Reducing risk is the only way for community joint-ventures to get serious with commercial banks. Without commercial finance, this niche tourism sector might never deliver on its potential. Photo: World Wildlife Fund
Over the last 20 years, joint-ventures between local communities and the private sector have grown up as a feature of the sustainable tourism development agenda. Typically, the community provides the land, the heritage or the wildlife asset base while the private sector brings the capital, management know-how and business networks. When they work well, these partnerships contribute substantially to local economic and social development, as well as providing professional, unique and authentic tourism experiences for visitors.
Lena Florry is an Area Manager for Wilderness Safaris, the private-sector partner in a community joint venture (CJV) lodge in Namibia. ”What we have here at Damaraland really changes our lives,” she says. “Previously, in our village, I was herding goats. Now we have good jobs and a much better life.” Crucially, Lena is also a member of the local community and takes personal pleasure in sharing the model’s success story with the camp’s US$500-a-night paying guests.
Typical benefits include income for communities through lease or contract agreements, employment and supply-chain opportunities, skills and knowledge transfer from the private sector, and usually a kind of joint “tourism asset protection” like wildlife preservation or heritage protection. In Namibia, for example, community conservation generated about US$7 million in returns for local communities in 2013, and the elephant population doubled in 20 years.
While much emphasis has been placed on the development impacts of this model, the actual health of the businesses has often been overlooked. As long as the ventures continue to deliver a development dividend – such as contributions to a community fund, or increased biodiversity – all is believed well. For the venture’s supporters, it may then come as a surprise when applications for commercial finance are rejected.
“We would like to finance the sector,” says Christo Viljoen at First National Bank (FNB) Namibia. “But our biggest challenge is to determine the financial viability of the community joint-ventures. We find the risks involved are not properly addressed in the business plans.”
Banks report that risks typically have to do with corporate governance, low-quality financial data, collateral, the level of experience of the sponsor, and a host of structural problems in the CJV business – not least, the balance between the development dividend versus the profitability of the business. All these factors help to undermine a firm’s viability. A business that cannot demonstrate financial viability – and, thus, show how it will pay back a loan – cannot be financed.
This presents a very real problem. Without the means to make necessary investments in the business (such as refurbishment or expansion), the quality of the tourism product deteriorates, occupancies and rates decline, and funds for the community and for wildlife protection drop.
In an effort to help the various stakeholders increase the financial viability of CJVs, reduce risk and increase loans, the World Bank Group and the World Wildlife Fund released “nine tips” at the recent tourism trade show ITB Berlin 2015. Dr. Hannah Messerli of the World Bank’s Trade and Competitiveness Global Practice said, “We believe that destinations that address these issues are more likely to provide comfort to the banks in lending.”
Agriculture and Rural Development
Growing up, I always dreaded to enter my grandmother’s kitchen in the village. She used firewood to cook: There was such a dark, thick smoke in the room that I couldn’t breathe or keep my eyes open. I really don’t know how my grandmother could spend hours and hours in there, every day, for so many years. And unfortunately, my grandmother is not an isolated case. More than 90 percent of Kenya’s population uses firewood, charcoal or kerosene for their daily cooking needs.
I always dreamed that clean sources of energy would make Kenyans more independent and less exposed to the serious health risks posed by fossil fuels. In rural areas, most women like my grandmother rely on firewood; its consumption not only depletes our forests but also emits hazardous smoke that causes indoor pollution and eventually respiratory illness. In areas where firewood is scarce, women have to use cow dung as fuel, an option possibly even worse in terms of pollution. Urban areas are affected too: The poor rely mostly on charcoal, another biomass that has the same negative effects and health risks of firewood.
Cleaner fuel options have already been developed but are often too expensive or too difficult to transport across the country to be adopted by a large part of the population, especially by the 40 percent of people at the base of the pyramid.
So what can be done? How can we make clean fuels more affordable and accessible?
I first heard about bottled biogas when I visited a "green" slaughterhouse in Kiserian, Kenya. I was really impressed: My dream of a cleaner, more affordable and easily accessible fuel was right there before my eyes.
