2015 - Proparco

P R O P A R C O A C T I V I T Y R E P O R T 2015
P R O P A R C O A C T I V I T Y R E P O R T 2015
Panorama
2015
P R O PA R C O
On the ground
with private players
P R O PA R C O, G R O U P E A G E N C E F R A N Ç A I S E D E D É V E L O P P E M E N T
Tel: +33 (0)1 53 44 31 08 – Fax: +33 (0)1 53 44 38 38
151, rue Saint-Honoré – 75001 Paris
www.proparco.fr
— ABOUT US —
Proparco,
a financial institution serving
the private sector and
sustainable development
€5
P
bn
on the balance
sheet.
80
target
countries.
438
clients.
roparco, a subsidiary of Agence
Fran­­
çaise de Développement (AFD)
devoted to private sector financing, has
been supporting sustainable economic, social
and environmental development for almost
40 years.
Operating in Africa, Asia, Latin America and
the Middle East, the institution extends loans,
makes equity investments and provides guarantees to help finance and support financial
institutions and corporate private-sector projects. Proparco focuses on the key development areas, such as renewable energy-based
infrastructure, agribusiness, financial institutions, health and education.
Through its work, Proparco seeks to bolster
the contribution of private enterprise to the
achievement of the Sustainable Development
Goals (SDGs) adopted by the international
community in 2015. A significant share of its
financing therefore goes to companies likely
to create jobs, supply essential goods and services and, more broadly, help reduce poverty
and mitigate climate change.
Moreover, to achieve its aims, Proparco takes a
broad-based approach to governance. Alongside majority shareholder AFD, its governing
bodies include public- and private-sector
financial institutions from France, the rest of
Europe, Africa and Latin America. Proparco
has a staff of over 200, divided up between
Paris and its 11 offices abroad. Proparco can
also rely on the AFD’s network of 72 agencies
and offices around the world.
Proparco’s role is also to promote the emergence of responsible business and financial
organizations in developing and emerging
economies. This means helping its clients
improve their environmental and social performance and their governance.
Proparco is one of Europe’s leading development finance institutions, and spearheads a
large number of joint programs with its peers.
3
— EDITORIAL —
2
Reaching the Sustainable
Development Goals
with private players
015 was a red letter year for the sustainable
development agenda. The Addis Ababa
Conference on Financing for Development,
the UN General Assembly on the Sustainable
Development Goals (SDGs) and the COP21 conference established guidelines for a new, universal
approach to tackling the interrelated, interlocking
issues of economic development, social inclusion
and preservation of our planet. Those many goals
cannot be reached unless all the stakeholders –
from companies and financial institutions to central
governments, from civil society to local authorities –
pitch in to help. Their involvement and contribution
will be essential to tackling the underlying challenges and fostering the emergence of pioneering
approaches to creating responsible, sustainable
models of development. Just such a commitment
to alliance and partnership guides the work of the
AFD Group, above all at Proparco, whose role is to
ensure a continuum between public-sector policy
and private-sector investment strategies in ways
that maximize developmental impact.
2015 was a very important year for the AFD Group.
We provided a larger amount of funding than
before – €8.3bn spanning all continents – with
55% of the total going to projects with co-benefits
for climate change mitigation (30% in the case of
Proparco). That increase was our response to the
ambitious goal set by French President Hollande,
who announced last September that an additional
€4bn would be channelled to development financing between now and 2020, including €2bn with
climate co-benefits. Such a plan will require our
Group to boost its annual volume of financing to
over €12bn throughout that period.
The President’s statement was a reaffirmation of
our key role in France’s development financing programme. And because it makes it necessary for us
to scale up – taking on greater size and credibility
AFRICA AS PRIORIT Y FOCUS
62 %
of financing approved by
Proparco this year (€648m)
went to Africa, in line with the French
government’s commitments on behalf
of the AFD Group.
– the AFD Group will gain recognition as an essential institution in the international arena. Proparco
will be very much a part of that process as a vital
contributor to the private-sector component of the
development finance agenda.
PRIVATE-SECTOR ORGANIZATIONS
AS DEVELOPMENT PARTNERS
The adoption of the SDGs amounted to official
recognition of the private sector’s vital contribution to development. Among the partners called
upon by the United Nations to help achieve those
goals were businesses and investors, alongside civil
society representatives and government officials.
Proparco has been successfully pursuing just such a
course for nearly 40 years now. Supplementing official development assistance, whose pivotal operator
in France is the AFD, Proparco
works to assist businesses and
financial institutions engaged
F I N A N C I N G A P P R OVA L S (in €m)
in a dynamic, responsible and
at the same time financially profitable entrepreneurial process
so as to promote sustainable,
1,066
inclusive, low-carbon growth
1,054
trajectories in developing and
1,023
emerging economies.
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P R O PA R C O A C T I V I T Y R E P O R T 2 015
2015
2013
By Anne PAUGAM, Chair of the Proparco Board
of Directors and Chief Executive Officer
of the AFD (2013-2016), and Claude PÉRIOU,
Chief Executive Officer of Proparco (2012-2016).
2014
“COP21 highlighted the central role of
private businesses and investors in the
fight against climate change: $1 trillion
is the annual requirement.”
5
OUR STRATEGY
IN 10 POINTS
MOBILIZING $4 TRILLION A YEAR
The United Nations has estimated that developing countries will require investment – from both
public and private sources – totalling anywhere from
$3.3 trillion to $4.5 trillion a year. However colossal
those figures look, reaching them will be crucial to
addressing the needs of Africa, Asia, Latin America
and the Middle East in such areas as infrastructure,
food security, health, education and adjustment to
climate change, as well as to mitigating social, economic and environmental imbalances around the world.
people, including the neediest among them. They
are also heavily involved with the transfer of skills
and technology from North to South – and within
the South. But however essential the private sector’s contribution to development may be, it is
no replacement for public policy. Private-sector
and public-sector actions supplement and mutually
enhance each other, provided that are properly
coordinated. The role of public funding must
accordingly be to catalyse and give direction to
private investment.
The private sector plays an essential role in creating wealth, distributing wages and contributing to a
wide variety of government budgets.
Over the past five years, companies
financed by Proparco have directly or
indirectly helped create or maintain
1.6 million jobs. Those companies
have also generated nearly €2bn in tax
revenue for the countries in which they
(equal to 31% of our funding)
operate. But the contribution of prifor projects with a positive
vate businesses to development goes
impact on climate change
well beyond their role as employers
(e.g., renewable energy, energy
and taxpayers. There is hardly a secefficiency).
tor in which they have no involvement, whether as investors, suppliers
of medium- and long-term funding,
operators or providers of technical
solutions. In Asia, Latin America and Africa, they
produce and distribute power, contribute to the
agribusiness value chain, transport goods and
people, provide financial services, process waste
and more. The private sector is not just a source of
financing; it also develops production technology
and promotes forms of consumption that generate
less pollution and use less energy. Furthermore,
in the Northern and Southern hemispheres, private-sector organizations are the primary producers
of research and development, bringing about innovations like mobile banking that benefit millions of
THE EXPANDING ROLE OF DEVELOPMENT
FINANCE INSTITUTIONS
To address the growing needs of its partners, Proparco has provided a steadily increasing volume
of financing. Its portfolio went from €9.7m and
65 clients in 1990 to nearly €4.5bn and over 400
clients in 2015. Its work, which initially focused
on French-speaking Africa, has since expanded to
cover all countries eligible for development assistance. Proparco today operates in 80 countries,
making it one of the leading European Development Finance Institutions.
