Recruiting Rafiki (and getting rid of the guy in the Land Rover)

In the last post I described the challenges involved in setting up and operating a sustainable last-mile distribution network in Tanzania. Chief among them is the difficult navigation of the very limited transportation infrastructure.

GCS Tanzania, like many others operating under these conditions, has chosen for a strategy of creating a network of micro-entrepreneurs (a.k.a GCS “Rafiki”) from the rural villages themselves. The primary aim of this network is to bring the cost of distribution down to a level that is affordable for everyone involved. But it also has the additional benefits of creating a source of income for villagers as well as enlisting sales agents for GCS who understand their customers better than anyone else. Taking this approach, however, introduces a number of new and very different challenges.

Typical road conditions in Arusha, Tanzania

Typical road conditions in Arusha, Tanzania

The success or failure of the entire business depends on the success of the Rafiki themselves. Yet most of them will have had little or no professional sales experience prior to joining GCS. The ability of the business, and in fact GCS itself, to survive will be determined by its ability to recruit, train, and support the Rafiki effectively. In other words the primary business drivers come down to three basic things:

  • How quickly Rafiki are recruited;
  • How much each Rafiki sells;
  • Scaling up both of them (much) faster than expenses.

In this post I will share how we are going about it and some of the lessons we’ve learned so far along the way.

Lesson #1: No need to reinvent the wheel

The decision to go the way of recruiting micro-entrepreneurs was not made overnight, it was the result of a long and painful process. In the beginning, GCS simply sent sales reps out to distant rural villages every day in a Land Rover with a trunk full of solar lights. Unfortunately, this proved to be a prohibitively expensive strategy due to the amount of fuel, labor, and vehicle wear-and-tear involved. Not to mention the need for frequent return visits to close deals.

The second approach also involved GCS reps hopping into Land Rovers, but this time to seek out and speak with the leaders of the villages to seek their support in recruiting local sales agents. This was a step in the right direction but recruitment progressed at a snail’s pace due to the time and effort required to introduce the company, its products, and the benefits of the micro-entrepreneurship. Eventually this also proved to be too costly as return visits were still required while village chairmen took time to consider the proposal.

Finally we wised up and realized that rather than build our own we should be taking advantage of networks that already exist. This was achieved more recently by partnering with World Vision, an international NGO active in Tanzania and with strong rural networks in the area. They helped us make the needed introductions in advance and enabled us to organize “tours” of areas. We would meet anywhere from 10-15 village chairmen in a single visit of just a few days and have as many as 20 new recruits by the end of the week. In just 5 weeks our network grew from 18 to more than 90 active Rafiki in just the Arusha area alone.

New recruits work on team projects at Rafiki training

New recruits work on team projects at Rafiki training

Lesson #2: Recruitment is not enough

Recruitment was a major success, but our work was hardly finished. As mentioned earlier, our long term success hangs on the the long term success of the Rafiki themselves. In order to make sure they got off to the best possible start we partnered again with World Vision to organize a comprehensive 3-day training seminar. The training itself (led by an excellent trainer from one of our local sales partners) was delivered to both new and existing Rafiki. It covered key topics such as marketing, sales, and financial fundamentals. It included role playing exercises, team projects, and presentations by top-selling Rafiki with advice on running a successful business.

More importantly the event provided an opportunity for all of the Rafiki to meet and get to know each other as well as the GCS staff. It helped to strengthen the personal bonds with each other and with the company, the value of which cannot be understated given the far-flung and impersonal nature of the rural distribution business.

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A top selling Rafiki shares her secrets with new recruits.

Lesson #3: Use local innovations to address local challenges

We’d come far at this point, but we had one more critical issue to address. Payment and delivery.

Tanzania is primarily a cash-only society, bank transfers and credit card payments are out of the question. To complicate matters, there is  no regular postal delivery service as we know it in Western countries. How are we going to deliver the products and collect payment without sending out the guy in the Land Rover every week?

