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AFRICAN DEVELOPMENT FOUNDATION (ADF). Nate Fields, CEO Africa Operations Creating the enabling environment for Diaspora-led investments: Prevailing investment opportunities and challenges in Africa Cape Town, South Africa Feb. 06-08, 2008. Overview of USADF. A U.S. Government foundation

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AFRICAN DEVELOPMENT FOUNDATION (ADF)

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AFRICAN DEVELOPMENTFOUNDATION (ADF)

Nate Fields, CEO Africa Operations

Creating the enabling environment for Diaspora-led investments: Prevailing investment opportunities and challenges in Africa

Cape Town, South Africa

Feb. 06-08, 2008


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Overview of USADF

  • A U.S. Government foundation

  • Began field operations in 1984

  • Responds to unsolicited proposals from small- and medium-sized businesses in Africa

  • and other community organizations

  • Budget from US Congress -- $30 million in FY 2008

  • Other funding from strategic partnerships in FY 2008

    • $13 million from 10 national governments and 1 MNC (Benin, Botswana, Cape Verde, Ghana, Guinea, Kano State in Nigeria, Mali, Rwanda, Tanzania, Uganda and Zambia).


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Unique SME investment model

  • Deep experience across many countries / sectors

  • Collaborate with local partners to deliver on the ground technical support on a day-to-day basis

  • Unique approach of requiring matching investments from African governments and/or corporations

  • Long history of successful strategic partnerships

  • Strong track record of innovation to create stronger SME successes

    • Exporter / processor linkages

    • Outgrower schemes

    • Supply chain linkages


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ADF’s Strategic Objective # 1: To stimulate economic growth, job creation and higher incomes within low income communities in Africa

  • Enhance growth, profitability and competitiveness of African-owned small and medium-sized enterprises

  • Expand production of high-value crops by small-scale farmers, value-added processing of agricultural products, and access to local and global markets

  • Promote SME involvement in extractive industry supply chains, infrastructure development and agricultural value chains

  • Develop community-based solutions to critical social and economic needs of marginalized communities and people


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Strategic Objective # 2: Expand local institutional and financial capacities to support and sustain enterprise development investments

  • Build world class business development services organizations services

  • Create renewable pools of local capital -- to fund small businesses and community initiatives

  • Forge strategic partnerships -- with African governments, other donor agencies, private investors and the private sector for joint funding and to significantly scale up programs

  • Document and disseminate information on program experiences, lessons learned, best practices, and successful business models


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Tangible Results Across Africa

Impacts on enterprises and on communities speak for themselves. Our results for 2006 investments include:

  • 46,533 jobs created

  • 21,540 women who directly benefited through jobs

  • $82.3 million gross revenues of USADF-assisted enterprises

  • $33.8 million value of export sales (2005)

  • $13 million cash commitment from African governments and corporations


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USADF-Guinea Alumina Corp Strategic Partnership

Program Overview

  • MOU signed in 2006

  • 5 year $10M USD fund to deliver community social and economic benefits

  • 2 components: SME linkages and community-based development

  • Widely recognized as a groundbreaking public-private partnership within the extractive industry


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USADF-Guinea Alumina Corp Strategic Partnership

  • Program Rationale

  • “ADF and GAC have agreed to cooperate in a mutual effort to support local communities and promote development of micro, small and medium scale enterprises in and around the bauxite mining zone of GAC in Guinea.

  • More specifically, the program will demonstrate an effective partnership and cooperation between ADF, a US public entity and GAC, a multinational private corporation, in the context of poverty alleviation in Guinea, a poor country of West Africa”


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USADF-GAC Program Investment Model

SME investments are recycled

  • Independent SME Linkages funding account (1:1 ADF and GAC Match)

  • Work against GAC’s target spending with local suppliers

  • Funds to be used in two ways: Enterprise Expansion Loans and Capacity Building Grants

SMEs

Capacity Building

Grants

Consulting

Training / Education

Technical Assistance

Joint Fund

1 to 1

ADF / GAC match

Enterprise Expansion

Loans

Working Capital

Capital Investments

Process Improvements

Assistance

Recycle Expansion Loans


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FOCUS OF SME INVESTMENTS

Community

Livelihoods

Construction

Operations

Local Consumer Economy

Construction: Fastest opportunity, provide technical assistance to local subs, strengthen national firms but require use of local workers / inputs

Operations: Invest in new skills and expansion of firms based in Conakry. In other cases, initially insource but spin off to local SMEs over time

