold Standard credits social benefits. to offset their emissions benefit from a well-recognized label. Gold Standard monitors, reports, and verifies CO2 emission reductions and co-benefits and internally checks third party audit reports. Due to the robust- Standards help companies benefit from good practices ness of the Gold Standard project process, its credits Standards and related certification systems enable companies are valued at a premium in the market. Three projects to set and enforce minimum technical, social and environ- in the GIM database – Toyola, Kuyasa and ToughStuff mental standards. Standards such as the well-known fair trade – have benefited from Gold Standard certification.s certification are often used to reward inclusive production Source: www.cdmgoldstandard.org processes. The fair trade movement aims to help developing country producers derive more benefit from their products, while promoting sustainability. Private equivalents of the pub- Empowering market participation increases incentives lic carbon market standards enable companies to sell and buy Increasing purchasing power within low-income communities carbon credits voluntarily, again creating incentives for inclu- enables residents to access products and services as consum- sive business practices.67 ers. South Africa’s social grant system directly transfers around $13 billion per annum in cash to 17 million beneficiaries.63 In Standards are also employed to signal quality to low-income Ethiopia, 8 million people benefit from the Productive Safety consumers. Some solar lamps, for example, have disappointed Nets Programme, which provides grants and employment op- users by failing shortly after their purchase, a significant cost portunities in public works programmes.64 Transfers are some- to low-income consumers. A new quality seal by the Lighting times made conditional upon certain actions, such as school Africa initiative shows users which products they can trust. attendance or health care. In Malawi, girls received a grant to enable them to go to school.65 Cash transfer programmes can Topic-specific platforms reduce barriers and enhance thus be a means of creating demand for certain services such inclusive business incentives as health care or education. These platforms bring together companies and other actors to invest jointly in commonly beneficial goods such as infra- Smart subsidies help increase demand more directly structure or capacity-building. A number of such platforms Smart subsidies are mechanisms which provide subsidized work to enhance quality and benefit smallholder farmers goods and services to a specific population while simulta- within particular value chains, including the Sustainable Tree neously developing specific markets.66 In Mali, the Malian Crops Programme, the Competitive African Cotton Initiative Agency for the Development of Household Energy and Rural (COMPACI) and the African Cashew Alliance. Taking a more Electrification (Amader) provides subsidies of up to 70% for geographic-based approach, at least two major regional de- expansion of the services provided by the Rural Energy Servic- velopment groups in sub-Saharan Africa channel public and es Companies. Subsidies are cut when the companies’ profit private investment into agricultural value chains. The South- margins exceed 20%. In this way, the government supports ern Agricultural Growth Corridor of Tanzania and the Beira Ag- the creation of a market for energy services. Indeed, part of ricultural Growth Corridor are specifically aimed at integrating what it means for a subsidy to be “smart” is that it is automati- small producers from low-income communities into the main- cally reduced once the target market has matured. stream economy, and respectively work to link the governments of Tanzania and Mozambique with international investors and development partners.68

44 Realizing Africa’s Wealth Fairtrade Africa standards help members of cooperatives like this woman in Ghana earn more and improve their quality of life.

interview Liban Egal CEO of First Somali Bank, Mogadishu

In May 2012, Liban Egal opened First Soma- li Bank, the first fully functioning bank in

Somalia after 20 years of war. In addition, Liban Egal Photo: the Somali entrepreneur, who returned to his homeland after having lived abroad for more than 20 years, also operates his father’s printing company and set up a market research company, a wireless broadband provider and a mobile money service.

One often hears that the level of rules and regulations in many parts of Africa is not conducive to business, but in Somalia it’s perhaps the absence of any regulation that creates the uncertainty. How are you dealing with this challenge? On the one hand, the absence of regulations makes it very easy to start businesses in Somalia. There are no dozens of forms to fill out,

Photo: Nathalie BertramsPhoto: no bureaucracy to deal with, and no expensive registration fees to Fairtrade Africa provides standards for pay. On the other hand, the absence of enforceable rules or con- 700,000 African farmers tract laws also means that business cannot function normally. For instance, First Somali Bank cannot In 2011, Fairtrade Africa, part of the Fairtrade Interna- “… rules need to grant credit to anyone because we tional network, counted more than 300 producer or- be simple and cannot ensure the repayment of ganizations among its members, an increase of 25% designed to make loans or enforce a contract in case over the previous year. In 2010, the group’s 700,000 of a default. You definitely need a farmers and workers in 29 African countries shared a markets work …” regulatory framework to develop a total sales revenue of $175 million from fair trade prod- formal economy, but rules need to ucts. Producers also received over $18 million in Fair- be simple and designed to make trade premiums, which were invested in community markets work: otherwise, with too projects. much regulation, you drive businesses underground or you just keep In Burkina Faso, multinational cosmetics company L’Oc- the economy informal, to no one’s advantage. citane en Provence bought more than 500 tons of shea butter at the fair trade price in 2011, about double the What do you expect from a regulatory environment in allow- ordinary local market price. Supplier cooperatives and ing you to succeed? their 15,000 rural women members received $1.2 mil- Now that a functioning government is slowly re-establishing itself, lion in revenue as a result. About 2% of this revenue policy makers need to have some understanding of how business goes to community development projects such as a works. People who are returning to Somalia now used to work dur- mutual health insurance programme. s ing the era of Siad Barre, when our economy was highly controlled. Source: Fairtrade Africa (2012) Annual Review 2011 If we just restore the old rules, rather than creating new frameworks, there is little chance of new investment transpiring. I will give you one more example: At the moment taxes here are very low. You can import goods through the harbour and you will be Through licensing, large companies enable smaller taxed on volume, not value, regardless of whether the shipment is players to create inclusive businesses worth $1,000 or $100,000. This is absurd and needs to change so Aspen Pharmacare has received voluntary licenses from some that government can collect enough taxes to pay for a functioning of the largest global pharmaceutical companies, including civil service, police service, and so on. GlaxoSmithKline, Boehringer Ingelheim and Bristol-Myers Squibb. A to Z Textiles benefited from a royalty-free technol- What policies would be useful in facilitating the financing of ogy transfer from Sumitomo Chemicals as part of a joint ven- inclusive business? ture aimed at producing long-lasting insecticide-treated mos- We need a functioning administration and civil service. I love the quito nets. These voluntary license agreements can involve concept of inclusive business, but we also need an entity to drive assistance with product manufacturing and distribution. that forward: some pan-African or international agency, or some association of countries to advance this idea.

Realizing Africa’s Wealth 45 3Creating incentives

Opportunities

Specific incentives for inclusive business remain comparatively scarce, especially on the part of governments in sub-Saha-

ran Africa. More – and better-crafted – measures to reward Alex Morgan Alliance, Rainforest Photo: inclusiveness and social benefits can help offset the often The Rainforest Alliance provides a standard for sustainable farming. This smallholder in Ghana now has improved access to international greater costs of operating in low-income communities. This in markets. turn can help the market-led approach to poverty alleviation grow to a more significant scale, giving concrete meaning to inclusive growth policies at the micro level.

Development partners should provide more technical Governments should embrace private sector innovation and policy-dialogue support to inclusive businesses, Enterprises’ efforts to establish innovative business models and align their various activities that include the poor are often stifled by the regulatory envi- Inclusive business programmes account for a very small part ronment, for example when a government refuses to provide of the activities of development partners, with other activities operating licenses. More flexible approaches to new models sometimes creating disincentives for inclusive business. For and more openness to private sector engagement can signifi- example, by providing items such as mosquito nets, family cantly reduce barriers to inclusive business. planning products or fertiliser free of charge, development partner programmes may in fact undermine local markets. Research institutes can develop measures of Development partners should also review how they can pro- inclusiveness vide incentives for inclusive business beyond direct funding. It is often hard to judge from the outside whether a business For example, they could consult with national governments is truly inclusive, and to what degree. To be sure, some com- on developing better policy environments, support compa- panies cater exclusively to low-income populations, but the nies by leading a dialogue process with governments, support number of these is not high. Many businesses procure from, the establishment and operation of thematic platforms, fund engage, employ or cater to low-income communities as just the development of local intermediaries providing services one part of their business. By creating an index of inclusive- to companies, or provide technical support. This can often be ness or similar tool, research institutes could facilitate the ac- achieved by integrating existing country programmes (such knowledgement of these contributions. as those focused on PSD) with global inclusive business programmes.69 Lobbying groups can advocate for policy change to incentivize inclusive business Governments can integrate inclusive business incen- Business associations, CSOs and universities can take the tives into mainstream policy-making lead in organizing advocacy for a new way of doing business. The inclusive business approach links economic and human Cross-sector alliances, not just between the private and public development, thus achieving “inclusive growth”. Frameworks sectors, but also across industries such as energy, agriculture, such as the UNDP’s inclusive market development or the mul- financial services or health care can be particularly powerful. ti-donor Making Markets Work for the Poor approach show This type of joint effort is less prone to rent-seeking behaviour how economic and human development policy can be pur- than are purely company initiatives, and are more credible in posefully aligned. For example, inclusive strategies can be in- articulating the needs of low-income people. tegrated into public procurement processes.

46 Realizing Africa’s Wealth Photo: WFP/Elaine WFP/Elaine Photo: Reinke Photo Sustainable Fisheries Programme Sustainable Fisheries Photo

Walmart works with the CSO Sustainable Fisheries Partnership to source The World Food Programme runs a training session with an M&E team fish in a sustainable and fair manner from aquaculture farmers like these so that they can run evaluations on local projects. Local evaluation in Zimbabwe. capacities are critical for enabling the enforcement of standards.

Corporate policies can set incentives internally and for Harmonized standards and labels increase recognition subcontractors among the target group Companies can establish codes of conduct or strategies that Consumers are often confused by today’s diversity of labels include incentives to integrate low-income communities and initiatives. Harmonization can help to facilitate recog- into their operations. For example, Mondelēz International nition. In the European Union, a single label with minimum (formerly Kraft Foods) Europe has committed to sourcing its standards governing organic production practices has been entire coffee bean supply in a sustainable manner by 2015.70 introduced. Even though a multitude of organic labels with To achieve this goal, the company now works closely with different standards exist, some more stringent than others, smallholder farmers and development partners to improve its consumers now need recognize just one label in order to iden- supply chain and ensure a fair deal for farmers. In 2010, Unile- tify an organic product. A similar approach may help to expand ver, another major multinational consumer goods company, the market for fair or ethical products. The 4C Association, an set a goal of reaching more than 1 billion people as customers international platform for stakeholders in the coffee sector, while halving its environmental footprint and sourcing 100% and the Rainforest Alliance, an international CSO dedicated to of its agricultural raw materials sustainably.71 To achieve this the conservation of tropical rainforests, have created a trans- aim, the company has set up a number of innovative projects lation mechanism that allows Rainforest Alliance certificate that target low-income communities with sustainable prod- holders to apply for the 4C License without having to undergo ucts such as efficient cook stoves. As part of its commitment the 4C verification process in its entirety.72 In addition, media to sustainable agriculture, Walmart aims to sell $1 billion in and standards organizations can help to raise awareness of ex- food sourced from 1 million small and medium-sized farmers, isting labels. Pooling resources to engage in awareness raising provide training to 1 million farmers, and increase income for and collective marketing can help all parties involved. the company’s small and medium-sized farm-product producers by 10% to 15%. These benchmarks create incentives for in- Local monitoring and certification bodies are required novation and investment within the company, and encourage Enforcing standards becomes costly when local providers of competitors to follow suit. monitoring and certification services are not available. And indeed, many sub-Saharan African countries lack local bodies capable of monitoring compliance with carbon trading, fair trade, organic production and other standards. Service providers should expand their services in this region.

Realizing Africa’s Wealth 47 4 Making investments Inclusive businesses often need initial investments to carry them through the point of operating stability. GADCO, a Ghanaian company that grows rice for its local market, demonstrates this start-up hurdle. Despite a solid business model, GADCO required investment by external capital providers in order to construct its initial farm and training facilities, as interest rates on local loans were insupportably high. Funding for inclusive business either comes from within the organization developing the new business or from external sources. Financial instruments available to entrepreneurs differ substantially across organizational backgrounds.

At the corporate level, internal financial resources, includ- At the micro-enterprise level, especially in the case of ing those from corporate foundations, are usually comple- informal businesses, micro-finance institutions (MFIs) and mented by external finance in the form of grant, debt or value-chain partners (e.g., buyers of agricultural products) equity funding. often provide credit.

At the SME level (which includes social enterprises), funding is provided by commercial banks, DFIs, impact investment funds or larger business partners.

48 Realizing Africa’s Wealth GADCO’s comprehensive business model of seed-to-shelf agricultural products requires significant investment. Patient capital can help inclusive businesses deal with longer payback times and high risk. Photo: Iggy Bassi, GADCO Photo:

Case Study: GADCO Photos: Iggy Bassi, GADCO Photos:

GADCO has been able to grow its local rice label and continues to scale-up, thanks in part to having the right financing partners. Attracting financing to work with smallholders

The Global Agri-Development Company (GADCO) is an With annual interest rates of 30% for a standard loan in integrated agri-food company based in Ghana. It aims to Ghana, starting up the business would not have been pos- integrate smallholder farmers in the central Volta region sible without outside help, given the initial capital require- into the agri-food and agri-processing value chain and to ment of more than $2 million. In its early days, GADCO thus provide reliable food products to African customers at com- received financial support from banks and impact investors petitive prices. GADCO started to roll out this model with aiming for financial, social and environmental returns.T he rice as its first product. It established a commercial nucleus Acumen Fund provided an equity investment of $1.5 mil- farm, which provides local small producers with training in lion, while Summit Capital and the Africa Agriculture and sustainable agricultural practices, equipment, and produc- Trade Investment Fund (AATIF) also provided capital. AA- tion inputs such as high-yield seeds, fertiliser and irrigation TIF is a public-private partnership funded by the German equipment. GADCO started business in 2012, and aims to government, KfW and Deutsche Bank that provides patient include over 11,000 farmers and their families in the next capital to inclusive businesses. Finally, impact investor Root five years, while tripling these individuals’ incomes. Capital provides GADCO with procurement credit, enabling the company to pay its farmers in advance for their inputs.

Realizing Africa’s Wealth 49 4 Making investments

Figure 16: Access to bank loans across countries, 2006–2010

80% Percent of firms with a bank loan/line of credit 70%

60%

50%

40% African countries

Rest of the world 30%

20%

10%

0% Countries

Source: AfDB (2011) Financing Africa: Through the Crisis and Beyond

Challenges

Inclusive businesses often find it more difficult to attract in- Many SMEs and MSMEs in Africa evolve in the informal sector vestment than do mainstream businesses, both because they and are therefore unable to give banks the minimum informa- venture into challenging low-income markets and experiment tion they require to grant a loan, such as legal documents or with new business models. As a result, traditional banks and financial statements. However, even SMEs in the formal sector other mainstream investors perceive these as high-risk busi- face difficulties. Accounting standards in the region are lax or nesses, a fact that drives interest rates up and makes equity even altogether absent. Credit bureaus either do not exist or investment hard to find.T hese businesses therefore require are ineffective. Risk capital is even more difficult to raise than patient capital – that is, capital invested over comparatively debt finance. Unlike in the rest of the world, start-up facilities, long time horizons, with a greater tolerance for risk and lower venture funds, private equity investments and angel investors return expectations than are typically shown by mainstream play a very minor financing role in sub-Saharan Africa.75 investors.73 The rewards for such patience can come in the form of profitable expansion into underserved markets, im- Micro-enterprises can benefit from micro-finance loans and proved reputations, and stronger stakeholder relations. value chain finance from business partners. On the other end of the spectrum, large companies can usually leverage capi- Access to credit has been a particular problem in sub-Saharan tal provided internally or raise finance through investors and Africa. According to the World Bank Enterprise Survey, 44.9% commercial banks. However, there is a “missing middle” – the of African companies regard access to finance as a major ob- investment bracket for firms that need between $1,000 and stacle to their activities.74 On average, only 23.1% of enterpris- $100,000.76 This leaves many promising inclusive business es have loans or lines of credit, a significantly lower share than concepts unrealized. According to research conducted by the in other developing countries (see Figure 16). IFC and McKinsey Global Institute, the total financing gap for SMEs in Africa is between $140 billion and $170 billion.77

50 Realizing Africa’s Wealth The Tony Elumelu Foundation supports African entrepreneurship Photo: Dr. Wiebe Boer Wiebe Dr. Photo:

The Tony Elumelu Foundation (TEF) is an African non-profit organization founded in 2010 by Nigerian businessman Tony O. Elumelu. The foundation aims to promote excellence in business leadership and entrepreneurship across Africa. For example, the African Markets Internship Programme (AMIP), matches MBA students from top African and international business schools with innovative mid-sized African-owned businesses across the continent. The foundation also invests in innovative African business that create positive financial, social and environmental impact in key development sectors. As the African champion for im- Impact investing, such as the investment TEF made at Mtanga Farms in pact investing, the foundation also works to build the Tanzania, helps bridge the gap between philanthropy and for-profit ventures. field across Africa and serves as the African voice on the subject. s Source: www.tonyelumelufoundation.org

Achievements

“Impact investment” is a relatively new concept, in which tra- Local impact investors are beginning to play a role ditional financing instruments such as equity and debt are A new breed of high-net-worth individual is emerging in Africa. employed for social purposes. Most impact investors support- Many of these individuals are interested in using their wealth ing inclusive business projects in Africa have to date been to make an impact in their homelands. Over the past decade, international actors, mainly DFIs, private foundations and high-profile business personalities have created foundations investment funds. However, a local impact investing scene is with significant endowments to support the growth of African evolving. Challenge funds are providing grant funding in an entrepreneurship. Examples include the Tony Elumelu Founda- effort to catalyze inclusive business models. Local banks are tion and the Dangote Foundation. increasing their SME lending portfolios, while MFIs cater to micro-businesses. Remittances play a critical role in financing Commercial banks are increasingly providing the region’s MSMEs. finance to SMEs Togo-based Ecobank, for example, has grown its SME portfolio Impact investing is an investment approach combining by 269% over the past three years, bringing its total loan book social and commercial objectives to $603 million across six countries in West and Central Africa.81 Impact investments are investments made in companies, or- While this funding is not necessarily targeted specifically at in- ganizations or funds with the intention of generating measura- clusive businesses, many innovative business models have ben- ble social and environmental impact as well as financial return.78 efited from standard loans. For instance, Equity Bank and K-Rep Impact investing occurs across asset classes and includes pri- Bank, two Kenyan retail banks, provided finance to the Kenya vate equity and venture capital as well as debt. Impact investors Agricultural Commodity Exchange (KACE), which has success- include venture capital and private equity funds, DFIs, founda- fully helped increase the income of thousands of small-scale tions, and institutional investors. The balance between social farmers. Equity Bank extends credit to farmers, while K-Rep and commercial objectives can vary depending on an investor’s Bank offers financial guarantees during the start-up phase. background and mission: while foundations may provide funding at 0% interest, private equity funds tend to expect financial Technology, and especially mobile phone technology, has returns. Impact investing is expected to become a major source made it easier for such banks and others in Africa to increase of finance for inclusive business projects over the next 15 years. their SME lending portfolios by facilitating economies of scale According to the Dalberg consultancy, impact investors intend in which banks can raise their risk threshold and the cost of of- to spend $3.2 billion in West Africa alone over the next five fering new banking products is reduced.82 Branchless banking, years.79 In a recent survey by the Global Impact Investing Net- such as that pioneered by Equity Bank in Kenya and Standard work, 34% of the 99 respondents said they focused their invest- Bank in South Africa, is also making more capital available for ments on Africa.80 lending to SMEs and micro-entrepreneurs.

Realizing Africa’s Wealth 51 4 Making investments

The Africa Enterprise Challenge Fund (AECF) finances innovations

The Africa Enterprise Challenge Fund (AECF) was specifically designed to support inclusive business practices in Africa. This $190 million private-sector fund is backed by the Australian Government Aid Programme (AusAid), the Danish International Development Agen- cy (Danida), the U.K. Department for International De- velopment (DFID), the International Fund for Agricul- tural Development (IFAD), the Netherlands Ministry of Foreign Affairs (NMFA), and the Swedish International Development Cooperation Agency (Sida). The fund calls for proposals from all countries in Africa, and offers between $250,000 and $1.5 million in grant funding per award. Since its launch in 2008, the fund has overseen fourteen investment competition rounds, supporting new investment in the agribusiness, renewable energy, climate change adaptation, rural fi- Photo: AECF Mtanga Farms Limited, one of AECF’s recipients, has created 4 new potato nancial services, and media and information sectors. In varieties in 30 years for the benefit ofT anzanian smallholder farmers. sum, AECF has granted financial support to 133 projects in 22 countries across Africa. s Source: www.aecfafrica.org

Development partners use challenge funds to Micro-finance eases inclusive businesses’ financing incentivize innovation needs by providing financial services to their clients and A challenge fund awards public funds to private companies producers on a competitive basis, with grants linked to the quality and MFIs focus on micro-enterprises and individual entrepreneurs, expected impact of the project. Challenge funds provide in- with average investment sizes of between $50 and $1,000. They centives for businesses to address particular social and/or thus provide indirect support for inclusive businesses by fund- environmental issues. They usually provide matching grants, ing their suppliers, consumers and distributors. MFIs’ total loan with the private partner contributing at least half of the total portfolio for Africa reached $7.2 billion in 2011, covering a total investment. Obtaining funding from public sources can be a of 5.7 million borrowers.83 In Kenya, solar technology company lengthy process that requires the devotion of considerable re- ToughStuff works in partnership with local MFIs to sell its lamps sources to administrative requirements. However, enterprises and make them affordable to its target group by stretching the that have obtained funding from such institutions often find it payment over time, thanks to microcredit financing. much easier to gain access to additional funding options.

