Dust and Dignity
A couple of weeks ago, I had the opportunity to spend the week with a group of Acumen Fund partners in Nairobi, Kenya. During the course of the week, we visited many of Acumen’s investments and met with their local team. I’ve been an investor and partner in Acumen Fund for over three years and recently joined their Advisory Council.
We cut through the dust, bouncing along on the copper earth on what Kenya calls a road. We are on our way to an ophthalmological outreach camp in Karatina, a couple hours north of Nairobi. The camp is run by Dr. Kibata, the founder of UHEAL. Dr. Kibata grew up on a small farm and watched his father go blind due to diabetic retinopathy. Diabetes is an enormous problem in parts of East Africa and India and untreated can lead to blindness. Dr. Kibata’s core clinic is located in Nairobi, but he has conducted a handful of outreach camps to reach patients in the rural areas. Today we are visiting one such camp. We pull up and find hundreds of patients waiting outside on plastic chairs to see the doctor. They’ve heard about the camp through word of mouth or radio advertisements and have come from the surrounding villages. Today he’ll see over 200 patients, about 10% of whom will need laser surgery to prevent blindness. The patients work their way through an eye exam (conducted in a dark room with sheets hanging on the windows to block out the sun), blood pressure measurement, and blood testing, and lastly they see the doctor. Dr. Kibata is the only doctor in the region who can perform these surgeries, and there is one functioning laser in the country. He operates on a cross-subsidy model where patients in Nairobi who can afford the surgery help underwrite the costs of the outreach camp in rural areas. With the work today, he’ll just break even. It’s early days, but there is a clear path for enormous impact. And soon, he’ll be able to help even more people as Acumen’s investment will help him purchase a laser and fit it into a van to create a mobile clinic for UHEAL.
In downtown Nairobi, we see a similar business model. David Kuria, the founder of Ecotact, a public sanitation company, shows us his Iko Toilet, a pay-for-use toilet. David, the designer and an architect by training, is addressing the dangerous lack of public sanitation in the slums of Kenya. Like Dr. Kibata, he relies on a cross-subsidy model where the downtown toilets in commercial districts help underwrite the cost of toilets in the slums. Ecotact has 26 toilets in operation with over 4 million uses last year, and customers pay 5 shillings (about 7 cents) per use. We visit a facility in the downtown business district, and business is booming. This unit leases out space to a small refreshment store and a shoeshine operation off the back. It’s a beautiful day, and there is a line for shoes to be shined. The toilet in the slum is less busy, but a steady stream of people flow through. It’s a hard problem—how do you convince someone to pay for something typically viewed as free (going to the bathroom) out of very limited income? David has a unique approach: make sanitation sexy. He’s had Miss Kenya, the vice president, and various other Kenyan celebrities visit his facilities. Still, it’s an uphill battle—the fact that the business even exists shines a light on the government’s inability to provide basic services, and David has to negotiate the land lease with the government each time he opens a new facility.
In Kibera, we meet other aspiring entrepreneurs. There is a youth group that has built a greenhouse on what was previously a trash pile; their tomatoes are just starting to sprout. And they’ve installed a pay-for-use toilet similar to Ecotact’s—success brings competition, after all. The youth group meets in a structure on the edge of a ravine where the railroad to Uganda comes through. Kibera sits on both sides of these tracks. The railroad technically owns 100 meters of land on each side and could reclaim it at anytime. We visit Hot Sun Films, a film school and production company in the middle of Kibera. Through the gate, crammed into a small room, we find iMacs and a group of young directors brimming with excitement. Their latest movie, Together Supreme, is being shown at the Vancouver International Film Festival. We leave as the prayer bells begin to ring, passing a bright red wall painted with Enjoy a Coca-Cola. It seems iMacs and Cokes are universal.