€290 m
Like its counterparts elsewhere in Europe, Proparco uses a wide range of financing tools (loans,
equity and quasi-equity investments, guarantees)
to ensure effective support to private business. It
acts as a catalyst for private capital from local and
international providers – not only its peers and
shareholders, but also private equity funds, foundations and private investors and entrepreneurs.
Through its in-depth knowledge of conditions on
the ground, Proparco is well-equipped to handle the political, financial, social and environmental risks related to locally developed projects and
can therefore offer the private sector incentives to
back projects initially perceived to be too risky. At
the same time, Proparco has continued to give its
clients hands-on assistance with improving their
(2014-2019)
environmental, social and governance practices.
This includes financing technical assistance to help
clients enhance working conditions, reduce their
carbon footprint and achieve environmental certification, for example. By promoting such good practices, we not only contribute to sustainability; we
also serve France’s strategic interests.
30% of our activity on projects that
01 Focus
help combat climate change.
development in Africa by
02 Support
providing financing of at least €3.7bn
CONSTANTLY EVOLVING NEEDS
To meet its clients’ constantly evolving needs even
more effectively, Proparco will continue in 2016 to
boost the added value of its offering by drawing
on the sectoral and geographic expertise of it AFD
Group staff, expanding its technical assistance work
and facilitating networking among private-sector
organizations.
The institution will also go on supporting the French
government’s focus on Africa while maintaining its
engagement with the sectors that are central to the
Sustainable Development Goals (SDGs): infrastructure (transport, energy, telecommunications), basic
services (healthcare, education, water and sanitation), finance (lending, leasing, insurance) and agribusiness. And whether by directly acquiring equity
interests or via FISEA, Proparco will be contributing
to the AFD’s €300m social and solidarity-based economy initiative.
Proparco already has extensive involvement with
French companies, and will continue to encourage
them to invest in developing countries. The institution takes advantage of its strong local presence
to disseminate and share its international expertise.
This approach not only allows French companies
to benefit from Proparco’s experience with specific industries and business networks; it also helps
export French know-how in support of projects for
which that know-how is in great demand.
Proparco and the AFD will also continue with their
efforts to strengthen the “Group offer” so that they
can promote innovative partnerships, while striving
for maximum consistency between public policy
and private-sector initiatives in partner countries. during the period, equal to roughly
50% of our activity.
Dedicate 25% of our activity to least
03 advanced,
low-income, transition or postcrisis countries.
the weight of equity and quasi04 Increase
equity investments and subordinated
loans in our portfolio from 14% to 30%.
up our education and health work
05 Ramp
to a total of 7% of our portfolio by 2019.
our clients enhance their
06 Help
environmental and social performance
and governance, in particular by
providing technical assistance.
our social business offer by
07 Develop
funding more companies active in the
inclusive economy.
€
1/3
of all financing approvals
in 2015 for fragile States
(least advanced countries –
LACs – and/or post-crisis countries).
22 %
of all funding provided through
co-financing arrangements with our
fellow EDFIs – Germany’s DEG and the Netherlands’
FMO – with multilateral institutions like the European
Investment Bank (EIB) and the International Finance
Corporation (IFC) or with Proparco shareholders.
€115 m
invested in equity, quasi-equity and
subordinated loans to support the growth
of private companies operating in developing
economies.
?
up to 10% of our equity
08 Devote
investments a year to early-stage
companies.
results and impact of projects
09 Measure
we finance to assess their contribution to
development.
our partnerships with our
10 Strengthen
fellow development finance institutions
and stakeholders.
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P R O PA R C O A C T I V I T Y R E P O R T 2 015
7
How Proparco
invests
Our mission
For Proparco, a “good project” is one that is in line with its mandate
and strategic direction, that is led by a sound client and that will have a social
and environmental impact on local development.
Strengthen the private sector’s
contribution to achievement of
the Sustainable Development Goals (SDGs)
Our tools
Loans
—
Equity and
quasi-equity
investments
—
Investment funds
—
Guarantees
—
Technical assistance
Our added
value
+ Expertise spanning multiple sectors
and geographies
+ Ability to organise complex projects
+ An international network
+ Catalyst role (arrangement, syndication,
credit facility management)
+ Effective risk management
(credit risk, environmental
and social risks, etc.)
+ Financial strength (as part
of the AFD Group)
Our areas
of involvement
Agriculture and agribusiness
Banks and financial markets
Climate
Education
Health
Industry
8
Investment conditions and principles
Targets
Additionality
Knock-on effect
Proparco supports the development
of companies and financial
institutions that are active in areas
of key importance to development,
both local organizations and
international companies
(particularly French) with operations
in the South or seeking to develop
subsidiaries there.
Proparco works to supplement the
activity of local and international
commercial banks, but without
coming into competition with
them. Its operations focus on
areas where its assistance is most
needed and where it has the
highest added value.
Proparco’s financing aims to
demonstrate the economic and
financial viability of private
enterprise in businesses and/or
regions in the South that investors
tend to shy away from. In this sense,
Proparco’s operations have
a significant knock-on effect.
Infrastructure (energy,
telecommunications, transport,
water and sanitation)
Microfinance
Tourism
P R O PA R C O A C T I V I T Y R E P O R T 2 015
Development impact
Client reliability
Project profitability
The contribution that the
companies it finances make to
local development is central
to Proparco’s approach to
investment.
All financing decisions are based
on an in-depth analysis of the
various risk factors – credit, social,
environmental and other risks –
related to clients and their projects.
Projects cannot last unless
they are profitable. Profitability is critical
to the business model of Proparco
and to its ability to win over additional
providers of funding.
9
P.13
P.18
On the ground
WITH THE
PRIVATE PLAYERS
P.20
P.41
SPECIAL FEATURE
Tunisia
ACCESS TO ENERGY
H I G H E R E D U C AT I O N
620 million Africans
with no lighting����������������������������������������� P.13
Serving the general interest�������������� P.31
LOW-CARBON INFRASTRUCTURE
Toilets in Nairobi’s slums������������������� P.37
S A N I TAT I O N
The land of the Incas
is going green����������������������������������������������P.18
AGRIBUSINESS
Business acumen and social
commitment as keys to success��� P.20
ACCESS TO CREDIT
Sound financial systems:
the backbone of Africa's
economic development���������������������P.28
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P R O PA R C O A C T I V I T Y R E P O R T 2 015
SPECIAL FEATURE
Tunisia
Betting on entrepreneurship������������ P.41
11
ACCESS TO ENERGY
620 million
Africans
with no lighting
A F R I C A – Universal access to reliable, affordable, clean energy
is one of the major challenges on today’s development agenda.
In 2011, the United Nations launched the Sustainable Energy for
All initiative with the aim of bringing together stakeholders from
governments, business and civil society to eliminate
energy poverty. This is a field in which Proparco has been
active for years.
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P R O PA R C O A C T I V I T Y R E P O R T 2 015
13
ACCESS TO ENERGY
AFRICA
O
ne billion four hundred million people get
by without electricity. Another three billion are dependent on coal and traditional
biomass sources such as wood and crop waste to
meet their lighting, cooking and heating needs.
In energy terms, Sub-Saharan Africa is the world’s
most deprived region. Over half of the population –
620 million people – lacks access to
electricity, particularly in the countryJust 3% of global electric
side. Africa has the same electric
power investment
power output as Germany, although
its population is thirteen times
projected over the next
larger. Moreover, the average price
two decades would be
per kilowatt-hour is higher south of
the Sahara than elsewhere: $0.14,
enough to ensure access
compared with $0.04 in South Asia,
of all to energy.
for example.