Value chain programmes fund interventions along the value chain, enhancing business conditions Development partners are increasingly using value chain approaches to make sure interventions are market-based and sustainable. By closing gaps in value chains, these programmes provide coordination and investment that enables the private sector to step in on a sustainable basis. They thus provide indirect financing to inclusive businesses by reducing the costs of reaching the low-income market.

52 Realizing Africa’s Wealth AFIM’s catalytic fund for cross- border agribusiness

The UNDP AFIM’s catalytic grants provide funding

Photo: ASNAPP-Ghana and TRIAS-Ghana and ASNAPP-Ghana Photo: to value-chain development initiatives in the agribusiness and agro-industry sectors that promote the MDGs through income and employment creation and improved food security. NGOs can apply for a grant as “project promoters” tasked with stimulating cross-border and regional value chains, attracting private investment or supporting regional institutions. The Sa- helian Onion Productivity and Market Enhancement Programme, for example, works with 2,500 farmers and value-chain actors in Ghana and Burkina Faso to The ASNAPP onion project in West Africa was one of increase onion farmers’ production and productivity several that received a catalytic grant in 2012. and reduce post-harvest losses. Participants in this programme receive training in good agricultural practices. s Source: AFIM (2012) Catalytic Funding for Cross-Border Regional Agri-Food Value Chain Projects

Mobile technology is encouraging innovation Remittances provide patient capital to Safaricom in Kenya has partnered with Equity Bank, one of Af- grassroots-level inclusive businesses rica’s leading financial institutions, to develop a savings and The value of remittances flowing towards sub-Saharan microloans account called M-Kesho. Under this programme, Africa was estimated by the World Bank at $22 billion in micro-entrepreneurs can apply for 30-day loans of between $1 2011, with growth to $27 billion expected by 2014.85 In and $60, which can prove crucial in surmounting the cash-flow countries such as Eritrea and Cape Verde, remittances ac- difficulties often faced by informal businesses.84 These instru- count for more than one-third of GDP.86 Remittances pro- ments take pressure off inclusive businesses, which might oth- vide an important source of capital to local entrepreneurs erwise cover these financing gaps themselves through value and SMEs operating inclusive businesses. chain finance. For example, agribusiness companies often advance seeds and other inputs to their outgrower farmers and recover their costs following the harvest.

Youth-to-Youth Funds catalyze Pasipanodya Tendai Photo: young entrepreneurs

The Youth-to-Youth Funds provide funding and capacity-building to youth organizations in East and West Africa in order to help young people set up their own businesses. The funds are an initiative of the Youth Em- ployment Network (YEN), itself a joint initiative of the United Nations, the International Labour Organization (ILO) and the World Bank, hosted by the ILO. With funding from the group’s challenge funds, youth organizations can support the setup of youth cooperatives. More than 450 businesses have been initiated or supported by the Youth-to-Youth Funds to date. s Youth-to-Youth funds give young people the tools they need to carry out projects and start businesses in their communities. Source: www.ilo.org/public/french/employment/yen/whatwedo/projects/y2y.htm

Realizing Africa’s Wealth 53 4 Making investments Photo: Technoserve Photo:

TechnoServe, an international NGO, supports local companies in bringing their practices up to international standards, making them investment-ready. Opportunities

There is growing interest on the part of impact investors in Guarantee funds can leverage private funding identifying and funding inclusive business opportunities in for inclusive business sub-Saharan Africa. What is lacking today is infrastructure able Loan, portfolio and bond guarantees are standard instruments to match this interest appropriately with local demand. in mainstream business. Governments, development partners and DFIs may set up similar vehicles for inclusive businesses. Intermediaries are needed to forge links between Providing guarantees for inclusive businesses can help public finance providers, in particular impact investors, and and private sector actors share the inevitable risk. businesses Whereas increasingly more money is flowing into Africa, a International asset managers and investment banks can significant amount of which is slated for social impact, im- launch inclusive business investment funds pact investors and others find it difficult to identify businesses To date, impact investment has been primarily provided by that meet not only their accounting and reporting standards, DFIs, foundations and specialized investment funds. Bring- but also their requirements in terms of providing both a solid ing impact investment practices into mainstream investment business plan and a promising business model. Local venture banks and asset management companies would help attract capital firms, incubation hubs and angel investors can help more funding for inclusive business. Social investors with less to identify investment-worthy inclusive businesses. They can focus on financial returns could then concentrate on the ini- build the capacities of promising ventures to absorb outside tial stages of business development, helping new businesses capital, help them comply with application and reporting achieve a scale, level of professionalism, and profit potential procedures, and assist them in meeting commercial and so- able to meet commercially oriented investors’ expectations. cial-impact expectations. Online marketplaces and business plan competitions can provide forums for entrepreneurs to More support is needed to measure social impact showcase their ideas. Impact investors require solid data on the social impact achieved by their portfolio investments. However, many inclu- Development partners and CSOs can help sive businesses do not have the capacities to set up adequate inclusive businesses become investment-ready measurement and reporting systems. Universities, business Indigenously grown businesses in particular often require schools and other local service providers could provide train- training and advisory services to build a sustainable business ing and education on impact measurement approaches, and model, meet international standards, and comply with inves- help businesses set up the systems required. tors’ accounting and reporting expectations. With this in mind, DFID’s Business Innovation Facility provides technical support to businesses. TechnoServe is an example of a CSO that offers business and technical consulting. More support of this type is required in order to meet impact investors’ demand for investment-ready projects.

54 Realizing Africa’s Wealth interview Photo: MyC4 Photo: Dr. James Mwangi CEO of Equity Bank, Kenya

Equity Bank is a retail bank in Kenya. With more than 8 million customers, mainly

from very low-income segments, it has the James Mwangi Dr. Photo: largest customer base of any bank in the country.

What is your assessment of the current situation regarding the availability of finance for inclusive business in Africa? From my perspective, the situation has in fact improved vastly MyC4 is an online platform that allows people to invest in MSMEs over the past decade. There are many excellent investment op- in Africa, to invest in MSMEs in Africa, for example this woman’s second-hand clothing business in Nairobi. portunities that hold promise and are sustainable, and as a result of that we have seen huge growth. The focus should really be on generating commercially viable opportunities.

Online platforms could channel individual investments Challenge funds and impact investors seem to have changed directly to inclusive businesses the game in the field of inclusive business over the past five Crowdsourcing platforms already present a huge variety of years. What is your take on that? projects with the opportunity to collect money from individ- Challenge funds and impact investors have brought in a whole new ual supporters. MyC4 is an online funding platform that has dimension in the field of invest- channelled $22 million in loans to 11,000 small businesses in “It might be time ment in Africa. They are comple- several countries in Africa over the past three years, helping to design more menting banks in a very innovative to sustain 52,000 jobs.87 Many individuals who seek to invest flexible financing way and are playing a significant in Africa also have social objectives in mind, and setting up a solutions …” role, especially when it comes to dedicated platform for this target group could help raise mon- supporting essential steps such as ey for homegrown inclusive businesses. piloting and testing new models. They are helping prove that inclusive businesses can work and are viable.

What can be done to close the “missing middle” and make financing more accessible to SMEs? I agree that SMEs find it difficult to get financing.T hey are too big for the micro-sector and too small for the corporate sector. But we

Photo: Photo: Mary Thibaut cannot separate this issue from the formal vs. informal dichotomy: the formal sector evolves in a value-chain ecosystem in a way the informal sector does not. Typically, the informal sector is far more dis- connected, or at least it cannot leverage its connections in the same manner that the formal sector can. It might be time for us to design more flexible financing solutions, and start by building bridges towards the “semi-formal” sector – that is, businesses that are on the cusp of formalization but just need that extra “push”.

What kind of intermediaries are required to match funding with entrepreneurs? We certainly need more capacity-building entities, such as CSOs and public organizations with demonstrated abilities to assist businesses in building inclusive models. One of the challenges that we have identified for SMEs is the lack of know-how and expertise in building sustainable businesses. Some would like to diversify to other sectors but are not clear on the impact of this diversification. Some have weak governance structures, as they have started as owner-managed businesses. Some would like to expand the horizon regionally. It is important that they are offered advisory services that will help Equity Bank supports low-income clients in their inclusive business them evolve quickly to the next level. financing needs by providing affordable loans and insurance.

Realizing Africa’s Wealth 55 5 Implementation support Even if market information has been secured, commercial incentives are in place, and enabling investments have been made, successfully implementing an inclusive business depends strongly on a range of intermediary and support services. Mondelēz, for example, is one of the world’s largest cocoa buyers. But when it set out to improve cocoa communities, it relied on technical support from specialized partners to realize a vision that would likely have been impossible alone. In this and other cases, implementation support covers a range of services that help realize inclusive strategies, and allow enterprises to interact successfully with their target groups in low-income communities

Logistical support is necessary to reach the low-income Marketing and communication support helps raise population with products and services, or to collect prod- awareness among low-income consumers, apprise poten- ucts from them. tial customers of the benefits of a product or service, and build the skills required for use. Transactional support facilitates financial transactions – paying or getting paid – as well as the documentation and Micro-enterprise support helps micro-business owners administration systems underlying that process. bring their operations up to the standards required to participate in larger value chains. This entails the identification, recruitment and formalization of micro-enterprises, as well as capacity-building to ensure that products or services meet required standards.

56 Realizing Africa’s Wealth Mondelēz buys cocoa from smallholder farmers in Ghana. The company requires the support of CSOs to train smallholders and set up local development plans. Photo: Ben Langdon Photo:

Case Study: Mondelēz

Mondelēz grows the next generation of cocoa farmers Cocoa is mainly produced by smallholder farmers in developing countries. Ghana is the world’s second-largest cocoa exporter, accounting for 23% of global production in 2010. However, Ghana’s cocoa production has been on the decline. Today, there are approximately 700,000 cocoa farmers among a population of 25 million. The average age of a cocoa farmer is about 56 years. And since cocoa farming is A farmer in Ghana sorts through cocoa beans. Farmers are provided difficult, risky and often produces little profit, most cocoa Mondelēz InternationalPhoto: training that not only helps produce quality cocoa, but also allows farmers are telling their kids to pursue a different career. them to pass on their knowledge to others as a community extension officer. For Mondelēz (formerly Kraft) as a major chocolate producer, the decline in cocoa production and quality represents a Once established, the farmer organizations are encouraged major supply-side risk. Yet cultivation of the next generation to associate so as to strengthen their negotiating power. of cocoa farmers requires more than simply enabling higher yields and better prices. Rather, the company saw its goal to be Mondelēz has also partnered with the Ghana Cocoa Board the creation of thriving and sustainable cocoa-growing com- (COCOBOD). COCOBOD has trained and now supervises munities. But in pursuing this aim, the company needed part- 17 community extension officers.T hese individuals in turn ners. In 2008, with support from UNDP, Mondelēz launched a train cocoa farmers in good farming practices and help with 10-year, $70-million-plus initiative called the Cadbury Cocoa fair trade certification. In each area, they also work with two Partnership designed to support cocoa communities in core to three local cocoa facilitators, generally young people cocoa-growing regions of the world, starting with Ghana. from the community who can assume responsibility once the extension officer leaves. Mondelēz teamed up with three experienced CSOs – CARE, World Vision and VSO – to work with an initial 100 communi- Over the first three years of the programme, the 100 com- ties. Under the programme, the CSOs collaborate with farm- munities involved increased their yields by 20%, and were er organizations to develop community action plans, which the recipients of $5.5 million in fair trade premiums. Nearly outline community priorities in terms of cocoa production, 200 development projects, from solar panels to wells, have infrastructure development and environmental sustainabili- been initiated by communities. By 2015, the partnership ty. CSO partners also help growers form farmer organizations. aims to expand to 500 communities.

Realizing Africa’s Wealth 57 5 Implementation support

Figure 17: Africa’s educational pyramid, 2009

years of schooling

18 Tertiary

16 5% 14

12 Upper secondary 19% 25% Transition rate 68% 10 37% 8 Lower secondary Transition rate 77% 2009 2010 2011 2010 2008 2009 52% 2012 2011 2011 2011 2010 2009 2008 2009 2009

6 RSA mbia mibia Kenya a Ghana wanda Primary completion rate 67% Nigeria Malawi Z mbique Primary Na Lesotho Uganda R anzania T 4 Botswana Zimbabwe Swaziland Moza 2 Gross intake rate 96% 0 100% of corresponding age group

Challenges

Inclusive businesses are defined by the fact of their operations Skills and knowledge in low-income communities. In these contexts, the lack of en- In most cases, inclusive businesses have to deal with a lack of abling market conditions makes business more complex than capacities on the part of their low-income business partners. in more traditional settings. Interactions with target groups Producers often lack the skills to implement certain produc- are complicated by the lack of physical infrastructure, knowl- tion standards, entrepreneurs lack accounting processes, and edge and skills, and financial services. consumers are often unable to read product information. Only 19% of students in Africa complete secondary education, and Physical infrastructure only 5% complete tertiary education (see Figure 17).89 About The lack of roads, railways, reliable energy sources, secure stor- 38% of sub-Saharan Africa’s adult population lacks the basic age and warehousing facilities, and other physical market in- literacy and numeracy skills needed in everyday life. Women frastructure increases the cost of doing business with low-in- account for more than 60% of the illiterate population.90 Busi- come communities. More than 70% of sub-Saharan Africa’s nesses cannot rely on a national system of vocational training, rural population, for instance, lives more than two kilometres and must thus build the skills they require themselves. away from an all-season road.88 Financial infrastructure The majority of people in sub-Saharan Africa do not participate in the formal financial market (see Figure 18). Only 24% of adults in the region hold a bank account.91 As a result, financial transactions are usually made in cash. But handling cash can create security issues for entrepreneurs in low-income communities. It also complicates accounting procedures. This situation is changing with the spread of mobile money services such as Safaricom M-Pesa and Lonestar. Indeed, 16% of adults in Africa report having used a mobile phone in 2011 to pay bills or send or receive money.92

58 Realizing Africa’s Wealth Figure 18: Status of financial inclusion in selected African nations

Banked Trad. banking products Formally served Other formal Informally served Informal Not served Use neither formal supplied by a financial institution products (not banking products, not products operating w/o recognized legal nor informal products supplied by a banking institution) governance (e.g., savings w/employer) 100 100 19 31 37 33 19 44 46 40 33 30 55 52 56 56 78

80 80 8 6 20 4 3 8 60 60 13 26 18 23 15 22 42 6 17 40 40 7 19 27 6 14 18 28 28 7 20 7 20 7 9 4 4 1 67 62 44 41 38 34 30 24 23 21 19 14 12 12 12 0 0

2009 2010 2011 2010 2008 2009 2012 2011 2011 2011 2010 2009 2008 2009 2009

RSA mbia mibia Kenya a Ghana wanda Nigeria Malawi Z mbique Na Lesotho Uganda R anzania T Botswana Zimbabwe Swaziland Moza

Source: UNDP. 2012. Inclusive Business Finance Field Guide 2012: A Handbook on Mobilizing Finance and Investment for MSMEs in Africa. United Nations Development Programme: 7

Achievements

CSOs and development agencies provide much of the imple- Micro-enterprise support, marketing and communica- mentation support received by companies operating in African tion services are provided primarily by CSOs or develop- markets. Government agencies sometimes help with exten- ment agencies sion services for smallholders. In general, however, the support These actors are often deeply immersed in local communi- available to companies for implementation on the local level ties, and can thus build on accumulated trust and established remains limited, especially in the area of logistics and transac- networks, while having a good understanding of local resi- tions. As a result, enterprises must create their support ecosys- dents’ perspectives. Thus, CSOs and development agencies are tem themselves, for example by spinning off local CSOs or by often the most desirable partners in terms of communicating building the capacities of local micro-entrepreneurs. The recent a new service to low-income customers or building capacities spread of mobile-phone technologies has made this process among producers and micro-entrepreneurs. In the introducto- somewhat easier, reducing transaction costs and making inclu- ry example of Mondelēz’s collaboration with Ghanaian cocoa sive business processes more efficient. producers, CSOs took over the tasks of establishing farmer associations and creating community development plans.

The Business Innovation Facility brings Sometimes, micro-enterprise support actually helps to incu- technical expertise to inclusive businesses bate an inclusive business by supporting local entrepreneurs. EnterpriseWorks, for instance, trained the founders of Toyola Energy in the production of energy efficient stoves, a process DFID’s Business Innovation Facility (BIF) was created in that gave the skills to set up their company. To date, Toyola has 2010 to provide technical support to inclusive business- sold more than 100,000 cook stoves, offset over 140,000 tons

es working at the grassroots level. Local hubs have been of CO2 emissions, and today employs more than 300 people set up in five countries, three of which – Malawi, Nigeria from low-income communities. and Zambia – are in Africa. Together, these three hubs have provided intensive support to 58 businesses, including both large and small companies. Hub managers can draw on a global network to find technical experts able to assess routes to market, develop supply chains, Photo: KarenPhoto: Smith, DFID BIF “stress test” a business model or tackle a host of other bottlenecks faced by companies. Lessons from this process are shared on the Practitioner Hub, a leading online DFID’s BIF has provided support to hundreds of community focused on inclusive business. s small business owners and Source: www.businessinnovationfacility.org employees.

Realizing Africa’s Wealth 59 5 Implementation support

SAP software enables transparency between co-op members and agribusinesses

SAP’s “virtual co-ops” increase traceability and efficiency in agricultural supply chains that include smallholders. The German software company partnered with Deutsche Gesellschaft für Internationale Zusam- menarbeit GmbH to deploy the system in the cashew and shea value chains in Ghana and Burkina Faso. The system links smallholder farmers with the processing companies, wholesale trading companies and retailers. Some 1,000 tons of produce have to date been traded by the system, amounting to 12,000 digitally recorded transactions. More than 7,000 smallholders benefit from greater transparency and fast payments, and the

entire supply chain is fully traceable. s Christian Merz,Photo: SAP AG Source: GIZ (2012) African Cashew initiative: cooperation with SAP

Inclusive businesses can spin off or incubate CSOs that Low-income people themselves play an important role provide small business support in providing logistics and transaction services In 2007, L’Occitane en Provence set up a CSO called Associ- Many inclusive businesses employ micro-entrepreneurs from ation Nord et Sud to provide capacity-building support and their local communities as franchisees or service providers. training in shea butter production, general business manage- Though they often have to make initial investments in build- ment, bookkeeping and fair trade standards to thousands of ing these local residents’ capacities, this investment quickly rural women in Burkina Faso who convert shea nuts into but- pays off in reduced costs, and in closer ties and stronger fa- ter. Similarly, Mauritania’s Tiviski created a CSO called the As- miliarity with local communities. ToughStuff andT oyola, both sociation of Milk Producers of Tiviski to help herders manage of which market clean energy devices in low-income commu- their livestock and access veterinary services. nities, have created a network of micro-entrepreneurs that sell their solar lamps and cook stoves. Government agencies sometimes play a role in establishing agricultural value chains Mobile communication and ICT reduce the cost of In Mondelēz’s case, the Ghana Cocoa Board helped build implementation technical expertise necessary for the company’s operations, Mobile-phone based money applications reduce the cost training and supervising 17 extension workers who were then and risk of financial transfers. Mobile information services tasked with building cocoa-farmer capacities. The Ethiopian can reach low-income customers with service information Agriculture Transformation Agency supports the development and offers, provide smallholder producers with information of domestic chickpea production, which in turn supports the on weather, prices and marketing opportunities, and inform sustainability of the PepsiCo Foundation’s chickpea initiative. micro-entrepreneurs of promotions. The Kenya Agricultural Commodity Exchange (KACE) initiative connects farmers and mainstream buyers, relaying information on a variety of commodities. e-Soko provides similar services in 16 African countries.

