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Friday, December 30, 2011

Weekly Review December 25-31

It’s the last week of the year, and we are surrounded by reflections on 2011 and resolutions for 2012. Here at Invested Development we have both. Our main ambitions for 2012 are to open our third office in India and test some innovative investment structures tailored especially for the techies in Nairobi. While we are excited about the prospects in India, Africa has made the biggest leaps and grabbed the headlines this year, notably from hopeless to hopeful.


  
Wealth and poverty in Africa – interactive” by Claire Provost and the Guardian interactive team on The Guardian Global Development
Wrapping up 2011, The Guardian posted several interactive charts highlighting Africa’s development. In addition to pulling World Bank Indicators, the charts also show which other world economies grew at similar rates to the African countries. For example, South Africa and the United States both experienced GDP growth of about 3%. Ethiopia and China both experienced GDP growth of about 10%. Check it out for projected GDP growth in 2012, economic inequality, stats on the growing middle class, and more.

Source: The Guardian
Africa’s quest for prosperity” by Calestous Juma on The Guardian Poverty Matters Blog
Local Harvard professor Calestous Juma writes in The Guardian on Africa’s transition from hopeless to hopeful. Professor Juma cites the two most important trends to watch are expanded regional markets and “improved strategies to harness the continent’s diasporas as source of technical expertise and business networks.” Initiatives such as the “Cape-to-Cairo grand free trade area” and heavy investment in infrastructure (particularly new fiber-optic cables) will make the continent stronger. Despite the challenges and large capital requirements for development goals, the diaspora and regional integration has the potential to foster sustainable regional growth in 2012.

12 Predictions for Africa Tech Scene in 2012” by Mbwana Alliy on Afrinnovator
Looking back on 2011, Mbwana Alliy offers his predictions for Africa in 2012. Originally from Tanzania and currently working in Silicon Valley, his predictions for 2012 are valid and we hope he’s right. Smartphone adoption, the evolution and maturity of mobile money, and mobile commerce are trends that we have watched closely in 2011 and we are confident in continuing to pursue them in 2012. As we are already seed stage, impact-focused technology investors, we do not doubt that many others will be following this trend. Alliy’s predictions are worth the read as they offer valuable and candid insights not found in The Economist or the Guardian.

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Happy New Year!

Friday, December 23, 2011

Weekly Review December 18-24

This week, we took a look at technology stories that will improve the African lifestyle. 

Well done to Ushahidi on raising a $1.9 million round from Omidyar Network. However, as we know, not every Kenyan techie success story is carried with the same glory and ease demonstrated by M-PESA.  Ushahidi’s experience is a great example of the efforts that go into the technology, the pitch, and the business model, and the repeated revisions and improvements. Afrinnovator offers insights into three lessons Ushahidi learned and how future innovators can learn from them.

Dispelling the Top Five Mobile Money Myths” by Ignacio Mas on NextBillion
Interestingly, there are still some doubts about the effectiveness on mobile money (not everywhere is a “Kenya”). Ignacio Mas on NextBillion clarifies the myths that the unfamiliar may assume about mobile money. Measures are in place to prevent money laundering. It’s easy to learn on a familiar tool. It’s safer than hiding cash under mattress. In short, mobile money is useful in its simplicity and that is what makes it so effective.

MTN, one of Africa’s largest mobile network operators (MNOs), has signed an MOU with Fortis to provide mobile money services to its customers. Fortis is a leading provider of microfinance in Nigeria. The combination of the extensive agent networks should lead to a successful rollout of mobile money in Nigeria.

Airtel Ghana is now providing mobile commerce services. The Airtel Money platform will allow customers to pay bills, transfer money, and withdraw money from ATMs.

ICT tools such as mobile phones, mobile broadband, and tablets can provide real time information to rural farmers. We’ve seen such agri-mobile application as mFarm, showing that innovation is coming from the bottom up. Now the idea is supported by the Technical  Centre for Agriculture and Rural Cooperation, who is calling for the distribution of ICT tools to rural African farmers. African governments should be spending 3.5 percent of GDP on agricultural extension services, as agriculture generally accounts for 30+% of the continent’s GDP.

