What's New at Engineers Without Borders
Sep 19 2012 @ 09:41
$100 Billion in Impact Investing Africa: The potential, the problem and the (EWB Canada) Approach
Impact investing is an idea that's really "exploded" in the development sector. As the subject line suggests, an estimated $100 billion is being invested in African businesses (in various forms) with a dual objective – make a profit and make a difference.
Sounds great, but like so many things, there are problems. A lot of these investments aren't providing the desired return on investment in terms of social change or profit, and that's potentially disastrous – without returns, the money will dry up.
So EWB set out to determine what the problem was and what could be done. Our teams dug a little deeper, looking for the obstacles to growth, specifically within the small- to medium-sized enterprise sector.
Problem – Misplaced Faith in the Almighty Dollar
A lack of access to capital is an admittedly big problem. But providing access to the capital doesn't solve the problem, because there's another, linked issue – the lack of experience and insight required to make the most effective use of it, or to optimize business processes. If a business is bleeding money, you can invest more to ensure it keeps running…but it's not going to last. When the money stops, the bleeding will continue.
EWB looked into how to stop the bleeding.
A Global First? Financial Investment + Human Investment = ROI
As you know, EWB works with African partner businesses and organizations, but also with other NGOs and development organizations. In this instance we partnered up with other pretty great organizations:
- The Lundin Foundation – they've invested in EWB's ventures before, specifically Rent To Own Africa. They, “invest in high potential small-and medium-sized businesses across Africa, with a view to generation wealth and employment needed to alleviate poverty on a sustained basis.”
- Injaro: An African fund management firm that "makes investments in debt, quasi-equity, and equity in small-and medium-sized enterprises along the agricultural value chain in designated countries of West Africa." Lundin invested in Injaro, and Injaro invested in...
- KONA Agro-Processing – An entrepreneurial, medium-sized cashew-processing enterprise in Ghana that was having some issues due to business continuity linked to maintenance issues, and access to capital.
We think the result may just be a global first – financial AND human investing, on site, in a medium-sized African enterprise between three organizations to create impact. Lundin and Injaro brought financial capital, and EWB invested our people, and then invested in KONA's people, to ensure that the business was “investment ready”.
Inside KONA: Goodluck, Maintenace, Business Innovation and EWB
As mentioned above, KONA had struggled to get its internal operations running efficiently and smoothly enough to generate consistent revenue. One of the major problems they faced was unpredictable down-time of their processing and packaging machinery, due to maintenance failures and technical errors. Machines would go down, creating a need for spare parts, which would have to be shipped in. This would cause backlogs in processing, which would lead to unprocessed cashews sitting in storage for months (instead of being sold), and the people who worked on the these tasks ended up going without pay.
Injaro flagged the maintenance issue and sought a partner who could help kona's people create a solution that was implementable and sustainable. Our goal was to find an opportunity to help the company fix it's internal systems instead of just fixing the machines, and in doing so, illustrate to a MASSIVE investment community that capital can go a LOT further when partnered up with human investments. In short:
- An EWBer embedded within the company as a normal staff person, armed with Injaro's observation that maintenance was an issue.
- After a month or two, he consulted with senior management and facilitated their analysis of the key challenges the company faced
- This led to the design and gradual implementation of a maintenance management system that would ensure machines were monitored and maintained to eliminate down-time
This required the collection and dissemination of machine maintenance knowledge, the creation of maintenance schedules and a reporting system so that every time maintenance was done so was documentation.
Ultimately this system was about empowering company employees to take full responsibility for maintenance issues, eliminating downtime to ensure the company was always running and Injaro's investment paid off. But there was one more piece to the puzzle – the employees who'd be managing the system. And that's where Goodluck comes in.
Unlocking Human Potential: Goodluck!
Goodluck is a KONA employee and he's literally bursting with potential. He didn't go to university to get an engineering degree, or business school for an MBA, but you'd be dazzled by his analytical thinking, his natural leadership and his zest for learning. In Canada, he'd likely have scholarships and a defined “up the ladder” career path. But the systems we enjoy that enable success and growth in Canada simply don't exist in Ghana yet.
The EWB team quickly recognized Goodluck's talent and potential as a process manager and problem solver, in KONA and as a leader who could make a big difference in the local economy. So they worked with him often, seeking his advice and asking him to assist with the project. As time went on, it became clear that Goodluck had management potential. He didn't just work on the maintenance system, he championed it with enthusiasm, and was instrumental in its success.
He wasn't a manager, but when it came to transferring full ownership to an internal leader, Goodluck was the obvious choice. So on EWB's recommendation he was promoted to manager, and today can be found guiding the continued operation of the maintenance system.
But that isn't the end of EWB's investment in KONA – through our Kumvana program, we're bringing a company executive to Canada, where they'll not only attend our annual conference in January, but will also complete intensive training and multiple internships with Canadian companies related to their business. The goal is exposure and insight to further unlock their incredible potential for change within Ghana's economy.
IMPACT: Back to the bottom-lines…what happened?
Going back to the beginning, you'll remember that EWB's goal is to enhance impact investing, and to define a model that works in providing both social and (when needed) financial ROI. So KONA's success as sort of a case study is pretty important here. How'd we do? How is KONA doing after that investment?
As you can see, the impact on KONA is undeniably huge. But one more interesting thing came out of this engagement, that ties directly to EWB's goal of enhancing the way that impact investing happens. EWB IS GOING TO LIBERIA!
With our history of success with SMEs, EWB is now working with the National Housing Authority, the Soros Foundation and Broadcove, a private equity investor, to create the first large-scale housing development in the country for 30 years. EcoHomes Liberia Limited will build 300 homes over the next five years. As the name implies, the houses will be economical to build … and economical to own with innovative financing and low running costs. You can read more about this exciting project here.
Think about that – from searching, to piloting and now, based on impact, multiplying our impact with one of the biggest social investors in the world. Call us crazy, but this is starting to look like systemic change!