60 Realizing Africa’s Wealth Opportunities interview

Ground-level support for the implementation of inclusive Gerry Van Den Houten businesses remains scarce. In general, transaction costs are Director of Enterprise Development, very high, often too high to allow for profitable business. In SABMiller Africa many cases, companies have to rely on the services of CSOs and development agencies; these in turn pursue their own SABMiller is the world’s second-largest

objectives and operational standards, which can complicate brewer. The company supports 100,000 di- Den Houten GerryVan Photo: cooperation. Building more specialized business support can rect farming jobs across Africa, including tens of thousands of make implementation substantially easier. smallholders in countries such as Zimbabwe, Uganda, Mozam- bique and Tanzania Research institutes should investigate effective governance structures within cross-sectoral partnerships How do you organize transactions and logistics with your While partners from outside the private sector often bring es- smallholder suppliers? sential capacities into a business, these cross-sectoral partner- By nature, it is not easy for a formal enterprise like SABMiller to have ships can add significant complexity and management costs suppliers coming from the informal economy. You simply cannot to a business. The governance mechanisms underlying these do this remotely; you need a per- cross-sectoral partnerships are not well understood. More re- “In some places manent presence on the ground. search is needed into how these partnerships are governed, there simply are So, after some fine-tuning, we what works and what does not. no commercial have come up with a “hub-and- farms, so we iden- spoke” model. The details change Development agencies and governments should from one place to another, but mainstream inclusive business into existing business tify a ’lead farmer’, the principle remains: the centre development services often with the help of the hub is a commercial farmer, Many development agencies and governments already provide of a specialized who typically works with about support to MSMEs in setting up their business through business agricultural service one hundred smaller farmers. The development services (BDS), a classic component of PSD pro- provider.” commercial farming operation grammes. These existing services could be developed further to acts as an intermediary between include specialized support for inclusive business development, us and the small scale producers. In some places there simply are which requires a clear focus on social and environmental results. no commercial farms, so we identify a “lead farmer”, often with the help of a specialized agricultural service provider. CSOs and development agencies can help to build local service providers Do you provide training and assistance to smallholders? Instead of providing implementation services themselves, The commercial farmer is motivated by our business, so he or she these actors could focus on training local entities to provide would provide training and assistance to small holders, to improve these services on an independent and commercial basis. Such yields, test new varieties, etc. service companies could also be spun off from CSOs that are currently offering these services, but which find it difficult to Are you also involved in financing smallholders? adapt their processes to required corporate standards. On the transactional level, we work mainly with commercial banks. As SABMiller, we have more clout than smallholder farmers would Governments can facilitate implementation by have individually, so we can obtain better terms for loans and improving the general business environment credit for them. We do not get involved beyond that, however, as Better roads and logistics systems would help reduce trans- financing is not our core business. portation costs and make it easier to reach into low-income communities, especially in rural areas. Better general and vocational education would reduce the burden on companies to engage in capacity-building and awareness-raising.

Considerable specialized mobile-based ICT support opportunities remain untapped This includes small business warehouse-management and accounting systems able to integrate with larger corporate ICT systems. Having a larger array of ICT solutions at their disposal could help small businesses manage their stock, keep track of goods and money flows, plan more efficiently, and exchange information with others.

Realizing Africa’s Wealth 61 6 Building inclusive business ecosystems A considerable amount of support is already available for entrepreneurs and companies in Africa seeking to venture into the low-income market or to create inclusive business. As the inclusive business approach gains momentum, local support initiatives are emerging that complement the support provided by international actors. The time is right for entrepreneurs and companies to seize the resulting opportunities and create profitable businesses that create access to income, goods and services, and choice.

At the same time, today’s inclusive business support land- Ecosystem-building initiatives can provide the connective scape is uneven, and much can be improved in terms of tissue needed to coordinate the multiplicity of actors mak- helping inclusive businesses to grow and increase their im- ing up an inclusive business ecosystem. Each type of actor, pact. The M-Pesa mobile money service has been the post- drawing on their unique capabilities, can contribute mak- er child for inclusive business in Africa, yet as case study ing ecosystems more conducive to successful commercial 6 relates, its success has not yet been replicated in South activity. Recommendations for concrete actions are pro- Africa. Differences in the respective inclusive business eco- vided in the second part of this chapter. systems seem to have spurred success in Kenya and sty- mied growth in South Africa.

62 Realizing Africa’s Wealth A woman in Liberia tending to her field.T hanks to a growing inclusive business ecosystem, her crop yields have grown measurably. Photo: Jake Lyell, BRAC Jake Lyell, Photo:

Case Study: M-Pesa

M-Pesa in Kenya and South Africa

M-Pesa is an electronic mobile-phone-based money transfer system. Safaricom, a major Kenyan mobile network operator, developed and launched the M-Pesa technology in 2007, with funding from Vodafone Group Plc. and the U.K. Department for International Development (DFID). The service quickly captured a significant share of the country’s -fi

nancial services market, reaching 15 million subscribers in M-Pesa Photo: 2011. Versions of M-Pesa were then successfully initiated in Safaricom offers M-Pesa customers incentives, such as airtime bonuses and good customer services, in order to build its brand Tanzania and in Afghanistan. and market.

However, M-Pesa did not meet with the same success in South Africa. In 2010, Vodafone introduced the system to Moreover, given South Africa’s high crime rate, informal the country in partnership with Nedbank, a well-estab- retailers there are less inclined to as act as cash deposit or lished financial institution. In part, the difference between withdrawal branches, as this makes them targets for crim- the two countries can be attributed to the differing regu- inals. Finally, the South African version of M-Pesa received latory environments. South Africa’s regulations regarding no external funding or support, as the Kenyan version did. customer registration and distributor approval are much This meant there was less room for experimentation and more stringent than those in Kenya. As a result, M-Pesa is adjustment to local needs and circumstances. mainly available at a few hundred formal Vodacom outlets and Nedbank bank branches or cash distributors, where- By the end of 2012, M-Pesa had only 1.2 million subscribers as in Kenya the services are almost universally available in South Africa, out of an estimated 12 million people who through a network of tens of thousands of informal trad- currently lack access to formal banking services. ers. This makes M-Pesa physically difficult to access for most low-income communities, especially in rural areas.

Realizing Africa’s Wealth 63 6 Building inclusive business ecosystems

Figure 19: Inclusive business ecosystems need connective tissue

Ecosystem-building initiatives provide connective tissue

Coordination is identified by many experts as the central Three examples show how ecosystem-building challenge in nurturing inclusive business ecosystems. All four initiatives work support functions have to be in place to create conditions conducive to inclusive business. If these functions are to be A number of inclusive business ecosystem-building initiatives developed in parallel, actors need to coordinate in some way. have been developed in recent years, some showing signifi- However, coordination itself is costly. Some actors thus need cant success. These initiatives are based on many years of re- to play the role of the “connective tissue” to make sure all the search and experience with building ecosystems that include pieces of the puzzle come together. Development partners low-income people, above all the “Making Markets Work for have recognized this need as they seek to encourage inclu- the Poor” and value chain approaches.93 Table 3 presents three sive markets and have started to invest in the development of such initiatives from different sectors and in different coun- these coordinating functions. tries:

• The Kenya Financial Sector Deepening Initiative (FSD) aims to increase access to financial services, especially for low-income people. By collaborating with various government institutions, banks, MFIs, informal providers of financial

Photo: Ashden Awards Ashden Photo: services, and education and research institutions, it helped to increase rates of formal and semiformal inclusion in the financial market from 26% in 2006 to 40% in 2009.

• Lighting Africa in Ghana and Kenya improves market conditions for lighting products by providing a quality seal for lighting products, a database of product and service providers, technical support to member companies, research, and policy dialogue. As a result, more than 2,500 company members are registered on the website, 2.5 million Africans had been provided with lighting products by April 2012, and 19 Lighting Africa supports companies such as Barefoot Power in many as- million people have been reached through consumer educa- pects of building a market, to the benefit of entrepreneurs and consumers. tion campaigns.

64 Realizing Africa’s Wealth • The Competitive Africa Cotton Industry initiative (COM- Funding is mostly used to pay for research and project de- PACI), working in six African countries, links smallholder velopment. This category can also include the development cotton farmers and cooperatives with agribusiness and tex- of innovative financing models. Lighting Africa has set up a tile firms, development partners, CSOs, and governments to trade finance facility and a funding facility for importers and build sustainable cotton value chains. The initiative supports distributors. COMPACI provides small loans to smallholders to 2.4 million sub-Saharan Africans, some of whom have seen a enable them to switch to sustainable practices. The initiatives 45% rise in net income due solely to cotton production. do not disburse loans or grants to businesses which would compete with the commercial market for credit. Rather, they All three initiatives have had significant success in creating facilitate access to credit, in part by enhancing the credibility ecosystems conducive to inclusive business, and as a result of business through industry standards, as in the case of Light- have enabled many low-income people to be integrated into ing Africa. larger value chains as producers, consumers, employees and entrepreneurs. The table summarizes each initiative’s activities Among the initiatives’ main contributions is their ability to set according to the logic of the Inclusive Business Ecosystem Di- up new intermediaries or build implementation support amond. capacities within existing organizations. FSD supported an insurance company in developing a livestock insurance product, and has helped micro-finance institutions attain bank Success factors for ecosystem-building status. It has also built the capacities of intermediaries such initiatives emerge as MicroSave, which provides training on micro-savings products. Lighting Africa has set up an information platform and a Though the initiatives differ fundamentally, some common quality assurance process. It provides training to MFIs on how patterns can be observed. to provide micro-finance products to finance the purchase of lighting. To ensure compliance with its label, COMPACI asks its All three initiatives are strictly evidence-based. On-the- cotton producer partners to provide farmers with the training ground research examining the market situation and existing and resources they need to farm sustainably. structural gaps inform the overall design of the initiatives as well as individual activities. The information is made availa- All three initiatives have achieved impressive success through ble to the public, either through online databases or codified this comprehensive approach. In only a few years, they have as quality standards. Lighting Africa, for example, has 3,000 impacted the lives of millions of low-income households, members in its supplier database. FSD publishes its FinAccess surpassing goals well ahead of schedule. They are thus living surveys. COMPACI has established a standard for sustainable proof that creating supportive ecosystems can enable inclu- cotton production based on research into best practices. sive business on a large scale – making economic growth inclusive by opening up opportunities for income, jobs and con- Based on this evidence, the initiatives support policy-mak- sumption to large numbers of people. ing through information and stakeholder facilitation. Here, initiatives collaborate closely with policy makers on dif- It is thus evident that ecosystem-building initiatives present a ferent levels. FSD works with ministries and regulators in Ken- promising model for providing the connective tissue holding ya. COMPACI works under the framework of the Comprehen- inclusive business ecosystems together. sive Africa Agriculture Development Programme (CAADP) to influence strategies for the cotton sector. And Lighting Africa has convinced the executive board of the UN CDM to bring their methodology for crediting emissions reductions from clean off-grid lighting into close alignment with its quality assurance framework.

Realizing Africa’s Wealth 65 6 Building inclusive business ecosystems

Kenya Financial Sector Deepening (FSD) Initiative Lighting Africa (LA) The Competitive Africa Cotton Initiative (COMPACI)

Table 3: Sector Financial services Energy Agriculture Comparison of three ecosystem-building initiatives Country Kenya Kenya and Ghana, currently expanding to Tanzania, Ethiopia, Six sub-Saharan states (Benin, Burkina Faso, Côte d’Ivoire, Malawi, Senegal and Mali. Mozambique and Zambia)

Launch year 2005 2005 2008

Description Independent trust, with the aim of supporting the development The initiative is mobilizing the private sector to create sustainable The initiative helps smallholder African cotton farmers implement of Kenyan financial markets and increasing financial inclusion. It markets for safe, affordable and modern off-grid lighting systems sustainable practices that improve their economic situation. Pur- pursues this mission in partnership with a network of 60 entities in Africa. chasers of Cotton made in Africa (CmiA) products pay a licensing from multiple sectors. fee to use the label.

Supported by • Government of Kenya IFC and World Bank Aid by Trade Foundation, BMZ, Bill and Melinda Gates Foundation • Development partners (AFD, DFID, Sida, the World Bank, and the Bill and Melinda Gates Foundation)

Incentives • Advised the Kenyan government on how to enhance the • Identified policy and regulatory barriers to off-grid lighting Works within the framework of the Comprehensive Africa Agricul- country’s regulatory environment; provides information and solutions in eight countries, and offered compensatory policy ture Development Programme (CAADP), advising African govern- facilitates multi-stakeholder consultations. recommendations. Study results were discussed with key figures ments on poverty alleviation through agricultural development in • Supported the Central Bank of Kenya in measures to open up from government and other sectors. Two countries have updated the cotton sector. banking channels to non-bank agents by commissioning an their policies on modern off-grid lighting as a result of these in-depth analysis of policy options. This analysis was presented discussions. during a stakeholder workshop. • Works directly with African governments in four countries to • Supported the establishment of the SACCO Societies Regulato- integrate off-grid lighting into rural energy and electrification ry Authority (SASRA), formalizing the semiformal savings and programmes. credit cooperatives (SACCOs). • Convinced the UN CDM executive board to bring their meth- • Provided advice on a regulation enabling the establishment and odology for crediting emissions reductions related to clean oversight of credit reference bureaus. off-grid lighting into close alignment with LA’s quality assurance framework.

Information Conducts FinAccess surveys. The demand-side survey documents • Conducts market research, analyzes distribution networks and Arranges for independent project monitoring and evaluation by an the state of and trends in financial inclusion. Supply-side surveys assesses market trends to help the industry make informed independent research institute, using focus group interviews and provide annual updates on the geographical coverage and mar- decisions. quantitative surveys along the supply chain. ket size of financial service subsectors. • Provides an online platform to advertise services and identify business opportunities.

Investment • Provides funding for projects, research. • Created a trade finance facility to increase manufacturing • Provides small loans to small farmers to finance start-up produc- • Partners with banks to develop supply chain finance products capacity. tion. for SMEs. • Created a funding facility to allow importers and distributors • Invests in strengthening the regional verification institutions. to have a steady, sustainable supply of products able to meet increasing demand.

Implementation • Provides technical assistance for product development, such as • Developed a producer quality seal representing independent • Manages and markets the distinctive red Cotton made in Africa support a livestock insurance product. verification of a product’s quality and performance. Working with label. • Helps institutions attain bank status. the University of Nairobi laboratory, conducts training in product • Cotton companies commit to providing the farmers with the testing, quality assessment and interpretation of test results. Es- • Builds capacities of intermediaries such as MicroSave, which training and resources needed to carry out sustainable cotton tablished a low-cost testing centre to carry out initial screenings provides training and support for the micro-finance sector; also farming practices. in Dakar, Senegal. works with retail providers who deliver services, such as com- • Third-party organizations (currently EcoCert and AfriCert) audit mercial banks and community-based organizations. • Provides support to member companies for a fee. Members farmers and cotton companies to hold all entities accountable to receive advice on product design, access to periodic product • Helps to increase financial literacy through the Financial Educa- CmiA requirements. field-testing, technical capacity-building, opportunities for B2B tion and Consumer Protection Partnership (FEPP). • Ensures that retail partners have access to the cotton they need, links and matchmaking services with local distributors. whenever they need it, by providing easy access to a network of • Provides training for MFIs on opportunities for consumer lend- spinning mills and textile manufacturers. ing. LA’s product-quality benchmarks increase MFIs’ security in providing loans. • Conducts consumer education campaigns in Kenya and Ghana. A total of 1,000 village forums have taken place to date.

Results • Formal and semiformal financial-market inclusion rate increased • Over 2,500 company members are registered on the website. • COMPACI reports an exponential increase in member farmers from 26% in 2006 to 40% in 2009. • By April 2012, 2.5 million Africans had been provided with light- and cotton seed production, with prices at an all time high. • The population share completely excluded from the financial ing products. • Supports 2.4 million sub-Saharan Africans, some of whom have sector is lower in Kenya than any other country in Africa except • 19 million people have been reached through consumer educa- seen a 45% rise in net income solely due to cotton production. South Africa. tion campaigns. • While the private sector originally provided one-third of the initi- • 7 MFIs are providing microloans for consumers to purchase ative’s financing, this is projected to increase to 50% by 2015. off-grid lighting products that have passed LA’s quality tests. In Kenya, $411,000 in financing and loans has been provided to consumers purchasing solar lanterns.

Sources FSD website (www.fsdkenya.org) and annual reports. Lighting Africa website (www.lightingafrica.org) COMPACI website (www.compaci.org) and annual reports

66 Realizing Africa’s Wealth Kenya Financial Sector Deepening (FSD) Initiative Lighting Africa (LA) The Competitive Africa Cotton Initiative (COMPACI)

Sector Financial services Energy Agriculture

Country Kenya Kenya and Ghana, currently expanding to Tanzania, Ethiopia, Six sub-Saharan states (Benin, Burkina Faso, Côte d’Ivoire, Malawi, Senegal and Mali. Mozambique and Zambia)

Launch year 2005 2005 2008

Sources FSD website (www.fsdkenya.org) and annual reports. Lighting Africa website (www.lightingafrica.org) COMPACI website (www.compaci.org) and annual reports

Realizing Africa’s Wealth 67 6 Building inclusive business ecosystems

interview Gerhard Coetzee Head of Inclusive Banking Strategic Initi- Gerhard Coetzee Photo: atives at Absa Consumer Banking and Di- Everyone can contribute rector of the Centre for Inclusive Banking in Africa at the University of Pretoria Creating inclusive businesses ecosystems is a complex task, Absa Group Limited (Absa), a subsidiary of Barclays Bank, is but it pays off in the form of sustained job creation, growth and one of South Africa’s largest financial services groups. Its Inclu- improved living conditions within low-income communities. sive Banking Segment offers targeted services for low-income Four support functions have emerged as critical in enabling customers. the success of inclusive businesses: information, incentives, investment and implementation support. Table 4 summarizes What gaps do you perceive in the supporting environment? opportunities to build inclusive ecosystems identified in the We need support at different levels. previous chapters, grouped by actor. Building inclusive busi- At the regulatory and policy level there is a need to create a far ness ecosystems in Africa will require entrepreneurship and more enabling situation. For example, if you want to outsource innovative solutions on the part of all societal actors, not just business to small businesses, getting them registered takes enterprises. around 150 steps – it’s far too complicated. At the industry level, the right training and educational sup- The companies and entrepreneurs driving inclusive business- port is a must. Most large companies overcome this by innovat- es also need to be engaged in shaping and driving the devel- ing and investing. But I am worried about the medium-sized and opment of supportive ecosystems. They can encourage this small businesses that want to run inclusive businesses, but don’t process by: have the capacity to do this. At the firm level, “sweeteners” are important. Even for a large • Being transparent about their own challenges. After all, corporation like Absa, getting a small grant can be a trigger, be- the support environment should respond to what entrepre- cause it helps me convince my leadership to invest in inclusive neurs and companies actually need. Openness in talking business. I can start without competing with far more profitable about difficulties and failures, enablers and successes helps models within Absa. Like that, I can create an example. Once this to establish a culture of learning, and provides essential in- is working, I have a case and then can start competing. formation to support institutions.

What are best practices in building supportive ecosystems? • Managing support rather than being influenced by it. While It is critical that companies seek out support, and not the oth- this is a particular danger for start-ups and social enterprises, er way round. Equity Bank, for example, always used grants in a even larger companies can be influenced in their decisions smart way to create new business lines. When it started to build by support institutions’ priorities and programmes. However, its mobile banking scheme, it proposed the project to the Bill and businesses will be sustainable only if they make economic Melinda Gates Foundation, which they knew was interested in the sense and create real value. Companies and entrepreneurs subject. So instead of getting distracted by following the support are thus well advised to be proactive about the specific sup- that is out there, companies have to know exactly what they need, port they need. and then manage the support system. • Engaging in dialogue with governments and other sup- What opportunities do you see for building support? port institutions in order to co-create effective solutions.T he Companies need to be much more open to sharing information, owners of inclusive businesses are the only ones who can in order to learn from each other. Intermediaries can facilitate this know whether a supportive policy or programme will actu- culture of openness. There is an overemphasis on competition ally help, or whether it may create undesirable distortions today, and an underemphasis on cooperation. In order to create in the market. By engaging in the creation of solutions, this inclusive businesses and ecosystems, companies need to cooper- deep knowledge is fed directly into the process of creating ate far more, and leave the competition for later. Intermediaries inclusive business ecosystems. can help to create an atmosphere of coopetition by sharing case studies or by hosting forums to exchange experiences. s In effect, companies and entrepreneurs need to become ecosystem entrepreneurs, not only creating innovative business models, but orchestrating and shaping the ecosystem around them.

68 Realizing Africa’s Wealth Table 4: Opportunities to contribute to ecosystem creation, by actor and function

Actor type Information Incentives Investment Implementation Support

Companies • Provide specialized market • Set corporate incentives to Launch inclusive business • Spin off micro and small research services for the provide direction and enable investment funds. enterprises that provide low-income market. the collaboration with the support services. • Develop and implement informal market (e.g., pro- • Develop ICT systems that mobile applications that curement policies). facilitate business in low-in- gather data. • Set and enforce stand- come communities. • Provide technology licenses ards that reward inclusive to enable local development practices. of inclusive businesses.

