A Ripe Landscape

Economics

Editor's note: This year, 17 African countries mark 50 years of independence. The Mantle and Project Africa's joint series, African Revolutions, marks this milestone with a series of live events and online publications examining each of these countries.

With its capital city of Dakar located on the westernmost point of Africa, Senegal is the gateway to the continent. This semi-arid country, about the size of Uganda (slightly smaller than the American State of South Dakota), has some of the best transportation, telecommunications, and communication infrastructure in West Africa. Dakar has become the transportation hub of the region, with a number of airlines flying eastbound toward other African countries, northbound to Northern Africa (Morocco and Tunisia) and Europe, and west toward the United States. Between the international airlines Delta, Air France, and South African Airways, there are currently three daily flights between to the U.S.  and South Africa.

Due to continued instability in nearby Cote d’Ivoire, over the past six years many companies have relocated to use Senegal as a regional center for their West African operations.

Senegal is one of Africa’s most politically and economically stable countries. Since independence from France in 1960, Senegal has been a functioning democracy. Free and fair elections in 2000 brought President Abdoulaye Wade to power, ending 40 years of Socialist Party rule. He was re-elected in 2007.

Senegal’s economy has grown consistently at rates close to five percent annually since the mid-1990s.  Due to a deep energy crisis and the demise of Senegal’s phosphate and fertilizer sector, growth fell to 2.1 percent in 2006, but rebounded to around 4.8 percent in 2007. These gains are due in part to a monetary policy that is controlled by the regional central bank, the West African States Central Bank (B.C.E.A.O.), headquartered in Dakar.

Senegal’s economy remains vulnerable to external factors, however: rainfall, international tourist demand, and variable commodity prices are three main culprits. Fish, phosphates, and peanuts (in the form of peanut oil) are our biggest exports, while tourism remains an important additional foreign exchange earner. A significant Senegalese expatriate community also returns—through formal and informal networks—important amounts of foreign exchange to Senegal in the form of remittances estimated in 2007 at USD 1.8 billion.

Senegal’s commercial climate is also challenging for U.S. companies accustomed to a business environment where the driving forces remain fair competition, transparent rules, and a level playing field. In Senegal, there is a continually perceived lack of transparency in the allocation of public contracts. This is particularly the case in the quickly-expanding construction sector where allegations of corruption have motivated aggressive inquiries from the press, civil society, and opposition parties.

The top sectors offering potential for U.S. companies’ investment in Senegal are telecommunications, power generation systems, construction equipment, medical equipment, wastewater treatment technology, agricultural commodities, computers and peripherals, used clothing, and cosmetics.

Enter the Social Entrepreneurs

In this context, social entrepreneurship is a very viable business model in Senegal. Although social entrepreneurship is still in its infancy in Senegal, the opportunities abound in  sectors that need to be developed.  In short, with social entrepreneurship, goods can be produced to solve problems of water supply, sanitation, food shortage, and energy while creating jobs for the unemployed.

Despite the many challenges existing for entrepreneurs in Senegal (including high unemployment), a social business can be the most relevant business model for a developing economy. A social business is an enterprise with a social mission. Its aim is to reach some social goals, namely improving the condition of the consumer and surrounding environment, while achieving financial gains.

In Senegal, the main challenge a social entrepreneur faces is corruption: the most extreme example is the case of Millicom, a U.S. firm currently in litigation with the government of Senegal. In this case, senior-level Senegalese officials allegedly attempted a USD 200 million shakedown of Millicom over their license to provide cell phone service in Senegal. The case is in arbitration before the World Bank’s International Center for Settlement of Investment disputes; hopefully this case will conclude with a satisfactory result for both parties.

Other than corruption, which is being addressed as a major issue in Senegalese society, the slow administrative process of establishing a company can also be viewed as a deterrent for aspiring entrepreneurs in Senegal.

A social business will be profitable if thorough research is performed in the business planning process, and if the actual financial results mirror or exceed the financial forecasts from the business plan. Questions, such as the affordability of products or service sold, market conditions, and reliable information on all costs associated with doing business need to be answered with accuracy before testing the product or service. Ultimately though, the execution of the operations should be flawless to guarantee a higher chance of success.

