The fall & rise of the Angolan Coffee Industry

NexThought Monday: Angolan Robusta – Getting the Best Coffee in the World to Market

By Tara Sabre Collier

Imagine if, after drinking only Fanta soda your entire life, you tasted fresh-squeezed organic orange juice for the first time? You’d discover a world of flavors so bright and a level of freshness, so high it’d completely redefine your standards for juice, and you’d probably never want to look at a soft drink ever again.

That’s basically what happened when I took my first sip of organic Angolan coffee, just roasted, ground, and brewed by the directors of Angola’s National Coffee Institute. My palate was overcome by the whirlwind of this silky yet smoky, round yet sharp, earthy yet luxurious taste experience. In all my years of Folgers, Starbucks, Illy, Bustelo and even Turkish coffee, nothing had ever come close.  It’s like I had been living a lie, thinking I was drinking coffee all these years, but it was just a castoff substitute of the real thing. 

After tasting it, it was no surprise to learn that prior to the war, coffee had been Angola’s leading export. In fact,Angola was once the world’s fourth biggest coffee exporter because its Robusta – so silky yet full-bodied – is one-of-a-kind.  According to the National Coffee Institute, there was so much demand for Angolan Robusta that after the war started, it had to be exported and cultivated abroad since the national coffee industry-entered paralysis.

In 2007, just five years after the war’s conclusion, the industry was effectively re-launched with the first international shipment of Angolan coffee. Today, there are dozens of cooperatives and a few local manufacturers that supply ground and whole coffee beans to domestic and international markets. I had the pleasure of working with some of these coffee cooperatives, under the auspices of Pro-Angro Angola, a USAID-funded project to advance Angola’s agricultural sector. Pro-Agro aims to promote economic growth within a sector that generates over 60 percent of Angola’s livelihoods yet only 10 percent of GDP. Despite the fact that the country is extremely fertile, agricultural productivity is low and underdeveloped and thus, in Luanda, much of the food is imported. This discrepancy, of course, contributes to Angola’s high poverty rates andhence, the rationale for ProAgro’s agricultural development programs.

Returning to the subject of Angolan coffee, I was 100 percent sure after tasting it that it could overtake Brazil and Colombia, and fill all of our cafes, grocery stores and kitchen counters with this amazing lush aroma and spectacular taste. But, in interviewing cooperatives, manufacturers and buyers, I came across several caveats that hinder the Angolan coffee industry and its farmers, and thus, our access to this marvelous product.

• Quality & Quantity:  Most of the existing plants are several decades old, thus reducing output per hectare. The only remedy is planting more hectares or new plants, both of which require capital and due to the production cycle, the investment takes a few years to recoup.  Additionally, many cooperatives lack adequate machinery for shelling and cleaning, which can compromise the quality delivered to manufacturers. Moreover, coffee is significantly more labor intensive than other crops and short-staffed cooperatives end up reducing product quality.
• Transformation: There are insufficient facilities for transforming green coffee beans into finished products and because of their lack of access to machinery, many farmers simply sell the raw material wholesale to walking vendors who then transform these goods in the cities.
• Transport: Most farmers are in rural areas, and Robusta production is concentrated in Gabela, Amboim, and Kwanza Sul. Transport to processing centers can be complicated and costly, which means it is often at the buyers’ expense.
• Export: Export requirements are not always clearly communicated and the paperwork and processing can result in long delays and high costs.  These delays are costs are worthwhile given that international market prices (based on London Commodity Exchange) are almost twice as high as Angolan prices, but most cooperatives cannot bear these prices up front.

Obviously, financing and training are key to resolving much of these caveats but perhaps there are also other solutions that will help the Angolan coffee sector advance.   

• Thus, I am sharing these challenges with you, Nextbillion readers, in hopes of gathering insights and resources from the blog’s global audience. What has worked in your country or sector that can overcome these hurdles in Angola?

Building supply chains in emerging markets

In Africa as in many emerging markets, supply chains are still a huge challenge.  The biggest factor is that local suppliers are often non-existent or under-developed and highly informal.  This contributes to unreliability, which is further compounded by both governance and infrastructure weaknesses.  These factors can only be resolved through political will and significant investments over the next five to ten years.

So the question remains:  how do we build these linkages now?

We are currently tackling this problem by finding serious entrepreneurs with high-potential and a clear vision. Many of our clients include the neighborhood grocers, the small “mom and pop shops” and the local retailers- precisely the local partners and distributors that national and international players need to reach the mass market.  Especially for the fast moving commercial goods (FMCG) segment, local retailers and distributors (at least within GroFin’s portfolio) are unique in almost exclusively catering to middle and low-income consumers.  In catering to such a large population, they almost always ensure consistent and high demand and because international manufacturers need reliable providers, they can potentially access long-term supply contracts.  However, this symbiosis is endangered when the local company lacks the capacity or infrastructure to fulfill their contract.

We try to help address both the capacity and infrastructure gap by providing business training and financing the transport or facilities needed.  Subsequently, FMCG retailers and distributors are among some of our huge success stories. However, the local supply chain benefits don’t end with the FMCG sector, they continue to ripple out from all the companies in our portfolio.

As our portfolio companies expand, their purchasing power affects other local enterprises in their industry.  At intake, the average GroFin portfolio company uses an average of 8 local suppliers.  However, within the average 5-year loan period, their demand increases, creating contracts for an average of 17 local suppliers.  Today, GroFin’s 500+ investees contract nearly 7000 other local enterprises across Africa and the Middle East.

Given our 10-year track record, we’ve also amassed a sizable network and are able to refer potential suppliers and clients to our investees.  As investees grow, they are able to provide consistent cash flow to these suppliers.  In economic terms, these cash flows were estimated to be approximately US$100M annually.

An add-on benefit of GroFin’s business support is the push for better environmental, social and governance (ESG) standards.  At intake, GroFin investees are measured on a variety of benchmarks, such as their accounting systems, worker health and safety policies, and environmental sustainability.  We then help them upgrade and reach global standards for their sector or industry.  As they become more organized and streamlined in their own accounting, distribution and systems, their supplier requirements also become more uniform and consistent.

Besides our own work, there’s much to learn from global leaders with proven and new approaches to local supply development.  Coca-Cola’s micro-distribution center model may have emerged to market soft drinks, but now is shaping methodologies for inclusive businesses across the developing world.   Our partner Shell Foundation has developed two new types of social enterprise “intermediaries” or supply chain connectors that work across retail supply chains in Southern and East Africa.

