Finish Your Beer, there are Poor People in Africa, Pt. II of II

“Here we just plant anyhow.”

--TechnoServe-supported farmer explaining the typical unorganized farming method of villagers

Each morning around 5:30 am, 42-year old Grunja Jamomi wakes, and after eating a traditional breakfast made from black-eyed peas, heads out to his fields of yam, peanuts, and now, four acres of sorghum. This past year he harvested 875 kg of sorghum on one acre (that's a lot), twice what non-TechnoServe-supported farmers are getting. Regardless of what feelings you may harbor about the poor having too many kids, with the $360 he earned from his harvest, according to him, he’s able to send all seven of his school-age children to school (In total he has 10…count ‘em, 10 children!). Grunja, pictured with his wife and…well…some children, told me, “Before I went into the program, whenever I harvested, I would only sell in bits…I couldn’t use it for anything concrete. Sometimes I would run out of money and I couldn’t exactly tell what I had used it for.”

I met Grunja, in Tindando village, two hours west of Tamale in the Northern Region. After a couple days in Wa, Steve and I headed out to the capital of the region and set up camp at a nice hotel, from where we made our way to Tindando over some roads nastier than month-old hair clogged in a drain into one of the most isolated places I’ve ever been. There I met Kingsley Kayan, the animated nucleus farmer, and George Biligon, his miracle-worker who does all the ground-levelwork with the outgrowers. In the picture in the previous post, I’m pictured with Kingsley on the left and George on the right in front of Kingsley’s second tractor, which he purchased without TNS support to increase his profits and better serve his outgrowers (in the first pic in this post I'm with George who, as the only person who speaks English in the village, is my translator).

Kingsley, however successful, is where the shortfall of the project is centered on. These nucleus farmers are still not at a point where they can supply direct to Guinness. TechnoServe still acts as the aggregator and single marketing point, and is in effect a crutch. Said Steve, “The project is successful, but it’s not yet sustainable.” Guinness doesn’t want to deal with 13 small nucleus farmers for one raw material, a very small portion of its overall production (the brewery produces three beers, plus other beverages). The next steps in the project need to be to attract bigger commercial farmers and/or group these nucleus farmers together. Anticipating this, Kingsley and others have already started doing this on their own, as six of them have formed a marketing company.

From Tamale we traveled to Kumasi to visit the Guinness brewery, where I chatted it up with employees about the project and even got to hang out at the company bar (see pic). Employees get a monthly allotment of beer – not a surprising, or bad, perk. That night, full of Guinness suds and exhausted from a week’s work, I spent some time out and about exploring the city’s nightlife before flying out the next day.

Despite the project’s shortcomings – they wanted it to be self-sustainable after five years – I like the approach of the project: linking the poor into supply chains with commercial entities that have a vested-interest (profit) in seeing them succeed. 1/3 of the funding for this $3 million project is coming from Guinness to develop this supply chain, and if the project is extended they are expected to put in a larger proportion. This is opposed to disconnected efforts like village-level standalone businesses which, certainly, have their own merits.

And supplying to a company like Guinness isn’t the only way this approach of plugging the little guy into a larger system can work. In another project I’m working on, TechnoServe’s Cocoa Abrabopa (meaning “A Better Life”) project, an input company (fertilizers, fungicide, insecticide) is selling its products to enlisted farmers. The company has an incentive to train the farmers to make sure the inputs are applied correctly to attain the huge yields that are possible, which in turn convince the farmers to keep buying more. Some farmers claim the inputs are too expensive (those who leave often come back), but in the end it's the best option when they get the enormous net profit increases. I’m not at liberty to say how big they are because the results aren’t yet public, but man, it’s incredible. It looks like the input company will fund most, if not all, of the project’s extension.

As Steve explained to me on one of our many drives, in the late ‘90s there was a big shakeup at TechnoServe as they made this change in organizational direction. People with open minds like him stayed; the stubborn ones were asked to leave. I think efforts on standalone businesses are probably more worthwhile when dealing with promising, high-powered entrepreneurs doing something bigger than village-level business, more like SMEs. When dealing with the small guys, it might be better to plug them into a system – not all of them have business capability, though certainly some should be given a shot (read: microfinance). I’m not going into the microfinance question, again. I think we’ve worn the tread off those tires.