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Friday, December 16, 2011

Weekly Review December 11-17

This week, headlines on technology and mobile phones in India caught our attention. The innovations and solutions to existing problems in the market continue to inspire us.

India’s ‘missed call’ mobile ecosystem” by Katie Fehrenbacker on Gigaom
This article called a missed call “the poor man’s text message” in India. The missed call is a great example of users in emerging markets taking advantage of the resources available to them. Although it means extremely low average revenue per user (ARPU), every telecom’s nightmare, it presents significant opportunities for innovation from social entrepreneurs.

The World’s Cheapest Tablet, Finally on Sale” by Margherita Stancati on WSJ India Blog
We first reported on this back in October, and now it is officially on the market. Aakash, the US$35 Android tablet made by DataWind is now available for sale. An upgrade is coming in the New Year, but this tablet should make a significant splash in India. You can order one here.

Pursuing a world of mobile wallets” on Times of India
Mobile phones are integrated into almost every aspect of daily life in India, yet there is still more room for mobile phones to provide valuable services.  For example, mobile banking seems to be playing a critical role in the quest answer for mass financial inclusion. This article in Time of India points to trends that would lead to the mobile phone and mobile wallets being in all facets of business and government.

The Planning Commission Deputy Chairman Montek Singh Ahluwalia is pushing for increased broadband and mobile penetration in India. Ahluwalia believes this will ultimately promote financial inclusion, while lowering the cost of doing so. This will eventually enable all citizens to receive the benefits of financial exchanges.

Thanks to everyone who came out to CleanTechThatMatters on Wednesday! We were delighted with the turnout and excited about all of the projects we heard about. Keep an eye out for the next one! 

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Tuesday, December 13, 2011

Rich People, Nerds, and the Kenyan Context: Thoughts from the Nairobi Office Part 4

Editor's Note: This is the last post in Sean Smith's series from the Nairobi office. Catch up on anything you missed by clicking the links below. 

The Kenyan Context 

These groups of Rich People and Nerds are slowly beginning to identify each other.  They are slowly feeling each other out and gaining a better understanding of early stage investment and how to use it.  Yet, the fact that these groups exist and are starting to build off each other is not what is most exciting about Kenya.  What is most interesting is that this activity is unfolding in a country of technology adopters.

James Surowiecki of the New Yorker wrote an article titled "Innovative Consumption" in which he outlines why the United States has consistently been able to produce innovative companies like Dropbox.  In essence, he points to the willingness of Americans to embrace new technologies as an oft-overlooked factor in America's history of cranking out innovative technologies.  I would argue that the same mentality of technology adoption exists today in Kenya. 

The most obvious example of a technology adopting culture lies with M-PESA.  In just four short years M-PESA has gone from pilot to almost complete penetration of working age adults.  The service has already facilitated more transactions within Kenya than Western Union has throughout the entire world.  To be honest there are probably many factors that led to this success (the regulatory environment, Safaricom's dominant market share, etc.), but one would be remiss to ignore the fact that overwhelmingly Kenyans put their trust, and their hard earned cash, into an untested technology.  For a more scientific piece of evidence I'd like to point to Intel's "Technology Metabolism Index," which maps how technology diffuses through the total population of a given country once introduced.  Kenya received a +5, the highest possible rating for diffusion of new technologies.

While it may seem a bit ridiculous to many Americans that anything like Silicon Valley could spring up in East Africa, our team at Invested Development is confident that these three forces are going to lead to many more success stories coming out of Kenya. We’re just excited to be a part of it.

#CleanTechThatMatters is on December 14th. 
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Monday, December 12, 2011

Rich People, Nerds, and the Kenyan Context: Thoughts from the Nairobi Office Part 3

Editor's Note: This is the third installment of Sean Smith's series on Rich People, Nerds, and the Kenyan Context. Be sure to catch up on Part 1 and Part 2 if you missed them. 