Finally, the SupplyChainLab is chock full of information about improving local supply chains in emerging markets.

http://www.grofinblog.com/impact_development/building-local-supply-chains/

Creating Inclusive Growth through SMEs

Despite being the world’s second fastest-growing region, Africa’s challenge is translating this growth into broad-based improvements in well-being. Tackling five key areas for sustainable SME development (infrastructure, regulation, capacity, finance and business linkages) together with targeted investment in high-growth sectors will put Africa on the trajectory toward booming, yet inclusive economic development.

How can a 5% GDP growth fail to translate into a commensurate reduction in poverty, over years and years? Perversely, how can Africa have managed to increase the number of people living in extreme poverty over the past decade? 

It all boils down to economic expansion with insufficient job creation. In some countries, this is because GDP growth is mostly stemming from resource extraction and foreign investment, with relatively little upscaling of the local services or manufacturing sectors. For example, according to Standard Bank, the discovery of the world’s 4th biggest gas reserves in Mozambique is predicted to more than quadruple GDP over the next 20 years, but create less than 1 million jobs in a country of over 20 million (mostly young) people. In some cases, there is a misalignment in the types of jobs created and the educational backgrounds of and resources available to citizens. Insufficient local job creation is compounded by increasing urbanization of former agricultural producers, inadequate infrastructure, paltry public services, sub-par intra-regional trade and other limitations. All of this gives rise to the current situation, in which “lived poverty” pervades and remains virtually unchanged across Africa.

Promoting local small and medium enterprise is the most effective and sustainable solution for creating more inclusive growth. SMEs, in general, comprise the majority of firms and the largest employer in much of the world. As opposed to foreign investment, which may be concentrated in a particular sector or region, local SMEs create opportunities across geographic areas and sectors and employ much broader and more diverse segments of the labor force. In addition, preliminary evidence suggests that formal small enterprises provide better stability, higher pay and better benefits to their employees than micro enterprises and informal firms. In comprising the majority of firms and reaching much deeper and earlier market penetration than foreign firms, local SMEs are often the principal provider of goods and services in lower and middle income communities.  They also are more tapped into local networks and are instrumental in creating offtake for other local suppliers, thus strengthening local value chains.The expansion and fortification of these local value chains means higher local job creation and increased revenues to both private and public sectors.

Yet across Africa, more than 70% of SMEs cease within 5 years and in some countries, the failure rate is as high as 90%. While some of this dissolution may be inherent to creative destruction, there are also internal and external factors that combat SME growth potential. Having identified these factors, we can maximize the likelihood of success. Above all, we must create strong SME ecosystems. An enabling environment for a successful SME segment would have the following characteristics:

1) Infrastructure: Comprehensive and navigable transport networks (from roads to trains and aviation), consistent electricity, decent telecommunications systems and fiber-optic networks ensure SMEs can produce and sell. In many African countries, SMEs have cited regular electricity and infrastructure as their biggest growth challenge.

2) Regulation: Regulatory factors can make it too costly or too cumbersome for SMEs to grow their businesses. These factors can include cost and time of formalization, legal structures to protect investors, the bureaucracy of labor policy and tax payments. African countries have historically demonstrated higher relative monetary and time requirements for regulatory compliance. 

3) Capacity: Improving human capital is correlated with improved growth, at the firm level. At the most basic level, setting standards and providing instruction on basic principles of accounting, strategy and marketing can be instrumental for SMEs. For example, GroFin’s surveys of over 5,000 SME entrepreneurs across Africa indicate that most of them lack basic accounting systems as well as formal ESG standards. As SMEs grow, more rigorous technical assistance becomes vital, especially to comply with procurement protocols of government or large corporates. 

4) Finance: Over 70% of SMEs in Africa cannot access adequate capital to grow their businesses. Whether it’s fulfilling their first large contract or expanding facilities to fit more customers, SME capacity to meet demand is often capped by capital constraints.

5) Linkages: Networks can play a pivotal role in enabling SME growth. This is particularly true when revenues are derived from business-to-business sales, but networks can also play a role accessing capital, inputs and other business opportunities. At GroFin, we have now added business linkages to our social performance metrics so that we can leverage our networks to find investees new suppliers and clients. Additionally, local and international networks (ranging from chambers of commerce to investment facilitation organizations such as VC4Africa) are helping to connect entrepreneurs and make business opportunities more widely available.

Assuming the aforementioned factors are addressed in the business enabling environment, SMEs are in an optimal position to advance inclusive growth in Africa.  This can be accomplished most rapidly by high-growth SMEs, specifically. In other words, increasing the number of new firms is not as important as supporting firms with high job creation potential. Contrary to popular belief, it is high-growth SMEs, and not start-ups, that significantly expand employment. While short-term growth is expected from any company that fills a gap in an emerging market, the goal is to find more long-term high growth companies. Research on the high-growth SME segment is still nascent in Africa, but the global literature, as well as applied experience in SME development and impact investing, leads to a few insights on defining characteristics:

• Established cash-positive firms and seasoned entrepreneurs: Cash-positive firms with even 2 years of activity have a greater probability of overcoming the segment’s 70% failure rate. Likewise, seasoned entrepreneurs with a track record in the target sector or industry are more likely to be able to navigate launching a new business or product.
• Corporate supply chains: Insertion within large corporate supply chains can help SMEs improve operational standards and reach scale through consistent cash flows.
• Consumer products for a growing middle class: Africa’s growing middle class is expected to reach 1 billion by 2060. Businesses that tackle gaps in their consumer demands, especially those with solid product and marketing distribution systems can ride a huge wave of growth.
• Localized Technology: Globally, tech businesses are recognized for delivering tremendous returns to investors. But to be classified as high-growth in Africa, these businesses should be responding to gaps in the local market. There is a huge difference between replicating Western apps for a relatively small upscale market versus scaling mobile payment services in a region which is over 80% unbanked. The latter would be classified as high-growth, as evidenced by the successes of M-Pesa, MTN Mobile Money and Zoona.

Imagine an Ecosystem for Small & Medium Enterprises

If it takes a village to raise a child, then it must take an ecosystem to grow and scale thriving businesses. We place a lot of emphasis on the role of financiers, business development service providers, incubators, government and donors to grow this ecosystem in Africa. But what’s really exciting is to see multinational corporations step in and likewise contribute to supporting entrepreneurs, scaling innovations and making local economies more inclusive. 