But a social business must go further: it has to serve a community and promote a sense of social responsibility at the local level. Furthermore, what makes a social business different from a “regular” business is the participatory aspect of its consumers. Social businesses are the result of collective dynamics from a community that shares a certain need. Consumers are represented and participate in the structure of the enterprise itself.

In summary, a well-designed social enterprise that takes into consideration all of the vital criteria in its business model can be sustainable, profitable, and socially responsible in Senegal.

Take the business model of our company, Performance Consultants, as an example. Our firm is designed to be sustainable and profitable while helping the poor in Senegal first (as a test) before moving to the rest of West Africa.

Functionally, our firm is an export company that distributes technology for water, sanitation, energy, construction, agriculture, and transportation sectors. With solid American suppliers, we provide quality goods at competitive prices in West African markets.

With a strong focus on rural communities, we have collected valuable data on their lifestyles and their most urgent needs in order to design a line of products specifically fitted for their context. This thorough analysis has helped us determine affordable pricing for these communities and understand all the factors associated with delivery/installation of equipment (hand water pumps, solar panels, wind turbines, agricultural tools, etc.).

Since access to clean drinking water, energy, and increasing the food supply are urgent needs for the communities we serve, providing solutions that improve the lives of our consumers fulfills our social objectives. Moreover, there are additional services we offer to our clients, including training on using and maintaining equipment, and training the villagers in manufacturing solutions by using local materials (thereby encouraging local social entrepreneurship).

The social solutions we offer, coupled with a high level of interaction with our consumers, make us a social enterprise: the clients play a participatory role in our strategies and operations. We listen to them.
 

Toward the Future

In today's business world, Africa still doesn't get the recognition it deserves. Instead, it is rarely spoken of or even acknowledged as a group developing nations. This condition is the result of media propaganda mainly focusing on the problems of the continent and not addressing the positive progress being achieved, and also the overall lack of information dissemination about the possibilities in exports and bilateral relations.

But the largest misconception is the belief that Africa just doesn't have the purchasing power to be a viable market—but nothing can be further from the truth. To wit:

- In 2008, the United States purchased USD 86 billion worth of goods from Africa, while Africa purchased 18 billion of American goods. This trade deficit creates a surplus of USD 68 billion for African economies. Who still thinks that Africa doesn't have purchasing power?

- When selling in Africa, it is important to select the right customers in order to conduct a successful business venture. We have two types of consumers: large companies and entire communities. Larger companies are able to pay for goods in bulk while rural communities pay by spreading the costs throughout the community (each family brings a small contribution—a real community effort).

The largest share of our consumer base is by far African rural communities—600 million consumers live in villages (an untapped market). Access to clean drinking water, energy, and agricultural tools are an important sector in our operations, since these are the most urgent needs for our largest market. Our market analysis trips in Senegal reveal valuable insights: villagers feel neglected by governments and private sector; most of them walk five miles daily just to collect dirty water; they don't have access to any form of energy. And to think, most of the time they can actually afford these improvements!

Our company responds to this underserved market with immediate solutions. The assumption that only aid can assist these communities and they don't have purchasing power is false: they just need an opportunity to be more productive and become more independent; after all, they raise farm animals and grow crops, so they do have a substantial purchasing power.

One of our main products for the rural communities is the "simple hand pump," which serves their most urgent need: access to clean drinking water. Clean water significantly improves the overall health of the community (most diseases come from dirty water), improves their productivity (so much time wasted in collecting water), and improves their economies (more time spent on money-making activities). Along with pump sales, we follow up with our clients with pump repair and maintenance services to keep them satisfied. We then sell these same customers solar panels for their energy needs.

Other villages will notice the improvements of their neighbors and they will come to us for these services to improve their lives. This ripple effect in the rural areas makes Senegal, and West Africa at large, ripe for social entrepreneurship.

November 27, 2010

Africa, AR 2010, Senegal, Social Entrepreneurship