Local Consumer Economy: Build consumer and business-services enterprises in and around the bauxite region

Community Livelihoods: Deliver local sources of income, generally ag-based, that create employment within the footprint of the mining activities


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SME - MNC Linkages Methodology

1. Investment

Strategy

2. SME Development

3. Link SME to MNC

4. Ensure SME Performance

  • Analyze MNC supply requirements

  • Survey community priorities

  • Conduct SME outreach

  • Prioritize sectors / spend categories

  • Assess SME capabilities in each sector / spend category

  • Define sector strategy:

  • Link only

  • Invest and link

  • Insource / spin off later

  • Formulate SME Investment and Linkage Roadmap

  • SME screening

  • Business plan development

  • Determine financing need

  • Capacity building grant (USADF EDI)

  • Pre-commercial expansion loan (USADF EEI)

  • Commercial loan / link to financial institution

  • Execute financing agreements / fund investments

  • Implement business plans

  • Supplier training in doing business w/ MNCs

  • Request for Proposal (RFP) response facilitation

  • Costing / pricing

  • Capacity planning

  • Working capital needs

  • Contracting support

  • Commitments / penalties

  • Link to legal assistance

  • Contract implementation

  • Production planning

  • Customer relationship management

  • Track enterprise performance

  • Quarterly financial reports

  • Measure against growth targets

  • Track supplier performance

  • Self reporting

  • MNC reporting

  • Intervene as necessary using proven turnaround capability

  • Facilitate additional market linkages


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Requirements GatheringConstruction Schedule Analysis

Sangaredi Alumina Refinery Schedule was analyzed with the following results:

  • Number of Projects: ~75

  • Number of Sub-Projects: ~188 (across all projects)

  • Project Phases: Engineering  Procurement  Construction Commissioning

  • Construction related activities command the most demand


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SME Capability Assessment

SMEs were methodically assessed using a comprehensive toolkit covering both subjective and quantitative attributes

Initial Assessment

Analysis

Analysis

SME

List

GAC

Needs

SME

Interview

SME

Site Visit

USADF SME Assessment Toolkit

SMEs were assessed and scored on the criteria below.


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Business appraisals

Business and strategic planning

Financial management and accounting

Product development

Operations improvements

Governance support

Managerial assistance & training

Access to improved technology

technical assistance

Fixed capital

Working capital

Quality assurance

Market studies

Marketing strategies

Market linkages

Business performance measurement

Monitoring and remediation

Evaluation & impact Assessments

Audits

Types of ADF SupportADF provides an integrated assistance package that may include


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Progress Update : December 2007

FY 2007 Results

  • Invested$1M USD in 6 SMEs

  • Sectors include:

  • Projected outputs:

  • Implement FY07 investments

    • $1.4M in SME investment

    • Sectors include:

    • Construction

    • Security

    • Food production

    • Uniforms

    • Maintenance services

    • 700 jobs

    • $2M in wage growth

    • > $10M in incremental revenue rowth

    FY 2008 Planning

    • Construction inputs (blocks / wood)

    • Professional services (PR, engineering services, consulting)

    • Maintenance services


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    Investment Size and Duration

    • Enterprise Expansion Investments typically range from $100,000 to $250,000 (may be larger in rare cases)

    • EEIs are for 5 years, but may extend longer

    • Operational Assistance Grant (OAG), to improve the capabilities of an enterprise not yet ready for an enterprise expansion investment

    • OAGs are 50% repayable for up to $100,000 over 1 to 2 years and may be followed by an application for an EEI.


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    Frozen and chilled Nile perch

    Fresh and processed rock lobster

    Dried paprika peppers

    Cured vanilla

    Beef products

    Fresh fruits and vegetables

    Solar-powered hearing aids

    Citronella tea bags

    Tie-dyed textiles

    Cattle and ostrich hides

    Cashews

    Dried pineapple

    Sugar

    Salt

    Traditional African foods

    Clothing

    Examples of Export Products From FY 2005 Projects


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    Recent Project Examples

    • Botswana Khama Rhino Sanctuary – $201,000 for construction of two chalets and a restaurant at this ecotourism facility plus training, TA, and working capital


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    Recent Project Examples

    • Cape Verde Tipografia -- $245,000 to enable a printing shop to produce full-color advertising materials, magazines, and newspapers and treat its wastewater effectively. ADF funding helped them obtain a commercial bank loan for a new building and ADF is helping them access a soft loan from another donor for equipment.