Last month, GE announced the launch of a 200 million rand (USD 18.7 million) fund for South African small and medium enterprises. This fund is part of a broader pan-African engagement which will inject more than 5 billion rand (over USD $467,000,000) into the continent. The fund will combine technical and general business development services and financing to build a more competitive cadre of local suppliers long-term. Early stage to mature SMEs that fit within the GE supply chain will be eligible for training, support and funding. The program will ensure participating companies meet the production standards necessary for GE, thus preparing them to serve other multinational corporates as well. Additionally, the fund aligns with South Africa’s Black Economic Empowerment initiative and localization goals, by targeting black entrepreneurs or those from previously disadvantaged groups. By expanding economic opportunities for entrepreneurs that were previously restricted from accessing capital and networks, it will also be vital to creating inclusive growth in one of the world’smost financially inequitable nations. 

The launch of this supplier development fund also coincides with GE’s launch of a Customer Innovation Centre [CIC], also here in South Africa. The 500 million rand facility will be a research and innovation hub to generate better energy, health care, transport and lighting products for South African and African markets. Like the SME fund, the CIC also addresses socio-economic inclusion, focusing on recruitment of black and previously disadvantaged groups. Given that these demographic groups also reflect the majority of South African consumers, their inclusive insights about customer preferences will likely be useful as well. While the CIC’s research and product development are primarily oriented towards better localization of GE products, there’s no doubt that the innovation and technology transfer will end up benefitting industry at large. As with GE’s partnership with Quirky or its Healthymagination fund, these are perfect illustrations of shared value.

For South African entrepreneurs, especially within energy, health care, transport and lighting, it’s a fantastic opportunity to access capital, world-class technical capacity building, and off-take with a global brand. For GE, it’s a strategic business play to gain a long-term competitive edge in Africa. From these vantage points, it looks like a win-win… and if so, it could have major implications for Africa’s venture capital and SME finance ecosystem.  

Because even as more SME funds open and early stage venture capital networks increase, it’s worth remembering that the SME finance gap is still nearly 100 billion USD here in Sub-Saharan Africa. 

If GE, the fourth biggest company in the world, is willing to bet on local SMEs in Africa, it could potentially catalyze other large companies. Corporate venturing is a very tactical response to the local content requirements in many resource-rich African countries. Since their investment is based on strategic imperatives and not just financial returns, corporate venture investors are well suited to help fill the SME finance gap. They have the specific technical expertise to build capacity. Equally as important, their offtake agreements will actually help boost turnover, thus growing the SMEs. And of course, this makes SMEs more creditworthy, which is also a boon for the SME finance sector. 

With a company of GE’s magnitude taking such a strong stance for SMEs in Africa, it will hopefully generate a ripple effect that will draw other major players into the space.

African Angel Investors

As an impact investor, I see angel investors as key allies and collaborators, but angel investor circles are notably absent in most African capitals. This is ironic, given that many forms of community and social lending (like susus and chamas) have existed here for ages. Although the amounts lent in these groups are small, they show the same collaborative spirit that’s behind angel investing. Still, given the less sophisticated financial and regulatory markets in Africa, there are not many formal structures where one can gain this kind of support, especially for social and BoP-focused business ideas.

I had the pleasure of attending the recent Sankalp Africa Forum session on Angel Investor Networks, where Suzanne Biegel, Eric Osiakwan and Ranjith Cherickel presented on behalf of Clearly So, Angel Africa List and 88 mph, respectively. Discussion focused on the challenges and potential solutions to developing Africa’s angel investing ecosystem.

As the panelists mentioned, high-net worth individuals in Africa can make great earnings in local real estate markets, through government procurement and even by trading – so many see little reason to seek returns from something as novel as angel investing. Thus, convincing people to engage in angel investing in Africa requires lots of trust, and potentially some social pressure.

The Tony Elumelu Foundation has reportedly tried to catalyze this social pressure by supporting angel networks and homegrown philanthropy. African Investors for Development was launched in 2012 with a similar mission. I was really delighted to learn that AngelAfrica is now partnering with the African Venture Capital Association on some of this ecosystem development, and I wish more of the other players would likewise begin to align and collaborate. It will end up improving returns for all of us.

As the panel pointed out, developing local angel networks means opening up sources of capital that  bring expertise plus market linkages – these lead to increased probability of business success. They also mean more active networks for information sharing, which helps all investors (including impact investors) vet deals more effectively. Relative to foreign impact investors, local angel and domestic impact investors are more likely to recognize and support high-value business models that reflect their local culture. This helps make our market-based development solutions more endogenous and probably more effective.

Local angel networks are also good for pipelines, good for “first loss” capital and good for creating an ecosystem. They can even be among the backers of impact investment funds, which reduces our currency risks. All of this can contribute to good fund economics for impact investors.

In my view, the two big challenges to developing Africa’s angel investing ecosystem are:
– Creating the impetus
– Ensuring inclusiveness

The first challenge is slowly being addressed, given the advancements mentioned above. It would be even better if the media and civil society were similarly highlighting the importance of African angel investors, furthering the social momentum.

The second challenge will be much harder. Africa is the world’s second most inequitable region, after Latin America, and money tends to coagulate among connected individuals at the top.  Through educational incubators and business plan competitions, we can at least ensure that some of the businesses supported will be generating solutions for the base. We also have to work to ensure geographic inclusiveness, as currently the incubators, angel networks and impact investors are disproportionately saturating in South Africa, Kenya and Nigeria. 

A Golden Burst of Flavor and Incomes for the BOP

By Tara Sabre Collier

The goldenberry is creating BoP jobs in Peruvian highlands.

Goldenberry lives up to its name.  The small saffron-colored marble-esque berry, with the texture of tomatillo and taste of tangerine, is generating waves of demand among Peruvian and international gourmets. This demand is creating golden opportunities for BOP farmers in the Peruvian highlands. Its cultivation does not require massive investments in technology or even in human resources, and so these shifts in international preference, can add huge value for a region of small farmers.

The highlands, particularly Cajamarca, have a long legacy of agriculture and animal husbandry, but not necessarily of innovation in the global economy. Cajamarca, renowned for its potato, rice, corn, wheat and cassava, however, is at the forefront of developing a rare fruit cluster. Indigenous to Peru, goldenberry is by no means a new fruit, but it has only recently experienced acclaim in Peruvian gourmet cuisine and in international markets. This emergence has created an impetus to not only expand production, but also to organize, streamline and maximize a new and potentially competitive cluster.