The Nerds

The Rich People are only relevant and useful if there are large numbers of "Nerds" that are hacking away at new technologies and scheming how to launch the next big thing. One of the most remarkable things about Kenya is that the term "Nerd" and some of its negative connotations seem to have little or no relevance here.  Rather, to be a techie, to sit and write lines of code is exciting, hip, and a path to generating a stable income.  The university and technical college ecosystem in Nairobi is graduating hundreds if not thousands of Computer Science majors each year.  When you factor in the additional training that can be found at Safaricom Academy, Samsung's newly announced Engineering Academy, the eMobilis Mobile Training Academy, and m:Lab's Trainee Program (amongst others) what you get is the nearly 6,000 members of the iHub who proudly call themselves techies. 

These techies are part of a Kenya that prides itself on innovation, entrepreneurship, and technical acumen.  They are intelligent, tech savvy, and hungry to create Kenya's next great success story.  They earn a better income than many their age simply by shopping themselves out as freelancers while hacking away at their own ventures on the side.  In Nairobi, to be technical is cool and people are getting technical in a hurry.  If you drop by any of the numerous training sessions in Nairobi you are as likely to meet a taxi driver learning to code as you are the hunch backed, introverted stereotype we identify as "Nerds."

Check back tomorrow for the final post in the series. 

#CleanTechThatMatters is on December 14th. 
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Friday, December 9, 2011

Weekly Review December 3-10

In honor of our upcoming event, Clean Tech That Matters, it’s only appropriate to report on articles discussing clean tech and alternative energy opportunities in emerging markets. Anytime you can get a group of ambitious techies, entrepreneurs, and investors in the same room, seeking extraordinary innovations in a time of favorable policy developments and continued market growth, it’s a time for celebration. If you like what you’re hearing, come find out more at Greentown Labs in Boston on Wednesday, December 14. Find out all the details here.

NextEnergy Capital is working to raise a fund for renewable energy projects in Africa.  About 80% of the funds will be invested in infrastructure projects; the rest will be invested in early stage technologies with the goal of bringing them to the African market. The fund manager is already working with European Merchant Bank to develop a €18 million 6.5 MW photovoltaic project in South Africa. Check out the article to find out all the details on the investors and other plans for the fund.

Power out of Africa” by Andrea Chipman on The Wall Street Journal
There’s no denying that Africa presents a huge opportunity for renewable energy development. The continent is described appropriately as a “blank canvas,” since infrastructure is currently unreliable or nonexistent. Meanwhile, renewable energy is increasingly cheaper, safer, and more efficient. In addition, most Africans are not connected to the grid and rely on diesel generators, costing them $1.00 per kWh, while solar PV power would only cost $0.20 per kWh. The difference in adoption usually comes down to the upfront expenditure cost differentials (PV is more costly upfront, but cheaper on an average cost of energy basis), which is why such solutions should be supported by government subsidies to promote adoption. An interesting article coming from the Wall Street Journal, it offers a great summary of renewable energy in Africa.  

African nations move closer to EU position at Durban climate change talks” by John Vidal and Fiona Harvey on The Guardian
Climate change talks are very relevant to clean energy development in emerging markets, as developing countries are holding higher stakes and having a greater influence. The UN’s Framework Convention on Climate Change in Durban, South Africa Conference of the Parties (COP17) wraps up this week. Propositions from COP17 include extending the Kyoto Protocol’s carbon reduction targets beyond 2012 and setting up “a new green fund ‘to keep Africa safe’ from climate change.” It’s very important that Africa plays a critical role in international talks as it is the continent that will be most deeply affected by climate change.  The Guardian’s overview offers a great overview of the highlights from the talk so far, and we’re looking forward to seeing the outcomes. (NB. This is only the second time the COP has been held it Africa. It was held in Nairobi, Kenya in 2006).

Econet Solar is a subsidiary of African mobile phone operator Econet Wireless. The subsidiary has launched a first-generation prepaid solar-powered home power station. It allows users to light their homes and charge their phones. Customers will pay for energy in a similar fashion to buying airtime. This is very similar to Simpa Networks’ Progressive Purchase Model, which actually allows users to work towards ownership.  Both solutions overcome the financial barrier of the up-front cost of the system.