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    Recent Project Examples

    • Ghana Ernimich --$248,000 for expanded production of traditional ethnic foods sold to specialized shops and grocery stores in the US under the brand, Nina Foods. ADF will provide working capital, vehicles, market development support (website and implementation of international quality standards), training, and improved management systems


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    Recent Project Examples

    • Ghana Integrated Tamale Fruit Co. (ITFC) – 2 projects to help outgrowers establish 200 2-acre plots of organic mangoes with tractor leasing, irrigation systems, farming tools and inputs, and extension services. ITFC will provide land to be owned by the outgrowers and market the produce, but farmers will have the right to sell to other buyers.


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    Recent Project Examples

    • Ghana Woodhouse --$250,000 for the only large-scale, modern manufacturer of furniture for schools in Ghana. The company will buy new equipment, a generator, hardware and software for computer-assisted design, and transport vehicles


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    Recent Project Examples

    • Mali Benkadi Laundry -- $249,000 to establish a modern laundry that will employ women with obstetric fistulas. Profits will enable the Benkadi Association to increase medical treatment and its community outreach and education for this medical condition

    • Namibia Rudro – $268,000 for a leveraged buy-out by the employees of a textile company that had been owned by a non-indigenous Namibian


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    Examples of Project Impact

    • Tanzania Mtibwa Sugar scaled up its production through its support for the production of small-scale sugarcane outgrowers. Funded in FY 2002, Mtibwa Sugar has increased its gross export revenues from $1.188 million in FY 2002 to $5.034 million in FY 2005.


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    Examples of Project Impact

    • Uganda’s Kelvin Shaun, a hydrated lime processing business, received a US$250,000 grant in FY 2005 to expand production for import substitution. ADF funding supported construction of new production facilities and the purchase of vehicles, equipment, and inputs. Kelvin Shaun has secured a contract to supply a construction company with 200 metric tons of hydrated lime valued at US$259,500. The company’s net income has increased 17 fold.


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    Examplesof Project Impact

    • ADF support enabled Botswana Godisa Technologies to produce low-cost hearing aids for people in developing countries using parts purchased in bulk from a British company. A similar hearing aid in Europe costs 4 times as much.

    • ADF also supported the design and production of solar chargers for the hearing aid batteries. Godisa won a first-place award for international product design from the Design Institute of South Africa.

    • Between January 2002 and September 2005, Godisa sold over 2,750 hearing aids and chargers.

    • Godisa is also helping NGOs in other countries begin production of the hearing aids and chargers. Godisa recovers its expenses for helping to establish the other businesses from donor or foreign government funding, but does not accept a franchise fee or royalties as long as the manufacturer 1) is an NGO, 2) hires the disabled, and 3) has a qualified business manager.

    • By early 2006, replications are expected to be underway in Brazil, Jordan, and the Philippines. Donor funds are also being sought for replications in Pakistan, the Dominican Republic, and Mexico.


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    How ADF Measures Its Performance (1)

    1. Revenue Growth

    Cumulative increase in the sales of enterprise development projects over their extrapolated baseline levels during the project period and the 3 years following the grant expiration date

    2. Investment Multiplier

    For every dollar disbursed to enterprise development projects that were active or have closed within the past 3 years, the cumulative increase in their gross revenues (sales) over the extrapolated baseline level during the project period and the 3 years following the grant expiration date

    3. Profitability

    Percent of active enterprise development projects that have achieved a positive net income before income taxes, depreciation, and CRG contributions in the reporting year by the end of their third year or earlier


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    How ADF Measures Its Performance (2)

    4. Community Reinvestment

    Percent of active enterprise development projects that are current in meeting their cumulative CRG pledges from the end of their third year and onward

    5. Sustainability

    Percent of completed enterprise development projects or social development projects that are still operating during the 3 years following expiration of the ADF investment

    6. Partnership Contributions

    Funds received from strategic partnerships during the year as a percentage of new ADF obligations for development projects


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    How ADF Measures Its Performance (3)

    7.Follow-on Financing

    Cumulative non-ADF loans, grants, or equity investments received by active and closed projects from the ADF grant start date through the 3 years following the grant expiration date

    8. Overhead Rate

    ADF’s non-program costs as a percentage of (USG appropriations + non-USG funding contributions received).

    9. Disbursement Efficiency Median time required between the ADF Country Representative’s receipt of a grant disbursement request from the partner organization and ADF transmittal of the funds


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