Historically, goldenberry has grown endogenously in wild orchards, but was not cultivated industrially. Today, there are more than a dozen companies, mostly SMEs in the Lambayeque region, developing the goldenberry cluster. Some make raisins, others make jam, spirits, or juices, and new entrants are investigating potential in the organic, pharmaceutical and cosmetic sectors. The “boom” has lead to a greater need for goldenberry production and catalyzed demand for value chain products and services such as wires, poles, nets, baskets, containers, transportation, consulting, professional, technical, labor, and vendors – to name a few.

The small farmers who predominate the region have found diverse income streams in small processing plants that have sprouted up, as well as in pruning and harvesting jobs. This has been particularly beneficial to low-income women, who are participating in this market. Nevertheless, the region has struggled in lacking the technical and market expertise to maximize the development of the sector.  Here, with Technoserve and the USAID Farmer-to-Farmer project, I have had the good fortune to work with young professionals who are helping to fill this vacuum: Alejandro Otoya and Hans Gutierrez, of Agro Quri. These entrepreneurs sensed goldenberry’s huge potential more than four years ago and wondered how they could standardize superior quality and mass produce on a broader level, while creating jobs at the base of the pyramid.

(Above: Enjoying Peruvian goldenberries. I can personally attest it far exceeds its other exporting competitors when it comes to flavor).

“After three years of research, we obtained a high quality fruit, golden color (which is required by the export market), delicious flavor, texture and aesthetics, down to the cocoon that covers, which is also very decorative,” says Otoya. 

The entrepreneurs lunched Agro Quri with a mere two acres and a host of local farmers in Cajamarca. Otoya notes that the local farmers were reluctant at first; lacking confidence that goldenberry could be lucrative. In fact, one of Agro Quri’s greatest challenges was dealing with resistance from local farmers to abandoning the conventional structure. Financial investment went hand in hand with dialogue and cooperation to gain trust and buy-in from the local farmers, who eventually formed the association. The entrepreneurs began by introducing and financing drip irrigation systems and staking systems that lengthen the plants in matrixes with galvanized wire. 

“With staking systems, the plant can grow two feet unlike wild plants that are expanded and do not grow much. With this technology, the culture adapted to the conditions of the mountain to get an output of 15 kilograms per plant, versus the average seven to eight kilograms,” said Otoya.  

Today, Agro Quri’s investments have paid off handsomely. It now produces enough to supply more than two tons per week of fresh goldenberry to national supermarkets, creating incomes for hundreds of local farmers.

Looking ahead, the young entrepreneurs are unrolling plans to create a processing plant and are beginning to eye the export market. Colombia and Zimbabwe lead only a handful of countries that produce goldenberry globally, but they already have advanced their agrarian technologies and export logistics. Alejandro, Hans and rest of the goldenberry producers in Peru also must master the next step in the chain and hopefully help Peru carve its niche. Peru’s reputation (although probably not undisputed) as the culinary capital of South America and growing global demand for Peruvian specialties can be huge assets in branding Peruvian goldenberry. By doing so when exposure is still new, consumer preferences can actually be in Peru’s favor.  

I personally have tasted the Peruvian goldenberry and can attest it far exceeds its other exporting competitors in flavor. So Alejandro, Hans and the rest of Cajamarca have one less consumer to convince.

Original source: http://nextbillion.net/blogpost.aspx?blogid=1979

Eco-tourism in the Sacred Valley

Maras has more burros than people. Yet in the lucid expanse of hills and mountains known as “the Window to the Sacred Valley” Maras does not have many jobs or industries or much else, besides nature, agriculture and a rich cultural tradition. That may change, with the opening of Sumak Andean, an eco-tourism center launched by Cusco entrepreneur, Elena Gonzalez.
Sumak Andean aims to provide tourists with an immersion experience in local customs that go back to the Incas while bolstering opportunities for the people of Maras. This is seemingly a perfect symbiosis.
With the support of Technoserve & the USAID Farmer-to-Farmer project, I was able to directly collaborate with Sumak Andean in development of their marketing campaign and was able to witness some of the challenges and opportunities of this model firsthand.
Eco-tourism and cultural tourism are an ideal income generation projects in rural and isolated areas, with landscapes that will entice tourists and with a certain cultural and environmental “purity”. Its meant to be a sharp contrast from the average eco-tourist’s frenetic, high-tech and globalized existence. In many of the isolated areas that meet these criteria, there may be paltry industrial development, transport and infrastructure.
This can complicate supply chains and reduce an already small market of target consumers. However, for those truly committed to sustainable development and cultural exchange, taking an extra boat, dirt road or burro to have an amazing experience is part of the experience.
Another challenge can be maximizing eco-tourism’s potential as an income generator when higher education and business administration have been such distant realities or priorities for the local population. Any eco-tourism center can bring economic benefits, by creating markets for local agriculture and handicrafts- but to exceed that benchmark and bring more direct economic opportunity requires maximized local staffing. For people who have only known farming or quilting or herding, learning how to itemize a budget or implement a marketing plan can require a huge leap!
This educational gap may be why many eco-tourism centers are run by outsider or foreigners. However, social entrepreneur and travel agency proprietor Elena Gonzalez created a unique cooperative model for Sumak Andean. Elena leads Sumak Andean in collaboration with a local women’s association form the community. The association was initially a cooperative of local women making handicrafts and lunches from locally grown crops- Elena enjoyed bringing tourists to the cooperative for meals en route to more visible tourist locales such as the local salt mines or archaeological sites. But there was no building, no bathrooms, no structure, in place for anything more than a roadside, hearth-cooked meal. Elena partnered with the association to help them obtain a commercial space, and create something bigger.
Together, they created a business plan that won Technoserve’s Idea Tu Empresa Business Plan competition. With no knowledge of how to write a business plan, no capital, no equipment, no land, the community association was in no way prepared for a commercial loan. Even if they had obtained a microfinance loan, they still would have been without the technical capacity to manage construction, launch and operation of the space. With funding and technical assistance from Technoserve and the USAID Farmer-to-Farmer project, Elena and the association are currently in the midst of construction and improving the constituents’ capacity in sales, customer service and management. Elena hopes that after building their skills up, the association will be able to assume complete control and leadership of Sumak Andean.
The association is gaining more and more financial savvy and more innovative ideas about improving their business and involving the community. As they interact with tourist, they learn more about consumer preferences and trends and already, they have expanded to include Sumak Andean herbology tours, cooking classes and craftsmanship classes. While some worry about the effect of exposure to globalization can affect traditional communities, community members in Maras are mostly proud and eager to share their culture. Although they don’t know much about typical lifestyles in the US or Europe, they sense that the American and European tourists can gain immense value in learning how to live in harmony with nature. As the tensions over natural disasters and corporate sustainability reach a boiling point, insight from communities like Maras becomes even more relevant.
Eco-tourism presents great potential to help both industrialized nations and emerging markets gain needed experiences, resources and insights. Its part of a new generation of business models that merge social impact and environmental sustainability. Of course, balancing these objectives can lead to new challenges, which Elena and myriad other entrepreneurs are deftly overcoming.