Governments • Make market data (e.g., from • Create an enabling environ- Create guarantee funds Create frameworks that enable household survey) accessible ment with policies conducive mitigating investor risk, thus public agencies, such as ex- to private sector. to inclusive business practic- channelling more capital to tension services, to collaborate • Encourage public research es. Use “smart subsidies” to inclusive business. with the private sector. institutes (e.g., in agricul- enable new markets. ture) to collaborate with the • Act as an anchor buyer private sector. for businesses (“inclusive • Create award schemes to procurement”) and build promote inclusive business. supplier capacities. Encour- age the creation of inclusive business through outsourc- ing of services (e.g., waste collection). • Embrace innovative inclusive business approaches by the private sector.

Development • Fund market research and • Act as an anchor buyer to Build local intermediaries, • Link challenge funds and partners research on inclusive busi- business (“inclusive procure- such as incubators or venture similar financial programmes ness models and ecosystem ment”) and build capacities capital funds. with ground-level technical development. of suppliers support. • Support the development of • Fund and facilitate platforms • Support entrepreneurs in local research and advisory for collective action, as by setting up support services services. developing standards or such as local marketing or investing in market infra- logistics companies. structure. • Support inclusive business through technical advice and policy dialogue. • Support the development of local monitoring and certification bodies.

CSOs • Build capacities of local en- Support the development and Build micro and small busi- Support entrepreneurs in set- trepreneurs to offer market implementation of standards nesses’ capacities to receive ting up support services such research services. and certification systems. investment. as local marketing or logistics • Facilitate market research in companies. low-income communities.

Research • Create localized knowledge Develop better measures of Support inclusive businesses Create insight into effective institutions on how inclusive business inclusiveness to enable the in measuring social impact. governance mechanisms for works and the actors that targeting of incentives. cross-sectoral partnerships. support it. • Teach inclusive business and entrepreneurship practices; offer executive education. • Collaborate with inclusive businesses (e.g., in assessing performance).

Intermediaries • Promote inclusive business Organize lobby groups to Act as matchmakers between Improve transparency of exist- among members. advocate for policies enabling patient capital and inclusive ing services. • Platforms allow multiple inclusive business. business. companies to share the cost of research. • Multi-stakeholder platforms can facilitate the standardiza- tion of labels.

Realizing Africa’s Wealth 69 6 Building inclusive business ecosystems

A call to action

In order to further advance the inclusive business approach and realize Africa’s wealth, especially the potential of millions of young Africans as drivers of inclusive businesses, actors of all kinds must engage in deeper cooperation and coordination. The success of inclusive business ecosystem-building initiatives shows that coordination can pay off quickly. Provid- ing funds and sharing information are critical in creating this “connective tissue”. The lessons thus learned prompt several additional recommendations:

• New inclusive business ecosystem-building initiatives should be developed at the national and regional levels, aimed at creating inclusive markets and enabling inclusive businesses. These initiatives should coordinate the multiplicity of players involved in creating a new market, and provide direct support to entrepreneurs and enterprises that drive inclusive businesses.

• Finance vehicles able to support ecosystem-building initiatives are needed on a regional and national level. These vehicles should not fund inclusive businesses directly, but rather provide the resources to coordinate, inform and fund the creation of ecosystems conducive to inclusive business on a broad scale. This could include incubators for inclusive business, research initiatives, investment funds and BDSs, among other entities.

• Centres of excellence for inclusive business and markets can build and share knowledge about the inclusive business approach at the national and regional levels. In particular, centres of excellence could undertake additional research on existing ecosystem-building initiatives, document successful approaches, and act as seedbeds and coordinators for new initiatives.

The post-MDG framework will ask the private sector to contribute to development goals, often by engaging in core business approaches. Yet without ecosystems conducive to inclu- sivity, companies will struggle to live up to this expectation. All societal actors thus have a role in creating appropriate conditions for inclusive business, and thus realizing Africa’s greatest source of wealth: its young and growing population.

70 Realizing Africa’s Wealth Photo: Adam Rogers/UNCDF Adam Photo: Annexes

Realizing Africa’s Wealth 71 Endnotes

1 These insights have been 16 UN Food and Agriculture 28 Examples from the Growing 43 According to figures pro- elaborated in the following Organization (FAO), the Inter- Inclusive Market’s initiative’s vided by Kenya’s Ministry of publications: UNDP (2008). national Fund for Agricultur- case portfolio are not indi- Public Health and Sanitation. Creating Value for All; UNDP al Development (IFAD) and vidually elaborated or cited www.publichealth.go.ke (2010). The MDGs: Everyone’s the World Food Programme with footnotes. Please refer 44 Business. (WFP) (2012). State of Food to the case study annex for Enrico Calandro, Allison Insecurity in the World 2012. summaries. Gillwald, Mpho Moyo, and 2 Examples from the Growing Christoph Stork (2010). Inclusive Market initiative’s 17 IGME (2010). Levels & Trends 29 Equity Bank Group website Comparative ICT Sector Per- case portfolio are not indi- in Child Mortality. www.equitybankgroup.com formance Review 2009/2010. vidually elaborated or cited Cape Town: Research ICT 18 30 with footnotes. Please refer World Bank (2011). Africa See interview in the Africa. to the case study annex for Development Indicators “Implementation support” 45 summaries. Factoids 2011 – Ten Facts chapter. International Telecommuni- about Sub-Saharan Africa cations Union. www.itu.org 31 3 Equity Bank Group website Compared with the World. See the initiative’s online 46 www.equitybankgroup.com case database at www.grow- ibid. 19 McKinsey Global Institute inginclusivemarkets.org 47 4 See interview in the “Sup- (2012). Africa at work – Job DBSA (2011). Doing business 32 porting implementation” creation and inclusive BOP Learning Lab South in post-conflict and fragile chapter. growth. Africa (2008). Low Income states: Challenges and risks. does not mean no income Development Planning Divi- 5 GIM website 20 ibid. (Fact Sheet). sion Working Paper No. 23. www.growinginclusivemar- 21 33 48 kets.org United Nations (2011). ODI (2012). Post-2015 Mil- WRI and IFC. (2007). The Next Regional Overview: Youth in lennium Development Goals 4 Billion. Market Size and 6 Adapted from: Christina Africa. – What role for business? Business Strategy at the Base Gradl and Beth Jenkins of the Pyramid. 22 34 (2011). Tackling Barriers UNESCO (2010). Education Adapted from: Christina 49 to Scale – From Inclusive for All Global Monitoring Gradl and Beth Jenkins Financial Diaries website Business Models to Inclusive Report 2010. (2011). Tackling Barriers www.financialdiaries.com to Scale – From Inclusive Business Ecosystems. 23 50 UNESCO Institute for Business Models to Inclusive The World Bank. (2012). 7 AfDB, OECD, UNDP, UNECA Statistics. (2010). “Adult and Business Ecosystems. Doing Business 2013: Doing (2012). African Economic Youth Literacy: Global Trends Business in a More Transpar- 35 Outlook 2012. in Gender Parity”. UIS Fact The 400 examples were iden- ent World. Sheet, No. 3, September tified through comprehen- 51 8 ibid. 2010. sive desktop research. CGAD (2009). Africa’s Private Sector: What’s Wrong with 9 IMF (2012). World Economic 24 UNESCO (2010). Education 36 C.K. Prahalad and Stuart the Business Environment Outlook 2012. for All Global Monitoring Hart (2001). The Fortune at and What to Do About It. Report 2010. the Bottom of the Pyramid; 10 52 AfDB, OECD, UNDP, UNECA C.K. Prahalad (2004). The DBSA (2011). Doing business 25 (2012). African Economic Data on Energy from United Fortune at the Bottom of the in post-conflict and fragile Outlook 2012. Nations Industrial Develop- Pyramid. states: Challenges and risks. ment Organization (2009). Development Planning Divi- 11 McKinsey Global Institute “Scaling Up Renewable En- 37 World Development Report sion Working Paper No. 23. (2010). Lions on the move – ergy In Africa”. 12th Ordinary (2008). Agriculture for Devel- 53 the progress and potential of Session of Heads of States opment. Washington, D.C.: UNDP and UN Rule of African economies. and Governments of the World Bank. Law, Commission on Legal Empowerment of the Poor 12 African Union: Addis Ababa, These are estimates based 38 Ethiopia. Data on water an ibid. (2008). Making the Law Work on household surveys in 22 for Everyone. countries. See IFC and WRI. sanitation from AfDB, AUC, 39 WRI and IFC (2008). The Next (2007). The Next 4 Billion. UNDP and UNECA (2012). 4 Billion. Market Size and 54 McKinsey Global Institute Market Size and Business Assessing Progress in Africa Business Strategy at the Base (2012) Africa at work – Job Strategy at the Base of the Towards the Millennium of the Pyramid. creation and inclusive Pyramid. Development Goals. growth. 40 Bill and Melinda Gates Foun- 13 AfDB, OECD, UNDP, UNECA 26 WRI and IFC (2008). The Next dation and the World Bank 55 ILO (2009). The informal (2012). African Economic 4 Billion. All data on income (2012). Financial Inclusion in economy in Africa: Promot- Outlook 2012: Promoting levels are from the World sub-Saharan Africa. Findex ing transition to formality: Youth Employment. Bank’s PovCal database. Notes No 04. Challenges and strategies. http://iresearch.worldbank. 14 ibid. org/PovcalNet/index.htm?1 41 Roland Berger Strategy 56 ECA (Economic and Social Consultants (2012). Global Policy Division, United Na- 15 UNDP (2012). Africa Human 27 World Bank (2011). World Topics: Inside Africa. tions Economic Commission Development Report 2012 Development Report 2012. for Africa) and IZA (Institute 42 – Towards a Food Secure This is based on USAid for the Study of Labor) Future. figures. (2006). The Impact of Globali- zation on the Informal Sector in Africa.

72 Realizing Africa’s Wealth 57 World Bank (2012). Doing 70 Mondelez International web- 84 How we made it in Africa Business 2013: Doing Busi- site www.kraftfoodscompa- website ness in a More Transparent ny.com/eu/en/Responsibili- www.howwemadeitinafrica. World. ty/sustainability/index.aspx com/mobile-banking-mov- ing-beyond-just-provid- 58 ibid. 71 Unilever sustainability ing-transactional-servic- website 59 World Bank (2012). Africa can es/4705/ www.unilever.com/sustain- help feed Africa – Removing able-living/ourapproach/ 85 World Bank (2012). Remit- barriers to regional trade in oursustainabilitystrategy tances Flows in 2011– an food staples. Update. Migration and 72 UNCTAD (2011). “Promoting 60 UN Procurement Capacity Development Brief. standards for responsible Development Centre and investment in value chains”. 86 IFAD website the UNEP (2012). Sustainable G20 report to the High-Lev- www.ifad.org/remittances/ Public Procurement. el Development Working maps/africa.htm 61 IISD (2006). Markets for Group. 87 MyC4 website Ecosystem Services – A 73 Thomas L. Friedman (2007). www.myc4.com Potential Tool for Multilateral “Patient Capital for an Africa Environmental Agreements. 88 That Can’t Wait”. The New DBSA (2011). Doing business in post-conflict and fragile 62 World Food Programmme York Times, April 20, 2007. states: Challenges and risks. Purchase for Progress pro- 74 World Bank Enterprise Sur- Development Planning Divi- gramme website vey. www.enterprisesurveys. sion Working Paper No. 23. www.wfp.org/purchase-pro- org gress/overview 89 OECD (2011). Education at a 75 Julien Lefilieur (2009). Glance. 63 South African Social Security Financing SMEs in a context Agency website 90 of strong information UNESCO (2010). Education www.sassa.gov.za asymmetry. Private Sector & for All 64 DFID (2011). Cash Transfers Development (1). 91 World Bank (2012). “Measur- Literature Review. 76 Global Development Advi- ing Financial Inclusion: The Global Findex Database”. 65 Sarah Baird, Ephraim Chirwa, sors (2011). Impact investing Policy Research Working Craig McIntosh and Berk in West Africa. Paper 6025. Özler (2010). Schooling, 77 IFC and McKinsey (2010). Income, and Sexual Behavior: 92 Two Trillion and Counting: ibid., 2. The Design, Implementation, Assessing the credit gap for and Short-Term Impacts of 93 For more on the Making Mar- micro, small and medi- a CCT Programme for School- kets Work for the Poor (M4P) um-sized enterprises in the ing in Malawi. www.iza.org/ approach see, for example, a developing world. conference_files/riskonom- series of publications by the ics2009/4990.pdf 78 The Global Impact Investing DFID and SDC, including the Network website 2008 publication: A Synthesis 66 ODI (2008). Towards ’smart’ www.thegiin.org of the Making Markets work subsidies in agriculture? Les- for the Poor (M4P) Approach. sons from recent experience 79 Dalberg Global Development 94 in Malawi. Advisors (2011). Impact World Bank Poverty Indica- investing in West Africa. tors 2010. 67 For an overview of voluntary 95 carbon market mechanisms, 80 Global Impact Investing Net- Statistics South Africa (2012) see WWF (2008). Making work and JP Morgan (2012). www.statssa.gov.za/keyindi- Sense of the Voluntary Car- Perspectives on Progress – cators/keyindicators.asp bon Market - A Comparison The Impact Investor Survey. 96 December 2009 rates. of Carbon Offset Standards. 81 Arnold EKPE, CEO of 68 SAGCOT website Ecobank, and Dr. Temitope www.sagcot.com and www. OSHIKOYA, Senior Policy beiracorridor.com Adviser, Ecobank. Interview 69 Bertelsmann Stiftung and 82 James Mwangi, CEO of Equi- UN Global Compact (2011). ty Bank, Interview Partners in Development – How Donors can better 83 Mix Market website engage the private sector for www.mixmarket.org/mfi/ development in LDCs. region/Africa

Realizing Africa’s Wealth 73 Acronyms

Acronym Full Acronym Full AFD French Development Agency DEG German Investment and Development AATIF Africa Agriculture and Trade Investment Corporation Fund DFI development finance institution Absa Absa Group Limited DFID U.K. Department for International ACA African Cashew Alliance Development AEC African Economic Community EAC East African Community AECF Africa Enterprise Challenge Fund ECOWAS Economic Community of West African States AECID Spanish Agency for International Develop- EDF Electricité de France ment Cooperation EIAR Ethiopian Institute for Agricultural Research AFIM African Facility for Inclusive Markets FEPP Financial Education and Consumer AMADER Malian Agency for the Development of Protection Partnership Household Energy and Rural Electrification FSD Kenya Financial Sector Deepening Initiative ARV anti-retrovirals GADCO GADCO Global Agri-Development AU African Union Company AusAid Australian Government Aid Programme GDP Gross Domestic Product B2B Business to Business GFK Society for Consumer Research BEE Black Economic Empowerment GIM Growing Inclusive Markets BID Net- Business in Development Network GIZ German Society for International work Cooperation BMZ German Federal Ministry for Economic HIV/AIDS Human Immunodeficiency Virus/Acquired Cooperation and Development immune deficiency syndrome BOP Bottom of the Pyramid ICCO Interchurch organization for development CAADP Comprehensive Africa Agriculture cooperation Development Programme ICT information and communications technology CARE Cooperative for Assistance and Relief IDE International Development Enterprises Everywhere IFAD International Fund for Agricultural Devel- CBO community-based organizations opment CDM Clean Development Mechanism IFC International Finance Corporation CECI CSO Centre d’Etude et de Coopération IFPRI International Food Policy Research Institute Internationale IISD International Institute for Sustainable CFW Child and Family Wellness Development CGIAR Consultative Group on International IITA International Institute of Tropical Agriculture Agricultural Research ILO International Labour Organisation COCOBOD Ghana Cocoa Board IMD Inclusive Market Development COMESA Common Market for Eastern and Southern IT Information Technology Africa ITFC Integrated Tamale Fruit Company COMPACI Comprehensive African Cotton Initiative KACE Kenya Agricultural Commodity Exchange CSO civil society organization Ltd. CSR corporate social responsibility LA Lighting Africa DADTCO Dutch Agricultural Development and MDG Millennium Development Goals Trading Company MFI micro-finance institutions Danida Danish International Development Agency M4P Making Markets Work for the Poor MNC multinational company

74 Realizing Africa’s Wealth Acronym Full MSME micro, small and medium-sized enterprises NMFA Norwegian Ministry of Foreign Affairs OHADA Organization for the Harmonization of Busi- ness Law in Africa PSE private sector engagement REC regional economic communities RESCO Rural Energy Services Companies SACCO Savings and Credit Cooperative Organisa- tion SADC Southern African Development Community SAGCOT Southern Agricultural Growth Corridor of Tanzania SASRA SACCO Societies Regulatory Authority Sida Swedish International Development Coop- eration Agency SME small and medium enterprises SNV Dutch Development Agency UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme USAID United States Agency for International Development VEV Senegalese company Du Vent, de L’Eau pour la Vie VSO Voluntary Service Overseas WFP World Food Programme WRI World Resources Institute WSUP Water and Sanitation for the Urban Poor WWF World Wide Fund for Nature YEN Youth Employment Network

Realizing Africa’s Wealth 75 Case studies

Name of enterprise Country Type of Sector Year of Writing enterprise Adina for Life Senegal MSME Agriculture and 2010 forestry Amanz’ abantu South Africa MSME Water and sanitation 2008 Aspen Pharmacare South Africa Developing Health care 2008 country MNC Association of Private Water Operators Uganda MSME Water and sanitation 2008 Barclays Ghana Foreign MNC Financial services 2008 BRAC Liberia CSO Financial services 2012 Cadbury Cocoa Partnership Ghana Foreign MNC Agriculture and 2012 forestry Cashew Producers and USAID Guinea MSME Agriculture and 2008 forestry Celtel and Celpay Democratic Developing ICT 2008 Republic of country MNC Congo Chaka Group Senegal MSME ICT 2008 Du Vent, de l’Eau pour la Vie Senegal MSME Water and sanitation 2010 Dunavant Zambia Foreign MNC Agriculture and 2012 forestry Ecotact Kenya CSO Water and sanitation 2010 EDF Mali Foreign MNC Energy 2008 Edu-Loan South Africa MSME Financial services 2008 The El-Fashir Blacksmiths Cooperative/ Sudan CSO Consumer goods 2010 Practical Action Esoko Ghana CSO ICT 2010 Ethiopian Honey and Beeswax Produc- Ethiopia CSO Agriculture and 2012 ers and Exporters Association forestry Fair Trade Cotton Mali CSO Agriculture and 2008 forestry GADCO Ghana MSME Agriculture and 2012 forestry Inova Burkina Faso MSME Financial services 2012 Integrated Tamale Fruit Company Ghana MSME Agriculture and 2008 forestry K-REP Bank Kenya Large domestic Financial services 2008 company Kenya Agricultural Commodity Ex- Kenya CSO Agriculture and 2010 change Limited forestry Kuyasa South Africa CSO Energy 2010 L’Occitane Burkina Faso Foreign MNC Agriculture and 2012 forestry Lonestar Liberia MSME ICT 2012

76 Realizing Africa’s Wealth Name of enterprise Country Type of Sector Year of Writing enterprise MAP International Uganda MSME Financial services 2010 Mobah Rural Horizons Nigeria MSME Consumer goods 2010 Moladi South Africa MSME Housing and 2010 construction Mondi Recycling South Africa Foreign MNC Waste 2010 Olam Nigeria Foreign MNC Agriculture and 2010 forestry PepsiCo Ethiopia Foreign MNC Agriculture and 2012 forestry Pésinet Mali CSO Health care 2008 RMB and Nedbank South Africa Large domestic Financial services 2008 company Safaricom M-Pesa Kenya Foreign MNC ICT 2008 Sanofi Sub-Saharan Foreign MNC Health care 2008 Africa Tedcor South Africa MSME Waste 2010 The Sustainable Healthcare Foundation Kenya CSO Health care 2008 Tiviski Dairy Mauritania MSME Agriculture and 2008 forestry ToughStuff Kenya MSME Energy 2012 Toyola Ghana MSME Energy 2010 VidaGás Mozambique CSO Energy 2008

Realizing Africa’s Wealth 77 Case studies

Adina for Life

Type of enterprise Country MSME Senegal Sector(s) Agriculture and forestry

dina for Life Inc. is a joint venture created Adina received considerable initial funding from Type of in 2004 to sell culturally authentic, healthy private capital and venture capitalists. The busi- institutional A support beverages to the North American market. Mar- ness also received support from Agribusiness in Investment; gette Wade-Marchand, a Senegalese expat, con- Sustainable Natural African Plants (ASNAPP), a Implementation support ceived the idea after discovering that a hibiscus multinational agricultural consultancy, and As- drink called Bissap, an important symbol of Sen- sociation Education Santé (AES), a Senegalese egalese culture, was beginning to disappear. non-profit organization led by the First Lady She partnered with Greg Steltenpohl, an entre- of Senegal, both of which provided advice and preneur in the juice industry, to sign a fair trade monitoring. AES also provided training to the contract with the Quality Biological Agricultural cooperative in the early stages of the business. Cooperative (QABCOO) in Senegal, which har- s vested the hibiscus blossoms for the drinks. The 527 members of this cooperative, mostly women, experienced an eight-fold increase in Author(s): income and benefited from capacity-building. Mamadou Gaye Adina has implemented similar business models in Ethiopia, Guatemala, India and Indonesia. Year of writing 2010