For now, we’ve addressed the first part, delivery of products, with the recruitment of Field Officers. They come from the same areas as the Rafiki themselves and have reliable access to some means of mobility. In addition to receiving deliveries of inventory on a regular basis (usually by courier or minibus), Field Officers are responsible for supporting a group of 10-15 Rafiki with stock deliveries and overall sales and business support on an ongoing basis. Payment, on the other hand, is a different matter. Fortunately, we’ve been able to take advantage of a fairly recent local innovation that has come into wide use across East Africa.

Mobile phone payment platforms such as M-Pesa and Airtel Money have not only eliminated the need to travel and meet face-to-face in order to collect cash but also most of the risks involved in handling large amounts of money. Using M-Pesa or Airtel, GCS will, in fact, go 100% cash-free within the next couple of weeks. This short video by Vodacom provides a quick introduction of how the mobile payment system works.

A mobile money agent in Tanzania (photo from nextbillion.net)

A mobile money agent in Tanzania (photo from nextbillion.net)

Looking ahead

GCS is now in a great position. We’ve definitely had a lot of help getting where we are and there is still plenty of work left to do. But the ingredients for success are in place. In the coming weeks we will support Rafiki by investing in promotion and marketing campaigns. We will also be working to establish partnerships with local financial institutions to make it easier for Rafiki to get the capital they need to grow their businesses.

At this time we are also looking even further out into the future seeking out other affordable technologies which can have as much of an impact on rural quality of life as solar lighting has.

This is a sure topic for a future post…

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The GCS Rafiki project: A “last mile” distribution network for rural Africa

Ok, here’s a challenge: Go sell and deliver your product into the most remote, rural areas of East Africa where transportation infrastructure is underdeveloped at best (but most likely non-existent) and the average income is less than $2 USD per day. Wait, there’s also a catch: you need to be profitable.

This has come to be known as the “last-mile” or “last kilometer” distribution challenge for the base of the pyramid (BoP). Nearly anyone who has tried to do business in many parts of Africa or India has had to take it on and it is the challenge currently facing us at GCS Tanzania. The most common difficulty in serving these markets comes down to simple economics: the cost and effort required to send people and product to these communities far too often exceeds the income generated from sales.

The "last mile" is always the toughest...

The “last mile” is always the toughest…

A conventional wisdom has emerged that the best way to tackle this problem is by recruiting the villagers themselves as sales agents or “village level entrepreneurs” (VLEs). Encouraged by examples like Hindustan Unilever’s Project Shakti in India, companies have adopted this approach hoping not only to build a profitable sales and distribution channel for themselves but also to create a stable and viable source of income for the villagers. When successful,  these networks can result in a long lasting mutually beneficial arrangement for everyone involved.

This is the approach that we’ve decided to take on in Tanzania in the form of the “GCS Rafiki network” (“Rafiki” is the Swahili word for “friend”). For now, it is being used exclusively for the sale and distribution of solar lights and chargers, but the network itself is being developed for the future dissemination of innovative technologies of all kinds.

Recruiting "Rafiki" in northern Tanzania

Recruiting “Rafiki” in northern Tanzania

The more immediate goal, however, is to prove (primarily to ourselves) that it can be a profitable and  self-sustaining sales channel. Of course, nothing worthwhile comes easily and as expected there are a number of daunting challenges involved, any one of which could easily sink the entire project. Among the more salient at the moment (and in no particular order):

  • Infrastructure and logistics:  Less than 15% of the roads in Tanzania are paved (and those that are are mostly in urban areas) making it costly and challenging to go to these areas on a regular basis. There is also no postal delivery service as we know it in Western countries. How do we deliver product, monitor sales, and collect payment reliably and effectively under these conditions?
  • Entrepreneur recruitment: The success of the network depends entirely on the recruitment and success of the individual entrepreneurs. The challenge is not only to recruit good people and get them started as quickly as possible, but also to ensure that the ones who are already active continue to meet their targets and be successful.
  • Customer buying power: At retail prices ranging from $12 – 40 USD, even a basic solar light represents a significant chunk of monthly income for our typical customer. Does it provide enough value to the customer to justify the expense? If so, how do we best demonstrate and communicate that value? How do we empower our VLEs to communicate that value?
  • Entrepreneur financing: Like our target customers, newly recruited village entrepreneurs will have very few, if any, assets. In most cases they will not even qualify for microcredit loans. Do we consign them goods or extend them credit ourselves? If so, what is the risk to our company and how do we manage it?
  • Incentive structure: This can be tough to get right in any business, let alone in the context of a different culture than your own. Get this one wrong, however, and things can really backfire on you. Understanding the people who are working for you and what motivates them to be successful is absolutely imperative.
  • Risk management: A significant amount of cash and product must change hands in the process – most of the time through people we do not know and will never meet. Risk can never be eliminated, but how do we keep it to a minimum?

