Business Going Global How local Business can capitalize on global opportunities A Case for SA SMMEs in Africa
Three billion people in the world live on less than $2.50 a day. These people are not poor because of any innate human differences. Instead, they lack the knowledge, skills and tools needed to lift themselves out of poverty. We believe in the power of private enterprise to transform lives. 1
TechnoServe believes that enterprising people are key drivers to capturing and growing value TechnoServe works with enterprising people in the developing world to build competitive farms, businesses and industries. 2
Our primary role is to be an enabler to this transformative development We will be the most effective catalyst and partner for transformative, on-the-ground, market-based solutions to poverty. 3
As a global organization we have gained a lot of experience across different environments. Active Benin Brazil Burkina Faso Chile Colombia Côte d Ivoire Ethiopia Ghana Guatemala Haiti Honduras India Kenya Malawi Mexico Mozambique Nicaragua Nigeria Peru Rwanda South Africa Swaziland Tanzania Uganda Zambia Zimbabwe Emerging Botswana Democratic Republic of the Congo El Salvador Morocco South Sudan Past Belize China Costa Rica Dominica Madagascar Mali Panama Poland Sudan Offices London, UK Norwalk, CT Washington, DC (Headquarters) As of 07/2013
Our Theory of Change is centered on the impact of targeted interventions 5
We have come to understand that at the heart of improving business and industrial performance is functioning market systems A market system is the network of buyers, sellers and other actors that come together to trade in a given product or service. The participants in a market system include: Direct market players producers, buyers and consumers who drive economic activity in the market Suppliers of supporting goods and services -- such as finance, equipment, transport, technology and business consulting Entities that form and influence the business environment -- such as regulatory agencies, infrastructure providers and business associations. A market system can be specific to a product (coffee, mangoes, dairy) or a cross-cutting sector (finance, labor, business development services). A market system s strength is measured by how readily the participants can obtain financing, launch businesses and adopt new technologies and best practices. 6
Small beginnings, big impact in 2012. Higher Revenues for Farmers WE WORK TO STRENGTHEN MARKET SYSTEMS SO THAT SMALLHOLDER FARMERS CAN SUSTAINABLY INCREASE THEIR INCOMES. 568,300 Farmers Participating $43.9m Increase in Farmer Revenues $211m Total Farmer Revenues Higher Revenues for Businesses WE HELP ENTERPRISING PEOPLE BUILD AND EXPAND BUSINESSES THAT PROVIDE ECONOMIC OPPORTUNITY. 2.9 Million Men, Women and Children Who Benefited 1,540 Businesses Participating $26.7m Increase in Business Revenues $110m Total Business Revenues New Jobs, Higher Wages WE TARGET INDUSTRIES WITH THE POTENTIAL TO CREATE JOBS ON A LARGE SCALE IN POOR COMMUNITIES. 9,330 New Jobs $10m Increase in Wages Paid $23.5m Total Wages Paid (Based on an average of five people per family) Sustainability WE BUILD SOLUTIONS THAT LAST AFTER OUR INVOLVEMENT ENDS. $26.2m in Financing for Farmers $17.4m in Financing for Businesses
Strategic Partnerships
SO WHAT? 9
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THE AFRICAN CONTINENT IS THE NEW GLOBAL 11
The global population stats point to an African story 12
Africa is awakening, with huge upside potential $1.6 Trillion $860m Consumer Spend 20 Companies >3 Bn. Collective GDP in 2008 Africa Today 52 Mega Cities 316m Mobile Users 60% Share of Uncultivated Land Lions on the move... McKinsey, 2010 13
The future looks bright, and is full of opportunity 1.1 Bn. $1.6Tr. $2.6Tr 128m 50% Urban Africans Households with discretionary income Working Age Africans Consumer Spend by 2020 Combined GDP in 2020 14
Fundamentally, local businesses must be opportunity seeking, market orientated and agile enough. : Who is the customer? Is it still the European Consumer? The Asian Manufacturer or Perhaps the African Consumer. Where is the demand? Is this in raw materials? Semi Processed or Finished Goods? What is the market opportunity? Can we quantify it? Is it large enough to sustain the business? What are the drivers in that market ( Quality? Sustainability? Food Safety? Reliability? Price? Availability?)