Finish Your Beer, there are Poor People in Africa, Pt. I of II

NGOs won’t touch tobacco – Mr. Billy Gates couldn’t honestly try to stamp out smoking in China while funding tobacco farming for the poor in Africa – but apparently booze is cool. That’s an oversimplification – rather the attitude is “Beer is gonna be brewed, let’s just brew it with something different that helps the poor.” That something different is sorghum, which is produced strongly in Western Africa. Guinness Ghana Breweries is using sorghum supplied by 7,000+ TechnoServe-supported farmers in the northern regions. Over the past 5 years, TechnoServe farmers have supplied nearly 7,000 tons of sorghum to replace 40% of the barley in Guinness’ Foreign Extra Stout, a meal-in-a-glass that I’ve taken to drinking to help the farmers (it even lists sorghum as one of the ingredients on the label…really cool stuff). Guinness is saving money by not having to import barley from Europe and is supporting local farmers, which has that nice corporate image thing going for it.

I was brought on at TechnoServe (TNS) – partly…this is one of my four projects – to document the project’s successes (and failures). TechnoServe recently sent me (way) up north for a week to drive around to villages and interview farmers on what impact it’s had on them. Throughout the time I was with Steve Mwinkaara (pic 1), the amazing sorghum project director who’s one of the most impressive individuals I’ve ever met. He reminds me of Gerson from CLUSA in Mozambique – a no-nonsense local who works his behind off and isn’t all starry-eyed about big aid plans to save the Rest. He just wants to pump out sorghum.

We started in Kumasi, where he picked me up from the airport and drove us up to Wa, about as far away as you can get from Accra. We stopped for lunch and met a friend of his who was looking to start up a commercial tomato farm and was looking at possibilities for sorghum to rotate with it (why he wanted to meet Steve). Two equity investors, both bankers, one of which was from the US, were also there to look at investing in the tomato farm (equity is pretty much the only way to go when loans bring interest rates of 15-20% or more). It was really cool to see how business deals get done.

In Wa we went to several villages where TNS had organized focus groups, and I was blown away by the response. When they ask farmers to come out, boy do they clear their schedules. At our first group in Sabuli village, I counted at least 50 people. At the second group, we were late and they waited over two hours for us. I got to try pito (not too bad), the local brew made from fermented sorghum. They were really talkative too. Person after person kept saying the same thing: We have to have this program. The guaranteed buyer (in Guinness) and bulk payment is key. Explained outgrower Francis Vuurong, “And these school fees – I have three brothers in secondary school. Now, with this project, when you get the money you immediately just go to pay the fee, and then you are free, waiting for the next year.” With bulk payments they can do something substantial instead of spending it bit by bit on things like pito as they wait for the price to rise.

TechnoServe has also made available over $3 million of credit through a microfinance organization. This has allowed bigger farmers to buy tractors and provide fertilizers and plowing services on credit to the outgrowers, who sell their sorghum to the bigger farmers who in turn sell to Guinness. Says nucleus farmer Augustine Sandow,“With [the tractor], I have now increased the acreage on my own. Initially, I could farm maybe 10 acres, 20 acres, but now I farm up to 100 acres on my own…And I’ve got workers under me who are paid monthly, men and women.” I made a comment about the credit being provided in the form of inputs, not cash directly to the men. Steve and the women joked that the men would just go and buy another wife. All the men laughed. They knew it was true.

Needless to say, I've been pretty impressed with the project thus far. I'll explain exactly why in the next post, but I'll also talk about the major failing of the program. As this project is ending next March, I'm preparing this report as a guide for what the next steps are Guinness meets with TNS and other stakeholders (I hate that word) later this fall. How this major failing fits into that is pretty important.

Absurdity in Ada Foah

This post has been a long time coming and mostly concerns one particular weekend adventure, rather than an attempt to say something smart about poverty...maybe I'll work something in to justify its existence. On a recent weekend I loaded a tro-tro to Ada Foah, a beachy place two hours east of Accra. I traveled with five Germans, only two of which I knew (and not very well...that's the nature of traveling), so you can imagine how disconcerted they were when a tall, goofy American showed up sporting board shorts, a Stars and Stripes bandanna, and a bright yellow Barack Obama family (yes, the First Family) sleeveless shirt. Oh yea, it was game time.