This post is intended as the first in a series describing the efforts to address some of these challenges and to share what we learn along the way. Future posts will go into more depth on these and other topics.

Comments are always appreciated!

The GCS Rafiki project: A “last mile” distribution network for rural Africa

Ok, here’s a challenge: Go sell and deliver your product into the most remote, rural areas of East Africa where transportation infrastructure is underdeveloped at best (but most likely non-existent) and the average income is less than $2 USD per day. Wait, there’s also a catch: you need to be profitable.

This has come to be known as the “last-mile” or “last kilometer” distribution challenge for the base of the pyramid (BoP). Nearly anyone who has tried to do business in many parts of Africa or India has had to take it on and it is the challenge currently facing us at GCS Tanzania. The most common difficulty in serving these markets comes down to simple economics: the cost and effort required to send people and product to these communities far too often exceeds the income generated from sales.

The "last mile" is always the toughest...

The “last mile” is always the toughest…

A conventional wisdom has emerged that the best way to tackle this problem is by recruiting the villagers themselves as sales agents or “village level entrepreneurs” (VLEs). Encouraged by examples like Hindustan Unilever’s Project Shakti in India, companies have adopted this approach hoping not only to build a profitable sales and distribution channel for themselves but also to create a stable and viable source of income for the villagers. When successful,  these networks can result in a long lasting mutually beneficial arrangement for everyone involved.

This is the approach that we’ve decided to take on in Tanzania in the form of the “GCS Rafiki network” (“Rafiki” is the Swahili word for “friend”). For now, it is being used exclusively for the sale and distribution of solar lights and chargers, but the network itself is being developed for the future dissemination of innovative technologies of all kinds.

Recruiting "Rafiki" in northern Tanzania

Recruiting “Rafiki” in northern Tanzania

The more immediate goal, however, is to prove (primarily to ourselves) that it can be a profitable and  self-sustaining sales channel. Of course, nothing worthwhile comes easily and as expected there are a number of daunting challenges involved, any one of which could easily sink the entire project. Among the more salient at the moment (and in no particular order):

  • Infrastructure and logistics:  Less than 15% of the roads in Tanzania are paved (and those that are are mostly in urban areas) making it costly and challenging to go to these areas on a regular basis. There is also no postal delivery service as we know it in Western countries. How do we deliver product, monitor sales, and collect payment reliably and effectively under these conditions?
  • Entrepreneur recruitment: The success of the network depends entirely on the recruitment and success of the individual entrepreneurs. The challenge is not only to recruit good people and get them started as quickly as possible, but also to ensure that the ones who are already active continue to meet their targets and be successful.
  • Customer buying power: At retail prices ranging from $12 – 40 USD, even a basic solar light represents a significant chunk of monthly income for our typical customer. Does it provide enough value to the customer to justify the expense? If so, how do we best demonstrate and communicate that value? How do we empower our VLEs to communicate that value?
  • Entrepreneur financing: Like our target customers, newly recruited village entrepreneurs will have very few, if any, assets. In most cases they will not even qualify for microcredit loans. Do we consign them goods or extend them credit ourselves? If so, what is the risk to our company and how do we manage it?
  • Incentive structure: This can be tough to get right in any business, let alone in the context of a different culture than your own. Get this one wrong, however, and things can really backfire on you. Understanding the people who are working for you and what motivates them to be successful is absolutely imperative.
  • Risk management: A significant amount of cash and product must change hands in the process – most of the time through people we do not know and will never meet. Risk can never be eliminated, but how do we keep it to a minimum?