The Keekonyoike Slaughterhouse found an innovative way to produce affordable biogas and package it for distribution all around the country. Using a special bio-digester, this business can turn blood and waste from a community-based Maasai slaughterhouse into biogas for cooking. To facilitate transport, the firm stores the fuel in recycled cylinders and used tires, reducing even further the environmental impact of the operation. Just to give me a better idea of the "green" potential of his business, the manager told me that this first biogas plant is expected to cut methane emissions by more than 360,000 kilograms per year (the equivalent of almost 2,000 passenger vehicles).
Indeed, "bottled" biogas (biogas compressed into a cylinder) has huge potential in Kenya: Farmers can directly produce it, recycling the waste from their farms; can use it for their cooking needs; and, thanks to the bottling process, can sell the excess on the local market, generating income while saving the environment.
Keekonyokie is a company that began operations in 1982. It runs an abattoir that slaughters about 100 cows per day to meet the meat demand in Nairobi and its environs. In 2008, with the support from GTZ, the company constructed two 20-foot-deep biogas digesters that would help manage the abattoir waste, which was becoming a menace and a health hazard. Within a short time, the biogas being produced from the digesters was more than the company could absorb. The company managers started thinking of compressing and bottling the excess biogas, but they needed support to test the technical and commercial viability of their idea.
When infoDev’s Kenya Climate Innovation Center (KCIC) opened its doors in October 2012, Keekonyokie was one of the first companies to be admitted.
Wanted: Mobile apps for African agriculture (Credit: infoDev)
Today, there are close to 900 million mobile phone subscribers in Africa. Sixty-five percent of the continent’s labor force works in agriculture or related sectors and it accounts for 32% of the gross domestic product. Mobile innovations are already improving efficiencies in the agricultural value chain; research shows that grain traders with mobile application usage experienced income growth of 29% and banana farmers in Uganda saw their revenues go up with 36%.
The mAgri Challenge, a business competition, has been designed to identify and support entrepreneurs developing mobile apps for agriculture in Africa. If you have worked with mobile tech entrepreneurs in Africa over the last few years, you might be thinking: “Not another mobile apps challenge!” This ‘competition fatigue’ is not completely unwarranted. Too many quick competitions for mobile apps, which at first seemed cool and generated lots of attention, have left in their wake a pool of mobile entrepreneurs confused about the next steps they can take to grow their business.
Agribusiness can help Nepal's products claim a larger share of the global market (Credit: World Bank)
Take a moment and think about where you would go for the best tea, coffee or dumplings. Would a country like Nepal rank high on your list, or for that matter even be on your go-to list? For a majority of people, maybe not immediately. Yet I would argue that the country should actually rank very high on your list (in full disclosure, this post and report are about agro-processing in Nepal).
On the flip side, the question for the Nepalese and interested agro-processors comes back to, well how do we make it rank at the top of anyone’s list? The food is already above standards and extremely palatable, thus it wouldn’t be very difficult to market. And imagine the type of marketing and branding that could be used; Himalayan grown, grown in the cool climates of the Tibetan mountains, and so on.
Five hundred million. That’s the official estimate, the number that practitioners arrive at from a range of 200 to 900 million. That is the number of smallholder farmers in the world, and it makes a lot of eyes pop in development circles.
Take for example the most recent agribusiness value-chain event, Making the Connection: value chains for transforming small holder agriculture, which convened recently in Addis Ababa, Ethiopia. While the 500 attendees represented the private sector, government, civil society, farmers’ organizations and academia, almost all discussions had a way of looping back to one topic: smallholders.Why is it that the attendees were so fixated on the farming segment of the value chain? Is Africa not yet ready to climb past the very first rung of the value chain? Today, it is estimated that a mere 10% of the global agricultural production undergoes processing.
India is swimming in grain these days, thanks to the Green Revolution, bumper crops and food security policies that encourage farmers to grow more. But unfortunately, India’s ability to store and manage its surplus grain hasn’t kept pace with production. The Wall Street Journal reports that state-run warehouses have a capacity of 63 million metric tons, while grain stocks are expected to be 75 million. To make things worse, many existing storage facilities are low-quality structures that aren’t up to the job. This means millions of tons of grain could be lost through exposure, deterioration and pests—bad news in a country of 1.2 billion with widespread hunger and an estimated poverty rate of 32 percent.