Energy poverty in the region is clearly an obstacle to
human, social and economic development. Its adverse
impact on schooling for children and the agricultural
value chain (production, processing and storage) is
particularly well-documented.
To make matters worse, 1,400,000 people die every
year from inhaling toxic fumes given off by cooking
fuels. Malaria is responsible for fewer deaths.
1. The poorest inhabitants
of the African countryside
spend up to $150 a year
on batteries, candles and
mobile phone recharges.
2. Lighting alone can
significantly enhance
learning by enabling
children to go on studying
after nightfall.
14
UNIVERSAL ACCESS TO ELECTRICIT Y
IS NO PIPE DREAM
The goal of the Sustainable Energy for All initiative
is to provide universal access to modern energy services, double the share of renewable energy in the
global energy mix and double the global rate of
improvement in energy efficiency by 2030. But that
goal will not become a reality without involvement by
all the stakeholders, starting with those in the private
sector, who can deliver solutions as investors, producers and distributors.
Changing the global energy landscape will require
pioneering public-private partnerships, substantial
private investment and joint efforts by governments,
businesses and civil society to strengthen markets.
This strikes some people as a challenge, others as an
opportunity – the opportunity for financial and technological innovation, with new markets, new industrial
partnerships, more jobs and income.
1
A FUND TO COMBAT ENERGY POVERT Y
“Connecting a rural home to the power grid repre­
sents a high investment for electric power companies,”
explains Emmanuel Beau, the co-founder of Energy
Access Ventures (EAV), a venture capital firm. “Most
African States don’t have the resources to cover the
cost, particularly as power consumption often boils
down to scattered lighting, which offers a limited
return on investment. So the main focus is still on
urban areas and business users.”
EAV is the only investment fund in Sub-Saharan
Africa dedicated to financing (€250,000 to €4m) and
2
P R O PA R C O A C T I V I T Y R E P O R T 2 015
assisting SMEs that offer energy access solutions
to households in the region’s rural and semi-urban
areas. Initiated at the behest of the French company
Schneider Electric, which covered a third of its
resources, EAV also received funding from the AFD
Group. In 2015, the latter invested €5m through its
Support Fund for Businesses in Africa (FISEA), a unit
advised by Proparco. The Fonds Français pour l’Environnement Mondial (French Facility for the Global
Environment – FFEM) likewise invested €1.5m, and
additional financing was provided by CDC (Proparco’s
British peer), the European Investment Bank
0,14
dollar per kWh
south of Sahara:
three times higher
than in South Asia
15
ACCESS TO ENERGY
3
Emmanuel Beau, co-founder of Energy Access Ventures (EAV)
“Who can live today without lighting?”
EAV co-founder Emmanuel Beau is
someone who takes the long view.
He aims to make clean, affordable
power available to a million more
Africans by 2025. And that requires
mobilizing investors and raising funds.
Laid-back, self-confident, Emmanuel
Beau gets passionate when he talks about
EAV, energy access and Africa. In his late
twenties, Beau considers it a matter of
necessity to provide Africa’s rural dwellers
with lighting, above all from renewable
sources. Necessity in this case means
“reinventing the world we live in, starting
with our approach to producing, distributing
and consuming energy”. Before becoming
a manager of a €54.5m investment fund,
Beau gained valuable experience on the
ground. He turned a workshop in the
AFRICA
3.-4 OGE develops
and markets solar
systems coupled with
batteries that can
be connected up to
LED lamps, phone
chargers and other
electrical appliances.
The company offers
leasing arrangements
to cover the cost of
solar equipment and
enables customers to
control how and when
they pay via mobile
money.
Senegalese bush into a social enterprise
that leases out solar power systems
under hire-purchase schemes (managed
and supported by rural microfinance
institutions) to individual and collective
users, for example, and managed social
impact energy investments in Africa for
Schneider Electric. He belongs to the
up-and-coming generation of bold French
entrepreneurs and investors who believe
in taking action to “change the world”. But
because naive optimism isn’t his style,
he stresses the need to raise “loads” of
capital to achieve that. “The mobile money
boom, with Africa leading the way, has
combined with progress in solar energy
technology to make low-cost individual
energy access solutions a reality. As a result,
business models that foster the emergence
of viable venture capital firms are gaining
traction. Most startups in the sector are in
the experimental stage, but in Tanzania,
for example, OGE has gone from 10,000
installations a year to over 10,000 a month.”
EAV’s goal is for “those startups to break
even and start turning a profit so that they
can scale up and demonstrate the maturity
of the market”. For that to happen, support
from Proparco and other development
banks is “essential to ‘de-risking’ the
business model and attracting capital”,
Beau explains. Driving his determination
to see the companies in his portfolio
succeed is the belief that their success is
“the prerequisite to replicating their business
model across Sub-Saharan Africa and
perhaps at that point to make electricity
available to 620 million Africans”.
4
“Changing the global energy
landscape will require
pioneering public-private
partnerships, investment
and efforts by governments,
businesses and civil society
to strengthen markets.”
(EIB) and the OPEC Fund for International Development (OFID).Proparco and the FFEM also co-finance
technical assistance to provide training and expertise
in management, corporate governance and recycling
to companies in the EAV portfolio. Schneider Electric
in turn makes its engineers, marketing specialists and
consultants available to the firm.
PREPAY BY PHONE
To bring electric power service to people in rural areas,
EAV takes advantage of mobile money options and the
emergence of “plug-and-play” solar power kits. “They
offer an easy way to cover simple needs and prepay
power use,” says Emmanuel Beau.
16
P R O PA R C O A C T I V I T Y R E P O R T 2 015
In 2015, EAV made an inaugural $2m investment in
Off.Grid:Electric (OGE), a San Francisco and Arusha,
Tanzania-based company that develops and markets solar systems coupled with batteries that can be
connected up to LED lamps, phone chargers and other
electrical appliances. OGE offers leasing arrangements
to cover the cost of solar equipment and enables customers to control how and when they pay via mobile
money. Every month, the company “turns the lights
on” for thousands of people in Tanzania and Rwanda.
It plans to reach the one-million
customer mark by 2017 and branch
out into others countries in the
region. Further EAV investment
deals are under examination or soon
to be clinched. 1,405
megawatts
of power
capacity will
be installed,
including 695 MW
from renewable
energy sources,
through Proparco
financing in 2015.
17
LOW-CARBON INFRASTRUCTURE
The land of the Incas
P
is going green
As the country hosting the 2014 Climate Change Conference, Peru ambitiously
lifted its renewable energy target for 2018 to 60% of total electric power output.
The thinking behind that move was the need to prepare for depletion of Peru’s gas
reserves and make its hydroelectric plants less vulnerable to climate change.
PERU –
Located 500 km south
of Lima in the coastal desert
in Nazca Province,
the Marcona wind farm has
16 turbines with a rated
power of 2 MW each.
eru ranked near the bottom of the Human
Development Index in 2000, but has since
experienced a “golden decade.” Between
2003 and 2013, GDP grew by better than 6% a year
on average. And while growth has slowed recently,
Peru still boasts one of South America’s most vibrant
economies. From an energy standpoint, this has
made electric power increasingly available to the
population. The level of coverage rose from 45% in
1990 to over 91% in 2015. During the same period,
however, energy consumption surged by nearly 80%,
and the trend shows no signs of abating, either. The
government expects demand to increase 10% a year
until 2019. This highlights the urgent need to boost
production capacity.