#CleanTechThatMatters is on December 14th. 
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Thursday, December 8, 2011

Rich People, Nerds, and the Kenyan Context: Thoughts from the Nairobi Office Part 2

Editor's Note: This post is the second installment in Sean Smith's series on Rich People, Nerds, and the Kenyan Context. Click here if you missed Part 1. 

The Rich People

The most important kind of Rich Person a startup hub can have is successful technology entrepreneurs that are looking to support new startups.  Often, this is subject to a chicken and egg dilemma. Without support, introductions, and investment from successful industry veterans it is a difficult path for startups to find success.  Kenya, however, seems to be on the verge of graduating its first class of successful technology entrepreneurs.  Organizations like Kenya Data Networks, the Wananchi Group, Seven Seas Technologies, Craft Silicon, Cellulant, and Ushahidi have all been successful and are looking to support younger entrepreneurs.  In various ways, the founders of these companies are looking to invest in entrepreneurs and offer various support structures to help them grow.

Beyond just investment capital, support is offered to the tech community in the form of Njeri Rionge's Business Lounge, Ushahidi's iHub, the Plexus Group, 88mph, the m:Lab, and any of the other half dozen incubators currently in the works.  It is on the back of these support structures that young, creative entrepreneurs will be able to leverage the necessary funds, mentorship, and connections to launch successful tech enterprises.

Check back tomorrow to  learn about "The Nerds."

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Wednesday, December 7, 2011

Rich People, Nerds, and the Kenyan Context: Thoughts from the Nairobi Office Part 1

Editor's Note: This is the first post in a series from Sean Smith, who recently moved to Nairobi, Kenya to open Invested Development's East African office. 
via Wikimedia


Having recently moved to Kenya to establish ID's first international office, I am often asked by friends, family, and colleagues a simple question, "Why Nairobi?” My answer is often just as simple, "Because Nairobi is positioning itself to become the Silicon Valley of Africa."  What isn't so simple is the justification behind such a claim.  So I'd like to take a crack at explaining exactly why and how Nairobi is rapidly forming into a vibrant and compelling startup hub. 

In Paul Graham's essay "How to Be Silicon Valley," he mentions there are three factors needed to replicate Silicon Valley:  Rich People, Nerds, and the right Environment.  The Rich People have the money and, ideally, the expertise to mentor and seed the Nerds, whose ideas are the foundation upon which companies are built. Graham argues that it is the interplay between these two groups, in a supportive environment, that drives high growth startups.  If a city can duplicate that, he says, then any city can be Silicon Valley.
Check back tomorrow to read about "The Rich People" and why they're important.

#CleanTechThatMatters is on December 14th. 
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Friday, December 2, 2011

Weekly Review November 27-December 3


After last week’s regional focus on Africa, this week we focused our reading on social enterprise and development in Latin America.

Latin America Report: Ready for Explosive Growth” on Renewable Energy World
Many Latin American nations are reducing their reliance on fossil fuels and by transitioning toward renewable energies like wind, solar, geothermal and biofuels. Wind energy prices are increasingly competitive, especially in Brazil, which are expanding so rapidly that wind farms may very overtake natural gas thermal plants in the next 5 years. With high hopes for solar, Renewable Energy World is launching a weekly report on Latin America. Watch out for in on Wednesdays.

Rural Peru gets connected” by Mattia Cabitza on The Guardian Poverty Matters Blog
Revolutionizing life in Peru, where one in four people live without electricity, 130 rural communities are benefitting from the Euro-Solar Programme. The program reaches “more than 300,000 people whose communities are not connected to the electricity grid.” Each community received solar panels and the free EU kit, which allowed them to run dozens of electronics, including an antenna for satellite Internet. The investment of ~$47.6 million is also benefiting seven other Latin American nations.
                                                                                                                                  
SMEs in South America will be crucial to the development of the region, according to a survey of 170 regional banks that are looking to increase their credit portfolio in the sector. This year, 89% of banks actively lend to SMEs, up 13% from 2008. This type of support and confidence in the SME sector helps foster entrepreneurship and continued growth in the region.