So Who is the African Customer? 16
What are his tastes and behaviours, and traits 17
What are his/her demands and behaviours?? 18
The Devil is often in the detail, and we miss him!! 19
Urbanisation is creating different trends within African food tastes 20
How do we capture this opportunity??? 21
Knowledge of where the growth will come is critical 22
Its Important to know what the enablers are Logistics Standards Local Knowledge Technology 23
Case Study: Rebuilding Mozambique s Cashew Industry Context Mozambique was a world leader in production and processing in the early 1970s, twenty years later the industry had collapsed. Undifferentiated FAQ raw nuts were all exported; other nations benefited from the value-added processing. Our Solution Work with local entrepreneurs to establish small processing plants near rural suppliers, help in capital raising, plant design, training. Use efficient labor-intensive technologies to extract premium nuts; build durable marketing structures and linkages. Help create and sustain new market linkages (forward and backward), build brand, and improve bargaining power. Help farmers improve productivity and quality of nuts and replant Results In 2008, 13 assisted plants purchased raw product from more than 102,150 producers, paying premiums of up to 15%. Processing plants have average export sales of nearly $600,000. More than 5,100 direct jobs created. Local entrepreneur-owned services company managing brand/quality and providing ongoing services.
Case Study: Driving Shared Value with Nespresso/Nestle and Smallholder Coffee Farmers in Colombia Context Associations of smallholder farming families located in a geographic area with an ideal climate for growing coffee that could enter into the Nespresso premium-grade AAA category and receive a premium. No established value chain; lack of farmer knowledge of how to take advantage of the opportunity. Our Solution Partnership between anchor buyer of premium grade AAA coffee (Nespresso)m committed smallholder farmers (1,260 families), and support institutions (the National Coffee Producer Association and Expocafe) Develop the value chain model; calculate the benefits for each player Deliver technical, farm-level training to improve quality Develop practical traceability system and drive efficiencies along the value chain Facilitate an innovative partnership between farmer, buyer and sector support institutions Results Trained 1,260 small-scale farmers, resulting in the sustainable integration of 1,740 farmers in the AAA value chain Increased the volume of AAA quality coffee bought from small-scale farmers by 99 percent Reduced payment time to farmers by 50 percent Implemented a AAA coffee traceability system
Case Study: Boosting Coffee Incomes for East African Smallholder Farmers Context Market for high-quality specialty coffee displays fairly consistent and strong growth East Africa s topography and agro-climatic conditions can produce competitive specialty coffee. But instead, poor smallholder practices result in low yields and low quality, traded as commodity coffee at lower prices Our Solution Building upon years of local success, TNS received a $47 M scale-up grant from the Bill & Melinda Gates Foundation to assist smallholders (ET, KE, RW, TZ) to improve the quality and quantity of coffee they produce for sale to the specialty market. TNS then: Developed farmer-owned wet mill businesses to produce high-quality washed coffee Assisted in commercial financing of capex and working capital Delivered field-based agronomy training to improve yields Facilitated partnerships between farmers and buyers Supported exporters to provide credit and marketing services Results Assisted 195,000 smallholder farmers and 285 wet mill businesses Facilitated $20 million deal between IFC and Ethiopia s NIB International Bank to provide cooperative financing Increased farmer yields by 44 percent. Increased prices paid directly to farmers by $0.89/kg
The DTI incentives regime supports such adventures 27
A number of facilities are available to assist enterprises Trade Opportunity Centre Assists SA companies across sectors to identify international business opportunities. Provides a matching service for SA exporters with international buyers Black Supplier Development Programme Manufacturing Competitiveness Enhancement Programme Sector Programme for Industrial Innovation Export Marketing and Investment Assistance 28
Contact Information MANDLA NKOMO TechnoServe (South Africa) mnkomo@tns.org Skype: mandla.nkomo T +27114826005/4/1 F +27114825588 M+27724945802 BUSINESS SOLUTIONS TO POVERTY