JUST 2% OF POWER COMES FROM
SOLAR AND WIND FACILITIES
Peru’s electricity generation capacity is evenly
divided between hydroelectric and geothermal
sources; the country produces natural gas. Solar
and wind power account for less than 2% of the
national energy mix, although Peru has substantial, as yet unexploited renewable resources. For
example, its wind power potential has been estimated at 22,000 MW – compared with installed
capacity of 142 MW. To make the most of this
asset, the government has introduced legislation
that is highly supportive of investment in electric power from renewable energy sources (biomass, wind power, geothermal power, tidal power
and hydropower). The private sector currently
covers 70% of total renewable energy investment.
In connection
with the COP21 conference,
Peru committed
to a 30% reduction
of its greenhouse gas
emissions by 2030.
In 2015, Proparco extended a $10m loan and a
$19m loan to the companies Parque Eólico Marcona
and Parque Eólico Tres Hermanas (a Cobra Group
subsidiary) to build and operate two wind farms in
Nazca Province. Through a joint financing facility
with its German and Dutch peers, DEG and FMO,
Proparco mobilized a total of $69m for the two projects with an aggregate cost of $335m. Additional
support came from Corporación Andina de Fomento
(CAF), which provided $20m, Natixis and Exim Bank
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P R O PA R C O A C T I V I T Y R E P O R T 2 015
GLOBAL INVESTMENT NEEDED
I N L OW - C A R B O N T E C H N O L O G Y, 2 014 - 2 0 3 5
In trillions ($tn)
Total: $35tn
Electric vehicles
Industry
2.1
1.4
Transport
CO2 capture and
storage
Electricity
transmission and
distribution
5.9
8.1
Emissions
reduction
2.1
Energy
efficiency
Energy
generation
Buildings
4
Biodiesel
0.9
Renewable electricity
Nuclear power
8.8
1.7
NB: The figures indicate the need for investment in low-carbon technology between 2014 and 2035 in
order to limit the average temperature increase in the world to 2°C. Source: IEA, 2014.
US. This is the second renewable energy project in
Peru supported by Proparco after T-Solar in 2011,
the country’s first large-scale solar power plant, with
capacity of 44 MW.
VOTED BEST RENEWABLE
ENERGY PROJECT
The 32 MW Marcona facility came on stream
in May 2014 as Peru’s first wind farm. Together
with Tres Hermanas, a 97 MW facility commissioned
in January 2016, it forms the country’s largest
wind farm. Thanks to the two wind farms, 428,000
tonnes of CO2 equivalent emissions will be avoided
a year. Their entire output will be sold to the national
power grid.
In September 2015, Proparco and
its peers won the Best Renewable
Energy Financing in Latin America
award for this financing package
from Latin Finance, an authoritative
bimonthly magazine on Latin America’s financial markets. 876,000
TEQ CO2
avoided per
year thanks to
Proparco financing
in 2015
19
T H É M AT I Q U E
AGRIBUSINESS
Business acumen
and social commitment
PAY S
as keys
to success
20
P R O PA R C O A C T I V I T Y R E P O R T 2 015
21
AGRIBUSINESS
2
MA’s Foods, a processed foods manufacturer whose
specialities are spices and coconut derivatives, has made a name for itself over
the past three decades, not only in its home market Sri Lanka, but also abroad
– in countries ranging from Japan to the Netherlands. Company founder
Mario de Alwis owes that success to a combination of business acumen
and a concern for the land and the people working with him.
SRI L ANK A —
S
SRI L ANK A
ri Lanka has long been famous for such
spices as cinnamon, pepper, cloves and nutmeg. Spices, along with spice derivatives
and essential oils, still account for over 50% of
the country’s agricultural exports. And in that market, MA’s Foods is one of the most respected names.
Founded thirty years ago in Dambulla, a town
near the island country’s largest plantations,
MA’s Foods started out as a spice processing
business with just five employees. The comp a n y g r a d u a l l y e x p a n d i n g i t s p ro d u c t p o r t folio to include preserved pickles, chutneys,
curry paste, spice mixes and other items, with
t h e re s u l t t h a t i t b o a s t s f i v e b r a n d s t o d a y.
In 2006, coconut milk and powder were added to the
roster. What began as a micro-enterprise has developed into a thriving firm with a workforce of 300.
1
1
To obtain the resources needed to ensure that
expansion, founder Mario de Alwis turned to local
and international investors and funding providers.
The latest is Aavishkaar, a venture capital firm in
India in which Proparco acquired a stake in 2015. It
has invested $2.1m in MA’s (see box, p. 27). Mario
de Alwis has successfully anticipated market expectations. In 2003, for example, his company was the
first in Sri Lanka to win Safe Quality Food (SQF)
certification for its food safety control system. Two
years later, MA’s was certified as an organic food
processor in the European Union and Japan. Subsequent certifications include FSSC 22 000 (food
safety), ISO 14 001 (environmental management),
OHSAS 18 001 (occupational health and safety), fair
trade, organic agriculture (Europe, Japan, United
States) and SEDEX (ethical trade).
Small farmers are the
centrepiece of the
MA’s Foods business
model. They are the
ones who guarantee
the quality of the
products it sells.
7
2. At this 25,000-tree
coconut plantation, four
men manually extract
coconuts from their shells
– up to 3,000 per day (3).
At the Dambulla factory,
the process has been
mechanized (4).
3
4
1. The Dambulla factory is the
“historic” location for MA’s
Foods. It opened in 1986 with
5 employees; today it has
143. Over one third of them
stay in on-site accommodations
during the week.
22
P R O PA R C O A C T I V I T Y R E P O R T 2 015
23
TH
A
GÉRM
I BAUTSI IQNUEES S
9
7
8
Sri Lanka is a
leading producer
of cinnamon
sticks, which are
prepared by hand.
The outer bark (8)
is first shaved off
of cinnamon tree
branches so that the
inner bark (9) can be
peeled away in thin
strips. The strips are
then arranged in
layers (10). As they
dry, they retract and
turn brown (7).
SRI L ANK A
5
5. The MA’s Foods factory
in Minuwangoda, a short
distance from the Colombo
international airport,
processes an average of
7,000 tins of coconut milk
and more than a tonne of
coconut powder a day.
MARRYING BUSINESS WITH
COMMUNIT Y SPIRIT
The other key ingredient in the company’s success
is its choice of an inclusive business model, as
Mario de Alwis explains. “Right from the start, we
conceived of MA’s as a company connected to its
6. Lionel, a blind employee,
environment – the people of Dambulla, the plan­
has been working at the
MA’s Foods factory in
ters in the vicinity...” In his view, what makes MA’s
Dambulla since it opened.
different from other agribusiness companies in Sri
Packaging is one of his main
Lanka are “local roots, taking the people we work
tasks.
with into account. Without that, you can gain a foot­
hold in the market, but you can’t last. Some people
in this industry forget that they owe their success
first and foremost to the men and women who work
for them. You can have the best technology and the
best machines, but what ultimately counts are the
planters who put their hands in the soil, the factory
employees who select and prepare your products.
If you miss that point, you miss what the business
is all about.”
A t M A’s F o o d s , 5 0 % o f t h e
employees are women. Two of
them are managers and four are
Two out of every three
assistant managers (compared
women in Sri Lanka are
with seven men). For Mario, those
not part of the labour force. numbers are a legitimate source of
pride in a country where two out
Here, they make up 50%
of every three women are not part
of the personnel.
of the labour force.
24
6
10
At its factories, MA’s Foods provides employees
with free food and accommodations. In Dambulla,
roughly a hundred of them are housed on the premises during the workweek. That policy costs money,
of course, but it also helps put the factory’s operations on a more secure footing. For the employees
as well, the benefits are considerable. Rents for a
one-room flat in the area range from €40 to €60
a month, and monthly food bills are just as high –
whereas most workers only earn between €100 and
€300 a month.
