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A program proposed by the World Institute for Leadership and Management in Africa August 2012

Preparing for Impactful Entrepreneurship in Africa Effective Leadership of Environmentally and Socially Sustainable Business. A program proposed by the World Institute for Leadership and Management in Africa August 2012. Who I Am, What I Want. “…he was an icon…”

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A program proposed by the World Institute for Leadership and Management in Africa August 2012

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  1. Preparing for Impactful Entrepreneurship in AfricaEffective Leadership of Environmentally and Socially Sustainable Business A program proposed by the World Institute for Leadership and Management in Africa August 2012

  2. Who I Am, What I Want “…he was an icon…” -World Bank colleague Vikram Nehru Definition of icon: “…an object of uncritical devotion…” -Meriam Webster “Not an icon, just a dreamer” -Catherine Armington (wife of 50 years) “Not a dreamer, a relentless visionary, with a heart, in it to change the world for the better” -protegee Christina Adamova “I want your advice (with needed criticism)” -Paul Armington, president of WILMA

  3. Introducing Sustainable Growth Strategy Limited Liability Company (LLC) • These gentlemen need a better connection with “social entrepreneurs” to leverage their “impact investment” for sustainable growth • They need a better growth strategy and an agency to implement it • Our “MPE Model” aims to supply this need • In principle, can it succeed?

  4. Initial Pilot Region: East Africa Our target countries in East Africa We include the following countries in our ‘East Africa’ designation: Burundi, Kenya, Rwanda, Tanzania & Uganda

  5. The First Application of the Model

  6. The Value Proposition • Sustainable Growth Strategy LLC (SGS) will be the bridge between micro-creditfinance and venture capital through bottom-up, financially sustainable investment in target communities in East Africa by 2020 • SGS will build a new business incubation service that prepares capable entrepreneurs with worthy ideas to cross this value-adding bridge to become bankable SMEs • SGS will change the way growth is generated in East Africa through development of long-term sustainable outcomes

  7. How Micro Private Equity Works: The SGS Business Model • SGS invests in marketable securities for best returns in emerging markets • Profits are invested in the equity of early-stage but highly profitable companies that build rural business infrastructure and that harvest opportunities for profit that this infrastructure creates • SGS minority ownership (in the shares of its investee companies) is levered by co-investment with local (and international) strategic partners

  8. The Power of Linkages • SGS co-invests with local resource providers…which • … empowers local investors • … builds capacity for entrepreneurship and startups, and • … creates specialized intermediaries called Business Incubation Partners (BIPs) More on BIPs later!

  9. Model Structure: The Private Investment Account • The SGS Investment Manager manages a Private Investment Account, invested with financial leverage in marketable securities of major companies best positioned to profit from expected high growth in Africa and other emerging markets • The Investment Manager and his team have the special knowledge of East Africa to warrant expectations of a long-run ROI on this Private Investment Account of at least 20% p.a. net. • A portion of this profit is disbursed annually to build a Private Equity Account, the rest being reinvested to grow the senior Account

  10. …and the Private Equity Account • This Account invests in minority equity positions in high-growth companies selected by the SGS criteria and investment process • The Investment Manager has full fiduciary responsibility to the LLC’s members as the investors in this Account

  11. MPE Investments: Rural Infrastructure SGS will invest in companies that supply critical business infrastructure to historically-underserved areas. Here are some key sectors for such investment: • Roads • Information and Communications Technology • Energy for Electric Power, Transport, Home and Industry • Agricultural Infrastructure • Water • Market Centers • Storage • Health

  12. Water Is Basic: Building Ahakishaka Waterworks

  13. MPE Investments: Linked Business Opportunities SGS will invest in innovative businesses whose profits are raised by strategically-sequenced investments in rural infrastructure. Here are some key sectors for such investments: • Micro-irrigation technologies • Scalable, sustainable fish farming • Technology and logistics for frozen foods • Tourist facilities • Biofuel for village electrification • Scalable solar technologies for off-grid markets • Waste-to-energy conversion • Construction with local materials and design

  14. Investing in Synergy • The MPE Model endorses the general argument for investing in linked business clusters • For example, the Government of Tanzania’s Compact with the Millennium Challenge Corporation is investing nationally in big water, energy, and transport projects • So could SGS, using MPE in Ahakishaka, maximizing synergies for local impact and leveraging the results of the Compact

  15. Some Ahakishaka Enterprises technology for clean development meat and biogas production agricultural innovation

  16. Attributes of MPE Investee Companies • Female leadership and ownership (like the woman out front, photo below) • Links to the “real economies”: selling to the base of the pyramid • Control of the supply chain: building a holistic resource profile • Leadership by CEOs who try to affect their policy environment… • and that do not depend on special relationships with government Women in Ahakishaka

  17. The Investment Process (details in the Briefing Book) • Identification • Community engagement • Preparation • Appraisal • Negotiation • Approval • Supervision • Exit

  18. Results • MPE investments impact the local economy directly • The MPE model is replicable and scalable • The area of impact will tend to spread organically through BIPs • MPE investments link forwardto: --education --health --youth ready for leadership of social enterprise --women ready for entrepreneurship beyond microfinance --equality of access to knowledge --empowerment for advocacy Signs of progress (next photo): learning, celebrating, singing

  19. Strategic Partners of SGS • Local companies specialized in particular sectors… • …will enhance and protect SGS investments… • …and provide co-investment along with know-how…. • …to profit from fast-growing markets while adding social and environmental value

  20. Business Incubation Partners (BIPs) • Business Incubation Partners (BIPs) are intermediary companies that connect venture capital and its impact investors at the top of the pyramid with social entrepreneurs and microcredit users at its base • BIPs serve enterprises that are early in their learning curve, from the blueprint stage onward for many years • BIPs provide comprehensive help—a one-stop local shop for “intellectual capital” that is expected to earn a return eventually • Their technical assistance raises expected returns to impact investors and leverages enterprise philanthropy • BIPs are for-benefit businesses (for profit but not for dividend) structured as joint ventures of local-area development companies and a sponsoring partner (or consortium) having an interest in MPE finance

  21. BIP Finance • Operating cash for startup of BIPs is provided by the sponsoring JV partner (or consortium) • BIPs earn a percentage of new MPE investments for which they are responsible • BIPs contract with SGS and its Affiliates to receive fees for essential management services (“hi-touch” to complement “hi-tech”) • BIPs sell services at cost needed by their MPE-investee clients • After BIPs repay any loans, operating surpluses are set to grow as BIPs scale up their portfolios of bankable clients • These surpluses represent a potential return to the BIP owners

  22. A New Role for DFIs • Development Finance Institutions should encourage client governments to allocate a portion of their required counterpart finance of DFI loans/grants to the startup capitalization of Business Incubation Partners • In this way DFIs will increase the impact of their operations on growth in low-income countries at no marginal cost to taxpayers • The sources of this so-allocated counterpart finance may be private philanthropy and low-cost loans • Thus private money adds value to given flows of public assistance

  23. Summary Diagram of the MPE Model

  24. “If familiarity were useful, water wouldn’t cook fish” -- Cameroon Strategic Growth Strategy LLCC Contact Paul Armington President of WILMA 3031 Macomb Street NW Washington D.C. 20008, USA parmington@wilma.us www.wilma.us

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