Dear Friends
I've just returned from a two week intensive trip through eastern and southern Africa with Nina and Rowan. We visited twelve projects, most of whom we already fund, across Rwanda, Uganda, Kenya and Zambia.
I've returned re-energised about both the quality of our investments and the ability for us to make a difference in the lives of the world's poorest families. While I saw plenty to make me despair, there was plenty to be excited about.
Firstly, some brief background on aid-flows and wider observations on the aid industry in Africa ...
The Big Guys
Non-profits are a massive industry in Africa - mostly driven through Official Development Agencies (NZAID, USAID, DFID, etc) and through the large multilaterals (UN, WHO, etc). Most of the intergovernmental flows began life as an arm of foreign policy during the Cold War. They are subject to high levels of corruption, inefficiency and unintended consequences. Most leaders of the countries we visited are at least extremely rich as a result.
Additionally, Nairobi has hundreds of NGO's, most of whom do not measure their impact, the collateral damage they cause (huge wage inflation that pushes all human capital into NGO's, for example) and have no focus on long-term economic sustainability. Official Development Assistance (ODA) simply plans to continue forever. There is no exit plan and very limited accountability demanded by donors.
Anecdotally, approximately 15% of money pushed into the top of the funnel through governmental budgetary support makes it to the contractors executing the work. Those contracts are typically executed at 5x local market prices. That renders a 3% efficiency into projects that largely do not track any meaningful measures of impact - disease burden, literacy, numeracy, income levels, etc.
Note this is mostly a Western approach - the Chinese, whatever one thinks of their motives, have a very different development model - they build infrastructure with local labour with Chinese management at Chinese prices. It feels like all the roads in Nairobi are having 4 lanes added.
It is important not to conflate these views on economic development with very basic services and emergency aid -- vaccinations, vitamin A, B, zinc, folate supplements, de-worming pills, access to condoms, basic maternal health, etc, which all fall into the camp of things that should simply be funded due to their proven impacts - ideally by governments and the multi-laterals if it is to be sustainable. This work overlaps with what we do, but is not our core focus.
It seems clear that driving money into the government education or healthcare systems makes all money subject to massive inefficiencies, incompetence, corrupution and general misallocation when it stretches beyond the very cheapest and proven interventions.
The Foundations and Rich Guys
The other major part of the money flowing into Africa is driven by Foundations and Rich Guys. While this money is dwarfed by the big dollars - even Gates is tiny compared to the U.N., for example - it is here where there is the greatest hope for different approaches.
The greatest need is not for more ideas (another water purification system, say) or more green college grads on their OE, but for efficient, sustainable distribution systems where everyone gets paid on the way, incentives are aligned and where you preserve the margins and accountability chains between customers, suppliers, distributors, etc. There is a good reason why within 10 years everyone in Africa managed to get a cell-phone and most of them have access to mobile payments and savings systems.
The biggest lesson I learnt in this regard is that while it appears as if there is heaps of money flowing into Africa - the reality is that capital is extremely scarce for good models that measure impact where these are businesses or business-like and which have the ability to scale. NGO's seem addicted to simply giving stuff away and do not employ or retain entrepreneurs.
Large foundations tend to be quite constrained in their mandates, risk-averse, and full of "development experts". There are no businesspeople in sight.
I see a lot of similarities in how for-profit ventures in NZ struggle with the same issue of access to capital, so don't know how this will get resolved more broadly.
What we are doing
The organisations we're been funding for the last few years typically meet the following criteria:
1) They measure their impacts, impacts are significant and managing by evidence is part of their culture.
2) The organisation has the will and (theoretically, at least) ability to scale to serve at least One Million people while systematically weaning off donor funds. This means management are both committed to scaling and think about systems and unit economics continually so they can achieve large scale impact and efficiencies.
3) They have world-class management that could just as easily build a company in New Zealand or the U.S. as well as plenty of target country experience and entrepreneurial scrappiness to make shit happen.
4) Our money must be able to make a difference. We don't want to be funding very large ($25m+) orgs where our funding is not material. These orgs usually have both limited ability to scale (due to needing significant donor funds forever) and the strategy is lead to much by donors and fundraising teams.
5) They must be frugal, flexible, pragmatic operators.
The big opportunities
My present view is that the biggest opportunities are in integrated models which:
1) Increase incomes, of poor farmers in particular - farmers comprise 75% of the world's poorest people (and are over-represented in infant mortality/ morbidity stats) and it is reasonably easy, technically, to dramatically increase yields and incomes quite easily, while making them food self-sufficient as you go. You just need to solve the distribution and farm extension models economically.
2) Target areas of high impact healthcare - 1 in 6 kids in the countries we visited die before their first day of school. This is due to a mix of low levels of health knowledge (sanitation, etc) and limited access to basic medicines - e.g. $1 anti-malarials like Coartem cure you within 3 days.
3) Provide education with measurable impact on literacy, numeracy. We know that kids in school in poor countries do not learn very much. Teachers are underpaid, under-monitored, of dubious quality and do not, on average, materially change literacy or numeracy rates in primary education. The average kid in school gets 1.5 hrs of tuition per day.
Poor people need a lot more income if they are to become not poor. I was talking with a farmer in a village yesterday who was a customer of an organisation we fund. Simon's income was very high by local standards - about $1000 per year from growing vegetables using irrigation with a Kickstart pump. There are no school fees for Simon's children - like most countries, primary education is free by UN edict. However, the cost of mandatory uniforms, books, materials, "homework fees", "special attention fees", etc set his family back about $450 per year per child. In simple dollar terms, Simon pays more to educate his children (in an ineffective school, most likely) than I do in Wellington.
Kickstart
Many of you provided funding to Kickstart after we brought Martin out to NZ last year. In total you gave $400k on top of our own investment. Together we are over 5% of their budget.
We visited Kickstart in Kenya and saw their pumps in several other locations. These guys are doing great work with transformative impact on farmer incomes and related indicators such as child health.
They currently have a budget of about $6.5m per year. Their management structures and reporting need some work and I am working with Martin to help with a planned re-org.
I'll circulate a deck on Kickstart to all those who provided funding to them in the coming fortnight.
Jasmine wider objectives
My objective with Jasmine is to do very high impact philanthropy in places where the cost per life impacted is compelling and where evidence and data exist that confirm that what our investees do actually works. Additionally, I want to help others who are interested in the same sort of thing to do it effectively. I put about half my time and most of my reading into this area. We partner actively with world leading philanthropic organisations that share our objectives and approach so we supercharge our learning curve. We were in Africa with the Mulago Foundation who has a similar approach to us.
My approach is to engage with large potential funders who share our values and want to deliver impact and make their lives more fun by providing themselves and their children with meaningful learning and travel opportunities. There is quite a lot of fun to be had doing this work if you are blessed with a surfeit of cash or talents and the desire to make a difference.
If you are interested in doing more in this space or knowing more or want to sit down some time to discuss further, please get in touch.
Thanks for your support.
p.p.s. Feel free to forward this email as you wish
Talking with a small holder farmer in Rwanda
Great bones, 5 bedrooms with en-suites
Farmer lady with baby feet
Silverfox with Silverback
Nice man who projects Mountain Gorillas from poachers and us from the other Guerillas.
USAID food may be bland and collapse local food prices, but the tin it comes in is great for building doors
Nina getting a pregnancy consultation with Living Goods community health promoter in Uganda
Talking to Congolese war victims in Nairobi. 10 people in 2m X 5m room, plus visitors.
Kids are cute everywhere. He wants to play for Manchester United when he grows up
Giraffe, Rowan, Me