P R O PA R C O A C T I V I T Y R E P O R T 2 015
25
AGRIBUSINESS
12
A FUND FOR MICRO - AND SMALL
ENTERPRISES IN ASIA
How fair trade works
Aavishkaar, or balance
between social impact
and return
on investment
Smallholders and workers located near the start of
the value chain don’t always get a fair share of the
wealth they help create. The Fairtrade system has
set out to achieve greater equity in international
trade. The minimum price determined on the basis
of Fairtrade Standards covers the cost of production
and provides farmers with a safety net at times when
world market prices fall below a sustainable level.
Farmers also receive a Fairtrade Premium that is put
into a community fund to finance projects devoted to
education, healthcare, increasing yields and the quality
of farms.
Founded in 2001, Aavishkaar (which means “invention”
in Hindi) is India’s leading impact investment firm. It
has over $150m under management through its five
funds dedicated to providing capital (from $0.5m to
$5m) to micro- and small enterprises operating in
agribusiness, education, energy, healthcare, water and
sanitation or working to promote financial inclusion.
Its vision and mission are to catalyse economic and
social development while generating commercial
returns. Aavishkaar investments have helped, for
example, to create nearly 35,000 jobs and make
affordable goods and services available to over 28
million people in rural and semi-urban areas. Those
achievements have earned the company a number
of awards, including the World Business Award,
which in 2006 recognised Aavishkaar’s flagship fund
(AIMVCF) as one of the top ten business models in
the world working towards achieving the Millennium
Development Goals (MDGs).
SRI L ANK A
11
11. Mrs. Shriyani is the
secretary of the SafeNet
sustainable agriculture
planters’ association in the
south of the island. She
single-handedly runs her
farm, where cinnamon trees
and pepper plants grow at
the foot of coconut trees.
That diversification ensures
a steady revenue stream all
year long.
THE VALUE OF WORKING THE LAND
But that’s not all there is to the community involvement of MA’s Foods. The company gives precedence to sourcing from small farmers, and assists
them with the adoption of socially responsible
business practices. MA’s took the initiative in organising a network of planters committed to sustainable
agriculture called SafeNet (Sustainable Agri-Farmers
Enterprise Network). The goal is to help them meet
international certification standards for free trade
and organic agriculture. The company’s staff provides advisory service, technical assistance and
training. Moreover, MA’s Foods covers the cost
of certification. On the coconut plantations in the
south of the island, the organic label has enabled
SafeNet planters to sell a kilo of output for 300
to 400 rupees above the price for conventional
coconut. Even so, Rajeewa Kularathna, the head of
compliance at Dambulla, admits it can be an uphill
struggle. “It’s sometimes hard to get
farmers to change their practices
and see the benefits of certification,
Over
particularly when you realise that
it may take up to five years to get
the Fairtrade label and two or three
jobs for
years to get organic certification.”
planters will
In supporting the organic agriculture
be created or
trend in Sri Lanka and fair trade, the
maintained
founder of MA’s Foods makes no
in the value chain
secret of his desire to help restore
of agricultural
farming to its rightful status. “As in
projects financed by
other countries, farming has become
Proparco in 2015.
unattractive here. Our young people
350,000
26
13
are leaving the countryside. To them, farming is
the last option, what you do when you’ve failed
elsewhere. I’m worried about the future. Fifty years
from now, we’ll have to feed three million more
people. How are we going to manage that if no one
wants to work the land? Sri Lanka is lucky enough
to have the natural and human potential to go a
long way towards meeting that challenge, but so
far, there have been very few attempts to aggregate
all the interested parties and develop a sustainable,
nationwide agribusiness sector that serves the inte­
rests of our farmers, our economy and our country.”
The response, claims Mario, is to try to give prior
accomplishments a sustainable character. “After
growing MA’s, we need to think about the next step.
I won’t be around forever, so it’s important to me
to attend to succession,” he says. And he’s already
prepared the ground. His eldest son, Maliek, is the
current CEO of MA’s Foods, and his youngest son,
Sheran, is in charge of compliance.
P R O PA R C O A C T I V I T Y R E P O R T 2 015
12. On the 1st of May,
MA’s Foods invited all
its employees and their
families to celebrate
the company’s thirtieth
anniversary at its Dambulla
location. The festivities
included foot races,
a palm weaving contest,
a bed bolster fight and
a relay race for the top soda
drinkers (in the foreground,
Mario de Alwis).
13. Near the coconut
plantations in southern
Sri Lanka, Mario joined
forces with Jumbo
Supermarkten, a Dutch
client, to help renovate an
elementary school where
70 children of local planters
are enrolled.
Encouraged by its success in India, Aavishkaar has
moved on to replicate its “recipe” in South and
Southeast Asia. Its new $45m fund, Aavishkaar Frontier
Fund (AFF), was established to assist high-growth
micro-and small enterprises in Pakistan, Bangladesh,
Indonesia and Sri Lanka. In support of that aim,
Proparco acquired a €6m interest in AFF in 2015.
AFF made its first investment in Sri Lanka – providing
$2.1m (300 million rupees) to help MA’s Foods roll
out new products (vegetable oils and recipe mixes),
increase its production capacity, above all for export,
and open an additional coconut processing plant in the
north of the country, a region torn by civil war between
1983 and 2009.
27
ACCESS TO CREDIT
Sound financial systems:
the backbone of Africa’s
economic development
With average annual GDP growth of over
5% since 2000, Sub-Saharan Africa is one the most economically vibrant
regions in the world today. That trend can be attributed in large part
to strong commodity exports, improved macroeconomic policies and
a burgeoning middle class. But the continent needs to diversify its growth
drivers, and that requires efficient financial institutions able to help
businesses invest. Especially small businesses.
S U B -S A H A R A N A F R I C A –
S
ince the 1990s, Africa’s financial systems –
the banks, stock exchanges, microfinance
organizations and other institutions providing
financial resources to the broader economy – have
undergone major change. Although long-dominated by a handful of institutions, undermined by
serial liquidity and solvency crises, the financial
sector has gradually become healthier and deeper.
Resilient and efficient private-sector banks have
taken advantage of a more effectively regulated
environment to extend their reach and offer new
services and financial instruments to companies
and individuals alike. Some of them have adopted
regional strategies that have given them the critical
mass they need to be able to finance infrastructure
and other large-scale projects.
SMALL BUSINESSES – STILL CONSIDERED
TOO RISK Y
Half of all small businesses south of the Sahara still
suffer from inadequate access to funding, however,
as a number of banks continue to classify them as
high-risk clients. Moreover, those 50 million African
SMEs play a vital role in the local economy, generating nearly 60% of total employment and one third
of the region’s combined GDP (source: IFC).
Funding for energy, water, transport, telecommunications and other such infrastructure is likewise
in short supply on the continent, even as financing
needs have mounted steadily to an estimated €80bn
a year. Another significant indicator is that two out
of three adults are “unbanked” and therefore have
no access to financial services. Yet the ability to
save money, access credit and take out insurance is
often a prerequisite for starting a business, buying a
home and insuring against the risk of illness.
Despite noteworthy progress over the past two
decades, local banks still have only limited ability
to make large-long-term loans or, for that matter,
to assess complex projects such as public-private
partnerships. At the same time, the bond market,
B A N K I N G COV E R AG E R AT E
IN SUB -SAHAR AN AFRICA
2 billion
unbanked adults in 2014, including
350 million
SMEs in Sub-Saharan Africa
generate nearly 60% of total
employment and one third of the
region’s GDP. Yet they have been
left out of the banking system.