This post is intended as the first in a series describing the efforts to address some of these challenges and to share what we learn along the way. Future posts will go into more depth on these and other topics.

Comments are always appreciated!

Opportunity vs. Opportunism

In the blog post I wrote after the attending the DEMO Africa conference in Kenya last year, I observed that many of the companies presenting seemed to be addressing what I called “luxury problems” – ordering pizza online, chat rooms for television programs, concierge services for business travelers, etc. Others had pitches of the form “It’s like _____ but African”.

There were definitely some very good business plans presented at DEMO, but all too often I found myself wondering if some of them were primarily designed to address an unmet need in the African market or merely to impress the foreign investors in attendance by telling them what they wanted to hear. It didn’t help that many of the participants seemed to have been coached into wearing the standard issue Silicon Valley uniform (jeans and t-shirt with a sport coat).

Not long afterwards, CIO East Africa magazine (the primary sponsor of the very same event) published an editorial on the detrimental effect of what they called “compepreneurship”, referring to a proliferation of “start ups” with business plans designed  more for winning cash prizes than for actual execution in the marketplace. (Note: unfortunately article doesn’t appear to be posted publicly, but it was featured in the November 2012 issue. I will update this post if a link is found).

But how does one, especially a foreigner in a market, manage to figure out if an innovation is the real deal? How do you separate opportunity from opportunism? Changing the way we perceive innovation might be a good place to start.

Technology vs. Need

Innovation occurs, quite simply, when an unmet need finds a technology that addresses it – regardless of where it came from. All too often we fixate on the latter and not enough on the former (and those in the hype generation business like to keep it that way).

Let’s take a look at a famous African example: mobile money, pioneered by M-PESA in Kenya. This technology has enabled millions to make payments and money transfers using SMS text messaging technology from cheap basic mobile phones. Who would have guessed that such an important basic financial need would be met by a telecommunications technology, let alone one as simple and unremarkable as SMS text messaging? Prior to availability of mobile payments, people would have to spend an entire day traveling to and ultimately waiting in the nearest physical bank branch to make even the simplest transaction. Now it is all done in just a few seconds and it has transformed the way people conduct business.

Waiting in line at a bank in Tanzania

On the other hand if this technology is so great why hasn’t taken off in Europe or the U.S.? Because the need simply isn’t there. Online banking and credit card transactions may be a little more cumbersome than a text message, but they work just fine and hence our need is met. We are able to focus on much more pressing matters such as the need to download movies for free.

The first question to ask yourself when evaluating a business idea is if you can identify the unmet need being addressed by the technology in question – and if you understand its real world implications.

Think inside of the box

I had an interesting experience when I visited Rwanda last year. In my weekly Google Alert digest, I came across a headline about how Rwanda had acheived the fastest internet connectivity in Africa. I immediately clicked on the link, but the problem was that I couldn’t read the article. The page wouldn’t load. Like many other places I had been on that trip, my internet connection, while technically existent, was barely usable. Even when I could maintain a wifi connection for longer than 2 minutes it was too excruciatingly slow and left my need for the latest hot news on Rwandan tech woefully unmet.

It’s great when a country, like Rwanda, can get access to a revolutionary new technology, like blazing fast internet. But  it doesn’t do much good if the intended users are unable to access it and thus not much of an innovation if it doesn’t meet any needs. Inventing the next new game-changing product or service is great work if you can get it, but those opportunities are few and far between. There is challenge (and opportunity) enough for the rest of us in simply disseminating the ones that are already there – or even just finding ways to organize the markets that already exist.

These types of opportunities are often overlooked as they are usually not particularly sexy or glamorous and hence not very good material for magazine articles or business plan competitions. But more often than not they address important unmet needs and are refreshingly free of hype.

You’ll do as your told.

A friend and former colleague whose job it had been to manage partner relations in Africa for a large high tech firm once gave me a very simple bit of advice: “When you go to Africa, you don’t get to do what you want to do. You do what the market tells you to do.”