The occasion was a festival of some sort, and while we never really found out what the purpose was, there were cold drinks, food everywhere, jamming rap music, and as an added bonus people were hoisting the village chiefs up in chairs. It didn't really matter.

Another thing big crowd events bring is pick pocketers, and like most foreigners I'm sure I appear to be sweating dollar bills. It happened when I was taking a picture of the ceremony with my right hand. I felt a slight tug on my right pocket. That doesn't feel natural. I looked down to find a hand halfway into my pocket, and quickly connected it to the person to which it belonged. Without thinking I shoved him almost to the ground. Having been robbed and nearly robbed on multiple occasions over the course of my trip, I had a sudden urge to take out all my aggression on this one punk kid. It wasn't necessary. After finding out what had happened, the crowd, feeling extremely shamed, took out some kind of beating on this kid. Then they dragged him over to the cops. Meanwhile, Julian, one of the Germans I was with, just realized his camera was gone. Apparently it was a group effort.

I was asked to join in the police vehicle with Julian, another German friend, 10 heavily armored Ghanaian police (looked like a riot squad), and the kid who was now pleading his innocence to me, literally in tears. Oh, and this was after those police had roughed the kid up.At the police station they stripped the kid down to his boxers and threw him in jail, pretty much no questions asked. Oh, and this was after these police had roughed him up– slapping, hair yanking, and shoving included.

Two interesting things came out of this. First, there was an overwhelming sense of shame among the Ghanaian people that one of their own would steal. This was as opposed to Mozambique where, having been nearly pickpocketed during the middle of the day on more than one occasion, no one batted an eye. Secondly, the police just seemed like they wanted to assert their authority, show they had power. They didn’t even take the time to get straight that the kid had tried to rob me, not actually robbed Julian. They didn’t care. In Africa and most third-world countries, I’ve become very aware of the need for people with power and wealth to flout it. It doesn’t seem to be as prominent in the States, where many more people have it.

And I can’t talk about robberies without the recent rash of incidents. My friend is now heading home to Canada after multiple robberies (cellphone, purse, laptop, etc.) and sexual assault. My flatmate and her friend had a machete put to one of their throats by a group of guys on motorcycles, which resulted in the loss of everything they were carrying. And these machete-motorcycle robberies have been happening a lot lately.

We told the cops to let the kid go in a little while – he’d learned his lesson. The whole pickpocket incident didn’t really bother me, and it was quickly in the past when I was called on-stage to a Coca-Cola promotion. They said they wanted me to say something about Ghana and Coke, easy enough.

Well that quickly escalated into a dance-off against Julian with two rando Ghanaian girls who were clearly excited to be booty dancing with white boys. This was not in the contract. My attitude for on-stage dancing is a lot like that for karaoke – white boys can’t dance, so let’s not try (my German friend in the crowd actually overheard a local rhetorically ask “Do no white people know how to dance?”).

So instead of trying to look like a passionate first-round American Idol contestant who was clearly riding the misguided encouragement of his or friends, I tried to be silly and energetic (not hard), and just get the crowd into it. They got into it for sure (see crowd reaction pic), but when it came time to voting they weren’t picking up what I was putting down. Julian won the honor of “best of the worst” and an epically annoying Coca-Cola vuvuzela. Thank God I didn’t win that.

I have the full movies of the dance-offs, but I'm saving my last shreds of dignity by withholding this evidence.

That night brought more shenanigans which I won’t go into here and all in all it was a solid weekend, culminating in an entire tro-tro filled with whities headed nonstop back to Accra the next morning. Like most of my weekend endeavors, I was left with lots of memories in stow and little of my reputation still intact.

Microfranchising: Depth and Breadth in Development, Pt. II of II

(this might make a bit more sense if you read the previous post first)

Getting on with it, one way I like to think of development is in terms of breadth – how many people it can reach; and depth – how much it can really impact the poor at the ground level. Grassroots or bottom-up approaches generally have impacts that are pretty profound on a limited number of people. One organization with which I worked – Ashraya Initiative for Children (AIC) – touches 12 children in its orphanage and another 200 in its educational and health outreach. They are doing amazing things in the lives of these 12 kids and doing much good for the others, but is this really changing the face of poverty in a country where 450 million live on less than $1.25 a day? You need a lot of AICs. A lot.