28
P R O PA R C O A C T I V I T Y R E P O R T 2 015
in Sub-Saharan Africa
24 %
34 %
2011
2014
another source of long-term funding, has yet to
move beyond the initial stage in Africa.
Only one out of three adults
in Sub-Saharan Africa has a
bank account.
FINANCIAL INTERMEDIARIES
AS SDG PARTNERS?
Financial intermediaries have a vital role to
play in achieving the Sustainable Development
Goals (SDGs) adopted by the United Nations in
2015, above all because they are able to mobilize resources and expand their service offer for
small businesses, infrastructure projects and retail
customers.
Like its peers, Proparco assists banks in making
the most of that ability. The institution helps them
gain a clearer view of small business credit risk by
putting in place special analytical tools, provides
the long-term resources (up to 20 years) in local or
foreign currency (euro or dollar) needed to finance
investments and supports their efforts to promote
financial inclusion.
Proparco also extends dedicated lines of credit to enable banks to invest more extensively in
renewable energy, agriculture and healthcare –
areas that typically receive little in the way of commercial bank financing.
In addition, development finance institutions can
contribute to capital market expansion by
29
ACCESS TO CREDIT
guaranteeing debt issuance. Proparco, for example,
is authorized to guarantee financial market transactions in the West African Economic and Monetary
Union (UEMOA). With 39 companies listed and total
capitalization of €1.17bn, the Bourse Régionale des
Valeurs Mobilières (BRVM), the securities exchange
shared by the UEMOA’s eight member countries,
was established to make it easier for companies to
access the resources they need to grow.
H I G H E R E D U C AT I O N
Serving the
47%
MSME ACCESS
TO CREDIT
in Sub-Saharan Africa
Unserved
8% Underserved
3% Have access to credit
42% Make no use of credit
89% of all micro-, small and
medium-sized enterprises have
no access to credit and make
no use of it.
S U B -S A H A R A N A F R I C A
40%
DISSEMINATING RESPONSIBLE
BUSINESS PRACTICES
As essential participants in the African economy,
financial intermediaries are also instrumental in disseminating responsible business practices among
the companies they finance. Proparco therefore
assists them in setting up systems for managing the
environmental and social risks associated with their
operations and those of the companies in their portfolios, in adhering to principles for the protection of
microfinance clients and in combating money laundering and terrorism financing. general interest
6%
Private commercial
bank
State-owned bank
and/or governement agency
MSME SOURCE
OF FINANCING
Sub-Saharan Africa
26%
28%
Non-bank financial
institution
Other source
Source: IFC Enterprise Finance Gap Database.
TA N Z A N I A
The National Microfinance Bank gives
priority to mobile services and SMEs
Only 6% of adults and 8% of SMEs in Tanzania have access to bank credit. The National Microfinance Bank
(NMB) was founded in 1997 with the aim of reversing that trend. In five years’ time, the NMB doubled the
number of its retail clients and expanded its branch network into rural areas. It has become the country’s
leading bank. The NMB’s current ambition is to increase its SME client base and develop new mobile banking
services to facilitate transactions for people with no nearby bank branches or ATMs.
The NMB also aims to extend its financial education program for school children, based on the reasoning
that greater familiarity with financial products and risks will help young people understand their economic
environment and make sensible choices.
In conjunction with its Dutch counterpart, FMO, Proparco made a $30m loan to NMB to support the rollout of
that strategy.
30
€554
m
committed by
Proparco in 2015
D O M I N I C A N R E P U B L I C – To secure the future of the country and its youth,
the government of the Dominican Republic aims to “democratize higher
education”. However, lacking the resources to finance universities and
further education for teaching staff, the authorities have turned to the private
sector. The Pontificia Universidad Católica Madre y Maestra (PUCMM)
has been performing a public service function for over 50 years.
to the financial
sector in the
developing world
31
H I G H E R E D U C AT I O N
1
L
DOMINIC AN REPUBLIC
ike many countries in Latin America, the
Dominican Republic has seen skyrocketing
enrolment at institutions of higher learning
(universities, vocational schools and institutes of technology). The student body grew from 2,000 in 1950
to more than 400,000 in 2014, and the numbers even
tripled between 1990 and 2011.
Sixty per cent of all Dominican post-secondary
students are enrolled today at roughly 45 private
schools, while the remaining 40% go to the country’s
sole public university, the Universidad Autónoma de
Santo Domingo (Autonomous University of Santo
Domingo – UASD), founded in 1538 as the first univ­
ersity in the Americas – a century before Harvard.
1. Since 1967, over 70,000
students have graduated
from the PUCMM.
2. PUCMM students are
divided up between the
historic Santiago campus
(68%) and the capital city
campus in Santo Domingo
(32%).
QUANTITY AT THE EXPENSE OF QUALITY?
This rapid shift to mass higher education has particularly affected the management capacity of the
UASD, the quality of instruction and the value of
the diplomas awarded. In a country where 40% of
the population is under age 20 and where an estimated 660,000 students are expected by 2018, the
logistical, financial and organizational challenges are
formidable. With just 2% of GDP devoted to higher
education, the Dominican government cannot meet
the rising cost of mass higher education on its own.
That explains the government’s reliance on vigorous
growth of private-sector organizations such as NGOs,
religious associations, businesses and non-profits.
The percentage of students enrolled at private institutions thus rose from 23% in 1970 to 60% in 2016.
There has been considerable controversy over the
boom in Latin America’s private schools, some of
them with questionable credentials as universities
or institutes, whether in Brazil, Chile or the Dominican Republic. Admittedly, institutions offering
low-quality instruction that is often out of step with
market needs and the problems facing young people
looking for jobs have indeed proliferated, sometimes
in chaotic fashion. But the fact remains that those
schools are motivated by a desire to serve the public
inter­est. This means that they may turn out to provide valuable assistance to the government’s educational policy and, more broadly, to the country’s
economic development. In any case, this can certainly
be said of the Pontificia Universidad Católica Madre
y Maestra (PUCCM).
MADRE Y MAESTRA: A PRIVATE UNIVERSITY
“SERVING THE COMMUNITY”
During a trip to the Dominican Republic, a journalist
from Haiti wrote, “I was impressed with the Pontificia
Universidad Católica Madre y Maestra (PUCMM being
its Spanish acronym). And I dreamt of the day when
Haiti would have such a centre of learning. It is equip­
ped with all the amenities that belong to student life
and places special emphasis on technology studies,
which are essential to a country’s development.”
Founded in 1962, the institution so admired by the
Haitian journalist is the oldest private school in the
Dominican Republic.
The PUCMM is a non-profit school predicated on
the commitment “to educate human
resources to serve the community”.
It has two campuses today. The main,
historical campus is in Santiago de los
Caballeros in the north of the island;
t h e s e c o n d , m o re m o d e s t o n e i s
in the capital.
2
Between now and
2018, higher education
institutions will have
to accommodate
660,000 students, versus
375,000 today.
32
P R O PA R C O A C T I V I T Y R E P O R T 2 015
33
H I G H E R E D U C AT I O N
Encompassing four colleges, the PUCMM offers
42 undergraduate and as many doctoral programmes
in partnership with foreign universities, above all in
the United States and France (e.g., ENA and the
Montpellier Business School). It also possesses up-todate infrastructure and facilities, both for education
(e.g., lecture halls, laboratories, libraries) and for student life (e.g., a multi-purpose hall, a theatre, parks,
sport facilities). With a student body of 16,000, the
PUCMM is the country’s fourth largest university and
is considered on of its best, above all its medical
school. The PUCMM is held to the quality standards
set by the network of pontifical catholic universities,
which are increasingly becoming the norm in the
country. Moreover, the Dominican Republic has joined
in a drive for accreditation of the academic curricula
and institutions in Latin America and the Caribbean.
