Transcript 4 Kim Tan - Transformational Business Network

TRANSFORMATIONAL
BUSINESS
NETWORK
Obscene Inequality
“One-fifth of humanity live in countries
where many people think nothing of
spending $2 a day on a cappuccino.
Another fifth of humanity survive on less
than $1 a day and live in countries
where children die for want of a simple
anti-mosquito bed net”
Source: UN Human Development Report 2005
Unjust Consumption
• $7 billion is needed to provide 2.6 billion
people with access to clear water annually
– Less than we spend on perfume
– Less than Americans spend on elective
corrective surgery
• 3 day’s global military spending ($4.5b) could
send every child to school for a year
Source: UN Human Development Report 2005
Unfair Trade & Subsidies
• $1billion a YEAR on aid for
agriculture in poor countries
• $1 billion a DAY on subsidies of
agricultural overproduction at home
• EU diary subsidy is $2.50/cow/day
whilst 2.8b people live on <$2/day
Source: UN Human Development Report 2005
Aid is not the solution
• Aid is ineffective
– Distorts local economy
– Encourages inefficiency and waste
– Creates dependency culture
• Aid is inefficient
– 60% of aid money stays in donor countries
– US aid was $3/person in Africa (2002).
Deducting consultants, food & emergency
aid, admin costs & debt relief, only $0.06
was left (Jeffrey Sachs,2005)
Aid is not the solution
• Aid is not linked to economic growth:
‘In Africa, whilst aid increased from 5% to
17% of GDP in the 1990s, GDP growth
actually decreased from 2% to zero or
negative growth’ (World Bank Dev
Indicators, 2003)
‘Foreign aid had positively harmed the
poor in developing countries and should
end’ (Peter Bauer, Fifty Years of Failure)
What is our response
to this
Scandal of Global Poverty?
Tackling Global Poverty
• Humanitarian
Aid/Emergency relief
• Development projects
• G2G aid
• NGOs
• Foundations
• Venture philanthropy
Micro Finance Institutions
•
•
•
•
1971
1973
1976
2004
• 2006
Opportunity International
Accion International
Grameen Bank
IFC and MFI partners had portfolio
of $2.5b and 1.3m loans
Citigroup, ICICI and others enter the
market as intermediaries – new
asset class
Micro credit
• Fastest way to lift people out of abject poverty
into ‘normal’ poverty
• Advantages
•
•
•
•
Supplement income
‘Plug & Go’
Replacement of ‘expensive’ debt
Cash flow – critical needs
• Limitations
• Loans too small for enterprise
• Lack of skills training for enterprise
• Preference to be employee than entreprenuer
Enterprise solution to Poverty
• Economic growth is the fastest way to
reduce poverty – China, Asian Tigers
• FDI is critical to economic growth but
requires political and economic stability,
good governance – factors missing in
poor countries
• Social entrepreneurs needed to fill this
gap
Social Venture Capital
• Social Venture Capital or Social Enterprise
–
–
–
–
Alleviation of poverty through SME private enterprise
Job creation & Wealth creation
Triple Bottom line – financial, social, environmental
Sustainable profitable businesses
• Employment - dignity
• Empowerment - independence
• Entrepreneurship training
– Uses tools, disciplines and accountability of VC
Why SMEs?
• Mechanism for job creation
– SMEs employ 70% of the work force
– SMEs represent 99% of all registered
companies
• Higher success rate
• Source of entrepreneurship and
innovation
• Driver of competition
Environmental Conservation
pringHill
S
16
Social Transformation
From this…..
To this….
17
Hospitality intakes from Umzi Wethu
Food & Beverages
Freddie
Van
Rhyner
(SE)
Junior Chef
Carla Reed
(Uitenhage)
Danny
Sauls
(SE)
Heather
Rossouw
(SE)
Kosie
Plaatjies
(PE)
Marius
Maart
(SE)
Johan
Van Den
(PE)
Help the poor…
Come on safari!
Challenges of Social VC
•
•
•
•
•
Lack of local knowledge
Lack of trusted management
Distance & communication challenges
No exits
High risk
The Social VC Universe
• Private investors
• Individual or club
• Foundations
• Odmiyar, Google
• Social VC Funds
• Bridge Ventures (UK)
• Fusion Capital (Kenya)
• SpringHill (Africa)
• Unit/Investment trusts
• CRU Investments
• Listed investment companies/funds
INQO Investments IPO
• Listing on AltX, JSE 08
• Creating a new asset class: a
listed social venture capital
investment company
• Maximise financial and social
returns
• Promote to private banking
clients and SRI funds
• Prof Jakes Gerwel (Chairman)
• “Social investment is going to be a new asset
class. I am sure of it. Ten years from now,
people will be saying that pension funds,
insurance companies and corporations must
allocate a certain percentage of their assets
to organisations that provide a social as well
as a financial return”
Sir Ronald Cohen
in The Second Bounce of the Ball
TBN Loan Fund
by
Clive Moody
Mike Tingling
TBN Loan Fund
• Loan size [$5-10k] to TBN members for
projects
• Match funding
• Investors offered [3-4%]p.a
Borrowers [5-6%]p.a
• Minimum Fund Size: $150k
No maximum
The poor need jobs,
not aid