Big Goals, Modest Budgets

It’s easy to make a big splash if you have a ton of money to throw at promoting a product – I mean, did anyone not know Apple just rolled out the iPhone 5? But you have to get far more creative when you’re trying to do a lot with very little.

Like any organization targeting the Base of the Pyramid, EnerGcare faces enormous obstacles – not the least of which is a shortage of funds and personnel resources. So I was thrilled on Friday when I was asked to venture into the townships one last time on a special mission.

In May of this year, Kiva, an internet-based microfinance platform that raises over $1 million a week for the working poor, announced a partnership with Barefoot Power. Barefoot Power is the producer of the Firefly solar lights that are distributed by EnerGcare.

Through this partnership, Kiva has agreed to make interest-free financing available to Barefoot distributors, including EnerGcare, to accelerate the adoption of solar lighting in poor communities (you can read more about this partnership by clicking here).

Effectively, this funding will allow EnerGcare to purchase larger quantities of stock at lower prices, thereby aiding in their goal to get low cost, high quality products into difficult (and expensive) to reach areas.

In return for this financing, EnerGcare was asked to produce a short 4-5 minute video capturing real clients’ first hand accounts of how purchasing a solar light changed their lives.

To facilitate this project, Raymond, an EnerGcare entrepreneur in the Western Cape, coordinated meetings with several of his customers who agreed to give video testimonials. I expect the video to be available within a couple of weeks. Once it is completed, I’ll be sure to share it with you here.

EnerGcare customer demonstrating her Firefly light. She uses the light in her shop and earns a better salary now that she can stay open after dark

On a separate note, my father and sister are in town vising me this week. Inspired by my own time in the townships, I decided to take them to Mzoli’s for a genuine South African braai experience. It was an awesome day all around; we snapped photos with new friends, sampled samp and beans, pulled pork chops apart with our fingers and danced to the pulsing kwaito. The day encapsulated everything amazing about this cool city – fun times, delicious food and truly special people.

Mzoli’s – a popular hangout in Gugulethu township

Hence it’s nickname, the “Church of Meat”

Joe drumming to the beat. I bought his cd which is dedicated to “the street kids of Cape Town and to all of the good people who live in this beautiful city”

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Green Where It Counts

It’s a beautiful sunny Monday here in the Western Cape. I was still reminiscing about the events of the weekend while flipping through my notebook this morning when something caught my eye … “green where it counts.”

It was a phrase one of the project partners had used to sum up the EnerGcare brand proposition during a brainstorming session a couple of weeks ago. I remember jotting it down, but it didn’t fully register until now just how powerful that statement is.

Being an organization focused on clean energy initiatives is not in itself a novel idea – there are probably a dozen or more operating in South Africa alone. But to create a business that is attempting to reduce energy poverty, increase access to clean energy and generate employment at the BOP – that takes some cutting-edge thinking. EnerGcare is not just handing out a few solar lights and clean cookstoves, because while these types of programs may be well-intentioned, they undermine growth by creating a culture of dependency. Thomas Friedman, once wrote in a New York Times article:

“People grow out of poverty when they create small businesses that employ their neighbors. Nothing else lasts.”

EnerGcare’s goal of supporting healthy economic growth while creating sustainable employment is not easy. I’ve been struggling over the past few weeks to determine what an ideal structure should look like for the EnerGcare model, and I had narrowed my focus to a few intervention models (see diagram below).

A pure microfranchise model gives aspiring entrepreneurs the opportunity to run their own business, but it also requires access to start-up capital – and most of these people have no savings. Microcredit models solve that problem by providing access to financing, but as it currently stands, the EnerGcare model is still unproven and it would be unethical to ask poor people to take loans or buy products on credit until we are sure that the model works.

So I began to look closer at a theory called microconsignment.

Overview of a microconsignment model. Source: http://microconsignment.com.

In a microconsignment model, an entrepreneur is provided with products at no cost. When the products are sold, they repay the organization and keep their mark-up as profit. If the products sell, that’s great. If the products don’t sell, capital is tied up the field, but the burden of risk remains with the organization.

Seeing it in black and white, it seems pretty straightforward. In fact, it is what EnerGcare is doing already.

But until I started researching this topic, I always thought of it as a temporary solution. In fact, I’ve spent a lot of time thinking about how to move away from this model, but maybe there is no reason to. Clearly there are issues to fix and problems to solve with the current structure, but fundamentally, it may be just as viable as a long-term solution than any other approach. What will determine the success of the model will be our ability to create powerful synergies all throughout the EnerGcare value chain – from sourcing high quality, low-cost providers to finding the best local entrepreneurs and educating our consumers to create demand for the products. If we get all of these things right, I believe a microconsignment model could be scalable, replicable and sustainable, so this is where I plan to focus my energy over the next month.

In a bit of local news, South African truck drivers have been on strike for the past two weeks, as labor unrest spread from the mines to the transport sector. The dispute has been marred by violence and I received an emergency message from the U.S. Consulate General last week urging caution on all roadways after several reported incidents of vehicles being stoned and set on fire. The truckers union is now urging rail and port workers to join the strike. If that happened, it could effectively bring the entire transport sector to a standstill and halt exports of commodities such as gold, platinum and coal from Africa’s largest economy.

I haven’t witnessed any violence here in Cape Town, but I have felt some minor affects of the disturbance. While in the Johannesburg bus terminal two weeks ago, I went to three different banks to withdraw money from the ATM, and all were empty due to the disruption. Good thing Wimpy accepts credit!