The PUCMM boasts close to a 100% success rate for
students entering the labour market. Over the past
decade, however, enrolment levels have risen steadily; they are up by 37% in engineering and by 54%
in health sciences.
4
PROPARCO AND THE AFD: TOGETHER
FOR THE LONG HAUL
To meet such growing demand and its own goal
of “democratizing higher education”, the PUCMM
needs long-ter m funding in foreign currency,
something hard to come by in the country. Proparco
responded to that need in 2015 by
extending a $16m loan to enable the
In Santiago, where it
PUCMM to build and equip a new
was founded in 1962,
health sciences college and expand
the engineering school on its Santo
the PUCMM has been
Domingo campus.
recognized as “the
This is the fifth loan granted by the
city’s educational
AFD Group to the PUCMM. In 2003,
heritage”.
Proparco contributed to a major investment programme on the Santiago campus with a $12m loan. The money was used to build a
school of architecture and a new centre for technical
and vocational training as well as to upgrade and
equip various facilities for master’s programmes, the
student activity centre and the library.
5
3. The library co-financed by
Proparco.
4. The PUCMM offers 42
undergraduate and as many
doctoral programmes in
partnership with foreign
universities, above all in the
United States and France. It has
trained over 7,000 healthcare
professionals since 1967.
5. Proparco helped finance the
new school of architecture and
the new health sciences college.
3
34
P R O PA R C O A C T I V I T Y R E P O R T 2 015
35
DOMINIC AN REPUBLIC
H I G H E R E D U C AT I O N
LOANS TO DESERVING STUDENTS
“The university has had student loan programmes
ever since it was founded,” reports Inmaculada
Adames, the Vice-Provost. “They are essential to
implementing the university’s philosophy, because
they give deserving young people access to quality
higher education, regardless of their family’s income
level.” At the PUCMM, 30% of all students are loan
recipients.
The AFD has also been supporting the university for
ten years jointly with Proparco, extending three loans
totalling €26m since 2006. That funding has served
in particular to further the PUCMM’s social inclusion
policy for low-income, high-achieving Dominican
and Haitian students. Over 5,000 young people have
already benefited.
What makes the complementarity between Proparco
and its parent company so effective is that Proparco
commitments to improve the quality of infrastructure
and educational facilities are buttressed by AFD programmes to raise the level of teaching-staff qualification. Between now and 2018, some sixty members of
the staff will attend master’s and doctoral courses. At
the same time, the AFD helps the PUCMM achieve
greater international scope. Ninety-five students have
S A N I TAT I O N
6
entered a dual diploma programme with French universities and ten exchange programmes between
France and the Dominican Republic have been
arranged.
Because it facilitates access to quality education with
national and international recognition for thousands
of young Dominicans, the PUCMM not only contributes to the democratization of higher education,
but also offers Dominican youth a solid educational
background that is in tune with demand in the local
and regional labour market. This makes it a genuine
partner to the government authorities.
6. The PUCMM has
developed a social inclusion
policy for students from
neighbouring Haiti with the
aim of forging closer ties
between the future elites of
the two countries.
7. Women accounted for
60% of the year’s PUCMM
graduates in 2014.
7
Toilets
in Nairobi’s slums
45,700
students will
K E N YA — In the slum areas of Kenya’s capital, indoor flush
toilets are a rarity. Most people have to make do with plastic bags
and outdoor pit latrines. To remedy the situation, a company
called Sanergy has built up a network of low-cost pay toilets that
are put to optimal use, given that the organic waste is converted
into fertilizer and sold to farmers.
enjoy quality
service in
educational
structures
financed by
Proparco in 2015.
36
37
S A N I TAT I O N
AN INTEGRATED SANITATION VALUE CHAIN
T
his business model premised on serving the
poor has the support of the Novastar venture
catalyst firm, in which Proparco holds a stake.
Over 2.5 billion people around the world lack access to
adequate sanitation. In Nairobi’s slums alone, the figure
is 2.5 million. The inhabitants have to make do with
outdoor pit latrines or plastic bags, which they leave on
the streets or throw away further from home.
0.025 EURO CENT
Sanergy, an American-Kenyan company, has developed
toilets similar to the cubicles installed on work sites,
using local materials and workers, many of them slum
dwellers themselves, to fabricate them. These compact
Fresh Life Toilets (FLTs) are equipped with their own
waste storage cartridges. They can be installed and
used anywhere. To distribute the FLTs, Sanergy franchises them out to local residents – dubbed Fresh Life
Operators – who operate them as small businesses on
a pay-per-use basis. There are currently over 300 such
entrepreneurs.
K E N YA
They themselves set fees based on customer income:
from 0.025 to 0.043 euro cent on average (from 3 to
5 shillings). Sanergy also works to get landlords to install hygienic sanitation facilities on their property. While
some have raised rents to offset the cost of FLTs, most
of them have experienced higher occupancy rates in
1. The 646 toilets installed
in Nairobi slums are used
over 30,000 times a day.
2. Waste treatment and
conversion are Sanergy’s
primary source of income.
1
Novastar, or believing
in social business
Through its Investment and Support Fund for Business
in Africa (FISEA) advised by Proparco, the AFD Group
has invested $5.5m in Novastar Ventures East Africa
Fund. The $80m fund’s goal is to assist startups that
offer innovative ways to make essential goods and
services available in East Africa.
Novastar has already invested in eight companies,
including SolarNow, which provides low-cost solar
home systems to rural Uganda; Bridge International
Academies, a chain of nursery and primary schools
for underprivileged children in Kenya, Uganda and
Nigeria; and Sanergy.
“Sanergy makes sanitation
provision to slums profitable –
and thus sustainable. Our aim
is to serve half a million people
in Nairobi.”
David Auerbach, Sanergy co-founder
housing equipped with toilets, with the result that they
have no trouble recouping their investment. To guarantee service quality, the proper functioning of FLTs
and to stimulate demand, Sanergy provides the Fresh
Life Operators with support in obtaining title to property and building permits, which are complex procedures in slum areas. Operators can also get training in
basic accounting skills, customer service and so forth. In
partnership with Diva, an NGO that encourages Internet
users to lend money to local microcredit institutions,
Sanergy offers 12- or 24-month zero interest loans for
the purchase of toilets for a unit price of $500. Since the
programme’s inception in late 2011, 646 toilets have
been installed in eight Nairobi informal settlements.
They are used over 30,000 times a day and have made
it possible to collect and treat 7,500 tonnes of waste
to date.
38
P R O PA R C O A C T I V I T Y R E P O R T 2 015
2
4
and a half years
after inception of the
project
646
toilets installed
8
slums
equipped
Over
30,000
users a day
S A N I TAT I O N
FACILITIES
WA S TE TR ANSPORT
A N D R E M O VA L
W A S T E T R E AT M E N T
AND REUSE
7,500
tonnes of waste
treated
39
3.4. The waste
converted into organic
fertilizer is marketed
to farmers. The result
is an increase in crop
yields of between 30%
and 100%.
TA
S
HN
ÉM
I TA
ATTIIQ
OU
NE
SPECIAL FEATURE
Tunisia
Betting on
entrepreneurship
3
K E N YA
AN EXPERT’S POINT OF VIEW
Bénédicte Faivre-Tavignot, Associate Professor
at HEC Paris, co-founder of the HEC Chair Social
Business/Enterprise and Poverty
4
NEXT STOP, KIGALI, K AMPALA?
Waste treatment and conversion are Sanergy’s primary
source of income as well as the key to its success.