On the other hand you have top-down approaches, which tend to reach many more people but individually aren’t as impactful. A CLUSA management director explained the top-down push and resulting dilemma when we chatted last December: “A lot of donors are pushing us and myself included, and they said ‘Steve we need 50,000 farmers.’ ‘Well what can I do with 50,000 farmers? Yea I can make a little bit of an impact, but really, if Rob goes there, he can’t actually see it.’” This was contrasted to another NGO which I won’t name, who’d been there for 10 years and had gone pretty much nowhere with the traditional top-down approach – it was, in his words, “doing everything and nothing at the same time.” If you're trying to think in terms of government top-down, think of liberalizing trade between two countries, which may make prices slightly cheaper or products more available to all locals throughout the country, for example, but it’s not going to be hugely detectable per person.

This is one reason I like microfranchising. It has a wide-reach business approach that directly puts money in the pockets of the poor. In Ghana, FanMilk employs 7,000+ agents currently, and the company is also operating in Nigeria, Cote d’Ivore, Burkina Faso, Togo, and Benin. And this is just 7,000 at this given moment – the company has been operating over 40 years, with agent employment averaging eight years. This is all profit-driven: It has cost you, the Western taxpayer, nothing.

Microfranchising also works well for development for another main reason. The poor lack basic education and are, I’ve come to believe, generally uncreative. Expecting them to design and manage a profitable business is pretty unrealistic. For someone who is just trying to sustain oneself, I don’t think this should come as a surprise. I saw this with microfinance in Bangladesh – with the small-size loan groups, you see a lot of reselling. There wasn’t much value-added. Microfranchising takes the guesswork out of it.

So am I bashing microfinance? Only partly, because it’s a bit like comparing apples and oranges. Microfranchises and microfinance institutions (MFIs) are two different concepts. An MFI is more like the franchisor in the microfranchising approach – it’s the central business unit. The microfranchise is more like group lending in the microfinance approach in that it’s the distribution channel for the products – ice cream and loans in this post, respectively. In this way, I think they are both quite effective. Yet, coincidentally they both usually result in microbusinesses, and this is where I think microfranchising has the upper hand. With microcredit, rural villagers are, as I already noted, not adding much value and not able to take advantage of scale economies. They are producing a very inefficient product, and often diverting resources (credit) away from more appropriate SMEs. At the same time, a microfrachising approach is very scalable or easily replicated, though the MFI’s microbusinesses aren’t (though the lending is…so again I’m comparing apples to oranges).

There’s a lot more to microfranchising, and I’m hoping to look into it more here since there are a number microfrachise schemes operating, like CareShops, but I’ll spare you the details and only suggest that if you’re in NYC, try to get your hands on that FanYo.

Microfranchising: Depth and Breadth in Development, Pt. I of II

“One problem with development is that you have to figure out what’s your focus. Do you want to work with a million farmers or do you want to work with a thousand farmers and get it right?”

--CLUSA Mozambique management official, during a conversation last December

Meet Kwame. For the past three months on his summer school break, he's been spending his days, from about 7:00 or 8:00 in the morning until sometimes as late as 9:00pm, selling frosty yogurt, flavored ice, ice cream, and other refreshing cold items (Tampico, below) which sell well (I can attest) in the brutal Ghanaian heat.

What’s different about Kwame than other street hawkers is that he’s selling a branded item. These refreshments are produced by FanMilk, a Dutch-founded Nigerian company. FanMilk recruits the poor to sell their goods to thirsty guys like me, pretty much anywhere hilarious English is spoken in Ghana...which is everywhere (post coming soon). They’re dispatched on bicycles or with a walking cart, like Kwame, and are always honking their bike horns to get attention (in fact, I can hear one as I type this). Kwame said he can earn up to 10 GHC (~$7) in a day, but had to deposit a down payment of 30 GHC to as collateral against the cart. His brother helped him with this. And all franchisees are required to save 10% of their profit, to be returned to them when leaving the company. You can probably imagine how this extra money is helping himself, his education, and/or his family in pretty tangible way.

