The article is originally posted on Dowser
October 20th, 2011 12:52 PMBy Rachel Signer
Some people look at sub-Saharan Africa and see conflict, hardship, and poverty.
Others look at Africa and see a potential market in the millions of people who constitute the Base of the Pyramid. Still others are seeing opportunity to create businesses that create social impact alongside generating money.
And in the case of Novozymes, a Danish biotech company that is launching an agro-forestry and ethanol cooking stove business in Mozambique, called CleanStar, their team foresaw that building social impact into their business plan was the only way it would be viable.
“It’s more a matter of developing markets rather than servicing markets,” explained Stefan Maard, Senior Advisor in Novozymes’ Sustainability Development department of the venture.
Maard painted a picture of the potential market in Mozambique that illustrated how a socially-responsible strategy was also the most business-savvy. “If I wanted to produce ethanol-based cooking fuel in the US or Denmark, I would build a factory, then make a deal with existing agro operations, then retail,” he told Dowser. “These don’t exist in Mozambique and the places we want to work. If you want to work there you have t o have a different approach to the market. You have to create fully-integrated businesses. You can’t access existing value-chains because they don’t exist.”
Creating value-chains will be the key to Novozymes’ dream of building a local industry in Mozambique, which Maard called a “high-growth frontier market.” Now two years into their work in Mozambique, the Novozymes team and their local partners, who hold vital knowledge from years of work experience, have managed to recruit nearly five hundred subsistence farmers into their training program. This program provides farmers with the knowledge, skills, and materials – like seeds – to diversify and bolster their crop production. (A startup nonprofit in Kenya called Backpack Farm is doing something similar.) Then, Novozymes will buy whatever excess the farmers want to sell to them. As of now these farmers have very little market to sell to, and Maard estimates that this program will result in at least tripling their incomes.
The end product of the farmers’ crops will be ethanol that will power cooking stoves in homes in Mozambique’s urban capital, Maputo. This method of cooking will, Novozymes is hoping, replace now-dominant charcoal stoves. Currently most of the country’s subsistence farmers make money by cutting down trees for charcoal – a system common across sub-Saharan Africa. As a result, Africa is losing forestfaster than any region on the planet, alongside South America.
Novozymes is confident that their CleanStar business model, which integrates agro-forestry and local economics, will succeed – unlike previousattempts by Westerners to start profitable enterprises in Africa.
Maard and his colleagues studied those failed models closely so as to learn what not to do. “What those industries did was take a classic Western approach – we need to have a load of land, we need to have mechanized farming, a massive production facility, cheap land and cheap labor and good soils, make a huge farm then ship ethanol to Europe – the problem is that it just doesn’t work in most African countries for a range of reasons,” he said. A cheap, big operation simply doesn’t work in Africa, Maard explained, since the lack of high-skilled laborers in Africa essentially requires hiring expatriates, which raises the cost significantly; transportation costs skyrocket, too, when production facilities are remote.
“The opportunity is enormous and the need is enormous,” said Maard.