The following post is a narrative I submitted for the 2nd Annual Base of the Pyramid Narrative Competition, hosted by Cornell University.
In 2007, three orphans, Paulos Temesgen, Mussie Mohammed and Atkelt Girmay, started Selam Awassa Business Group (SABG). SABG is a for-profit enterprise focused on designing and producing appropriate technology for local farmers (crop threshers, manually operated irrigation and water pumps, etc.), contractors (cement mixers, hollow block units) and villagers (solar boxes, stoves). SABG produces many of these products with help from students apprenticing at their in-house vocational training facility. Profits are scheduled to be deployed back into the local community via self help groups (SHGs), based on the ‘Idir’ – a traditional community association for cooperation.
The life of an orphan in Ethiopia is extremely challenging. Paulos, Mussie and Atkelt were fortunate to find a family and sense of self at Selam Children’s Village in Addis Ababa, Ethiopia, one of the most renowned orphanages in Ethiopia. Eventually, all three graduated from Selam’s Vocational Training School. After graduation, they were retained as instructors due to their innovation in design and technical knowledge. Envisioning an opportunity for a for-profit enterprise to play a pivotal role in alleviating poverty and environmental degradation, provide vocational training and support the local community, they moved to Awassa and established Selam Awassa Business Group.
Ethiopia is characterized by wide-spread poverty and frequent droughts; 85% of the 80 million people in Ethiopia are employed in agriculture. The Ministry of Agriculture and Rural Development estimates that, drought due to inadequate soil and water management causes 5-7 million people to require food assistance each year, on average. Affordable rope-and-washer irrigation pumps, such as those produced by SABG, will not only increase farmer’s yield, but also decrease the likelihood of food shortages. Other post harvest technologies, such as crop threshers, greatly increase yield for rural farmers. As yield increases, less land is required for cultivation. The less land that is required for cultivation, the more soil and forests are preserved.
SABG produces many of these environmentally friendly agricultural products with assistance from students in their vocational training programs. Skilled labor is a scarce resource in Ethiopia, and SABG hopes to attain the 100% job placement rate experienced by Selam Vocational Training facility, where they were instructors. Providing students with skills in metal working, welding, and machine manufacturing ensures a life of independence and productivity.
Another advantage of SABG is that it is owned and operated by Ethiopians (with the exception of David Roschli, a Swiss engineer and founder of Selam Children’s Village, who has moved to Awassa to mentor the management team as they launch this venture). For this reason the organization does not have to overcome issues of distrust with rural farmers, faced by many international organizations. SABG has strong relations with farmers and others in the rural community. They can leverage these relationships to convince farmers of the impact an investment in irrigation pumps, plows, or crop threshers, designed to maximize output, would have on their earning potential. SABG also sells their products to international NGOs such as Service in Mission, Water is Life and International Rescue Committee who then give the products to rural farmers or villagers who cannot afford the initial cost, or do not believe in its benefits.
A diversified customer base consisting of NGOs, small farmers and private corporations (Midroc, Al Yust Trading) provides a fairly secure revenue stream. A partnership with Sasakawa Global, a Japanese NGO, has also proven beneficial for SABG. Sasakawa Global covers costs for SABG to develop prototypes in post harvest technology (multi crop threshers, maize threshers, etc.). Sasakawa, focused on creating awareness of the benefits of technology in agriculture, performs operating demonstrations in various regions throughout Ethiopia, using SABG products.
Even with a diverse customer base and the potential to scale the model to other regions in need of improved agricultural technology, SABG still faces many challenges. The decision to operate a for-profit enterprise, as opposed to an NGO, had consequences. One of the main challenges is the inability to raise relatively easily accessible capital from the NGO donor community. Unfortunately for SABG and similar organizations, donors have yet to fully embrace the idea of funding, through investment, for-profit enterprises. Rather than associating profit with greed, donors should embrace for-profit models as a sustainable approach to poverty alleviation.
In the fall of 2007 the SABG management team seized the opportunity to submit a business plan to a socially minded investment organization. The investment organization sees potential in SABG, but the due diligence process has proven longer and more arduous than either organization anticipated. SABG has generated sales revenue of 1,005,300 ETB (approximately $100,530 USD) through the first three quarters of 2008, but this does not provide enough cash flow to cover operating and capital expenditures.
SABG is counting on the investment to expand production facilities, office space and shop area for the vocational training facility. Now that the investment organization feels comfortable with financial projections and thus raising funds for investment in SABG, the pending global financial crisis may delay this deal indefinitely.
The notion of servicing the triple bottom line is quite a task, even in the developed world where it is popular and capital is more easily accessible. SABG, however, is not attempting to create an enterprise that services the triple bottom line because it is popular in the developed world, and certainly not because they expect it to be easy. They recognized the impact appropriate technology, vocational training and supporting self help groups will have on both the natural and social rural environment. With any luck, their model will prove to be one of the best models to a sustainable approach to service the triple bottom line in the developing world.
Addis Ababa, Ethiopia
If you are interested in learning more, placing an order, or investing in SABG, contact Atkelt Girmay at email@example.com.