Original source: http://community.businessfightspoverty.org/profiles/blogs/ecotourism-in-the-sacred?xg_source=activity

Why Inclusive Growth is Critical for Economic Success in Brazil?s BoP

By Tara Sabre Collier

Based on its GINI Coefficient, Brazil is one of the most inequitable countries in the world (additional statistics can be found here) and has long been a top global tourist destination. In this blog post I explore the question of whether the tourism industry can be shifted to perpetuate greater equality, or is destined to remain part of the problem. Here, I open an argument that inclusive growth is intricately linked to the potential for growth in the tourism industry in particular.

Income inequality in Brazil has been on the decline for several years. This has held true in industries such as education and transportation, as well as in social policies. Race and gender disparity, however, comprise two of the more complex factors in the country’s push for greater economic equity. These issues have yet to be resolved and must be carefully considered as the country pushes for new and continued growth in the tourism industry.

To frame the issue of inclusive growth, the Portrait of Inequality (PDF in Portuguese), published by Brazil’s Applied Economic Research Institute, showed that Afro-Brazilians comprise 49 percent of Brazil’s population, yet they are twice as likely to live below the poverty line. More than 40 percent of Afro-Brazilians live below the national poverty line and Afro-Brazilians comprise 66 percent of households in the favelas. Women in Brazil on average earn just 56 percent that of men’s earned income, even when accounting for significantly higher educational levels for women. Moreover, 30 percent of Brazil’s female labor force is in a situation of high economic vulnerability, i.e. domestic labor, unpaid labor or self-consumption labor. In addition to regular structural issues that limit economic access at the base of the pyramid, Brazil also must address these social and institutional issues for more inclusive growth.

Tourism has long been a tremendously vital sector in the Brazilian economy, generating more than $5 billion in revenue in 2009. Unfortunately, however, the sector has not had a great track record for trickling down impact. First, over 50 percent of tourism receipts in developing countries end up routed back to developed countries through imports or income to foreign labor or foreign firms. Secondly, the sector creates a massive number of jobs for the low and lowest income quintiles in Brazil, but many are low-wage and low-mobility positions. These positions include hotel and hospitality staff, cleaning staff, travel agencies, etc. And the informal side of the tourist sector is rampant with the previously mentioned racial and gender disparities. While there is no conclusive study to reference, one can easily observe that women and socially-excluded groups are over-represented in these informal tourist sector activities with even more limited livelihoods and mobility.

In the cities of Salvador and Rio de Janeiro, for example, major tourist attractions include Afro-Brazilian patrimonies – such as capoeira, samba, candomblé and traditional cuisine – and many of the service providers are Afro-Brazilians operating informal businesses. What elevates the precariousness of this issue is that Brazil is overtaking Thailand as the world’s most popular sex tourism destination. These income-generating activities perpetuate tremendous tourist demand while at the same time providing very limited pathways out of informality and economic limitation.

Racial and gender inequity, sex tourism, cultural tourism, and economic opportunity form a complex intersection in Brazil, though it is one that is shifting. One part of increasing the tourism sector’s inclusiveness is a broader upgrading of labor market access through transport, education and social policies- and this has already begun. Under Brazil’s Growth Acceleration Plan, the government has committed to investment in sustainable and eco-friendly urban development and slum upgrading, thus creating a plethora of jobs in construction, education and social services, often for low-income people. Since Rio de Janeiro was awarded both the 2014 World Cup and the 2016 Olympics, the city has unrolled a comprehensive revitalization plan, which will develop many low-income areas, promote green construction and provide training in tourism, hospitality, foreign languages and IT for the local population. New metro and transport routes will be availed in favelas and other low-income areas, expanding access to jobs.

However, there are still unanswered questions as to whether this growth plan will take specific action to address for social disparities. The lack of coherent inclusiveness strategies could easily perpetuate exclusion. It does, however, look promising.

At the broader federal level, Brazil has been extremely progressive about attacking gender and racial inequality. Lula’s administration launched a Secretariat for Racial Equality and a Secretariat for Policies for Women, which act at the federal and local level. Both have released innovative programs, ranging from training to credit to federal policies. These policies include affirmative action programs in public universities as well diversity training and supplier diversity programs. The Secretariat for Policies for Women even has a program to incentivize jobs for women in the rapidly expanding construction sector. In various capacities, state and local government are working to ensure that women and diverse ethnic groups are well-represented and take advantage of these opportunities in the economy, including the tourism sector.

The Secretariat for Social Assistance and Human Rights and the Secretariat for Policies for Women have launched a new program to help over 1,000 low-income women in Rio de Janeiro become integrated in the tourist economy, by providing several modules of relevant job and entrepreneurship training. The program is a win-win- filling a gap in human capital needed by 2014 and helping these women move out of the informal sector. Also, and although they do not specifically address gender, SEBRAE (the Brazilian SBA) is helping by not only providing training, but establishing SME handicrafts centers which market goods primarily produced by women entrepreneurs and cooperatives.

These are just 2 examples … but there is potential for so much more. The most interesting thing about this shift is the collaborative interaction between investors, the private sector, government and communities that seems to be going on in Rio. Can tourism be a boon to better income distribution in Brazil? If they rightly incorporate social inclusivity into market-based growth, I think it will. Let’s check back in 2016.

Original source: http://nextbillion.net/blogpost.aspx?blogid=2148

City of God’s Plan for Financial Inclusion

By Tara Sabre Collier

City of God may not have the highest literacy or lowest crime rates or sufficient economic opportunities for 67,000 inhabitants but in a major step forward, one of Rio de Janeiro’s most notorious favelas will have its own community bank and its own currency. 

City of God was built in 1960 as part of a government program to move citizens from precarious slums to other parts of the city. Although it was constructed with more solid infrastructure, the social and human development indicators for City of God remained and remain among the lowest in Rio de Janeiro. Isolation and lack of economic opportunity made the community extremely susceptible to drug trafficking and crime, plaguing it with astronomical violence and social ills.

