Tuesday, July 8, 2008

Lighting Africa Development Marketplace Conference

May 5th 2008

Accra, Ghana is so very hot. When we land at 9PM and walk off the plane it felt like sticking your head into the proverbial oven.  However, the excitement at participating in this conference combined with 14 hours of drinking beer and watching endless movies on a plane have combined to overcome this minor obstacle.    

Gathering on the bus it's nice to finally meet some other participants, advisors, and judges. There's an incredible buzz in the air.  We're all here to change the world; do something that is difficult, worthwhile, and necessary.  There is a buzz of traveling to Africa. This is forward movement, some might even say progress, after trudging through some heavy lifting to get people to start taking you seriously.  The building wave (maybe similar to 1989 before the dot com exploded?) of some new, larger than life episode in human development.  It's a huge new opportunity to bring "tools and technology" into emerging markets which help people improve their lives.  This is philanthropic as well as a business opportunity.  

Two years ago the conversations I had with investors and technology people were focused on two things:

1)" You're going to make poor people pay for products and services?" which roughly translates to "You're exploiting poor people for your own benefit"

2) "They're (you know who they are) poor, they can't afford the things you'll be selling."

Now, two years later, the conversation has shifted.  It goes screaming past whether aid works, or the "poor" should be given "stuff" to help them with their lives, or even whether poor people have money to spend on products.  The conversation has shifted to speaking in terms of:

1) Who are the poor?
2) What do they spend money on? 
3) What do the "poor" need?  

Who are the poor?  
The poor are difficult to categorize or label.  The poor cover a wide range of environments, economies and cultures.  Subsequently many of the poor are considered too poor, unsophisticated, and difficult by private investment wishing to produce enterprises through social ventures and are often overlooked.  However, strong partnerships with in-country NGO's, specific solutions for specific problems, localized value chains and access to enabling services such as financial instruments and credit will bridge this gap. 

What do they spend money on?

The poor buy products and services often seemingly similar to developed world customers.  They buy food, water, energy, clothing.  Average expenditures in Uganda for people living on $1/day presented as a percentage include:

49% on food
10% on household goods
7% on housing
4% on water
6.5% on energy
5% on health
5% on transportation

And as eloquently explained by Fortune at the Base of the Pyramid, there is a poverty premium due to a lack of access to competing products and services. Dave ran the numbers to compare costs of lighting in Tanzania versus the costs of lighting here in California and the results were shocking.  The basic comparison showed an almost 1000 fold increase in costs that the Tanzania customer pays for lighting versus California customers.

1 comment:

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