Truer words have never been spoken. Nearly every entrepreneur I’ve met who has done any significant amount of business in Africa has a major “pivot” story. The company I am working with here in Tanzania, for example, was founded with the mission of bringing simple bicycle powered agricultural equipment to rural farmers. “That’s nice,” the maket said, “but do you happen to have any idea where I could get some solar powered lights and chargers?” And so came the pivot… a great topic for future post.

No substitute

Statistics, editorials, books, reports and even wild speculation can all be useful guides to give a business idea some direction. Understanding the latest technologies provides us with the tools we need to accomplish great things. But there is no substitute for first hand knowledge of a market, because without understanding its true needs there can be no innovation.

Global Cycle Solutions

This blog is far overdue for a regular update, but things are about to change.

Next week I will begin a 6 months stay in East Africa. I will be spending the majority of that time in Arusha, Tanzania working with Global Cycle Solutions, a company dedicated to providing low cost, quality technology solutions to rural villagers. I intend to use this space to make periodic updates as things progress (along with the usual occasional posts about business in Africa in general).

I’ve been in contact with Global Cycle Solutions for a few months now but I haven’t yet written about them on this blog, so this video will provide a good introduction and overview of what they’re up to:

Global Cycle Solutons

This blog is far overdue for a regular update, but things are about to change.

Next week I will begin a 6 months stay in East Africa. I will be spending the majority of that time in Arusha, Tanzania working with Global Cycle Solutions, a company dedicated to providing low cost, quality technology solutions to rural villagers. I intend to use this space to make periodic updates as things progress (along with the usual occasional posts about business in Africa in general).

I’ve been in contact with Global Cycle Solutions for a few months now but I haven’t yet written about them on this blog, so this video will provide a good introduction and overview of what they’re up to:

A visit to Carnegie Mellon University in Rwanda

Earlier this year when I started researching the African ICT sector I came across an item that caught my attention. Carnegie Mellon University, one of the top ranked schools in the United States and the world, was opening a campus in Rwanda.  Like many others the only thing I knew about Rwanda prior to this were the horrible events that took place in 1994.

This news made me want to dig deeper, and on further research I found out that Rwanda has undergone an incredible transformation over the past 18 years. Today, Kigali is one of the cleanest safest cities in Africa, if not the world, and has been ranked the #3 best economy to do business in Sub-Saharan Africa (behind Mauritius and South Africa) in 2012 and again in 2013.

I got an opportunity to come and visit the school to see for myself this week while I was in Kigali and have a chat with Michel Bezy, CMU-R’s Associate Director. Bezy gave me an overview of the university, its mission and some context and insights on the current state of the East African ICT sector. (Bezy, by the way, also maintains a blog at http://brel54.blogspot.com/ which I highly recommend making the time for).

About CMU-R

In recent years, the Rwandan government led by President Paul Kagame has taken a strategy of investing heavily in education, especially in sciences and technology. CMU-R was specifically courted by the Rwandan government as part of a 10 year project intended to develop world class science and technology skills in the region. Rwanda also plans to open an ICT park in Kigali by 2015 as part of the country’s long term strategy. Currently CMU-R has 3 permanent local faculty (and 1 remote) and 24 students enrolled in the graduate program. It plans to increase this to 15 and 300 respectively and expand its curriculum to include new fields of study such as Electrical and Computer Engineering within the next 3 years.

CMU is, of course, not the first university from the developed world to open a campus in Africa. But, points out Bezy, while many universities simply transfer the same curricula taught in their home campuses and have it delivered by local or short term visiting professors, CMU expects its faculty to live in Rwanda during their tenure and will relocate them to do so. Hiring as well as student admission criteria are identical to that of its home campus in Pittsburgh, Pennsylvania (as well as the tuition fees) and a degree from CMU-R is equivalent to a degree from CMU in the USA. Although anyone can apply for admission from anywhere in the world, the curriculum is developed in Africa specifically for the African ICT context

CMU-R also offers executive education and works closely with kLab, a Bezy co-founded tech start-up incubator residing on the top floor of the same building. Plans are also in place to establish a dedicated Mobile Technology Research Center as well.

So, why Rwanda?

It seems I was not the first one to ask this question. Bezy explained that it is sometimes difficult at first to convince a top student from Kenya looking for a graduate program to choose Kigali over, say, the UK. “It can be like trying to convince someone to move to Des Moines, Iowa instead of Manhattan.”