These phenomena were showcased in the 2002 film, City of God, which put Rio’s problems of inequity and violence on display for the world. The community had begun organizing in the 1980’s but increased federal and state attention, partially spurred by the film’s reach, created an even more fertile ground for reforming City of God. Indeed, in the past few years, City of God has established a wide variety of job training, health improvement and social services programs. In 2008, the state government funded a web portal and wireless Internet for the entire area. In 2009, the UPP (specialty police units established to neutralize gang activity and violence) were instituted in the community, catalyzing a dramatic reduction in crime.  Between now and 2016, a series of infrastructure improvements are planned in preparation for the World Cup and Olympics, including construction of an expressway that will dramatically reduce transit time and access for City of God residents. All in all, things are looking up.

And now, Cidade de Deus (or CDD, as it is locally known) will have its own bank and currency. The initiative is part of collaboration between City of God, Rio’s Secretariat for Economic Development and the federal bank, Caixa Economica Federal, which will launch in August 2011. Modeled after Banco Palmas, a community bank established in Fortaleza over 10 years ago, CDD’s community bank will be the first of its kind in Rio de Janeiro. The project foments local economic development in two ways: by providing financial services to previously unbanked local businesses and populations by improving the sales and revenues of micro and small business within the community. 

As opposed to many local banks that require extensive documentation to open an account, the CDD community bank will only require identification and a minimum deposit. While the bank will repay Caixa Federal and offer commercial loans in Brazilian reais, it will dispense the community currency, the CDD, to residents. Moreover, even tourists can change reais to CDDs upon entering the community.

The CDD is deliberately set approximately 20 percent higher than the real, which incentivizes users to use it within all local business. Since this artificially discounts products sold in local enterprises, it compels residents to keep more money in the community, thus fueling growth of local businesses. The currency will be available in notes of 1,2,5, and 10 units and will feature the faces of local community heroes, such as Dona Benta, founder of a local community organization. Currently, the Secretariat and Caixa Economica Federal are working with community agencies from CDD to finalize details of loan amounts and terms with operations beginning in August 2011.

Across Brazil, there have been numerous new programs, including microfinance, which aim to expand access to financial services among the poor. However, community banks are distinct in their integration with the community social structures and more reasonable interest rates – the addition of a localized currency is another innovation to expand impact at the base of the pyramid. Given its location and terms, its likely that CDD Community Bank will have no shortage of interested customers, a market of 40,000 people. There has been no mention of federal or municipal plans to expand the scheme to another municipalities within the city, but the nearby municipality of Duque de Caxias is implementing a similar scheme in a low-income community called Saracuruna. 

Original source: http://nextbillion.net/blogpost.aspx?blogid=2390

NexThought Monday: Angolan Robusta – Getting the Best Coffee in the World to Market

By Tara Sabre Collier

Imagine if, after drinking only Fanta soda your entire life, you tasted fresh-squeezed organic orange juice for the first time? You’d discover a world of flavors so bright and a level of freshness, so high it’d completely redefine your standards for juice, and you’d probably never want to look at a soft drink ever again.

That’s basically what happened when I took my first sip of organic Angolan coffee, just roasted, ground, and brewed by the directors of Angola’s National Coffee Institute. My palate was overcome by the whirlwind of this silky yet smoky, round yet sharp, earthy yet luxurious taste experience. In all my years of Folgers, Starbucks, Illy, Bustelo and even Turkish coffee, nothing had ever come close.  It’s like I had been living a lie, thinking I was drinking coffee all these years, but it was just a castoff substitute of the real thing. 

After tasting it, it was no surprise to learn that prior to the war, coffee had been Angola’s leading export. In fact, Angola was once the world’s fourth biggest coffee exporter because its Robusta – so silky yet full-bodied – is one-of-a-kind.  According to the National Coffee Institute, there was so much demand for Angolan Robusta that after the war started, it had to be exported and cultivated abroad since the national coffee industry-entered paralysis.

In 2007, just five years after the war’s conclusion, the industry was effectively re-launched with the first international shipment of Angolan coffee. Today, there are dozens of cooperatives and a few local manufacturers that supply ground and whole coffee beans to domestic and international markets. I had the pleasure of working with some of these coffee cooperatives, under the auspices of Pro-Angro Angola, a USAID-funded project to advance Angola’s agricultural sector. Pro-Agro aims to promote economic growth within a sector that generates over 60 percent of Angola’s livelihoods yet only 10 percent of GDP. Despite the fact that the country is extremely fertile, agricultural productivity is low and underdeveloped and thus, in Luanda, much of the food is imported. This discrepancy, of course, contributes to Angola’s high poverty rates and hence, the rationale for ProAgro’s agricultural development programs.

Returning to the subject of Angolan coffee, I was 100 percent sure after tasting it that it could overtake Brazil and Colombia, and fill all of our cafes, grocery stores and kitchen counters with this amazing lush aroma and spectacular taste. But, in interviewing cooperatives, manufacturers and buyers, I came across several caveats that hinder the Angolan coffee industry and its farmers, and thus, our access to this marvelous product.

• Quality & Quantity:  Most of the existing plants are several decades old, thus reducing output per hectare. The only remedy is planting more hectares or new plants, both of which require capital and due to the production cycle, the investment takes a few years to recoup.  Additionally, many cooperatives lack adequate machinery for shelling and cleaning, which can compromise the quality delivered to manufacturers. Moreover, coffee is significantly more labor intensive than other crops and short-staffed cooperatives end up reducing product quality.
• Transformation: There are insufficient facilities for transforming green coffee beans into finished products and because of their lack of access to machinery, many farmers simply sell the raw material wholesale to walking vendors who then transform these goods in the cities.
• Transport: Most farmers are in rural areas, and Robusta production is concentrated in Gabela, Amboim, and Kwanza Sul. Transport to processing centers can be complicated and costly, which means it is often at the buyers’ expense.
• Export: Export requirements are not always clearly communicated and the paperwork and processing can result in long delays and high costs.  These delays are costs are worthwhile given that international market prices (based on London Commodity Exchange) are almost twice as high as Angolan prices, but most cooperatives cannot bear these prices up front.

Obviously, financing and training are key to resolving much of these caveats but perhaps there are also other solutions that will help the Angolan coffee sector advance.   

Thus, I am sharing these challenges with you, Nextbillion readers, in hopes of gathering insights and resources from the blog’s global audience. What has worked in your country or sector that can overcome these hurdles in Angola?

Original source: http://nextbillion.net/blogpost.aspx?blogid=2881

Impact Investing in the Base: A chat with Vox Capital’s Daniel Izzo

By Tara Sabre Collier

Daniel Izzo, co-founder of Vox Capital in Brazil.

