AFRICAN DEVELOPMENT
FOUNDATION (ADF)
Nate Fields, CEO Africa Operations
Creating the enabling environment for Diaspora-led
investments: Prevailing investment opportunities and
challenges in Africa
Cape Town, South Africa
Feb. 06-08, 2008
Overview of USADF
• A U.S. Government foundation
• Began field operations in 1984
• Responds to unsolicited proposals from small- and
medium-sized businesses in Africa
• and other community organizations
• Budget from US Congress -- $30 million in FY 2008
• Other funding from strategic partnerships in FY 2008
– $13 million from 10 national governments and 1 MNC (Benin,
Botswana, Cape Verde, Ghana, Guinea, Kano State in Nigeria,
Mali, Rwanda, Tanzania, Uganda and Zambia).
Unique SME investment model
– Deep experience across many countries / sectors
– Collaborate with local partners to deliver on the
ground technical support on a day-to-day basis
– Unique approach of requiring matching
investments from African governments and/or
corporations
– Long history of successful strategic partnerships
– Strong track record of innovation to create
stronger SME successes
• Exporter / processor linkages
• Outgrower schemes
• Supply chain linkages
ADF’s Strategic Objective # 1: To stimulate economic
growth, job creation and higher incomes within low income
communities in Africa
1. Enhance growth, profitability and competitiveness of Africanowned small and medium-sized enterprises
2. Expand production of high-value crops by small-scale farmers,
value-added processing of agricultural products, and access to
local and global markets
3. Promote SME involvement in extractive industry supply chains,
infrastructure development and agricultural value chains
4. Develop community-based solutions to critical social and
economic needs of marginalized communities and people
Strategic Objective # 2: Expand local institutional and
financial capacities to support and sustain enterprise
development investments
1. Build world class business development services organizations
services
2. Create renewable pools of local capital -- to fund small
businesses and community initiatives
3. Forge strategic partnerships -- with African governments, other
donor agencies, private investors and the private sector for joint
funding and to significantly scale up programs
4. Document and disseminate information on program
experiences, lessons learned, best practices, and successful
business models
Tangible Results Across Africa
Impacts on enterprises and on communities speak for
themselves. Our results for 2006 investments
include:
• 46,533 jobs created
•
21,540 women who directly benefited through jobs
•
$82.3 million gross revenues of USADF-assisted
enterprises
•
$33.8 million value of export sales (2005)
•
$13 million cash commitment from African governments
and corporations
USADF-Guinea Alumina Corp
Strategic Partnership
Program Overview
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MOU signed in 2006
5 year $10M USD fund to deliver community social and
economic benefits
• 2 components: SME linkages and community-based
development
• Widely recognized as a groundbreaking public-private
partnership within the extractive industry
USADF-Guinea Alumina Corp Strategic Partnership
• Program Rationale
• “ADF and GAC have agreed to cooperate in a mutual
effort to support local communities and promote
development of micro, small and medium scale
enterprises in and around the bauxite mining zone of
GAC in Guinea.
• More specifically, the program will demonstrate an
effective partnership and cooperation between ADF, a
US public entity and GAC, a multinational private
corporation, in the context of poverty alleviation in
Guinea, a poor country of West Africa”
USADF-GAC Program Investment Model
SME investments are recycled
• Independent SME Linkages funding account (1:1 ADF and GAC Match)
• Work against GAC’s target spending with local suppliers
• Funds to be used in two ways: Enterprise Expansion Loans and Capacity
Building Grants
SMEs
Joint Fund
1 to 1
ADF / GAC match
Assistance
Enterprise Expansion
Loans
Working Capital
Capital Investments
Process Improvements
Recycle Expansion Loans
Capacity Building
Grants
Consulting
Training / Education
Technical Assistance
FOCUS OF SME INVESTMENTS
Construction
Operations
Community
Livelihoods
Local Consumer Economy
Construction: Fastest opportunity, provide technical assistance to local
subs, strengthen national firms but require use of local workers / inputs
Operations: Invest in new skills and expansion of firms based in
Conakry. In other cases, initially insource but spin off to local SMEs
over time
Local Consumer Economy: Build consumer and business-services
enterprises in and around the bauxite region
Community Livelihoods: Deliver local sources of income, generally
ag-based, that create employment within the footprint of the mining
activities
SME - MNC Linkages Methodology
1. Investment
Strategy
 Analyze MNC supply
requirements
2. SME
Development
 SME screening
3. Link SME to
MNC
 Supplier training in doing
business w/ MNCs
 Business plan development
 Survey community
priorities
 Conduct SME outreach
 Prioritize sectors / spend
categories
 Assess SME capabilities
in each sector / spend
category
 Define sector strategy:
− Link only
− Invest and link