Amanz’ abantu

Type of enterprise Country MSME South Africa Sector(s) Water and sanitation

n South Africa’s Eastern Cape province, many with employable skills, offering training in all Type of institutional Ipeople lack access to potable water and san- aspects of planning and construction of water support itation, and forced to walk for several hours to and sanitation systems. Amanz’ abantu follows Incentives; obtain unclean river water. sound environmental practices in the design, Implementation support construction and delivery of water and sanita- Amanz’ abantu meaning “water for the people” tion services. in Xhosa, Ndebele and Zulu – was established as a private company in 1997 to fill this service In the late 1990s, the South African government delivery gap affecting peri-urban and rural introduced a public-private partnership solu- communities in the Eastern Cape. The company tion to service delivery demands. The Depart- supplies water that meets international quality ment of Water Affairs and Forestry responded standards, piping it to sites where individuals with its Build, Operate, Train, Transfer (BoTT) can access standpipes using smartcard technol- programme, which paved the way for the estab- ogy. Having a safe water supply within 200 me- lishment of Amanz’ abantu. s Author(s): tres of their homes has transformed residents’ Mamadou Gaye & lives. Amanz’ abuntu makes use of local labour, Ousmane Moreau generating employment and equipping locals Year of writing 2008

78 Realizing Africa’s Wealth Aspen Pharmacare

Country Type of enterprise South Africa Developing country MNC Sector(s) Health care

outh Africa has one of the highest HIV/AIDS Aspen received institutional support in the de- Type of rates in the world – yet until 2001 anti-retro- velopment of its generic line of drugs in South S institutional viral (ARV) medicines were unaffordable for the Africa. The South African government, under support majority of those infected. pressure from civil society groups, recognized Incentives the need for generic ARV production and used Aspen Pharmacare Holdings Ltd. (Aspen) is a the tax incentives mandated by its Strategic major pharmaceutical manufacturer based in Investment Programme (SIP) to enable Aspen Durban that supplies cheap, generic ARVs for to invest in manufacturing facilities for this South Africa’s free, universal, public-sector HIV/ purpose. Building on that investment and the AIDS treatment programme. The company also promise of a mass ARV programme in South provides affordable medicines for the treatment Africa, Aspen has secured voluntary licenses of other life-threatening diseases, including tu- from a significant number of multinational pat- berculosis and malaria. Steven Saad founded ent-holders to produce a broad array of ARVs.. Aspen in 1997. Starting small, it has since grown s to become the largest producer of tablets and Author(s): capsules in Africa. Courtenay Sprague & Stu Woolman

Year of writing 2008

Association of Private Water Operators

Country Type of enterprise Uganda MSME Sector(s) Water and sanitation

ver 85 percent of Uganda’s population lives The majority of initial funding came from the Type of Oin rural areas, often with poor water supply, Poverty Action Fund (PAF), with further con- institutional conditions which aggravate poverty and en- tributions from the Ugandan national govern- support courage the spread of disease. ment and other donors. The Ugandan National Investment; Incentives; Water Policy, implemented in 1999, provided Implementation support In 2003, Uganda developed a public-private the policy framework for reform. APWO has set partnership to address rural water needs. The up an accreditation manual for admittance to government finds sites, drills boreholes, facili- the Association. Technical and administrative tates community land purchase and subsidizes training, sponsored by GIZ and the Ugandan installation. Private water suppliers, who op- government, are provided to APWO members. erate under the umbrella of the Association of s Private Water Operators (APWO), distribute water, conduct safety checks and retain profits.T he community water board, meanwhile, owns the assets and sets tariffs and policies. In 2011 there Author(s): Winifred N. Karugu & were 35,000 active connections with PWOs in 74 Diane Ndutu Kanyagla small towns throughout Uganda. Year of writing 2008

Realizing Africa’s Wealth 79 Case studies

Barclays

Type of enterprise Country Foreign MNC Ghana Sector(s) ICT

usu collection, practised for over 300 years without having to expand its own network. The Type of in Africa, is an informal arrangement for mo- bank sells other services, such as small business institutional S support bilizing savings deposits. Operators collect a credit, through the collectors. Information; predetermined instalment of money from their Implementation support client on a daily or weekly basis. Four thousand Barclays raises awareness about its Susu Collec- Susu collectors are active in Ghana, each serving tors Initiative by inviting potential end-users to 200 to 850 clients a day. meetings and training sessions covering financial management and insurance. The bank also In 2005, Barclays Bank of Ghana began an initi- trains Susu collectors in delinquency manage- ative to leverage Susu collection in extending ment, financial credit and risk management.s micro-finance to Ghana’s small traders and micro-entrepreneurs. Collectors can store money safely at Barclays branches, where it earns interest. Barclays in turn gains access to the collec- Author(s): tors’ existing clients and benefits from collectors’ Robert Darko Osei expertise and good client relationships. The programme means the bank can increase cash flow Year of writing 2008

BRAC

Type of enterprise Country CSO Liberia Sector(s) Financial services

iberia has faced major difficulties rebuilding branches in seven of Liberia’s 15 counties, and Type of institutional Lboth physical and human capital since the has around 300 Liberian employees. It has pro- support end of its 14-year civil war in 2003. A mere 15 vided some 25,000 low-income Liberians with Incentives; Investment percent of Liberians are formally employed and micro-finance. 68 percent live below the poverty line. BRAC partnered with the Liberian Ministry of BRAC, an NGO founded in Bangladesh in 1972, Foreign Affairs, which issued the Articles of In- began operations in Liberia in 2008. It provides corporation that enabled the registration of its microloans to women, typically small business micro-finance company. BRAC obtains funds owners, as well as small enterprise loans. The from BRAC–Kiva and other donor organizations organization supports the agriculture activities such as FOSI, DFID, KIVA and SEDF. s of smallholder farmers by providing farm inputs and free training workshops. BRAC requires no physical collateral and offers its small loans – Author(s): ranging from $100 to $500 – at competitive in- Alfred K Tarway-Twalla terest rates. BRAC has opened 30 micro-finance

Year of writing 2012

80 Realizing Africa’s Wealth Cadbury Cocoa Partnership

Country Type of enterprise Ghana Foreign MNC Sector(s) Agriculture and forestry

n 2012, cocoa represented 22.5 percent of encourage the exchange of operational infor- Type of Ghana’s total export earnings; however low mation. The Partnership also works to attract I institutional productivity, a lack of access to inputs and cred- young people to cocoa farming through a peer- support it, and other challenges represent a threat to to-peer mentoring and awareness programme. Information; Investment; sustained production of this crop. Implementation Support The Partnership benefits from a strong network The Cadbury Cocoa Partnership was launched of partners who work at the policy, implemen- in 2008 by Mondelēz International (formerly tation and community levels. Mondelez Inter- Cadbury/Kraft), the Ghana Cocoa Board (COCO- national contributed the GBP 30 million imple- BOD), UNDP, World Vision, CARE International mentation fund and coordinates the partners. and other partners. The Partnership currently UNDP provides strategic and technical advice benefits 209 communities in seven districts. for further development of the programme. In each community, local cocoa facilitators are COCOBOD drives extension services, R&D and identified and trained to work closely with cocoa policy. CARE and other NGOs work at the com- farmers to increase production through regular munity level to help in capacity-building and Author(s): harvesting, spraying and fair trade certification, formation of community development plans. s Robert Darko Osei as well as the formation of farming societies to Year of writing 2012

Cashew Producers and USAID

Country Type of enterprise Guinea MSME Sector(s) Agriculture and forestry

n 2008, Guinea produced approximately 5,000 have been rehabilitated, seed quality improved Type of Itons of raw cashew nuts. Despite fertile soil and and large numbers of farmers have benefited institutional climatic conditions favourable to the large-scale from training. support cultivation of high quality cashews, Guinea’s Investment; Incentives; production is a fraction of what it could be. The The Partnership began with a $1 million funding Implementation support full potential of the sector has not been exploit- commitment from USAID, SPCIA – a local agri- ed due to lack of government support, financ- cultural support and export organization – and ing and coordination for market development. Kraft Foods. The Guinean government has contributed to the growth of the sector by waiving Since 2004, the Global Development Alliance export taxes. SPCIA has helped farmers form Partnership – encompassing several Guinean cooperatives in order to coordinate activities cashew cooperatives, the Guinean government, and share information, and together with oth- the U.S. Agency for International Development er NGOs, it has provided them with important (USAID) and multinational food company Kraft technical training. s Foods – has been helping Guinean farmers pro- Author(s): Mamadou Gaye duce and sell cashews. Old cashew plantations & Ousmane Moreau

Year of writing 2008

Realizing Africa’s Wealth 81 Case studies

Celtel and Celpay

Type of enterprise Country Developing MNC Democratic Republic of Congo Sector(s) ICT

he underdeveloped telecommunications indirect jobs, and allowed the exchange of infor- Type of industry in the Democratic Republic of Con- mation among communities previously isolated institutional T support go (DRC) was long hampered by an absence of by war and a lack of infrastructure. Investment; Information; infrastructure and the failed economy, marred Implementation support by years of civil war. Celtel International (bought Celtel DRC receives strong financial backing in 2010 by Bharti Airtel and rebranded as “Air- from its parent company and has built strong re- tel”) entered the DRC market in 2000. It was a lationships with political authorities. It benefit- market beset by widespread poverty, depleted ed from a law passed in 2003 providing a clearer human capacity and political uncertainty. The framework for the telecommunications indus- potential customer base was small and oppor- try. Celtel has invested in training programmes tunities for reaching it limited. Despite these targeting dynamic young employees and more obstacles, Celtel has gained more than two experienced managers. s million customers in the country. Celtel also established Celpay – now owned by the FirstRand Author(s): banking group – as a mobile banking system. Juana de Catheu Celtel injected cash into rural economies, created hundreds of direct jobs and thousands more Year of writing 2008

Chaka Group

Type of enterprise Country MSME Senegal Sector(s) ICT

any poverty-stricken households in Sene- for access to established banks, and offers a Type of institutional Mgal are dependent on remittances from its range of transfer options including purely cash support diaspora, but transferring money is not always or account transactions, or a blend of the two. Implementation support easy. Money Express is committed to its clients and its agents even hand deliver remittances to elderly Money Express, the flagship company of the customers. Chaka Group’s portfolio of businesses, offers an affordable and convenient way of sending re- Money Express partners with a network of finan- mittances to West African countries. Created in cial institutions, from national banks to small 1994 by Senegalese entrepreneur Meissa Deg- village savings offices.T he Senegalese Housing uene Ngoma, Money Express operates in both Bank has been an especially valuable partner, as rural and urban areas, working in partnership it operates in every country with a significant with networks of smaller banks in villages. It is Senegalese community. Money Express also cheaper to transfer money through Money Ex- places a strong emphasis on training. s Author(s): press than through the major established com- Mamadou Gaye petitors in the sector. This route is also open to & Ousmane Moreau customers who lack the identification necessary Year of writing 2008

82 Realizing Africa’s Wealth Du Vent, de l’Eau pour la Vie

Country Type of enterprise Senegal MSME Sector(s) Water and sanitation

ccess to water is a major issue in rural Sene- the same time, it continues to manufacture and Type of gal. People in these areas depend on water and install new pumps on site for communities. A institutional from traditional wells, which can be unreliable The pumps have provided numerous benefits to support and require immense effort, mostly from wom- communities, such as income from garden cul- Incentives; Investment; en. tivation, improved health and reduced time for Implementation support water collection. It has generated between 660 To solve this problem, wind-powered water and 1,100 jobs. pumps were installed by the Italian aid agency LVIA (Lay Volunteers International Association) The Senegalese government granted permis- in 130 Senegalese villages between 1981 and sion for the LVIA project to continue and grant- 1991, until funding ran dry. Michel Tine, a local ed tax relief to VEV for the pump parts that had man who had been employed by the agency, to be imported from India. The company also then started a company called Wind, Water for received an initial loan from E+Co, an NGO that Life (Du Vent, de l’Eau pour la Vie; VEV) to take supports small energy businesses in develop- over operations. The company provides main- ing countries. VEV also received management Author(s): tenance and repair for the pumps and sources coaching from Caritas, an international Catholic Mamadou Gaye local parts for the installation of new pumps, at philanthropic organization. s Year of writing 2010

Dunavant

Country Type of enterprise Zambia Foreign MNC Sector(s) Agriculture and forestry

he Zambian cotton industry provides a live- ties with its farmers and saw a higher cotton Type of Tlihood for approximately 350,000 smallhold- yield. The programme was considerably cheap- institutional er farmers whose productivity is at constant risk er than comparable initiatives in sub-Saharan support from malaria. Africa. Preliminary results suggest that scaling Investment; up this project could bring major economic and Implementation support Dunavant Zambia is a multinational cotton health benefits for cotton-farming households trading company that purchases seed cotton in Zambia. from smallholder farmers, processes it into lint and sells it internationally. It operates with over The National Malaria Control Centre provides 150,000 smallholders in five provinces. In an at- logistical support, equipment, and temporary tempt to build cross-sector synergies for public staff to the project.T he Bill and Melinda Gates health, the National Malaria Control Centre and Foundation provides funding. s Dunavant Zambia have implemented a large- scale malaria prevention programme targeting 40,000 extremely poor cotton-farming house- Author(s): Andrea Lozano holds. Malaria incidence was halved among the households; Dunavant also developed deeper Year of writing 2012

Realizing Africa’s Wealth 83 Case studies

Ecotact

Type of enterprise Country CSO Kenya Sector(s) Water and sanitation

ver 40 percent of Kenya’s population lacks Foundation, Rotary International, the Dutch Type of access to satisfactory sanitation, even more government, East Africa Breweries Limited and institutional O support so in urban slums. Safaricom. Ecotact has partnered with Water and Information; Investment Sanitation for the Urban Poor (WSUP) to carry Ecotact was founded in 2007 by Kenyan urban out research on sanitation in urban and peri-ur- planner David Kuria. This company has erected ban areas in Kenya, which laid the groundwork 60 multifunctional Ikotoilets (otherwise known for the design and ensured local needs were as “toilet malls”) in Kenya’s urban slums, which considered. Advocacy efforts by local and na- are accessed by more than 48,000 people a day. tional government and the company itself have These facilities are financially self-sustaining: also contributed to its success. Ecotact works users pay a small fee, micro-entrepreneurs rent with NGOs on a community outreach to educate commercial space and further revenues come communities about the value of good hygiene from advertising on Ikotoilet premises. Ikotoi- and proper waste management. s lets make use of innovative water conservation Author(s): measures. Winifred N. Karuga Ecotact began without financial backing but has Year of writing since received funding from Ashoka, the Schwab 2010

EDF

Type of enterprise Country Foreign MNC Mali Sector(s) Energy

ust 17 percent of Mali’s population has access EDF’s Mali operations began in the 1990s with a Type of institutional Jto electricity, even less in rural areas. comprehensive feasibility study on rural electri- support fication.T he company’s actions were facilitated Information; Investment; Koraye Kurumba and Yeelen Kura are rural ener- by favourable legal, regulatory and fiscal con- Implementation support gy services companies operated in Mali by Élec- ditions, overseen by the Malian Agency for the tricité de France (EDF), Dutch energy company Development of Household Energy (AMADER). Nuon and French group Total, with support Funding for the programme comes from the from the French Agency for the Environment Dutch government, the World Bank and the EDF and Energy Efficiency.T heir low-cost electric- itself, which also provides training programmes ity, based on solar home systems and small, and equipment to local subsidiaries. s low-voltage village micro-networks supplied by diesel generators, has had sizeable impact on development: improved standards of living, new income-generating activities and greater Author(s): quality of health care and education. The model Mamadou Gaye serves 3,000 customers.

Year of writing 2008

84 Realizing Africa’s Wealth Edu-Loan

Country Type of enterprise South Africa MSME Sector(s) Financial services

nder apartheid, South Africa’s public au- Edu-Loan pays universities upfront, it can often Type of thorities long neglected the education- secure a 10 percent discount on student fees. U institutional al needs of the vast majority of the country’s support people. Now, in the new economy, there is a Edu-Loan borrows credit from retail banks at the Investment pressing need for skilled and educated workers prime rate to pay its lenders’ tuition fees. In its to sustain development. However, many his- dealings with retail banks, Edu-Loan is guaran- torically disadvantaged people cannot afford teed by AFD (French Development Agency), the post-secondary education, nor do they qualify International Finance Corporation, DEG (Ger- for traditional modes of financing. man Investment & Development Agency) and Standard Bank. s Edu-Loan, a for-profit company that provides loans for post-secondary education, offers simple repayment options – at affordable rates – to applicants who have been disadvantaged in the past. Since its inception in 1996, Edu-Loan Author(s): has financed close to 600,000 students with Farid Baddache loans totalling over $300 million. Most loans are charged at 1 percent above the prime rate. Since Year of writing 2008

The El-Fashir Blacksmiths Cooperative/Practical Action

Country Type of enterprise Sudan CSO Sector(s) Consumer goods

he blacksmiths of El-Fashir are among the (metal and charcoal), mutual assistance in fill- Type of Tmost socially excluded castes in Darfur, Su- ing large orders and shared knowledge of in- institutional dan, practising in subsistence fashion without novations in production and design. Today the support the benefit of organization.T hrough a partner- cooperative owns and operates 75 workshops, Implementation support ship with UK-based international NGO Practical concentrated in the metalworking section of Action, the blacksmiths have formed a coopera- the El-Fashir markets. They produce agricultural tive with numerous benefits. implements and tools that are widely distributed across Darfur and nearby states, and have a In the 1990s, Practical Action introduced Dar- number of contracts with international agencies fur’s blacksmiths to new production techniques, such as FAO. materials and management practices. Once formed into a cooperative, the blacksmiths re- Practical Action provided considerable initial ceived further assistance from Practical Action support to the blacksmith cooperative, but on- in sourcing metal, contract negotiation and going capacity-building has enabled the black- the delivery of finished products. Cooperative smiths to assume ever greater responsibility for Author(s): Samer Abdelnour members benefit from bulk purchase of inputs core functions of their business. s

Year of writing 2010

Realizing Africa’s Wealth 85 Case studies

Esoko

Type of enterprise Country CSO Ghana Sector(s) ICT

soko Networks, founded in Ghana in 2005, is also be sent by voice message, and agricultural Type of the operator of Esoko, a mobile information experts are on hand in call centres to comple- institutional E support system developed with the aim of reducing ment data alerts. Not only can farmers negotiate Information; Incentives transaction costs and overcoming informa- better prices, choose different markets, or time tion asymmetry in the agricultural value chain, their sales better, but they can also participate thereby increasing the bargaining power and in out-grower schemes through Esoko profiling income of smallholder farmers. IT entrepreneur and reputational history. Participating farmers Mark Davies started the company, working with have experienced an average crop yield in- a team of local and international professionals crease of between 10 percent and 30 percent. to develop the mobile-enabled service. Devel- opment included a four-year pilot phase to tai- Esoko began as a donor-financed project with lor the technology to the local markets. Small- funding from the International Finance Corpo- holder farmers registered with Esoko receive a ration (IFC) and the Soros Economic Develop- text message package of weekly advisory ser- ment Fund (SEDF). s Author(s): vices including current market prices, match- Olayinka David-West ing bids and offers, weather forecasts as well as news and tips. In some countries, advisories may Year of writing 2010

Ethiopian Honey and Beeswax Producers and Exporters Association

Type of enterprise Country CSO Ethiopia Sector(s) Agriculture and forestry

thiopia’s honey and beeswax industry re- an out-growers scheme, providing workshops Type of institutional Emains underdeveloped despite ample natu- on modern beekeeping and post-harvest han- support ral resources. Smallholder beekeepers tend to dling to over 8,000 smallholder beekeepers who Incentives; Investment; use traditional techniques of beekeeping and also receive modern beehives and other inputs implementation support honey production, resulting in poor productiv- on a credit basis. ity and quality. The EHBPEA receives significant financial and In order to develop the value chain, seven local technical support. The Association is largely companies came together in 2005 to establish funded by donor organizations, particularly the the Ethiopian Honey and Beeswax Producers Netherlands Development Organisation (SNV). and Exporters Association (EHBPEA) as a plat- The EHBPEA also receives support from the form for cooperation and expansion. With the Ethiopian government, which has developed support of a range of NGO, government and national standards for the industry and assisted research partners, the Association has managed with international accreditation. s Author(s): to significantly improve standards in the sector, Tofik Siraj Fite which has led opened up access to niche international markets. The EHBPEA has also launched Year of writing 2012

86 Realizing Africa’s Wealth Fair Trade Cotton

Country Type of enterprise Mali CSO Sector(s) Agriculture and forestry

otton accounts for over 30 percent of Mali’s countries. The emphasis is on sustainable devel- Type of export revenues and represents the main opment with improved working conditions and C institutional source of income for millions of people. Malian guaranteed prices above the cost of production. support farmers generally work with outmoded tools Max Havelaar and Dagris, a French textile and Information; on family plots and compete with highly subsi- agricultural development agency, began evalu- Implementation support dized producers from wealthier countries, and ating Malian smallholder cotton farmers in the are consequently extremely vulnerable to inter- 1990s to determine whether they could meet national price fluctuations and market volatility. international fair trade standards. The Mali Tex- tile Development Company supplies technical The Fairtrade Labelling Organizations Interna- support to farmers as part of this programme, tional (FLO) and its French branch Max Havelaar, which improves the quality of cotton fibre pro- have responded to this situation by joining a duced. s number of French, Belgian, Swiss and UK clothing retailers (such as France’s Armor Lux) in a fair trade partnership which aims to improve in- Author(s): comes and bring greater sustainability to cotton Mamadou Gaye production practices in Mali and surrounding Year of writing 2008

GADCO

Country Type of enterprise Ghana MSME Sector(s) Agriculture and forestry

he agricultural sector employs over half of vate land on GADCO’s 1,000-hectacre nucleus Type of TGhana’s workforce and contributed 28 per- farm, which also serves as a demonstration facil- institutional cent of GDP in 2010. ity to encourage buy-in from other farmers. The support farmers’ annual income is expected to double Information; GADCO is an agri-food company that aims to through this programme. Implementation support promote hybrid grain production, add value to agricultural products through sustainable in- GADCO works with several partners in this en- frastructure and market its home-grown COPA deavour, including Syngenta, which provides grain products. GADCO incorporates smallhold- seeds and, other inputs as well as on-site R&D; ers into its value chain through its COPA Con- the World Bank, which conducts rigorous im- nect programme, helping them advance from pact evaluations to assist model development; subsistence to commercial agriculture. GADCO and Finatrade, which will assist in scaling up CO- buys quality produce from farmers and collects PA’s distribution throughout West Africa. Other a service fee that covers improved seeds and partners include challenge funds and NGOs other inputs provided to the farmer as well as which provide management assistance along Author(s): Robert Darko Osei overheads and a capital expenditure cost that with financial and technical support.s includes use of machinery. Smallholders culti- Year of writing 2012

Realizing Africa’s Wealth 87 Case studies

Inova

Type of enterprise Country MSME Burkina Faso Sector(s) Financial services

urkina Faso is a low-income country in which In order to promote the utilisation of financial Type of 43 percent of the population live below the services in the region, the Central Bank of West institutional B support national poverty line. The country’s financial African States, BCEAO, became one of the only Incentives sector remains underdeveloped, even in com- central banks in recent times to authorise elec- parison with other low-income countries. tronic money transactions by non-bank institutions. This favourable regulatory environment Inova was established in Burkina Faso in 2007 allowed new actors to launch “agency-less” to provide mobile money services. Inova has banking operations and develop a wider range adopted a franchise model, by which individuals of services. s or existing businesses set up Inova service centres across the country where consumers can deposit or withdraw cash. With around 60,000 clients, Inova recorded a transaction volume of $6 million for mobile money services in 2011, Author(s): including transfers, payments of utility bills and Yarri Kamara purchases, deposits and withdrawals.