At GroFin, one of our impact objectives is to fulfill the need for vital goods and services for a critical mass, especially at the base of the pyramid. GroFin specializes in financing and building the small and growing businesses [SGBs] at the base of the pyramid, and these SGBs are among the biggest service providers to the BoP.

As we look to expand our BoP portfolio, I hoped to learn from fund managers with real-world experience doing just that. Luckily, I had access to the insights of Daniel Izzo, who took some time out to chat with me. Daniel is the pioneering co-founder of Brazil’s first impact investing fund, Vox Capital, which focuses exclusively on BoP-serving businesses. 

Vox has invested in 12 companies, six with equity stakes and six with convertible debt investments. Although the Brazilian market and the African/ Middle Eastern markets (where I work) are quite different, I knew Daniel would have some cross-cutting insights about the ins and outs of reaching this demographic.

TSC: What percentage of businesses actively try to serve the BoP in Brazil?

DI:Less than 10 percent of business targets them. Most corporations are serving the C segment (the emerging middle class) and some are yes gradually blending into the D segment (one to two minimum wages per household). Most companies skip the E class (less than one minimum wage household) entirely – it’s just very hard to reach them both in terms of pricing and distribution. So generally the government administers any goods/services for this group or at the very least, they subsidize it.

TSC: When we last chatted, you mentioned you had lots of potential investees, even more than you can process. Is that still the case? And if so, how do you build so much deal flow for such a specific niche?

DI: Well, yes, the pipeline is pretty good. For example, we have a five-year investment term and it’s only at year 1.5, and we have already found 60 percent of the companies we want to invest in. Let’s remember, we want to invest in 10 companies over the entire term and, however good the pipeline is, the businesses still have to be evaluated as far as viability.

So to build the pipeline… you have to be around, you have to go local, to go to events, talk to people, read blogs, talk to journalists – we are always talking to people and building deal flow. A lot of good comes from the accelerator programs and the ecosystem. However, we don’t limit ourselves to the social entrepreneur labels – the best entrepreneurs we find are not even the ones who call themselves social entrepreneurs. 

TSC: So, for example, would you also go within those BoP communities to find local entrepreneurs who are identifying market gaps?

DI: They almost never are from those communities because the most scalable entrepreneurs rely so much on networks education and sophistication to become scalable, things that, unfortunately, are still lacking due to the poor educational system we have in Brazil.

Whenever we have an entrepreneur with quality and a good business idea, we try to implement a lean start up methodology and take them to hit the market with an MVP (this refers to the Minimum Viable Product, as espoused within Eric Ries’ Lean Start-Up method).  We will strategize and evolve as the market requires.

We also are very lucky to have a co-creation methodology for designing business models in collaboration with low-income communities, which we implement in conjunction with Plano CDE. Plano CDE is a market intelligence company focusing on low-income communities, and also one of our portfolio companies. It’s a strategic asset in our company, not only in terms of being a growing company, but also providing data and information that helps us better understand the needs of the BoP.

TSC: Given that businesses can have mixed audiences, and even really big companies like Lojas Americanas orBompreco have BoP customers, how do you qualify a business as BoP-serving?

DI: We do this in the due diligence phase by focusing on the problems they solve and whether these problems are critical to the BoP. When we look at solutions, we look for something designed for the severity and nature of the problem within lower-income communities, but designed with such a quality that it can be desirable by any income demographic.

For example, when you look at low-cost education in Brazil, it is intended for the BoP and unfortunately, doesn’t end up helping advance the (student) as much as it could, in cases where it delivers a level of education that no upper income person would ever accept or ever want to send their kid to. We are trying to help cut down on this because even though it serves a market gap, it extends certain disparities. We are trying to invest in a way that actually addresses the inequality of opportunity here in Brazil.

On the other hand, our investee, Sautil, started off addressing a specific problem faced by the BoP, but the product was so good and relevant, it ended up generating lots of demand even among upper income groups. 

TSC: And what is Sautil and what do they do?

DI: Sautil offers information on free or governmental health care options based on geolocation – 75 percent of the Brazilian population does not have private health coverage and with the current system for government online communication, a lot of people just don’t know where to go or where to get information on basic health service. So Sautil has geo-localized heath care information – but what happens is that the large insurance companies that serve the upper income segments also ended up wanting to buy it to reduce their costs.

At first, this was a dilemma for us – it wasn’t intended for this population. But then we realized it was a good indicator. It is a relevant service for any population, and now we are ensuring that all people with or without health insurance have access to information. And that is once again improving equality of access and equality of opportunity here in Brazil.

But anyway, we still want the BoP to comprise over 50 percent of customers for our investees.

TSC: Have your investees had specific challenges that relate to serving this market? Anything from irregularity of cash flows to security to distribution problems, anything that cuts across several investees?

DI: Most of all, they are linked by distribution problems. Because you have to go to the last mile to reach the BoP, especially when they live in suburbs and in the periphery. The delays in transport then make the development curve of the business longer. So you have a longer challenge as far as cash burn and cash flow. If, for example, the cost of reaching the BoP is too high and transportation or access costs make it so they have to include other markets, then OK – we want the business to be viable. But we have to see a strategic plan that still addresses the mission and the BoP.

It’s easier to deliver services than products, so we take this into consideration.

In general, we try to launch as fast as possible and then research often comes from learning about customer response and being able to pivot, it’s that lean start-up methodology again.

Tara Sabre Collier is an impact investing specialist at GroFin Capital, a pan-African impact investing fund.

Original source: http://nextbillion.net/blogpost.aspx?blogid=3847

ALIGNING OPERATIONS FOR IMPACT

Sabre Collier is a Skoll Scholar and one of our Shell Foundation Fellows. She shares with us reflections from Johannesburg, where she is working with GroFin. GroFin finances small and medium enterprises (SMEs) in Africa. 

The experience was interesting because it reveals some of the complexity and trade-offs that will increasingly be faced as impact investing and social business become more and more sophisticated and industrialized.

In general, I support the idea of the B Corp and GIIRS Rating as they are vital to sector development and positively changing the nature of business and finance. Also, the assessment was very comprehensive and useful for business improvement. I would highly encourage fellow entrepreneurs to use it even if just to gain better perspective on one’s business model. The assessment must have had 100 items from governance to transparency to worker rights to LEED certification to employee training to staff diversity to environmental responsibility to infinitely more.