− Insource / spin off later
 Formulate SME
Investment and Linkage
Roadmap
 Determine financing need
− Capacity building grant
(USADF EDI)
−Pre-commercial expansion
loan (USADF EEI)
− Commercial loan / link to
financial institution
 Execute financing
agreements / fund
investments
 Implement business plans
 Request for Proposal
(RFP) response facilitation
− Costing / pricing
− Capacity planning
− Working capital needs
4. Ensure SME
Performance
 Track enterprise
performance
− Quarterly financial reports
− Measure against growth
targets
 Track supplier performance
− Self reporting
− MNC reporting
 Contracting support
− Commitments / penalties
− Link to legal assistance
 Intervene as necessary
using proven turnaround
capability
 Contract implementation
− Production planning
− Customer relationship
management
 Facilitate additional market
linkages
Requirements Gathering
Construction
Schedule
Analysis
Sangaredi Alumina Refinery Schedule was analyzed with the following
results:
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Number of Projects: ~75
Number of Sub-Projects: ~188 (across all projects)
Project Phases: Engineering  Procurement  Construction  Commissioning
Construction related activities command the most demand
Construction
Work Content
Projects
Involved
Sub-Projects
Involved
Examples of Activities
Civil General
58
124
Area clearing & grubbing, drilling & blasting, surface compaction & leveling,
paving, foundation backfilling, ditches,
Electrical
45
75
Grounding, area lighting, cabling & wiring, fire alarm, testing
Instrumentation
44
56
Local instruments/panels, cabling trays/piping/cabling, control board
equipment,
Buildings
33
33
Foundation, plumbing & drainage, electrical, wall & roofing, exterior &
interior finish, HVAC,
Concrete
27
80
Foundations (piperack, equipment, structure, misc), concrete structures,
storage tank oil dike,
Piping
26
49
Pipe fabrication, pipe supports fabrication, pipe supports erection, A/G
piping, pipe install, hydrotesting,
Equipment
25
45
Equipment install, assembly,
Painting
25
47
Touch-ups painting, lettering/marking, surface coating, tank painting,
Steel Structure
25
70
Platforms/ladders/gratings, equipment steel structures, sub-piperack
structure
Insulation
23
37
insulation (pipe, powerplant)
SME Capability Assessment
SMEs were methodically assessed using a comprehensive toolkit covering
both subjective and quantitative attributes
Initial Assessment
GAC
Needs
SME
List
SME
Interview
Analysis
SME
Site Visit
Analysis
USADF SME Assessment Toolkit
SMEs were assessed and scored on the criteria below.
Business
Assessment
Entrepreneur
Assessment
- Profitability / Social
Impact
- Marketing /
Distribution
- Product Strength
- Operations
- Management /
Governance
- Character
- Commitment
- Competence
- Connection to
Community
Types of ADF Support
ADF provides an integrated assistance package that may
include
• Business appraisals
• Business and strategic
planning
• Financial management and
accounting
• Product development
• Operations improvements
• Governance support
• Managerial assistance &
training
• Access to improved
technology
• technical assistance
• Fixed capital
• Working capital
• Quality assurance
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Market studies
Marketing strategies
Market linkages
Business performance
measurement
• Monitoring and remediation
• Evaluation & impact
Assessments
• Audits
Progress Update : December 2007
FY 2007 Results
– Invested $1M USD in 6 SMEs
– Sectors include:
• Construction
• Security
• Food production
• Uniforms
• Maintenance services
• 700 jobs outputs:
– Projected
• $2M in wage growth
• > $10M in incremental revenue rowth
•
FYinvestments
2008 Planning
Implement FY07
– $1.4M in SME investment
– Sectors include:
• Construction inputs (blocks / wood)
• Professional services (PR, engineering services, consulting)
• Maintenance services
Investment Size and Duration
• Enterprise Expansion Investments typically
range from $100,000 to $250,000 (may be larger
in rare cases)
• EEIs are for 5 years, but may extend longer
• Operational Assistance Grant (OAG), to improve
the capabilities of an enterprise not yet ready for
an enterprise expansion investment
• OAGs are 50% repayable for up to $100,000
over 1 to 2 years and may be followed by an
application for an EEI.
Examples of Export Products From
FY 2005 Projects
• Frozen and chilled
Nile perch
• Fresh and processed
rock lobster
• Dried paprika peppers
• Cured vanilla
• Beef products
• Fresh fruits and
vegetables
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Solar-powered hearing aids
Citronella tea bags
Tie-dyed textiles
Cattle and ostrich hides
Cashews
Dried pineapple
Sugar
Salt
Traditional African foods
Clothing
Recent Project Examples
• Botswana Khama
Rhino Sanctuary –
$201,000 for
construction of two
chalets and a
restaurant at this
ecotourism facility
plus training, TA, and
working capital
Recent Project Examples
• Cape Verde Tipografia -$245,000 to enable a
printing shop to produce
full-color advertising
materials, magazines,
and newspapers and
treat its wastewater
effectively. ADF funding
helped them obtain a
commercial bank loan for
a new building and ADF
is helping them access a
soft loan from another
donor for equipment.