Year of writing 2012

Integrated Tamale Fruit Company

Type of enterprise Country MSME Ghana Sector(s) Agriculture and forestry

ural regions of Ghana are marked by a high large volume of high-quality organic mangoes Type of institutional Rincidence of poverty and many people are and farmers can look forward to long-term in- support economically inactive. The Integrated Tamale come prospects in mango production . The ITFC Investment; Fruit Company (ITFC) – operating in Ghana’s also provides technical assistance to farmers. s Implementation support Savelugu Nanton District – works with smallholder farmers to cultivate certified organic mangoes for local and export markets. Rather than acquiring one large parcel of land – which would be physically and financially impractical – the company generates high volumes through an out-grower scheme, which was launched in 2001 and had expanded to 1,300 farmers by 2008. The ITFC provides an interest-free loan to the out-growers through farm inputs and tech- Author(s): nical services, and farmers only start paying for Robert Darko Osei the loan once the trees yield fruit. This arrangement means the company can reliably source a Year of writing 2008

88 Realizing Africa’s Wealth K-REP Bank

Country Type of enterprise Kenya Large domestic company Sector(s) Financial services

-REP Bank, which started operations in 1999, In disadvantaged districts and communities Type of was Kenya’s first micro-finance bank. It pro- K-REP Bank offers undereducated clientele K institutional vides banking access to low-income workers, training in financial management during regu- support without sacrificing commercial viability. K-REP lar group meetings. s Implementation support regards banking and financial services as basic human rights. It offers a diverse range of products and services including microcredit facilities, individual loans, wholesale loans to micro- finance providers, deposit facilities and saving schemes, letters of credit and bank guarantees. Taking inspiration from the Grameen Bank’s group-lending model, the bank’s microcredit loans fall into three categories. Groups advance through the categories until they are eligible for commercial bank loans. In 2007 K-Rep Bank had Author(s): 180,000 lenders and around the same number Winifred N. Karugu of depositors. & Diane Nduta Kanyagia Year of writing 2008

Kenya Agriculture Commodity Exchange Limited (KACE)

Country Type of enterprise Kenya CSO Sector(s) Agriculture and forestry

mallholder farmers in rural sub-Saharan Afri- and to make their own sales offers.T housands of Type of Sca are often at a disadvantage in local and in- farmers in Kenya have seen improved earnings, institutional ternational agricultural markets because of their from 22 percent to as high as 150 percent for support limited access to markets and market informa- some commodities, and the company has start- Investment tion and an over-reliance on intermediaries who ed operations in Uganda and Tanzania. absorb most of their profits. While KACE was established without external In 1997, Dr. Adrian Mukhebi established KACE funding or loans, it has since received funding to address these problems within Kenya. This from a number of international donors includ- MSME collects up-to-date information on the ing USAID and the Rockefeller Foundation. Most price and availability of commodities in various of this funding has been pegged to specific pro- markets, which farmers and stakeholders can jects and has been used for capacity-building access at a small fee through a mobile text mes- and operational expansion. s saging service, at KACE’s rural information centres or on a daily nationwide radio programme. Author(s): Winifred N. Karugu Farmers can use the system to view purchase offers from potential customers and distributors Year of writing 2010

Realizing Africa’s Wealth 89 Case studies

Kuyasa

Type of enterprise Country CSO South Africa Sector(s) Energy

illions of people in South Africa who re- with access to renewable energy-efficient tech- Type of ceived public housing following the end nologies. The project stalled for two years due to institutional M support of apartheid suffer a disproportionate financial implementation and funding model problems, Incentives and health burden linked to poor thermal effi- but it was reactivated in August 2008 and com- ciency. pleted in October 2010.

The Kuyasa Clean Development Mechanism Occupants of the retrofitted houses made small (CDM) project was developed to retrofit 2,309 monthly financial contributions to the project low-income houses in Kuyasa, an informal hous- while the South African Department of Environ- ing settlement outside of Cape Town, with solar mental Affairs andT ourism and the provincial water geysers, insulated ceilings and compact government’s Department of Housing provided fluorescent lights.T he project was developed additional external funding for the project. s by SouthSouthNorth, a non-profit organization, when it recognized the potential of the Kyoto Author(s): Protocol’s CDM. The project aimed to improve Michael Goldman the thermal performance and energy efficiency of existing low-cost housing units, thereby alle- Year of writing viating energy poverty by providing the poor 2010

L’Occitane

Type of enterprise Country Foreign MNC Burkina Faso Sector(s) Agriculture and forestry

n Burkina Faso, 52 percent of the rural popu- velopment fund for the producer community. Type of institutional Ilation lives in poverty. The collection and pro- L’Occitane pays an 80 percent advance to the support cessing of shea butter, used for cooking and cooperatives each year so that they can meet Incentives; personal hygiene in the form of creams or soaps, the costs of harvesting, purchasing and process- Implementation support is one source of income. ing shea nuts. The company also provides labo- ratories for quality testing and offers a bonus for L’Occitane en Provence, a French multinational butter which meets the highest quality criteria. cosmetics firm known for luxury products based on natural ingredients, has been sourcing shea L’Occitane has partnered with several non-profit butter from women’s groups in Burkina Faso organizations in Burkina Faso, including Cana- since the 1980s, helping some 15,000 women da’s Centre d’Etude et de Coopération Interna- to achieve economic independence. Recently, tionale (CECI), which helped organize the wom- L’Occitane helped its suppliers obtain fair trade en’s groups into cooperatives and continues to and organic certification and it now buys its provide technical training. It supports coopera- Author(s): shea butter – 500 tons in 2011 – at a minimum tives in obtaining fair trade and organic certifi- Yarri Kamara fair trade price. The cooperatives contribute 2 cation. s percent of their sales revenues to a social de- Year of writing 2012

90 Realizing Africa’s Wealth Lonestar

Country Type of enterprise Liberia MSME Sector(s) ICT

iberia’s 14-year civil war devastated the estar’s Mobile Money to pay civil servants. LCC Type of country’s economy and infrastructure. Lon- has partnered with Ecobank to establish its mo- L institutional estar Communications Corporation (LCC) was bile banking service, and offers free ICT courses support launched in 1999 to fill the telecommunications to the general public through the University of Incentives gap. It provides affordable mobile services to Liberia. Finally, Lonestar works with NGOs and Liberians, including voice and data packages, other partners to provide further training and SMS and, most recently, mobile banking. LCC highlight important causes, such as children’s has over one million subscribers and has provid- rights and education. s ed many employment opportunities, targeting the highly at-risk group of unemployed young men that were singled out for recruitment by rebel forces during the civil war. The company employs 500 people directly and has created significant indirect employment. Author(s): LCC receives support from several partners. The Alfred K Tarway-Twalla Ministry of Finance, for example, inspired confidence in the company’s products by using Lon- Year of writing 2012

MAP International

Country Type of enterprise Uganda MSME Sector(s) Financial services

ganda faces serious challenges in extend- MAP International has expanded its customer Type of Uing financial services into rural areas and in base, issuing more than 100,000 debit cards institutional equipping low-income-earners with the iden- since its inception. It also operates 26 ATMs and support tification required by banking institutions. In over 150 point-of-sale terminals throughout Incentives 2006, 90 percent of the population did not have Uganda. access to a bank account. MAP has signed an agreement with PostBank In 2007, New York-based MAP International Uganda, a wholly government-owned bank. established an office in Uganda targeting im- This partnership has been very useful for MAP proved financial access, economic empower- in securing customers, and it subsequently de- ment, employment generation and enterprise veloped PostBank Uganda’s mobile banking in- creation in the country. MAP provides central frastructure. s bank-approved biometric identification and a virtual financial service that links consumers, merchants, banks, and service providers. Cus- Author(s): Eria Hisali tomers can use many different access points, including ATMs, mobile phones and computers. Year of writing 2010

Realizing Africa’s Wealth 91 Case studies

Mobah Rural Horizons

Type of enterprise Country MSME Nigeria Sector(s) Consumer goods

n rural Niger, poor road and electricity infra- need to preserve food. Abba identifies local pot Type of structure means produce spoils before enter- makers in new markets and commissions them institutional I support ing distribution channels, forcing farmers to to make the pots. Information; Incentives; accept lower prices for their goods. Investment Mobah Rural Horizons received funding from The pot-in-pot cooling system (“fridge for the family members and the UNDP with prize mon- poor”) was invented to help farmers preserve ey from the Rolex Award for Enterprise repre- their produce. Mohammed Bah Abba, a lecturer senting a further $75,000. The company bene- at a local university, used his personal savings fits from public procurement by bodies such as and tapped into a large, unemployed workforce Nigeria’s Ministry of Women’s Affairs, which dis- to produce a first set of 12,000 pots, which he tributes coolers to beneficiaries in rural areas. distributed to households for free to stimulate The company engages in marketing and ad- local demand. In 2000 he launched Mobah Rural vocacy initiatives in every new village it visits, Horizons in order to increase distribution. The using films to educate local farmers about the Author(s): company now sells 30,000 coolers a year in Ni- value of its technology. s Oluwemimo Oluwasola ger and Nigeria to farmers and other users who

Year of writing 2010

Moladi

Type of enterprise Country MSME South Africa Sector(s) Housing and construction

here is a massive demand for affordable need for traditional building materials. Moladi Type of institutional Thousing in developing countries across the technology has met resistance in the South Af- support world. A lack of resources, funds and skills short- rican construction industry, but has been more Implementation support ages, combined with environmental challenges, widely adopted in affordable housing projects mean many governments are hard-pressed to in 16 developing countries throughout Africa meet this demand. and Latin America, creating thousands of jobs.

Moladi is a stand-alone family business active Moladi provides training to builders for each in construction technology, offering solutions new project. The company is in the process of to the challenge of providing affordable hous- creating a “Moladi College” in South Africa to ing for the poor. The business was founded in train unskilled labourers in construction practic- the 1980s in South Africa by Hennie Botes, and es as well as enterprise management. s uses an innovative system of moulds assem- bled with plastic panels into which an aerated Author(s): mortar (stone-less concrete) is poured. This Pierre Coetzer construction method is relatively easy to work with while reducing costs and time, as well the Year of writing 2010

92 Realizing Africa’s Wealth Mondi Recycling

Country Type of enterprise South Africa Foreign MNC Sector(s) Waste

he waste management sector in South Afri- of low-income South Africans. This scheme has Type of ca has the potential to help alleviate unem- resulted in the establishment of 40 small enter- T institutional ployment in the country, which currently stands prises, each receiving around ZAR 1.07 million support at 24.9 percent, while also addressing such is- ($143,000) per year from Mondi. Incentives; sues as carbon emissions and environmental Implementation support sustainability. Mondi is supported by state-backed entities such as the Industrial Development Corpora- Mondi Recycling, a unit of Mondi Packaging tion (IDC), which provided a ZAR 500,000 loan South Africa, outsources an essential part of its ($66,700) as partial start-up finance for the buy- recovered-fibre supply chain to former employ- back centres in 2005. Many small entrepreneurs ees through an owner-driver scheme, establish- running the buy-back centres have received ing independent sorting and baling operations, training in financial literacy and management and conducting business with a network of skills from the South African Department of buy-back centres and individual hawkers. Many Trade and Industry. s of the owner-drivers have become successful Author(s): entrepreneurs, providing a living for hundreds Pierre Coetzer

Year of writing 2010

Olam

Country Type of enterprise Nigeria Foreign MNC Sector(s) Agriculture and forestry

he Nigerian agricultural sector employs 65 ny’s business portfolio embraces the entire prod- Type of Tpercent of the national labour force. Howev- uct supply chain, using a network of local buying institutional er, due to difficulties in market access and low agents, primary processing facilities and logisti- support production levels, the sector accounts for just cal services. Olam has generated 500 jobs direct- Information; 41.5 percent of GDP. ly and 10,000 indirectly, with farm earnings per Implementation support hectare increasing from $235 to $1,000. Olam has Olam Nigeria Limited is working to address prob- received several awards for its efforts, including lems associated with product failure, foreign the 2011 Africa Business Award for Corporate So- exchange transactions and lack of market infor- cial Responsibility and the 2010 award for Overall mation. The company, which initially focused on Best Exporter of the Year. primary commodities like cashews, cocoa and shea nuts, but has since expanded into packaged Olam engages in advocacy efforts with the Man- food products, engages smallholders by provid- ufacturers Association of Nigeria (MAN) and the ing farm equipment and inputs, which the farm- Nigerian Association of Chambers of Commerce, ers pay back in the form of medium-term loans, Industry, Mines and Agriculture (NACCIMA) to Author(s): Oluwemimo Oluwasola and encourages farmers to form cooperatives pressure the Nigerian government to address while providing them with training. The compa- infrastructure issues and inconsistent policies. s Year of writing 2010

Realizing Africa’s Wealth 93 Case studies

PepsiCo

Type of enterprise Country Foreign MNC Ethiopia Sector(s) Agriculture and forestry

thiopia is among the top producers and ex- food (RUSF) made from chickpeas, with the aim Type of porters of chickpeas in the world. However, of reaching 40,000 malnourished children via institutional E support challenges such as unreliable rainfall mean that the WFP. The project aims at eventually reaching Investment; chickpeas are treated as a secondary crop. 10,000 smallholder farmers. Implementation support In 2011, PepsiCo established a public-private PepsiCo approached USAID and the Ethiopi- partnership with WFP, USAID and the Ethiopian an Institute for Agricultural Research (EIAR) to government, which aims to introduce modern provide training to farmers in modern farming farming practices, improve irrigation and high- techniques and to assist with research on devel- er-yielding seeds to increase Ethiopian chickpea oping better chickpea seeds. USAID also provid- production and exports.. This will help secure a ed a grant of $7 million to the alliance to finance reliable, long-term supply for Pepsi’s range of technical assistance. s chickpea-based products, while allowing it to evaluate the market for these products in Africa. Author(s): PepsiCo is currently developing and producing Tofik Siraj Fite a cost-effective ready-to-use supplementary

Year of writing 2012

Pésinet

Type of enterprise Country CSO Mali Sector(s) Health care

ali has a very high child mortality rate the project initially proved financially unsus- Type of institutional M(around 10%), with major factors includ- tainable , but later used strategic partnerships support ing insufficient medical attention and late -di and technical and financial improvements to Investment; agnoses resulting from limited access to health successfully relaunch in Mali in 2007. To date, Implementation support care. Pesinet has enrolled 800 children.

Pesinet, launched in 2002 by Brussels-based Af- Afrique Initiatives provided financial and tech- rique Initiatives, is an early warning method for nical support, with further donations coming monitoring the health of children from low-in- from French local authorities. Two telecommu- come families. Mothers subscribe to Pesinet’s nications companies, Alcatel-Lucent and Or- services for a nominal fee, and a local represent- ange Mali, assisted with capacity-building and ative weighs their children twice a week. Re- equipment. s sults are communicated to a local doctor, who reviews the weight chart and requests a visit if Author(s): the weight readings are unusually low, often an Mamadou Gaye indication that medical treatment is required. & Ousmane Moreau Launched as a non-profit venture in Senegal, Year of writing 2008

94 Realizing Africa’s Wealth RMB and Nedbank

Country Type of enterprise South Africa Large domestic companies Sector(s) Financial services

rovision of decent housing for low-in- Nedbank makes mortgages available to a pre- Type of come-earners is a major concern in South viously excluded market: people too poor to P institutional Africa. Townships, or semi-informal settlements qualify for traditional housing loans but above support on the outskirts of cities, were neglected for the government threshold for public housing Incentives; Investment; decades under apartheid, resulting in chaotic support. Implementation support development and inadequate infrastructure. Both programmes also offer financial training Two South African banks, Rand Merchant Bank for clients. Nedbank, for example, educates new (RMB) and Nedbank, have each developed inno- borrowers about home finance and the respon- vative financial products targeted at South Afri- sibilities of home ownership. ca’s low-income housing market. Both projects, begun in 2007, conform to the Voluntary Finan- Financial support from the French Development cial Services Charter, a black economic empow- Agency (AFD) enabled banks to overcome the erment strategy designed by the private sector main barrier to entry: risk related to lower-in- with government support. come households. s Author(s): Farid Baddache RMB finances affordable housing programmes that favour social diversity in township areas. Year of writing 2008

Safaricom M-Pesa

Country Type of enterprise Kenya Foreign MNCs Sector(s) ICTAgriculture

n Kenya less than 7 percent of the population executed via text message at minimal cost. The Type of Ihas a formal bank account. The costs of bank- system has proved hugely successful in Kenya, institutional ing can be high and bank accounts are geared where it has over 15 million subscribers as well support towards middle and high-income populations. as in neighbouring Tanzania (over 7 million sub- Investment; Incentives scribers). M-Pesa (“M” for mobile and “pesa” from the Swa- hili word for money) is a mobile money transfer M-Pesa received initial funding from Vodafone system that was launched in Kenya in 2008 by Group Plc and the Department for International Safaricom, a major local mobile network oper- Development (DFID). The system also benefited ator, in a bid to make financial services more from a favourable regulatory environment in accessible to low-income customers. Custom- Kenya, which offers flexibility in customer reg- ers don’t need to go to banks as deposits and istration and the acquisition of new banking withdrawals can be made using from virtual ac- outlets. s counts at vendors shops, as well as outlets such as supermarkets and petrol stations. Even the Author(s): Winifred N. Karuga smallest transactions – bill payments, purchase & Triza Mwendwa of goods or services or remittances – can be Year of writing 2008