However, the rigor of such an assessment, particularly for small and growing businesses in low-income communities and countries, may be a bit unrealistic. How do we ensure higher standards without precluding more economically disadvantaged segments who can’t afford to invest in LEED certified buildings or paid worker training, etc? How many organizations from this segment have limited growth just because they lack awareness, capacity or tools for impact tracking and measurement and how do we change this? Note that we have to to take this in consideration when it comes to both organizations and individuals or the social impact space will not fulfill its potential to empower the most vulnerable.

In their favor, GIIRS and B Corp do actually take these challenges into consideration and thus, assessments have stratifications with different criteria.

The very existence of these rating systems underscore the increasing sophistication of social impact measurement. Back in the day, when primarily non-profits and NGOs were delivering social impact programming, social impact measurement had only a few tools and smaller sets of indicators. As the private sector has increasingly embraced shared value and the third sector has sought more commercial approaches to impact, rigor has increased. We all know what gets measured gets done. In the private sector, performance indicators can be narrowed down at the most granular level to make decisions about a store, a program or an employee.

As the social impact space continues to grow with the emergence of new corporate and social ventures, impact data is also increasing. This creates a network effect which will possibly make disclosing a broader and broader array of social impacts a requirement for impact investors and social businesses. The small set of indicators reported within an annual report are useful but with GIIRS and B Corp, the indicators encapsulate the life of the business or organization.

This holds them accountable for the broader social mission they uphold, not just their programs, but their whole business model and operations. For example, if an organizational mission is advancing professional outcomes for disadvantaged groups, then their HR policies would theoretically show some inclusion of this target and some specific growth opportunities, such as training. If solar plant manufacturer’s mission is environmental sustainability, then this is shown in both the number of panels produced but also in their sourcing and transport systems. For a long time, social businesses and organizations could simply focus on the core indicators but it is more tactical to ensure mission is aligned with operations at every level. This will be critical as much more transparency and measurement become the norm.

In the long run, this will certainly be a good thing. It will force businesses and organizations that are already doing good to do better. However, it will bring additional costs and time requirements. For impact investors serving small and growing businesses, we will have to make special effort to help them through this process because their impact is immense and deserves to be better reflected. For impact investors and social businesses at large, align operations with impact to bring your “A Game”.

Original source: http://skollcentreblog.org/2014/02/26/aligning-operations-for-impact/

The start-up ecosystem in Mozambique

 Tara Sabre is an impact investing specialist at GroFin Capital, part of VC4Africa’s investor network. Domingos Mazivila is a Senior Advisor to the USAID Speed[Support Program for Economic and Enterprise Development] Program in Mozambique. Below they share some news from Maputo on Mozambique’s startup-ecosystem.

Mozambique is one of Africa’s most attractive markets yet still off the radar for many Western investors. But since the discovery of the world 4th biggest natural gas reservesdeposits as well as the increasing exploitation of Africa’s second biggest coal reserves, that could potentially change rapidly. AT Kearney ranked it the Africa’s 9th most attractive retail market in 2014 and according to EY, Mozambique has had the greatest increase in FDI in all of Africa except for Kenya, with a 32% increase.  Also according to Ventures Africa Magazine, the country will maintain sub-Saharan Africa’s second fastest growth rates (after Malawi) between now and 2017.

So what does all this mean for the entrepreneurs on the ground? And are local investors, government entities, donors and other stakeholders leveraging this opportunity to grow an ecosystem? Who are the main government supporters for the entrepreneurial ecosystem?

This is cross-cutting. However, one government entity consolidating and coordinating support resources for start-ups and other small businesses is the IPEME. Through IPEME, local businesses can get access to training, micro-credit, and to a lesser extent, business linkages, such as delegations and missions. While not comprehensive, it’s a good starting point to connect to the ecosystem. IPEME also collaborates with the Ministry of Education and Ministry of Technology for some of the relevant entrepreneurial and workforce development programming.

Are there any Incubators or Accelerators active in Mozambique?

This wave is just starting to gain momentum in Mozambique but is getting lots of interest and support, including from government.  There are only a few;

IdeiaLab

IdeiaLab is an ‘entrepreneurship lab’ promoting entrepreneurship and innovation, focused on growth entrepreneurs and using a participative approach.

RLabs Mozambique

As of Sept. 2013, RLabs was launching its first Mozambican outpost, with support from the Ministry of Technology and the Finnish Government. It is not in Maputo however- it’s in Lionde, one of the Millennium villages, about 2 hours from the capital.

Maputo Living Labs

Maputo Living Labs was founded in 2011 and provides both IT training and incubation of IT solutions in response to local business needs.

Are there local VC funds or angel investors actively investing in local entrepreneurs?

While international investors are pouring into Mozambique, local venture capital or angel networks are still very nascent. The culture of angel investing and funding start-ups in Mozambique just was never there before.At the same time, there was a shortage of innovative ideas, which has a bit to do with our universities and education system.

Within tertiary education, people traditionally studied social sciences, so weren’t cut out for the kind of high-tech, high-growth businesses backed by VCs. However, the past 5 years, the labor market has been driven by the extractive industry, with a massive demand for every kind of labor.  This has actually changed the tertiary institutions and the students, all of whom are increasingly shifting towards the sciences. This may be truly catalytic in the medium term.

On that note, there is also a science industrial zone that is reportedly being developed around Maputo. And government has recently structured a donor-supported 7 mm meticais fund for start-ups. At the same time, now that this wealth of resources has been discovered, there is space for us to begin bridging and building up all kinds of local financing and business support measures- why not? The resources are there.  Plus, we’ve got this growing and giant number of corporations willing to enter into partnerships with local institutions to begin capitalizing our entrepreneurial ecosystem.

What’s the perspective of the Mozambican entrepreneur in the midst of this ecosystem- in his view, what are the greatest challenges and greatest opportunities?

In terms of opportunities, this is a unique moment for Mozambican entrepreneurs. Historically, the country has relied a lot on donor funding with non-nationally owned models.  Today there are corporate investors, like Anadarko, Mozal, forming initiatives and syndicates, to finance train and support SMEs and start-ups.  For example, Anadarko’s initiative is in collaboration with a university and IPEME.  It’s true that it’s the extractive sector that’s the driving force, the main attraction but it spills into the entire value chain- including training, construction, finance, technology, and manufacturing.

As far as challenges, the greatest challenges are skills development. We are still working on the necessary paradigm shift in the universities so that graduates have the STEM skills and critical thinking capability.  Also, the other hurdle is bolstering our quality standards, especially for manufacturing. So now there is a bold opportunity for Mozambican entrepreneurs, it’s truly a unique moment for us.

Original source: http://vc4africa.biz/blog/2014/08/06/the-start-up-ecosystem-in-mozambique/