FanMilk is a for-profit business that uses the conceptof microfranchising – somewhat like McDonald’s, but for the little guys. It uses pre-prepared business templates that allow it to scale quickly. For Kwame, he didn’t have to think about which products to sell, how to distribute the product, or what price to charge. But, he’s responsible for running his own business – he knows how many items he needs to sell to break even and has a selling strategy to accomplish this (e.g. where to take his cart and when?).

I finished my last post before the caveat post by saying I was going to talk about a development approach that’s pretty near the junction of top-down and bottom-up development approaches. I was misleading – rather I think it’s an approach which has results that correlate well with results of top-down and bottom-up approaches simultaneously. It’s the end, not the means. I've broken it down so as not to strain your eyes - I'll get into it next post.

A Response: Is Top-Down Development the Answer?

I was planning to talk in my next post about an approach that I think sits at the cross hairs of top-down/bottom-up. But, the provoking comments and emails on the last post proved to be a heavy helping of mind fodder, it got me to typin’, and eventually the response took a life of its own like my tomatoes in the back of my fridge. Shame...tomatoes are expensive here in Ghana.

To sum up the comments on the last post: Do I buy top-down approaches to poverty alleviation?

The post takes a one-sided perspective, I suppose, to play devil's advocate. Perhaps killing the suspense (I know you were on the edge of your seats), I’ll go ahed and tell you that I buy Kofi's argument, but only conditionally that it is one component of a broader arsenal of poverty alleviation tools, and should be paired with bottom-up methods.

There have been some successes of top-down approaches to development, aid-driven or not. To give a couple examples, China's SEZs and big government initiatives have made substantial inroads, though inequality is staggering and widening (however this is generally what we see when countries become more capitalistic - see Russia). “Poor” in China is not the same as “poor” in Africa – I’ve found this out when visiting villages in China and digging deep to see what injustices the government had done and how overwhelming their poverty was, coming back mostly empty-handed. And I noted Ghana's success with the banking sector as another example.

HOWEVER, I think Jes and Thomas, the commenters, are right too – top-down approaches (talking aid now; I'll get to business separately) have overwhelmingly failed to distribute wealth evenly. But I think, at least for the big aid side, it's because they've been sending the wrong incentives. What I didn’t tell you about Ghana’s success story was that it came after 19 adjustment loans (loans based on policy conditionalities) from the World Bank/IMF tag team. Adjustment loans were based on governments promising to change, rather than a proven track record. Thus, the worse a country’s policies – which you could see in high inflation rates, high black market premium (manipulation of exchange rate), etc. – the more money it received. I’m not saying give the money to rich countries, but rather tie the aid to the track record instead of promises to change (fortunately, this is starting to happen).

And, the entire incentive system of donor organizations is misguided – how many industries are there in which your goal is work yourself out of a job? As I realized after meeting with a World Food Program director to discuss the extension of WFP’s support in northern Mozambique, the people deciding to continue the NGO programs, at the end of the day, are mostly the same people whose jobs are at stake.

Looking at top-down business aside from top-down aid, I think it only gets you halfway. Providing income and job security is where big business can thrive in poverty alleviation, but simply having a low-wage job doesn’t ensure that your family can escape the poverty cycle.

Bangladesh has been largely transformed by the textile industry, which arrived when foreign investment by South Korea’s Daewoo started up one plant in 1980. Now the textile industry employs 3.5 million people and accounts for 80% of the country’s exports. When I was staying in Dhana’s industrial area, I’d watch every day as women in their colorful sarees would head to work, and I even visited one of the factories (and got kicked out when they thought I was asking too many questions). When I went into the slums for interviews, I found that textile jobs were helping, but workers weren’t escaping the cycle.

This is where there are opportunities for grassroots NGOs and bottom-up approaches. Bottom-up approaches, by definition, build on local capabilities rather than trying to overcome their weaknesses. Grassroots organizations can provide things that normally aren’t offered to the poor, like access to credit, which uses the local characteristic of the poor placing a high value on reputation. And big businesses, geographically speaking, don’t reach everyone. People flooded to Dhaka – the textile industry and other job opportunities weren’t in the villages. This is where NGOs can do things like helping develop village enterprises or cottage industries, in which they help the poor make and market handicrafts for high-end markets.