We find out at the airport that our flight to Kitale is a couple hours late, and we eventually leave at 2:30pm on our scheduled 11:30am flight, necessitating several calls to reschedule an entire afternoon of visits. On our way to western Kenya near the border of Uganda, the dual-prop plane sways with the currents as we climb. The landscape changes from dry arid plains to green rolling hills dotted with teepees of drying corn. It’s harvest time, and farmers are busy. As we pull off the airstrip, school kids are waiting in uniform. They come out to watch the one daily flight land. After lunch, we head off to see an agricultural finance organization that makes loans for agricultural assets.
The organization has over 8,000 members, over half of whom are women, and on our visit, we meet a community of borrowers. A small group has formed in order to get access to capital. A handful of members can have a loan out at any given time, and once it is repaid, other members request access. Loans are for a cow, a chicken coop, and the group asks about getting a loan for a milk chiller that they all could use collectively. The committee does the due diligence on each member, who first must be active in the group for a number of months, then raise a down payment, pass a house visit, and finally submit a formal project with detailed plans justifying the loan amount requested. The group is led by a 71-year-old woman as sharp as ever. If she was in charge of due diligence at the banks here, we wouldn’t have had a financial crisis. The group structure inherently creates accountability, and the loans go to assets (livestock and equipment) that pay real yields in the form of eggs and milk.
From there, we head off to visit test plots of hybrid seeds developed and distributed by Western Seed Company. The farmers walk us through various plots, past corn taller than we are, and we’re trailed by kids excited to get their pictures taken. Western Seed makes a variety of seeds that have been selected based on the high elevation and water traits unique to the area. The seeds are more productive, but convincing farmers to change is hard business. Most farmers here farm a half acre to a hectare in total, so over the course of a lifetime, a farmer may make only 40 choices on what to plant, and the resulting harvest determines not only financial success but whether the family will have enough food for the year. Innovation in agriculture inevitably takes a long time because the feedback cycle is often measured in years. We head back to Kitale, passing a flipped truck on the highway—the roads are probably the most dangerous part of the trip. After a fantastic dinner by candlelight (power is out in Kitale), we head back to the Kitale Club, which is a relic from the past. You can imagine some fine British chaps exchanging big-game stories sitting around the fire. You can golf the beautiful 9-hole golf course if you don’t mind the monkeys on the course or the occasional cow wandering through.
The next day, Saleem Esmail, the founder and CEO of Western Seed, leads us on a tour of the Western Seed facility. Saleem is a fifth-generation Kenyan, a Muslim, and from Southeast Asia. He’s an inspiring entrepreneur, and you just want to follow him no matter where it leads. The last couple years, demand has outpaced supply, and Saleem needs to increase productivity. With help from an Acumen investment, he’ll do this by purchasing and cultivating his own land to grow seeds that are then processed at his facility. His alternative to Acumen’s investment is a loan at 16% from a local bank that demands 200% collateral made up of both assets and guarantees from the board. You can see what patient capital really means with Saleem. It takes him on average 3 years to convert a customer from the competitor’s seeds, he has to plan 2-3 years in advance to ensure he has the proper stock ready, the weather is always unpredictable, farmers frequently do not have enough fertilizer, and he has limited access to financing. But Saleem has a plan, and he’s as sharp as any CEO you’ve met. He talks about the need to put cashflow to work (if you can’t, he says, you’re stagnant), about how critical good people are (his team is incredible, and morale is high in the plant), and how they work 24 hours a day in shifts if needed to address a problem. I’m always so impressed by farmers—the job requires them to be incredible business people.
We head back to Nariobi and, over the balance of the week, see variety of companies. There’s d.Light, founded by Sam Goldman and Ned Tozun, that produces solar lanterns to replace kerosene. They’ve sold 350,000 lanterns already throughout Africa, India, and Southeast Asia. Sam’s mission is to eradicate kerosene, which kills well over a million people in the developing world every year, from both fire and indoor pollution. We learn of a fire earlier in the year from a spilled kerosene lamp that killed several girls in Tanzania, and Sam’s motivation for starting the company came years ago when a friend of his was badly burned in a similar fire. In Tanzania, d.Light is getting traction through schools as students receive a $6 lantern to study with at night included in their school fees. The lamp runs on a 3w bulb, and newer versions have the ability to charge your cellphone. Often people have to travel 2 hours to charge their phones on car batteries, so this is a great improvement. Still, the cost is relatively high, and adoption is somewhat slow, but d.Light is making steady progress.