According to Eclac, the UN’s regional economic body, there are 177 million people living in poverty in Latin America. That’s 31.4% of the total regional population. The good news is that level is down from 1990, when 48.4% of the population lived in poverty. Poverty and inequality are on the decline, but to maintain this, there is a need for employment in high productivity sectors. See Eclac’s report for full details: Social Panorama of Latin America 2011 (PDF).

If you’re in Boston, don’t forget to sign up for our event #CleanTechThatMaters on December 14! Find out more here.
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Thursday, December 1, 2011

Poverty-Fighting Mobile Transaction Systems (Part 4): Social Capital

This is the fourth post in our series, “Leveraging Mobile Penetration at the BoP for Poverty-Fighting Mobile Transaction Systems.” Click the links below to catch up on anything you might have missed.
Social Capital - Networking and Participation
As we introduced in the first post, the key to a successful mobile technology applications to alleviate poverty is the exchange. In the case of networking and participation, an exchange is the receiving and sending of ideas and opinions and the power to organize or participate in the community.

Mobile phones create powerful social networking opportunities. Mobile applications can offer users the opportunity to leverage their networks for referrals and create opportunities for peer lending.  Social networking tools, everything from SMS to Facebook, facilitate organization and participation, as we witnessed during Egypt’s Arab Spring Revolution. Leveraging mobile ubiquity to expand on social capital reaps many benefits for users in a community where communication tools are limited.  

The mobile phone with its most basic feature, SMS, promotes impact by creating an exchange. NGOs and governments around the world have used SMS texts to inform and alert populations to serious alerts. For example,  FrontlineSMS and Jana (both discussed in this Weekly Review) allow businesses and NGOs alike to communicate with their target market in developing countries. FrontlineSMS prompts consumers to participate and engage through a platform that allows NGOs and businesses to send group texts, asking questions and opinions to a large mobile user base.  Similarly, Jana (formerly Txteagle) collects market research data with mobile phones by allowing businesses and NGOs to distribute surveys via SMS with promotional incentives.

Tying It All Together - Mobile Ubiquity and Reducing Poverty
It is clear that mobile phones provide many benefits to users at the base of the pyramid. In the United States we have access to such benefits and resources not only through mobile phones, but by many other mediums. We can network on LinkedIn, search for jobs on Monster, read reviews of local service providers on Yelp!, take surveys to get coupons, borrow from a bank, use and build credit, and transfer money in seconds on our online banking applications. While some may argue that these seem to be simply promoting consumerism, the key point to highlight once more is the exchange. To reiterate Dr. Harish Hande’s philosophy, we must allow the poor to create their own wealth by giving them the tools to do so. With a mobile phone at the fingertips of over 70% of the world and a growing community of social innovators, we can create mobile technologies for sustainable global development.

What other ways can we leverage mobile ubiquity to create poverty-fighting technology? 

Friday, November 25, 2011

Weekly Review November 20-26

Every week, we read about the subtle signs of development in Africa. Here is the round up from this week, featuring everything from renewable energy to mobile money.

Looking to Africa for innovation” by Nikki and Rob Wilson on The Guardian
The common school of thought believes that Africa should borrow from Western ways of thinking to promote development. On the contrary, there are many social systems and informal economies in place that are allowing Africans to make a living in ways we can’t imagine. Read the article for several examples that will really get you thinking.

Our blog post last week touched on the Ethiopian government’s capacity to increase mobile penetration in the country over the next five years. Another major problem the country faces is the severe under-electrified population. Now, the Ethiopian Electric Power Corporation has launched six wind power projects and one geo thermal plant to generate 1,015 megawatts of renewable energy. A $300M USD project, it would propel the country to be a top exporter of green power.

It is likely that we will never see another mobile money service provider with the same dominant success as M-Pesa. It is interesting to see how new markets are hosting mobile money services. Mozambique, for example, is seeing intensified efforts to push the adoption of mobile money. The state-owned mcel launched mKesh and now has 41,000 registered customers and 2,700 registered agents.