Realizing Africa’s Wealth 95 Case studies

Sanofi

Type of enterprise Country Foreign MNC sub-Saharan Africa Sector(s) Health care

n estimated 500,000 people were infected 10,000 in 2009. Doctors and other health care Type of with sleeping sickness throughout sub-Sa- workers received training in diagnosis and treat- institutional A support haran Africa in 2006. If left untreated, this illness ment of the disease. Information; Investment; is nearly always fatal. Implementation support To date, Sanofi has donated $75 million to the Sanofi, the largest pharmaceutical company in sleeping sickness programme, which will run Europe, partnered with the WHO in 2001 to fight until 2016. Sleeping sickness has also gained sleeping sickness and other neglected diseases. increased political attention, most notably in Multiple actions – drug donations, subsidies to 2005 when the African Union endorsed a resolu- distribution programmes and R&D to improve tion calling for the elimination of sleeping sick- treatment and diagnostics – combined to bring ness in countries where it is endemic. This has sleeping sickness under control. Since the part- sparked significant investment in research and nership began, more than 150,000 patients have development of new diagnostic and treatment been treated and the number of patients treat- options. s Author(s): ed for sleeping sickness has dropped by over 60 Robert Darko Osei percent. The number of reported new cases of the disease fell from 30,000 in 2001 to less than Year of writing 2008

Tedcor

Type of enterprise Country MSME South Africa Sector(s) Waste

any slums in urban South Africa are un- in South Africa and has created waste man- Type of institutional Mder-serviced as a consequence of un- agement enterprises for 120 community con- support der-resourced local governments. Authorities tractors. In order to secure the necessary skills, Investment; have responded by privatising some services, Tedcor only partners with black entrepreneurs Implementation support including waste management. who have graduated from secondary school, and provides extensive training in financial and Tedcor is a community-based for-profit re- business management. fuse removal company, established to provide affordable service to neglected areas, while Given the importance of affirmative action for helping black entrepreneurs build their own businesses in South Africa, Tedcor’s focus on businesses. Established in 1996 by businessman assisting emerging black entrepreneurs has en- John Houghton, the company provides ongo- abled it to obtain bank loans and waste removal ing financial and business support and certified trucks at preferential rates. s training to community contractors, who be- Author(s): come owner-drivers of waste-removal vehicles. Michael Goldman Tedcor holds a 10 percent share of the subcon- tracted municipal waste management system Year of writing 2010

96 Realizing Africa’s Wealth The Sustainable Healthcare Foundation

Country Type of enterprise Kenya CSO Sector(s) Health care

n Kenya, many people in slums and rural areas and a further 10 in Rwanda, the Foundation has Type of lack access to affordable medicines and basic served more than three million people. I institutional health care, leading to suffering and death from support afflictions like malaria and diarrhoea. The Foundation supports franchisees with start- Implementation support up finance, training and quality drugs, while The Sustainable Healthcare Foundation, found- handling government approval of new clinics ed in 2000, operates for-profit micro-drugstores and other regulatory requirements, and build- and clinics focusing on child and family wellness ing relationships with the Ministry of Health. (CFW) in rural areas and urban slums. It operates Community outreach is encouraged as it helps as a franchisor, selecting franchisees (commu- community members learn about services and nity health workers) and enforcing compliance also to voice their needs. The Foundation has with regulations while providing common worked with academic institutions to measure branding, logistics network and training. CFW the impact of CFW on health in Kenya. s shops and clinics offer access to affordable health care while generating enough revenue Author(s): to pay their nurse-owners and staff competi- Winifred Karugu tive salaries. With 66 franchise outlets in Kenya Year of writing 2008

Tiviski Dairy

Country Type of enterprise Mauritania MSME Sector(s) Agriculture and forestry

erding is an important cultural tradition in Mauritania’s economy. Tiviski is now lobbying Type of HMauritania, where 3.5 million work as no- European countries to import camel products. institutional madic livestock herders. However, it is increas- support ingly difficult to make a living this way. Tiviski began with an initial loan of €150,000 Investment; from the Caisse centrale de coopération Implementation support Tiviski, founded by Nancy Abeiderrahmane in économique. Cumulated investment in the Mauritania in 1987, is Africa’s first camel milk dairy is an estimated €4 million and includes dairy. It now also processes cow and goat milk investment in a UHT plant that required a loan for domestic consumption. Although nomadic of €2 million (€500,000 from Proparco, €500,000 families have long drunk milk from their live- from the IFC, and €1 million from local bank stock, there was no packaged or processed GBM). s fresh milk or fresh milk products available in urban grocery shops. Tiviski sources its milk from semi-nomadic subsistence herders, enabling them to earn incomes while still maintaining a Author(s): Mamadou Gaye traditional lifestyle. Its milk products have replaced those imported from Europe, bolstering Year of writing 2008

Realizing Africa’s Wealth 97 Case studies

ToughStuff

Type of enterprise Country MSME Kenya Sector(s) Energy

n Kenya 84 percent of the population has no The rapid rollout of ToughStuff products has Type of access to grid electricity. This dramatically af- been facilitated by several partnerships. Micro- institutional I support fects productivity, increases reliance on costly credit groups such as KREP, KADET and Faulu Implementation support and environmentally harmful fossil fuels, and Kenya offer credit through loan officers so- in exposes people to various health hazards, such dividuals can gain access to ToughStuff’s prod- as kerosene smoke. ucts over an agreed repayment period. Tough- Stuff has also partnered with One Acre Fund to ToughStuff East Africa, a subsidiary of Tough- provide farmers with lamp panels and phones Stuff International, is based in Kenya and seeks chargers as well as seeds, fertiliser and other to provide clean, affordable energy to low-in- farming inputs which allow farmers to work come earners in Kenya and other countries in longer and with fewer distractions. s East Africa. ToughStuff sells solar lamps, mobile phone chargers and batteries to low-income rural and urban consumers. Since launching Author(s): operations in 2010, ToughStuff has carved out a Winifred N. Karuga significant stake in the solar product market in & Diana W. Kimani Kenya, one of the largest in Africa. Year of writing 2012

Toyola

Type of enterprise Country MSME Ghana Sector(s) Energy

n Ghana, 33 percent of households use char- are now also sold in Togo and Burkina Faso. Type of institutional Icoal stoves, which are not only expensive but support also associated with significant health issues. The founders, Ghanaian entrepreneurs Suraj Investment; Wahab and Ernest Kyei, were part of a group of Implementation support Toyola cook stoves are fitted with a ceramic liner artisans trained to produce fuel-efficient stoves to improve fuel efficiency by 50 percent.T hey by EnterpriseWorks Ghana in 2002 under a US- are cleaner, more efficient and more durable AID-sponsored programme. Kumasi Institute than regular stoves, and sell for $7 each. Toyola of Technology and Environment offered advice started in 2006 and by 2011 it had produced on the business model and E+Co provided the 154,000 stoves, meeting the cooking needs of company’s initial loan, enabling it to buy its first 940,000 low-income earners, mostly in rural truck. A further loan from the UNEP’s AREED areas. The company has provided training and programme has allowed the company to ex- employment for over 300 artisans nationwide pand. s along its entire value chain. To increase afforda- Author(s): bility, Toyola offers customers the option to buy Robert Darko Osei on credit and pay back the loan over two months using money saved on charcoal. Toyola’s stoves Year of writing 2010

98 Realizing Africa’s Wealth VidaGás

Country Type of enterprise Mozambique CSO Sector(s) Energy

n Mozambique, a country with three doctors eReach and FDC introduced an improved cold Type of for every 100,000 people, there is an urgent chain and replaced decrepit kerosene refrigera- I institutional need for initiatives that expand the reach of tors in remote health facilities with liquefied pe- support health services to rural communities. In north- troleum gas (LPG)–powered refrigerators. More Investment; ern Mozambique, a major challenge for health than 350 tons of LPG were delivered in 2011 and Implementation support clinics is a lack of reliable fuel to provide light the company now operates in all four northern for medical operations and refrigerate vaccines. provinces of Mozambique. Health care training and supervision is provided for all staff. A pilot project aimed at extending these fuel services was launched in 2002. Partners in this Funding was initially raised by local sources in initiative include Graça Machel, a former Minis- Seattle, with larger partners emerging as the ter of Education dedicated to children’s health; project grew, including the Hunter Foundation VillageReach, a Seattle-based NGO deliver- of Scotland and the Dutch government’s bilat- ing health supplies; Mozambique’s Ministry of eral aid organization. s Health; and Fundação para o Desenvolvimento Author(s): da Comunidade (FDC), a community foundation Courtenay Sprague familiar with local development needs. Villag- Year of writing 2008

Realizing Africa’s Wealth 99 Useful resources

There are a wide range of institutions supporting enterprises and entrepreneurs in their efforts to work with low-income people as business partners. The case studies, interviews and surveys conducted for this report as well as the Practitioner Hub’s database inform the following list of institutions engaged in the four areas of the Inclusive Business Diamond: incentives, information, investment and implementation support. This list aims to provide leads for enterprises in search of support. However, it is by no means exhaus- tive. In particular, support institutions on the national level are not included.

INFORMATION Business Action for Africa International Business Leaders Awards A network of business and Forum Awards showcase transferable The following institutions development partners that An independent global mem- best practices, providing access contribute to the pool of promotes African development bers association that advocates to effective solutions and lessons knowledge on inclusive through advocacy, and by creat- and promotes business leader- learned. business by collecting data, ing partnerships and facilitating ship in corporate responsibility conducting research and knowledge-sharing. and development across multi- Ashden Awards engaging in advocacy. www.businessactionforafrica.org ple sectors, markets and issues. Promote environmentally friend- www.iblf.org/en/programmes/inclu- ly energy solutions that reduce Centre for Enterprise Devel- sive-growth/inclusive-business-mod- poverty and improve people’s Advocacy opment els.aspx lives. Ashden Awards support Advocacy involves the promo- A South African-based research energy pioneers in developing tion of inclusive business to all and advocacy organization that Schwab Foundation for Social their work. societal stakeholders. It often formulates policy proposals Entrepreneurship www.ashdenawards.org involves activities that open for the national government Provides platforms at the region- dialogue with policy makers and derived from on-the-ground al and global levels to highlight The BiD Network inform the decisions made. experience. and advance leading models of This network focuses on high- www.cde.org.za sustainable social innovation. growth SMEs, and hosts a web African Women in Business www.schwabfound.org/sf/index.htm platform to facilitate business Initiative Global Development Alliance plan competitions, tools for Aims to aid African women A market-based business model World Business Council for community building and entrepreneurs in developing for partnerships between the Sustainable Development coaching. SMEs through better access to public and private sectors to (WBCSD) www.bidnetwork.org finance. address jointly defined business A CEO-led organization of www.afdb.org/en/topics-and-sectors/ and development objectives. companies that cultivates strong G20 Challenge on Inclusive initiatives-partnerships/african-wom- http://idea.usaid.gov/organization/gp relationships with stakeholders Business Innovation en-in-business-initiative and drives policy change in favor A global competition for busi- Global Impact Investing of sustainable development nesses with innovative, scalable Ashoka Network solutions. and commercially viable ways of Provides both financial and pro- A not-for-profit organization www.wbcsd.org working with low-income peo- fessional support to individual dedicated to increasing the scale ple in developing countries. social entrepreneurs developing and effectiveness of impact World Economic Forum – New www.g20challenge.com inclusive business models. investing. Vision for Agriculture www.ashoka.org www.globalimpactinvestingnetwork. Involving public and private SEED Awards for Entrepre- org actors, the platform aims to neurship in Sustainable Aspen Network of Develop- develop a shared action agenda Development ment Entrepreneurs Initiative for Responsible and foster multi-stakeholder Supports innovative small-scale A global network of organiza- Development collaboration to achieve sustain- and locally driven entrepreneur- tions that invest money and A Harvard University initiative able agricultural growth through ships around the world that inte- expertise to propel entrepre- that engages in applied research market-based solutions. grate social and environmental neurship in emerging markets. on responsible investment www.weforum.org/issues/agricul- benefits into their business www.aspeninstitute.org/policy-work/ targeting long-term value for ture-and-food- security model. aspen-network-development-entre- investors and society. www.seedinit.org preneurs http://hausercenter.org/iri

100 Realizing Africa’s Wealth World Business and Develop- Consultative Group to Assist ODI Private Sector and INCENTIVES ment Awards the Poor Markets Organized by the International Independent policy and Conducts research into the Incentives help drive Chamber of Commerce and research centre comprised of development impact of busi- business in Africa by setting UNDP, this award recognizes 33 development agencies and ness, government policy and policies and standards that business contributions to devel- private foundations dedicated the business environment, and create a more conducive opment. to advancing financial access for examines economic incentives business environment, www.iccwbo.org/training-and-events/ the world’s poor. for improving impact reward business with competitions-and-awards/institute- www.cgap.org www.odi.org.uk/work/programmes/ low-income consumers, of-world-business-law/world-busi- business-development and empower low-income ness-and-development-awards/ Endeva people to participate in Reciprocity Research and consulting markets. Inclusive business institute dedicated to inclusive South African consultancy research institutions business, with general as well as specializing in inclusive business sector-specific (e.g., agribusi- models; also helps with imple- Research on inclusive business Platforms ness, microinsurance, energy, mentation and market research. generates valuable insights on pharma) information on inclu- Platforms create forums in which challenges, good solutions, ef- www.reciprocity.co.za sive business models. enterprises can engage in dia- fective business models, scaling logue with other stakeholders www.endeva.org UNDP Growing Inclusive and replication. and governments in particular, Markets and take collective action. BoP Knowledge Network Gordon Institute of Business A research and advocacy initi- Science (GIBS) A non-profit organization ative that seeks to understand, African Cashew Initiative Business school in South Africa enable and inspire the develop- that facilitates the development Multi-stakeholder initiative to set conducting research and lead- ment of more inclusive business of inclusive innovations in base and help implement a standard ership dialogues on inclusive models. of the pyramid (BoP) markets. for the sustainable production of business. www.bopinc.org www.growinginclusivemarkets.org Cashew nuts. www.gibs.co.za www.aci.africancashewalliance.com BOP Learning Lab Southern Market research Harvard CSR Initiative Africa Solid information on low-income Alliance for Green Revolution Seeks to study and enhance the Provides knowledge-sharing op- markets is rare, making the in Africa effectiveness of corporate social portunities on inclusive business following firms that specialize AGRA’s programmes focus on responsibility through research, in Africa. in market research important development in the agriculture dialogues, workshops, education www.bop.org.za/BOP_Lab/Home.html partners. sector by providing improved and outreach. seeds, encouraging soil fertility, Business Call to Action www.hks.harvard.edu/m-rcbg/CSRI Consumer Insight Ltd increasing market access and Provides a platform with op- A Nairobi-based market research facilitating partnerships. Intellecap portuntities to share expertise, company specializing in African www.agra-alliance.org knowledge and best practices Provides innovative business markets. solutions that help build and for market-based approaches to www.ciafrica.com/oindex The Comprehensive Africa development. scale profitable and sustainable Agriculture Development enterprises dedicated to social www.bcta-initiative.org Field Africa Platform and environmental change. A South Africa-based agency An African-owned and Afri- Business for Development www.intellecap.com that conducts market research in can-led initiative to boost agri- Pathfinder countries across Africa. cultural productivity in Africa. The LSE Co-Creation Lab Works with business associations www.fieldafrica.com www.nepad-caadp.net and CSOs to promote inclusive A partnership between leading scholars, NGOs, social entrepre- business in Africa; provides FinScope Competitive African Cotton neurs and companies seeking to performance measuring and A FinMark Trust initiative that Initiative (COMPACI) reduce poverty through success- practical support to companies provides nationally repre- Promotes improvements in ful business model innovation. interested in inclusive business. sentative studies of consumer cotton production in sub-Saha- www.b4dpathfinder.org www.icclab.com perceptions on financial services ran Africa in compliance with and issues, providing insight ecological, economic and social Monitor Inclusive Markets Business Fights Poverty into consumption patterns and sustainability criteria. A network of business and A specialized business unit financial management. www.compaci.org within Monitor Group focused development professionals that www.finscope.co.za/new/pages/ on identifying, developing, and provides peer-to-peer engage- default.aspx Donor Committee for Enter- ment and knowledge-sharing in catalysing investment in inclu- prise Development sive markets; recently acquired inclusive business. Initiative for Global Develop- Promotes economic opportu- by Deloitte. www.businessfightspoverty.org ment nity and self-reliance through www.mim.monitor.com A member-based network that private-sector development in Center for Sustainable Global facilitates business connections developing countries. Next Billion Enterprise (Cornell) and provides market insights in www.enterprise-development.org Engages in collaborative applied An online platform serving as sector-focused interest groups. a discussion forum, knowledge research and company-spon- www.igdleaders.org Grow Africa base and networking site for sored projects focused on Partnership platform that seeks individuals and organizations inclusive business strategy for- Jana to accelerate investment and interested in inclusive business. mulation and implementation. Market research company that transformative change in Afri- www.johnson.cornell.edu/ www.nextbillion.net connects brands with consumers can agriculture based on nation- Center-for-Sustainable-Global-Enter- in emerging markets through al agricultural priorities. prise.aspx mobile airtime incentives. www.growafrica.com www.jana.com Lighting Africa Research Africa Developed a product quality as- Based in Uganda and the surance programme for lighting Netherlands, Research Africa is a products. market research agency focused www.lightingafrica.org on social impact. www.researchafrica.com Realizing Africa’s Wealth 101 Useful resources

Making Finance Work for The International Federation Youth-to-Youth Fund Industrial Development Cor- Africa of Organic Agriculture Move- A fund for youth organizations poration An initiative to support the ments (IFOAM): provided by the Youth Employ- A national development finance development of African ment Network, a joint initiative institution set up to promote The worldwide umbrella organi- financial sectors through the by the ILO, UN and World Bank. economic growth and industrial zation for the organic move- coordination of financial sector Funding is designed to support development in all of Africa. ment. IFOAM formulated the development interventions young entrepreneurs in setting Owned by the South African IFOAM Basic Standards, on the across the continent so as to up their own businesses. government, the Industrial De- basis of which public and private avoid duplication and maximize velopment Corporation is under standard-setting bodies can www.ilo.org/public/english/employ- developmental impact. the supervision of the Economic develop more specific organic ment/yen/whatwedo/projects/y2y/ Development ministry. www.mfw4a.org standards. y2y.htm www.idc.co.za www.ifoam.org Nepad Business Foundation Development finance International Finance Corpora- A membership-based foundation Rainforest Alliance institutions (DFIs) that promotes sustainable eco- tion (IFC) An international NGO certifying DFIs encompass a range of nomic and social development Private-sector arm of the World farms that meet certain social, institutions, including loan funds throughout the African continent. Bank, providing financing mainly economic and environmental and micro-finance institutions, to medium-sized and large www.nepadbusinessfoundation.org criteria for sustainability. which provide financing to the enterprises. www.rainforest-alliance.org private sector for investments Sustainable Commodity Initi- that facilitate development. www.ifc.org ative (SCI) SA (Social Accountability) Norfund A joint initiative by the Interna- 8000: African Development Bank tional Institute for Sustainable The Norwegian Investment An international standard to Provides loans, grants and Development (IISD) and the Fund for Developing Countries promote workers’ rights and to technical assistance to private United Nations Conference is an investment company that enable employers to sustainably companies investing in regional on Trade and Development establishes and fosters profita- implement a systems-based ap- member countries. (UNCTAD), aiming to ensure that ble, sustainable enterprises in proach to ensuring decent work www.afdb.org sustainable practices are adopt- developing countries able to and working conditions. ed in commodity production generate economic growth and CDC and trade worldwide. www.sa-intl.org reduce poverty. Aiming to fight poverty by www.sustainablecommodities.org UTZ Certified helping build business, the www.norfund.no United Kingdom’s DFI provides Sustainable Trade Initiative Certification for sustainable PROPARCO farming practices. Enables farm- debt and equity capital, directly Convenes coalitions of leading A French DFI that invests in ers to learn better farming meth- and through intermediaries, to companies, civil society organ- emerging and developing ods, improve working conditions businesses in Africa and South izations and governments with countries as well as geographical and protect the environment. Asia. the aim of boosting sustainable areas in the southern hemi- www.cdcgroup.com production and consumption www.utzcerti!ed.org sphere. worldwide; goals include pover- Development Bank of South- www.proparco.fr/lang/en/Accue- ty reduction, safeguarding the ern Africa il_PROPARCO environment and spreading fair A development finance insti- and transparent trade practices. INVESTMENT USAID Development Credit tution that fosters sustainable Authority www.idhsustainabletrade.com The following institutions socio-economic development help fuel business by pro- by funding physical, social and Facilitates access to financing UNDP African Facility for Inclu- viding capital and impact economic infrastructures. for smallholder farmers and sive Markets SMEs participating in inclusive www.dbsa.org A regional UNDP programme investments that are suited business models through partial that supports the development to the unique needs of credit guarantees covering up DEG of inclusive markets across Africa inclusive business models. to 50 percent of defaults on Finances private-sector invest- through a combination of policy, loans made by private financial ments, such as long-term debt programming and partnership institutions. instruments, equity, mezzanine interventions at subregional and Challenge funds finance and guarantees, that www.usaid.gov/what-we-do/ continental levels. Challenge funds are financing improve living conditions in economic-growth-and-trade/devel- mechanisms that rely on propos- www.undp.org/africa/privatesector developing countries. opment-credit-authority-putting-lo- als submitted by organizations cal-wealth-work www.deginvest.de/EN_Home/About_ Standards in allocating funds for a specific area. DEG/index.jsp Standards create policies to Grant-making institutions reward positive social and envi- Africa Enterprise Challenge ECOWAS Bank for Investment ronmental benefits. Fund and Development Grants can provide essential AECF is a challenge fund that EBID is a development finance capital at several stages of the Fairtrade International supports new and innovative institution focused on West business model and are often A network of 25 organisations business models in Africa Africa. used to fund a specific project. that sets international fairtrade through competitive grants www.bidc-ebid.org/en/index.php African Grantmakers Affinity standards and supports fairtrade (US$50m–US$100m) to private Group farmers. sector companies. Finance for Development Promotes increased and more www.fairtrade.net www.aecfafrica.org A Netherlands-based entrepreneurial development bank effective grant-making in Gold Standard COOPAfrica Challenge Fund offering equity, loans or guar- Africa; provides a forum where foundations can network, share A certification scheme that The COOPAfrica Challenge Fund antees to companies, projects information on grant-making mobilizes funds for high-impact offers grants for cooperatives, and financial institutions in and build new information carbon offset projects. cooperative apex organizations developing markets. resources. www.cdmgoldstandard.org and other cooperative support www.fmo.nl agencies. www.africagrantmakers.org www.ilo.org/public/english/employment/ent/coop/africa/areas/ challenge.htm