I don’t think this answer of “both” comes as a surprise to many people reading this. It’s pretty clear that there’s no single answer to poverty alleviation, especially with the poor at varying rungs of the economic ladder and countries in varying stages of development. Again, I appreciate the comments and emails – it keeps me thinking. If only getting side-tracked could always be this productive!

Which Came First: the Economy or the Education?

Most of the people reading this blog, including its author, probably think education is pretty important in battling poverty. It’s the first thing many people list when talking about solutions to poverty. I recently had the chance to have lunch with Vandy grad Kofi Dadzi, who made some compelling arguments about education, big aid NGOs, and how you make a country grow.

Kofi is an incredibly sharp and fascinating guy. A computer science graduate and former Dell employee, he and a friend co-founded the Ghanaian tech company Rancard Solutions that links international media companies to telecom companies in Ghana. They create the platform that allows things like those annoying ESPN text message updates that my friend Justin gets every time Derek Jeter so much as yawns. It’s a pretty impressive company he’s built. Eventually we got talking about how to solve poverty. Education is like the flour in the cake, right? – it’s the main ingredient. The more educated a person is, the more empowered (us poverty people love that word) he or she is. However, Kofi echoed a view I’ve heard before when he said, “Education doesn’t matter unless you have the economy that can absorb the newly educated workforce.” What he’s basically saying is pretty important: if we’re talking about priorities, let’s forget about education and just get this economy humming.

Once there are jobs opportunities, people will demand education. In Zimbabwe right now, I wouldn’t say educating oneself is pointless, but when you don’t know what policies will be different each day when you get out of bed, how compelled will you be to invest in the future, to demand education? And even if you think someone would be motivated to get educated to leave the country for jobs, well, that furthers the point.

So how do you get a country to grow? Kofi thinks NGOs for the most part have been prohibiting Ghana from developing its own capacity. All of NGOs’ nice little “micro” ideas – a word donors round the world love to hear – just aren’t going to get a country’s economic engines going. He thinks bigger. What Ghana needs are big industries, or pro-business reform like the liberalization of Ghana’s banking sector that saw the number of banks increase from 7 to 143. The proliferation of banks and inflow of capital required banks to lend (at more competitive rates) to survive, in turn spurring business activity. In a relatively natural progression of growth, these domestic businesses grow, saturate the local market, and then look outside the country for more opportunities. This brings that outside money back home, like Kofi’s company is now trying to do in Nigeria. Helping companies enter foreign markets – like the Ghanaian government didn’t do for him in Nigeria – is another way to foster business growth. With all this business growth and new job opportunities, people want to get educated. And fostering business growth, I argued, is what some NGOs (like TechnoServe) are helping to do. NGOs aren’t pointless. I think it was a point taken.

Let’s go back to this assumption that growth comes before education. Is this really how it is? From 1960 to 1999, economist William Easterly notes in The Elusive Quest for Growth, there was an educational explosion from 1960 to 1990. Primary education reached 100% in half the world’s countries by 1990, compared to only 28% of the countries in 1960. Meanwhile, secondary education quadrupled from 13% to 45% over the same years. Studies conducted have found no association between education growth and economic growth per capita. The graph pictured bears this out pretty clearly. But there is a relationship between initial schooling and subsequent economic growth, perhaps because if you know growth is going to be robust in the future, the skilled wage will be growing faster, and so people have incentives to invest in education. Easterly notes, “The magnitude of the relationship between initial schooling and subsequent growth is more consistent with the story of growth causing schooling rather than schooling growth.” Plus, if a country is poor because of lack of skills, the few skilled workers should be earning a lot. But then why are all the educated Indians going to the US (this trend is not as solid as before)? Wages for the skilled are much higher in the US than India. It doesn’t pay to be a big fish in a little pond.

Education is good, but only under the right circumstances. There needs to be job opportunities. The way Kofi explains it, getting this going sounds more top-down. My Ghanaian colleague at TechnoServe agrees. But what about bottom-up/grassroots approaches? In the next post I’ll talk about an approach I think hits them both.