Durban Climate Talks to Aim for Pragmatic Results” by Leon Marshall, Environmental Journalist on News Watch South Africa
The annual UN meeting to discuss climate change is happening in Durban, South Africa next week. Emerging markets are having more say in international agreements. Climate change will drastically affect and possibly reverse positive developments in emerging markets, unless we take action now. For example, the African Enterprise Challenge Fund supports technologies for adapting to climate change.

If you’re in Boston, don’t forget to sign up for our event #CleanTechThatMaters on December 14! Find out more here.
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Friday, November 18, 2011

Weekly Review November 13 – 19

For Global Entrepreneurship Week, we’re following the discussion in various media outlets around the flow of capital to early stage startups. Most agree that entrepreneurship is a necessary tool for development and we’re happy to see that capital is beginning to flow to places where it's needed.

The Africa Enterprise Challenge Fund is continuing to promote the flow of private investment to clean tech entrepreneurs in Tanzania. To earn funding, businesses must offer an affordable product that is accessible in rural areas or an innovative solution to climate change to help small-hold farmers. Solutions must be financially viable, beneficial to the user, and conducive to the adoption of clean tech. EGG-energy recently won an AECF grant. Applications for this round close December 15, 2011.

Global Entrepreneurship Week: A Smarter World by Startups” by Jonathan Ortmans on The Huffington Post
This week’s celebration of entrepreneurship across 123 countries is a reminder of the many emerging markets that are welcoming and enabling startups. Some emerging markets have Ease of Doing Business Indices competitive with the likes of Switzerland and Singapore. This doesn’t come as a surprise, Ortmans says, and iterates: “New firms are indeed the greatest source of new wealth for struggling economies and a powerful weapon against poverty.”

Sean Parker: ‘Little Startups Are Ridiculously Over-Funded” by Erick Schonfeld on Tech Crunch
This week’s discussion surrounds the flow of investment capital into startups around the world. Sean Parker, somewhat controversially, thinks that the number of investors outweigh the number of fundable startups. He says that this leads to a diffusion of talent and VCs scrambling to get deal flow. Parker may think that “talented engineers and product designers … starting their own companies” lacks “impact,” but we think that entrepreneurs developing innovative technologies in mobile tech and energy open many more opportunities for impact. 

Accel Raises $155 Million for India Fund” by Evelyn M. Rusli on The New York Times DealBook
Facebook and Groupon backer, Accel Partners, raised a $155 million dollar fund called Accel India III. While Accel Partners isn’t the typical investor you’d find seeking to invest in impact at Sankalp, Accel India III will fund high-growth technology companies in India, include mobile technology. Investments will be early stage between $500,000 and $1 million.

A Silicon Valley Dream Grows in Guatlemala, Despite the Risks” by Damien Cave on The New York Times
Recreating Silicon Valley and technology incubators to promote social impact -  it’s happening in Guatemala, a huge achievement for a country known for its wide income gaps. Campus Tecnológico is an innovative new space that is promoting development on a large scale by housing startups dedicated to technology as a catalyst for change. Locally, the entrepreneurs at Campus Tecnológico are making the once run-down neighborhood attractive by filling apartments and simply buying lunch. Check out the article to learn more about the companies and their impact.

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Thursday, November 17, 2011

Can Lagging Ethiopia Reach African Mobile Penetration Standards?

Source
Adding 55M
Ethiopia is infamously lagging behind the African standard of mobile penetration rates. Currently, mobile penetration in Africa is around 50% and climbing, but Ethiopia’s mobile penetration is around 12%. The Government of Ethiopia, who controls the telecommunications industry in the country, has set some ambitious goals for the next five years to increase mobile penetration rates. While there are many benefits that come along with a mobile phone in the hands of the poor, here at ID, we’re wondering if Ethiopia can achieve their lofty goals. We looked at a few factors to find out if lagging Ethiopia can reach African mobile penetration standards, and it looks like it is possible.

Goals
The Ministry of Finance and Economic Development detailed its five-year strategic goals in Ethiopia’s Growth and Transformational Plan (GTP). To achieve the goal of 75% penetration by 2015, 65 million Ethiopians must have mobile phone subscriptions. It is important to note, however, that Ethio Telecom, the state-led telecom, wants to reach 65 million subscribers while maintaining a government monopoly over the industry.