But, he points out, the developed world’s ICT market is saturated whereas Rwanda’s (and Africa’s) is essentially virgin territory. Unemployment in the sector is much higher in the developed world than in Rwanda and Rwanda’s economy is growing significantly faster as well (8.8% real GDP growth in 2011 compared to 1%). Combined with the ambitious plans detailed in the Rwandan Government’s Vision 2020 strategy document, Bezy’s is bullish on Rwanda and his case for Kigali is indeed compelling.

Kigali, Rwanda

A tale of two cities

Nairobi is also competing to become the main regional hub in East Africa, but unlike Kenya, which is investing billions into building a shiny new ICT park in hopes of luring big players in the ICT industry such as Google and Microsoft to Nairobi, Rwanda is taking a more organic approach to its development. “The Silicon Valley came to be through a partnership and close cooperation between a top school (Stanford University), entrepreneurs, and established business. The money came later, and then only after the money was there did the shiny buildings appear.” Likewise, CMU-R is partnering closely with the kLab incubator and the companies operating Rwanda’s current ICT infrastructure, all of which reside in Telecom House, an unassuming 6 story building nestled among the embassies and government ministries near central Kigali.

“Marriott is building a 250 room hotel in Kigali right now and Carnegie Mellon researched the move to Rwanda for 5 years before making the decision to come”, Bezy adds. “Neither of these companies would make such an investment if they did not believe in the future of Rwanda and Kigali.” Sure, there are some downsides, Kigali doesn’t exactly have the most active nightlife and some have labeled the current government as an authoritarian regime. But, Bezy says, these problems are not unique to Rwanda and they are not impediments to the development of its ICT sector.

A tale of two worlds

So what is the difference between the ICT market in Africa and that of the rest of the world? For starters, many established tech companies from the developed world are under pressure by their shareholders to maintain high profits achieved either by charging fat margins for their wares or reducing their costs with massive scale.

This approach has worked well in developed markets where so far there has been enough demand for this and ICT budgets have largely been able to support it, but this is simply not the case in Africa. Google, he recounts, had once considered Rwanda as a site for one of its mega data centers  but quickly found that the region could provide neither the power nor the demand needed to utilize that kind of capacity effectively (a topic Bezy recently wrote about in his own blog)

kLab

In the developed world, for example, cloud providers compete against the cost of a customer’s legacy ICT infrastructure. Africa is about SMB (Small and Medium Business), however and SMBs in Africa have zero legacy infrastructure – they are starting from scratch. “Here you are competing with pen and paper, and in fact anything which can simply eliminate those manual activities is extremely valuable here. An African SMB might be willing to pay $5 per hour instead of 5 cents in order to avoid the $40-50,000 USD investment needed to procure its own equipment. The economy of scale is simply not needed.”

Mobile technology is also a fundamental difference. In developed markets, mobile is seen as a luxury, but in Africa it is absolutely core. Mobile must be central in everything that is developed if it stands a chance to succeed here. Plus what you make here had better be cheap, making open source software an essential component. This will be a real challenge for the Microsofts and Apples of the world.

So, what needs to be done now?

The infrastructure is already here, Bezy says, now it’s SaaS that needs to be developed. Interfaces must be easy and simple to use in order to bring users aboard who have never used IT or in some cases may even be semi-literate. The scale of big data centers is simply not needed yet as there are simply not enough customers demanding it – and those who are demanding it don’t yet have any data to migrate. The use of mobile money technologies such as M-PESA and MTN Mobile Money must be integrated and absolutely central to any offering as credit cards and corporate accounts are simply not widely in use here. Lot’s of solutions already exist but even existing offerings need to a lot of refinement yet and have a long way to go.

“This is a new paradigm,” Bezy adds, “The legacy infrastructure in the developed world is based on the need to be physically close to your customers. This is no longer necessary, services can be anywhere in the world.” He compares the situation in Africa in 2012 to that of the U.S. in 1982 – a couple of years before Windows and the Macintosh were first introduced to the world. Might we soon be witnessing the same in Africa?