We visit the factories of Insta, a company with a license agreement to make a calorically dense and nutritionally rich nut-paste-based product for distribution through various aid agencies. The product is often prescribed as medicine to get HIV patients’ BMIs high enough to go on antivirals. Insta is the model globally and the leader in the space, but still the work is complicated. Payments are irregular and the reliability of supplies (peanuts, milk) volatile. Acumen recently provided working capital to move forward on a batch of the product. Still, despite the critical importance of the nutritional supplement to those most in need, hard work lies ahead.
We visit Botanical Extracts EPZ Limited (BEEPZ). From a locally grown plant, BEEPZ extracts artemisinin, which is then used in antimalaria medicine. Hailed by Thomas Friedman in the New York Times a number of years ago, the company has had a tough go. Pricing for the drugs has been volatile and extraction efficiency hard to achieve. BEEPZ is running a couple days a week now, producing in limited quantities.
We end the day on a positive note at a housing development built by Jamii Bora, a local microfinance bank with 170,000 members, making it the largest in Kenya. The development is part of a plan to provide housing and community to people currently living in the slums. A group of women greet us as we arrive, and after some singing and dancing (in which we are included), they show us their work. They’ve made literally millions of bricks and roof tiles for homes that will be constructed. We visit the local school, the well, the water-treatment ponds, the clinic, and their homes. The woman are so excited about and proud of the development, and it’s amazing to think how far they’ve come, from the slums we visited earlier in the week to two-bedroom houses with running water. People are moving in that day, and there’s a real sense of community that you can just feel.
I leave each business thinking just how complicated these problems are. They touch on behavioral economics, marketing, finance, public policy, ethics, technology, and education. The problems exist an environment with little physical infrastructure—poor roads constitute 40-50% of the cost to transport goods, and there are frequent power outages. The effects of climate change are being felt so directly that the conversation has shifted from mitigation to adaptation already. I worry about how little institutional and governmental support there is, thinking back to Dr. Kibata’s eye clinic, which, adding confusion to inefficiency, is regulated by the Ministry of Health and competes with organizations selling glasses, who are regulated by the Minister of Culture and Social Services, often with different plans and conflicting incentives. These businesses operate in a country with a life expectancy of 54.5 years. Each of these entrepreneurs is—and I say this intending only the highest praise—unreasonable, slightly crazy, and incredibly inspiring. It’s unreasonable people who create change. Whether it’s the 200 patients that UHEAL saw the day we were there, the 350,000 lanterns d.Light has sold, the 8,000 members of the agricultural finance organization, or the 1200 tons of seed Saleem will produce at Western Seed, each one is producing real, measurable change. While they all might not make it, there’s not one of them I wouldn’t be proud to be invested in.
This is what I love about Acumen—it backs local entrepreneurs to solve the hardest problems for the people most in need. If you can prove the model, the sector follows. There’s now $4 coming into these sectors for every $1 Acumen puts up. You realize that aid has become a business, and while intentions are good, there are vested interests and incumbents often all too concerned with protecting their own positions first and foremost. And in this well-intentioned world filled with white SUVs, Acumen gets dirty. Their people on the ground have a working relationship with each of their investments. These guys don’t presume to know the answers, but they know the process that leads to answers and the systems of accountability that increase the chances of success. The problems are complicated—if they were easy, they would have been solved a couple billion dollars ago—but Acumen is creating measurable, repeatable examples of success founded on the belief that people want dignity, not dependence.
This post originally appeared on Nate Laurell’s blog, New Frontier: Solutions for an Accelerating World, where he writes on energy and the application of markets to various social issues. Nate is a board member and advisor to several technology-driven financial firms and recently joined the Acumen Fund Global Advisory Board.