Considerations in Ethiopia’s Favor
Many political and circumstantial indicators point to Ethiopia’s ability to reach 65 million mobile phone subscribers. Research by the Economist Intelligence Unit indicates that the underlying political climate is stable and should prove accommodating to telecommunications expansion (2008). Additionally, the US will continue to invest in Ethiopia to enjoy strategic advantages that come from the country’s proximity to Middle East and North Africa. China, Ethiopia’s dominant foreign investor, also has strategic benefits to gain from investing in the country to promote its global image. Relatively conservative predictions of 7.5% real GDP growth imply more than enough government revenue to afford the necessary capital expenditure (Lake & Walker, 2011).

Cost of Development
In order to determine if the government’s goal is feasible from a financial standpoint, we must understand if planned government expenditure can meet the cost of development. We estimated the cost of development by multiplying Ethiopia’s goal number of new subscribers (55 million) by the average capital expenditure necessary per subscriber in Africa. Public data from five operators (MTN, Vodacom, Orascom, Zain, and Vodafone) covering 16 African countries and over USD$5 billion in capital expenditure suggests an average cost per new subscriber of USD$32 per person (rounded towards the worst-case scenario). Based on that data, going from 10 million to 65 million subscribers in five years will require USD$1.76 billion in capital expenditure over the same period.

Government Expenditure
Assessing the government’s ability to pay for this infrastructure requires as estimation of expected values for GDP, tax rates, percent of government spending on capital expenditure, and percent of infrastructure spending on telecommunications.
Spending Capacity
=
5 Year GDP x Tax Rate x CapEx % of Budget x Telecom % of CapEx

Five-Year Estimates
  • Total GDP: Ethiopia will generate USD$180 billion in GDP over the next five years (World Bank, 2011; Lake & Walker, 2011)
  • Government Revenue: Collecting 15% of total GDP yields USD$27 billion in taxes (African Economic Outlook, 2011)
  • Capital Expenditure: Spending two-thirds of revenue gives USD$18 billion for development (African Economic Outlook, 2011)
  • Telecommunications: Allocating 10% of infrastructure spending to telecommunications leads to USD$1.8 billion in expected expenditure over the next five years (Foster & Morella, 2010).

An Attainable Goal?
Based on our analysis, reaching the additional 55 million subscribers will cost USD$1.76 billion while telecommunications expenditures should reach USD$1.8 billion. Though the numbers are a bit rough, Ethiopia could theoretically have enough money to reach its goal.

Speculation that the government’s state-led development model hinders potential mobile penetration growth is justified. Nonetheless, the country reached their interim goal of 10 million subscribers in July of 2011 (Ethio Telecom, 2011) thanks to a $500 million loan from the Chinese government. Our analysis did not consider external funding but even with our conservative estimations indicate that the Ethiopian government could achieve its ambitious goal.

High penetration rates in Ethiopia will open many new opportunities for mobile transaction technologies to fight poverty, but it’s just the first step. State-run entities are often capable of building larger scale infrastructure but lag desperately behind the free market. The government can provide the infrastructure, but will need the private sector’s participation for value-added services like mobile money and information exchange. Will the government allow the private sector to participate? Time will tell.

Works Cited:
African Economic Outlook. (2011). Ethiopia Report. Issy les Moulineaux, France: OECD Development Centre. Retrived from http://www.africaneconomicoutlook.org/.
Economist Intelligence Unit. (2008). Country Profile: Ethiopia. Kent: Patersons Dartford.
Foster, V., & Morella, E. (2010). Ethiopia’s Infrastructure: A Continental Perspective. Washington, DC: The World Bank.
Lake, J., & Walker, P. (September 2011). Country Report: Ethiopia. London: Economist Intelligence Unit.
The World Bank Group. (2011, October 10). World Bank Data. Retrieved from http://data.worldbank.org/
Yamamoto, D. (2007). Ethiopia: Telecommunications Sector Update. Addis Ababa, Ethiopia: Embassy of the United States.