102 Realizing Africa’s Wealth Bill & Melinda Gates Founda- Impact investment Grassroots Business Fund Private equity firms and tion funds A hybrid non-profit/for-profit fund managers Supports inclusive business develop- The following inclusive busi- model, partnering with busi- These investment managers ment through grants and partner- ness-minded investment funds nesses to provide them with raise pools of capital and ships. www.gatesfoundation.org often specialize in a geograph- both long-term investment typically make investments that ical area, sector, or size of capital and business advisory target a specific area, in this case Innovations Against Poverty business. services needed to overcome inclusive business. Provides grants, financial guar- challenges. antees and technical assistance Acumen Fund www.gbfund.org Actis to small and large companies, Makes debt and equity invest- A private equity firm that invests helping them pilot and scale ments in early-stage enterprises Leapfrog Investments in emerging markets and offers their inclusive business models. providing low-income con- A profit-with-purpose fund that three asset classes: private equi- http://businessinnovationfacility. sumers with affordable access invests in businesses focused on ty, infrastructure and real estate. org/page/about-us-about-innova- to health care, water, housing, financial services for the emerg- www.act.is tions-against-poverty energy, or agricultural inputs. ing consumer in Asia and Africa. www.acumenfund.org www.leapfroginvest.com Adlevo Capital Rockefeller Foundation Makes equity and equity-linked A major foundation that African Agricultural Capital LGT Venture Philanthropy investments in private compa- conducts research and provides Invests in commercially viable LGT Venture Philanthropy is nies in sub-Saharan Africa with grants for development initia- small and medium-sized agri- an impact investor supporting a focus on technology-enabled tives, including those involving cultural enterprises with high organizations with outstand- business models yielding impact investing and the crea- potential to improve the liveli- ing social and environmental positive social development tion of an enabling environment hoods of East African smallhold- impact. outcomes. for innovation. er farmers. www.lgtvp.com www.adlevocapital.com www.rockefellerfoundation.org www.aac.co.ke/web Lundin Foundation Advanced Finance & Skoll Foundation Agri-Vie A foundation that invests, both Investment Group A foundation that supports so- A private equity investment fund directly and through intermedi- An Africa-focused private equity cial entrepreneurship, support- focused on food and agribusi- aries, in African SMEs developing fund management company ing initiatives through financing ness in sub-Saharan Africa. inclusive business models. that mobilizes local capital in and partnerships. www.agrivie.com/ www.lundinfoundation.org/s/home. investment vehicles managed www.skollfoundation.org asp by African private equity pro- The Calvert Social Impact fessionals with an emphasis on The Small Enterprise Foundation Root Capital value addition beyond financial Foundation Provides affordable loans to fi- A non-profit social investment contributions. The Small Enterprise Foundation nance the growth of non-profits, fund that generates rural pros- www.afigfunds.com is a not-for-profit micro-fi- micro-finance institutions, fair perity in poor, environmentally nance institution that grants trade coffee cooperatives and vulnerable regions of Africa and Aureos microloans to existing, but social enterprises. Latin America by lending capital, An emerging market private marginal, micro-enterprises. www.calvertfoundation.org delivering financial training, equity firm providing growth www.sef.co.za and strengthening market con- capital in several main invest- Developing World Markets nections for small and growing ment sectors, including financial Tony Elumelu Foundation An asset manager and invest- agricultural businesses. services, general services, Provides start-up funding (debt ment bank dedicated to promot- www.rootcapital.org construction and engineering, and equity), supports BDSs to ing sustainable economic and manufacturing, FMCG and TMT help entrepreneurs craft their social development on a global Small Enterprise Assistance (telecoms/media/IT). ideas into bankable projects, scale. Fund www.aureos.com and facilitates the creation of fi- A private enterprise that invests nancially sustainable operations www.dwmarkets.com in early-stage businesses in Developing Partners under strong management. E + Co underserved markets. International www.tonyelumelufoundation.org E+Co makes clean energy invest- www.seaf.com A private equity firm that invests in newly liberalizing UNCDF ments in developing countries, focusing on start-ups and SMEs Soros Economic Development and post-conflict economies in The UN’s capital investment that provide lasting solutions to Fund Africa. agency for the world’s 49 least climate change and poverty. A foundation that supports www.dpi-llp.com developed countries creates economic development by new opportunities for poor peo- www.eandco.net investing in sustainable busi- Emerging Capital Partners ple and their small businesses by Emerging Africa Infrastructure nesses or initiatives that strive An Africa-focused private equity increasing access to micro-fi- Fund to alleviate poverty by creating firm that invests in companies nance and investment capital. A debt fund that provides long- jobs and revitalizing deteriorat- operating in business environ- www.uncdf.org term denominated debt or mez- ing communities. ments characterized by limited zanine finance on commercial www.sedfny.org competition, or in sectors where United States African Develop- Africa has either a comparative ment Foundation terms to finance the construction and development of private TLG Capital advantage or an unmet need. USADF provides grants of up to infrastructure. Niche financier of indigenous www.ecpinvestments.com $250,000 to community groups growth-capital in frontier mar- and small enterprises that ben- www.emergingafricafund.com kets, in particular sub-Saharan Ethos efit under served and marginal- Grameen Credit Agricole Africa, investing in profitable A private equity firm that makes ized groups in Africa. Foundation enterprises with a socially bene- long-term investments in www.adf.gov Grameen Credit Agricole ficial impact. medium-to-large businesses in Foundation promotes financing www.tlgcapital.com/home South Africa and, selectively, in adapted to micro-finance institu- sub-Saharan Africa. tions and social businesses. www.ethos.co.za/live/index.php www.grameen-credit-agricole.org

Realizing Africa’s Wealth 103 Useful resources

GroFin Business Innovation Facility International Development UNDP African Facility for GroFin is a specialist SME finance Operates “Practitioner’s Hub”, Enterprise (IDE) Inclusive Markets and development company of- an online platform for sharing Non-profit development organi- A regional UNDP programme fering a combination of risk cap- inclusive business-related sation supporting market-driv- that supports the development ital and business development information and supporting en projects and technologies of inclusive markets across Africa assistance to viable enterprises companies in developing or such as irrigation, drinking through a combination of policy, in Africa and the Middle East. scaling-up innovative inclusive water supply, and post-harvest programming and partnership www.grofin.com business models. processing. interventions at subregional and www.businessinnovationfacility. www.ideorg.org continental levels. Jacana ning.com www.undp.org/africa/privatesector A pan-African private equity Oxfam International company that invests in entre- CNFA International NGO focusing on UNDP Inclusive Market preneurs, builds successful SMEs, CNFA’s mission is to stimulate food security and agriculture, Development and delivers sustainable financial economic growth and improve often working in collaboration Derived from the UNDP’s and social returns. rural livelihoods in the develop- with the private sector. Growing Sustainable Business www.jacanapartners.com ing world by empowering the www.oxfam.org initiative, the inclusive market private sector. development approach works www.cnfa.org Phytotrade with companies on their core A non-profit, membership-based business while promoting devel- IMPLEMENTATION develoPPP.de organization that connects opment objectives. SUPPORT This multilateral initiative African farmers to international www.undp.org/content/undp/en/ supports partnerships between markets and provides members home/ourwork/partners/private_sec- Implementation involves companies and development advice, training, assistance with tor/IMD turning business ideas into agencies in support of inclusive certification, and networking reality. The following insti- business. opportunities. tutions help launch models www.developpp.de/en/index.html www.phytotradeafrica.com by offering well-rounded services that include Development Alternatives Practical Action advisory services, logistics International International NGO that uses support, capacity-building, An international development technology to address poverty and links to finance. consultancy that serves the issues, often working in collabo- private sector and non-profit ration with the private sector. foundations through social strat- www.practicalaction.org Accenture Development egy development, public-private Partnerships partnerships, market insight and Private Enterprise Partnership Strengthens organizations development, and local supplier Africa and builds emerging markets development. This IFC initiative works in from within by employing a www.dai.com partnership with multilateral not-for-profit model that makes agencies, governments and the Accenture’s core skills and assets Engineers Against Poverty private sector to deliver pro- accessible to the international Engineers Against Poverty is a grammes and advisory services development sector. specialist NGO working in the that improve the investment www.accenture.com/us-en/con- field of engineering and interna- climate, mobilize private sector sulting/international-development/ tional development. investment, and enhance the Pages/index.aspx www.engineersagainstpoverty.org competitiveness of private enterprises in Africa. AgDevCo Enterprise Development Work www.ifc.org/africa Invests social venture capital to Brings together the resources create commercially viable agri- essential to attract capital (debt SNV business investment opportuni- and equity) and political risk An international not-for-profit ties in sub-Saharan Africa. insurance for SMEs pursuing development agency that www.agdevco.com business opportunities in devel- provides advisory, knowledge oping countries. exchange and advocacy services Agri-ProFocus www.ednaccess.com to donor clients. A partnership with Dutch roots www.snvworld.org that promotes smallholder Imani Development entrepreneurship in developing A group of private, employ- Technoserve countries. ee-owned economic and Technoserve is a non-profit www.agri-profocus.nl development consultancy firms organization that develops offering a range of services for business solutions to poverty by The Business Place policy makers and the private linking people to information, Aims to promote entrepreneur- sector, specializing in trade, capital and markets. ship and the creation of sus- private-sector development, http://www.technoserve.org tainable businesses in Southern economic growth and regional Africa. integration. Total Impact Advisors www.tbp.co.za www.imanidevelopment.com An advisory practice that specializes in sourcing and Business Growth Initiative Innovations for Poverty Action developing global investment Provides both direct and indirect Support the application of rand- opportunities that are socially assistance through project omized controlled trials (RCTs) and financially attractive. designs, project evaluations, for product development etc. www.totalimpactadvisors.com research, technical briefs, work- www.poverty-action.org shops and seminars, and pilot demonstration projects. bgi.usaidallnet.gov

104 Realizing Africa’s Wealth Further reading

The literature on inclusive business in general and on development in the continent of Africa is vast. The list below provides some key references for further reading. A few publications also focus specifically on inclusive business in sub-Saharan Africa.

Online publications are cited only with the author(s), year and title. To find these publications, the name of the source document simply has to be entered into a standard search engine.

Inclusive Business in Development in Inclusive UNDP (2008) Africa Africa Business Creating Value for All: Strate- gies for Doing Business with Monitor Inclusive Markets (2011) AfDB, AUC, UNDP and UNECA (2012) Christina Gradl and Claudia the Poor Promise and Progress: Mar- MDG Report 2012: Assessing Knobloch (2010) Identifies constraints and ket-Based Solutions to Poverty Progress in Africa toward the Inclusive Business Guide potential solutions for inclusive in Africa Millennium Development Endeva business ventures on the basis of Monitor Group Goals A primer providing an overview 50 case studies A comprehensive analysis of fi- Tracks progress in Africa towards of how to develop an inclusive nancially sustainable enterprises the MDGs; discusses the post- business model and how com- UNDP (2010) addressing the challenges of 2015 development agenda and panies can engage more fully in The MDGs – Everyone’s poverty on the African continent how to best incorporate lessons low-income markets Business learned from the current MDGs Provides a guide to institutions UNDP (2012) Christina Gradl and Beth Jenkins that support inclusive business Inclusive Business Finance AfDB, OECD, UNDP, and UNECA (2011) through policy-making, research Field Guide 2012: A Handbook (2012) Tackling Barriers to Scale and advocacy, financing and on Mobilizing Finance and In- African Economic Outlook Harvard Kennedy School, CSR complementary capabilities by vestment for MSMEs in Africa An annual report that monitors Initiative MDG UNDP African Facility for Inclu- economic, social and political A framework describing inclu- WRI (2007) sive Markets developments on the African sive business ecosystems and A field guide on mobilizing continent; the 2012 theme was three structures companies can The Next 4 Billion: Market Size inclusive business finance from promoting youth employment use to effectively strengthen and and Business Strategy at the finance institutions that fund work within them Base of the Pyramid MSMEs McKinsey Global Institute (2010) Measures market opportunity Lions on the move: The pro- Monitor Inclusive Markets (2009) of BoP markets by sector and UNDP (2012) gress and potential of African Emerging Markets, Emerging country using quantitative The Roles and Opportunities economies Models assessments for the Private Sector in Afri- McKinsey Global Institute Monitor Group ca’s Agro-Food Industry Investigates the causes of Report analyzing the behaviors, UNDP African Facility for Inclu- African growth acceleration and economics and business models sive Markets identifies economic opportuni- of market-based solutions that Identifies private sector oppor- ties for businesses address the challenges of global tunities in Africa’s agro-food poverty industry Roland Berger Strategy Consultants (2012) Prahalad, C.K. and Stuart L. Hart Inside Africa (2002) Roland Berger Strategy Con- The Fortune at the Bottom sultants of the Pyramid. Strategy + Sector-by-sector analysis Business 26, no. 1st quarter including growth prospects and (2002): 14. opportunities Argues in favour of a business and profit-oriented approach to UNDP (2012) fighting poverty Africa Human Development Report 2012 - Towards a Food Secure Future An annual report on human development in Africa

Realizing Africa’s Wealth 105 Acknowledgements

We would like to thank the many contributors to this report.

Advisory Board Case study authors The guidance and insights provided by Advisory Board members have Case studies on inclusive businesses in sub-Saharan Africa have been been invaluable to the initiative and to this report. Advisory Board developed through several GIM research initiatives. Twenty-eight were members include: developed in the course of research projects conducted in 2008 and 2010, and 15 new case studies have been developed for this report. We Caroline Ashley, Director, Ashley Insight Ltd would like to thank the following authors for their contributions: Martin Bwalya, head, Comprehensive Africa Agriculture Development Programme (CAADP) Juana de Catheu, ecole Superieure des Sciences Economiques et Lynette Chen, ceo, NEPAD Business Foundation (NBF) Commerciales (France) Dr. Issa Faye, Manager Development Research Division, African Devel- Olayinka David-West, lagos Business School, Pan-African University opment Bank (AfDB) (Nigeria) Djamel Ghrib, head of Division Private Sector Investment & Resource Mamadou Gaye, African Institute of Management, Dakar (Senegal) Mobilization, African Union Commission (AUC) Michael Goldman, gordon Institute of Business Science (South Africa) Tashmia Ismail, senior lecturer and BoP Hub manager, Gordon Insti- Eria Hisali, Makerere University (Uganda) tute of Business Studies (GIBS) Yarri Kamara, Initiatives Conseil International (Burkina Faso) Ullrich Klins, coordinator for research and development: B4D Pathfind- Diane Nduta Kanyagia (Kenya) er, southern Africa Trust Winifred Karugu, Jomo Kenyatta University of Agriculture and Tech- Dr. Augustine Langyintuo, head Policy and Partnerships, Alliance for a nology (Kenya) Green Revolution in Africa (AGRA) Andrea Lozano, consultant at Aligned Strategies (USA) Futhi Mtoba, President, Business Unity South Africa (BUSA) Triza Mwenda (Kenya) Lucy Muchoki, ceo, Pan African Agribusiness & Agro-Industry Consor- Ousmane Moreau (Senegal) tium (PanAAC) Oluwemimo Oluwasola, obafemi Awolowo University (Nigeria) Fred Ogana, country Director Kenya, technoServe Robert D. Osei, University of Ghana (Ghana) Zahid Torres-Rahman, Founding Director, Business Fights Poverty Tofik Siraj Fite, Jimma University (Ethiopia) Courtenay Sprague, University of the Witwatersrand (South Africa) oikos UNDP Young Scholars Development Academy Alfred K. Tarway-Twalla, University of Liberia (Liberia) Participants of the oikos UNDP Young Scholar Development Academy, held in Nairobi from August 12 to 17, 2012, contributed ideas and recommendations for the report during a consultation.

106 Realizing Africa’s Wealth Interview partners Report team We would like to thank all experts and practitioners who contributed The report is a product of UNDP’s Regional Bureau for Africa (RBA). The their time and insight: report team would like to thank in particular: the RBA Director, Tegegne- work Gettu; Deputy Director, Babacar Cissé; and the Manager of UNDP’s Sarah Abdulhafiz Yusuf, ICE Addis Regional Service Centre for Eastern and Southern Africa, Olidapupo Adeoye, tony Elumelu Foundation Gerd Trogemann. Daniel Annerose, Manobi The UNDP AFIM team, led by Tomas Sales, includes Tiina Turunen, Jay Banjade, cARE international Ethiopia Jürgen Nagler, Pascale Bonzom and Daniel Acquaye. Gib Bulloch, Accenture Gerhard Coetzee, ABSA The UNDP GIM team, led by Sahba Sobhani, includes Suba Sivakuma- Andre Dellevoet, African Enterprise Challenge Fund ran and Teerayut Teerasupaluck. Valentina Douala, Pan African Business Coalition (PABC) on HIV/AIDS Liban Egal, First Somalia Bank The teams were supported by the research and consulting institutes Arnold Ekpe, Ecobank Endeva and Reciprocity. We would like to thank Christina Gradl and John Fay, shared Value Africa Pierre Coetzer as co-authors as well as Aline Krämer, Nico Pascarel, Johannes Flosbach, Roland Berger Claudia Knobloch and Alyssa Rivera. Lamira Hatifa, csI + Nina Henning, Johnson and Johnson We would also like to thank the Chief Economist of UNDP’s Regional Chris Isaac, AgDevCO Bureau for Africa, Pedro Conceicao and the Deputy Special Representative of the United Nations Secretary-General for Recovery and Governance in Nicola Jowel, sAB Miller Liberia, Aeneas C. Chuma, as well as other UNDP colleagues including Boaz Blackie Keizire, African Union Commission Ayodele Odusola, Marcos Neto, Casper Sonesson, Domingos Mazivila, Oscar Kimani, Business Mind Africa Ernest Fausther and other contributors for their valuable support. Anja Koenig, Reform Consulting Julia Kurnia, Zidisha Ufukile Kumalo, IDC Daniel Mobley, standard Chartered Bank Richard Morgan, Anglo American James Mwangi, equity Bank Ini Onuk, thristle Consulting Temitope Oshikoya, Ecobank Sagun Saxena, cleanstar Ventures, Heinrich Schultz, Organimark Safiatou Traore, African Union Commission Justin Smith, Woolworths Lyal White, gordon Institute of Business Science Gerry Van Den Houten, sAB Miller

Realizing Africa’s Wealth 107

Realizing Africa’s Wealth – Building Inclusive Businesses for Shared Prosperity May 2013

The views and recommendations expressed in this report do not necessarily represent those of the UN, UNDP or their Member States. The boundaries and names shown and the designations used on the maps do not imply official endorse- ment or acceptance by the United Nations.

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Realizing Africa’s Wealth 109 Africa’s wealth … lies primarily in its people – a young and growing population in search of opportunity. By enabling these individuals to engage in business, the private sector realizes their potential. Inclusive businesses integrate low-income people into their value chains, thus creating opportunities for this group that they can build on.

There has been considerable innovation and entrepre- This report describes the status of inclusive business in neurial drive in creating inclusive business in Africa. Yet sub-Saharan Africa and the ecosystems underlying the manifold constraints in the business environment mean enterprises and entrepreneurs driving such approaches. these businesses often struggle to reach a larger scale. It identifies promising opportunities in strengthening Supportive ecosystems that provide appropriate infor- these ecosystems, enabling enterprises and entrepre- mation, incentives, investment and implementation sup- neurs to build more – and stronger – inclusive businesses. port can stimulate the development of more inclusive businesses with greater impact.

Empowered lives. Resilient nations.

United Nations Development Programme One United Nations Plaza, New York, NY 10017, USA

www.undp.org/africa/privatesector

110 Realizing Africa’s Wealth