Recent Project Examples
• Ghana Ernimich --$248,000
for expanded production of
traditional ethnic foods sold
to specialized shops and
grocery stores in the US
under the brand, Nina
Foods. ADF will provide
working capital, vehicles,
market development
support (website and
implementation of
international quality
standards), training, and
improved management
systems
Recent Project Examples
• Ghana Integrated Tamale
Fruit Co. (ITFC) – 2
projects to help
outgrowers establish 200
2-acre plots of organic
mangoes with tractor
leasing, irrigation
systems, farming tools
and inputs, and extension
services. ITFC will
provide land to be owned
by the outgrowers and
market the produce, but
farmers will have the right
to sell to other buyers.
Recent Project Examples
• Ghana Woodhouse -$250,000 for the only
large-scale, modern
manufacturer of furniture
for schools in Ghana.
The company will buy
new equipment, a
generator, hardware and
software for computerassisted design, and
transport vehicles
Recent Project Examples
• Mali Benkadi Laundry -- $249,000 to establish a
modern laundry that will employ women with
obstetric fistulas. Profits will enable the Benkadi
Association to increase medical treatment and
its community outreach and education for this
medical condition
• Namibia Rudro – $268,000 for a leveraged buyout by the employees of a textile company that
had been owned by a non-indigenous Namibian
Examples of Project Impact
 Tanzania Mtibwa Sugar scaled up its
production through its support for the
production of small-scale sugarcane
outgrowers. Funded in FY 2002, Mtibwa
Sugar has increased its gross export
revenues from $1.188 million in FY 2002
to $5.034 million in FY 2005.
Examples of Project Impact
• Uganda’s Kelvin Shaun, a hydrated lime
processing business, received a US$250,000
grant in FY 2005 to expand production for
import substitution. ADF funding supported
construction of new production facilities and the
purchase of vehicles, equipment, and inputs.
Kelvin Shaun has secured a contract to supply a
construction company with 200 metric tons of
hydrated lime valued at US$259,500. The
company’s net income has increased 17 fold.
Examples of Project Impact
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ADF support enabled Botswana Godisa Technologies to produce low-cost
hearing aids for people in developing countries using parts purchased in
bulk from a British company. A similar hearing aid in Europe costs 4 times
as much.
ADF also supported the design and production of solar chargers for the
hearing aid batteries. Godisa won a first-place award for international
product design from the Design Institute of South Africa.
Between January 2002 and September 2005, Godisa sold over 2,750
hearing aids and chargers.
Godisa is also helping NGOs in other countries begin production of the
hearing aids and chargers. Godisa recovers its expenses for helping to
establish the other businesses from donor or foreign government funding,
but does not accept a franchise fee or royalties as long as the manufacturer
1) is an NGO, 2) hires the disabled, and 3) has a qualified business
manager.
By early 2006, replications are expected to be underway in Brazil, Jordan,
and the Philippines. Donor funds are also being sought for replications in
Pakistan, the Dominican Republic, and Mexico.
How ADF Measures Its Performance (1)
1. Revenue Growth
Cumulative increase in the sales of enterprise development projects
over their extrapolated baseline levels during the project period and
the 3 years following the grant expiration date
2. Investment Multiplier
For every dollar disbursed to enterprise development projects that
were active or have closed within the past 3 years, the cumulative
increase in their gross revenues (sales) over the extrapolated
baseline level during the project period and the 3 years following the
grant expiration date
3. Profitability
Percent of active enterprise development projects that have
achieved a positive net income before income taxes, depreciation,
and CRG contributions in the reporting year by the end of their third
year or earlier
How ADF Measures Its Performance (2)
4. Community
Reinvestment
Percent of active enterprise development projects that are current in
meeting their cumulative CRG pledges from the end of their third
year and onward
5. Sustainability
Percent of completed enterprise development projects or social
development projects that are still operating during the 3 years
following expiration of the ADF investment
6. Partnership Contributions
Funds received from strategic partnerships during the year as a
percentage of new ADF obligations for development projects
How ADF Measures Its Performance (3)
7. Follow-on Financing
Cumulative non-ADF loans, grants, or equity investments received
by active and closed projects from the ADF grant start date through
the 3 years following the grant expiration date
8. Overhead Rate
ADF’s non-program costs as a percentage of (USG appropriations +
non-USG funding contributions received).
9. Disbursement Efficiency Median time required between the ADF
Country Representative’s receipt of a grant disbursement request
from the partner organization and ADF transmittal of the funds