Tuesday, November 15, 2011

Poverty-Fighting Mobile Transaction Systems (Part 3): Information Exchange

This is the third installment in our series on mobile transaction systems and their contribution to the fight against poverty. First, we introduced this series with an overview of mobile penetration rates and the mobile phone’s power for impact. Then, last week, we highlighted the first transaction system - mobile money - and the benefits such transactions offer to users. This week, we will look at the different ways mobile phones facilitate exchanges of information and how they benefit the users.

Information Exchange
Mobile phones can provide information to the otherwise isolated citizens at the base of the pyramid. When mobile phones facilitate the exchange of information, this has perhaps the most wide-ranging impact on its users.

For Farmers
Source: http://www.grameenfoundation.org/
The ability to access information about weather and prices leads to make or break decisions for farmers. To facilitate quality access, organizations like the Grameen Foundation have developed schemes that allow poor farmers in Uganda to gain access to valuable market data. This empowers the farmers by granting them access to information about market prices, weather reports, and planting advice. Without the data and information, farmers can suffer costly losses that would be preventable with timely knowledge. A designated “community knowledge worker” (CKW) identified by Grameen collects information from farmers and uploads it to the database for other CKWs. This sort of data collection and information sharing is hugely empowering, but it’s impossible without access to a mobile phone. Other examples of organizations seeking to fill this gap are mFarm, iCow, and Esoko

For Job Seekers
Source: http://www.assuredlabor.com/
There are transaction systems that have revolutionized the job and talent searches in the developing world. As more corporations are moving into emerging markets, they need to source and hire talent. Mobile transaction platforms like Assured Labor (branded as Empleo Listo, think of Monster on SMS), allow companies to access potential employees on existing channels – mobile phones. On the other side, users can search for job openings on their phones. This enables users to find local jobs and avoid emigration where possible. This platform is especially advantageous for those who do not have access to traditional Internet on a PC, where most jobs are posted.

The mobile phone creates opportunities in markets that are beyond the reach of a traditional laptop.  You’ll find farmers and job seekers in all populations, but continued innovation in mobile technology can further extend the benefits of information exchange on a mobile phone.

Check back next week for examples of networking, participation, and social capital exchanges made possible on mobile phones.

Friday, November 11, 2011

Weekly Review November 6-12

A cornerstone of our philosophy is to combine the efficiency of the free market with the heart of the social sector. Private investment and entrepreneurship will create sustainable development in emerging markets.

Ennovent’s Sustainable Enterprise Fund announced yesterday that it invested in Barefoot Power. Barefoot provides renewable energy and lighting to off-grid or under electrified communities in India. Co-investors include Insitor, Oikocredit, and The Grace Foundation. There is still a large need for greater investment activity in India to electrify the country and eliminate energy poverty.

Investment manager speaks about venture capital in East Africa” Interview with InReturn Capital’s Eelco Benink by Regina Ekiru on How We Made It In Africa
Benink, an investment manager at InReturn Capital, discusses the firm’s investment criteria and portfolio, and the interest VC firms are showing in Africa. Africa is attractive to both impact investors and traditional venture capitalists because of its demonstrated and expected growth. The population is young, political environments are stabilizing, and there is a growing middle class and an abundance of natural resources.

Venture Capital Office Hours with Sean Smith” by Patrick Munyi on iHub Blog
Now that Invested Development is growing and expanding globally, our team member Sean Smith is getting settled in Nairobi, Kenya. He’s now holding open office hours at iHub Nairobi every other Friday. Entrepreneurs, innovators, or those interested in venture capital are welcome to come by and chat.

November 14th marks the beginning of Global Entrepreneurship Week. A project supported by the Kauffman Foundation. Local activities in participating countries include competitions, conferences, and networking events. This is an exciting opportunity to drive venture capital into emerging markets and to encourage entrepreneurship.


Libyans Need Economic Freedom” by Jay Hallen on The American
Libya is at a crossroads. Similar to Egypt, there are high numbers of unemployed youth. The article recommends that the National Transitional Council use oil revenues to create venture capital funds for college graduates. A startup community would not only develop the country’s economy, but do so in an all inclusive way.

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