Logistics teams provide FLT maintenance and collect
the waste cartridges in the slum areas. In addition, the
growth of its network has even enabled Sanergy to
expand that service to include food waste collection for
other companies. The waste is transported to a central
processing facility and converted into organic fertilizer
called Overgrow, and insect-based animal feed. Those
by-products are sold to over 200 farms. Overgrow is
said to increase crop yields by between 30% and 100%.
David Auerbach, one of Sanergy’s co-founders, today
aspires to “extend this initiative to all the big cities in the
world where it can be usefully installed: Kigali, Kampala
and Mombassa”. 40
Did you say
social business?
“In recent years, the concept of social business has emerged
as a middle road between philanthropy and the pursuit of
maximum profit. The idea is rooted in a dual realization. On the
one hand, governments and civil society are striving – especially
in poor countries – to resolve problems such as food insecurity
and insufficient access to healthcare, water, energy and adequate
housing. On the other, the principle of maximizing profits is showing
its limitations by intensifying pressure on resources, contributing
to global warming and widening social inequality.
The private sector can provide solutions to these challenges:
through social business, it supports social causes. Profit thus
becomes the means rather than the end; businesses are not
acting independently but in co-creation with public institutions
and civil society.
From “Social business: a different way of doing business and investing”,
Private Sector & Development, no.23, February 2016.
P R O PA R C O A C T I V I T Y R E P O R T 2 015
FIVE YEARS AFTER THE
REVOLUTION, TUNISIA IS
HUNTING FOR THE RIGHT PATH
– AND FOR WAYS TO KICKSTART THE ECONOMY. THE
PREREQUISITE IS UNLEASHING
THE POTENTIAL OF BUSINESS
AND YOUTH.
41
T U N I S I A – In December 2010, the suicide of a street vendor
triggered an uprising of Tunisian youth and the fall of President Ben
Ali. Despite the obstacles and uncertainties besetting the country
since then, Tunisia’s private sector has shown real resilience.
With the support of international backers that include Proparco,
businesses have continued to invest in their own expansion. And it
has paid off. Entrepreneurs, funding providers and startup creators
tell the story of a Tunisia eager to move forward, and how they are
already driving that movement.
T
WHAT ENTREPRENEURS WANT
Tunisia’s entrepreneurs don’t devote the bulk of
their energy to withstanding economic and political
shocks, however. All they want is to be able to grow
their business, hire workers and break into markets.
But that requires adequate funding – something
woefully unavailable in the country. According to the
World Bank, more than half the enterprises in Tunisia
remain unserved or underserved by the mainstream
financial sector. “Tunisian banks lend SMEs only half
the amount that Moroccan banks do,” claims Ahmed
Abdelkefi, an economist and businessman. What
is the explanation for that gap? “A lack of
million euros were
long-term local resources forces our banks to
committed by Proparco
raise capital in foreign markets at a high cost.
in 2015 to Tunisian businesses
They pass that cost on by charging prohibi­
and financial institutions.
tive rates on loans to SMEs.” Mr Abdelkefi
In the past 20 years, over €2.2bn
also blames “the absence of structures dedi­
have been mobilized by the
cated to SMEs inside banks, which lack the
AFD Group for the country.
expertise and experience needed to reach
out to that segment”.
44
42
Tunisia
SPECIAL FEATURE
SPECIAL FEATURE
Tunisia
unisia has accomplished great strides since the
revolution. To start with, it has adopted a new
Constitution that is one of the most advanced
in the Arab world and democratically elected a government for the first time in its history. But the country still
has to grapple with anaemic growth (0.8% in 2015) and
a disturbingly high 15% jobless rate that is even higher
among young people (33%), particularly the educated.
To make matters worse, the threat of terrorism discourages tourists and investors alike. None of this is
good news for businesses, especially the micro-, small
and medium-sized enterprises that form the backbone
of the country’s economy. And yet in the past five
years they have shown the kind of resilience that
commands respect.
T U N I S I E L E A S I N G – P R O PA R CO
A 20-year
partnership
LEASING: A “FAST AND EFFICIENT”
SOLUTION
With liquidity in such short supply, whether in dinars or
in foreign currency, leasing has become increasingly
popular, as it has proven highly competitive. Tunisie
Leasing (TL) is an equipment and property leasing company founded in 1984. It lends to micro-, small and
medium-sized enterprises for the purchase of motor
vehicles and the light and heavy equipment that is
vital to trading, service and manufacturing companies. TL was the first firm to launch such an offer in
Tunisia. Three decades later, it has 20% of the market and healthy profit margins. “Our SME niche policy
is what has enabled us to respond faster and more
efficiently compared with the long decision-making
P R O PA R C O A C T I V I T Y R E P O R T 2 015
circuits at banks,” says CEO Fethi Mestiri.
“Even with economic uncertainty and the
trouble they have getting funding, small
businesses have continued to invest.
When they turn to us, it’s to cover an
immediate need.” In 2014, TM signed
over 5,000 agreements, the vast majority
of them for amounts below €50,000.
Over
1/3
of Tunisia’s
MSMEs
with funding needs have
never contacted a financial
institution.
“The experience of Tunisie Leasing is one of the most
successful in North Africa,” Mr Mestiri concludes. And
in fact, its leaders have even exported their approach
in the region. In 2006, they created Maghreb Leasing
Algérie (MLA), with Proparco investing €3m in 2006 and
2009. Same recipe, same success story.
Proparco has a history of partnership with
TL, which is also one of its oldest equity
investments. The institution has assisted
the leasing company in diversifying its sources
of funding and developing its business with
three lines of credit (in 2004, 2009 and 2015)
in foreign and local currency totalling €24m.
Proparco has also helped TL expand across
the region. In 2015, the two partners jointly
acquired equity stakes in Alios Finance,
a leasing company operating in nine countries
in Sub-Saharan Africa. This dynamic process
should lead to the emergence of a pan-African
leasing heavyweight that can make it easier
for many African companies to pay
for equipment.
Today, Proparco’s technical assistance
unit works with Tunisie Leasing's staff to
put in place a system for managing the
environmental and social risks attendant on
the business of TL clients.
43
A silver and amber jewellery
maker, Zeineb Ben Jaafar
took out her first loan from
Enda in 1998 – for 200
dinars (€200 at the time).
"Then 400, 600, 1,000,
3,000 and most recently
5,000 dinars,” she says. All
told, she has borrowed over
24,000 dinars. What she
terms “truly a small fortune”
enabled her not only to
increase her output, but
also to send one daughter to
the Tunis School of Fine Arts
and pay for private tutoring
to help her youngest
daughter get her scientific
A Level qualification.
Tunisia
SPECIAL FEATURE
“Employment, Liberty,
Dignity” was the slogan
of the revolution. Five
years later, the monthly
minimum wage (for a
48-hour week) is only €150
and over one out of every
seven Tunisians lives below
the poverty line.
PAY S
SPECIAL FEATURE
Tunisia
T H É M AT I Q U E
A PLACE IN THE SUN FOR MICROFINANCE
“Enda is our child. A child going on age 27.” With
a touch of humour, Michael Philip Cracknell tells the
story of a pioneering microfinance organization in
Tunisia – the one he founded in 1990 with his wife,
Essma Ben Hamida, and that has just given birth
to a public limited company. In 1995, Enda served
18 clients. Twenty years later, the number had risen to
270,000 in both urban and rural areas (58%/42%), with
women making up 67% of the total.
tation, along with “rigorous management and transpa­
rent practices,”, Mr Cracknell adds. He also points out
that “In 2011, when the revolt led to property damage,
Enda branches were defended by their customers”.
In a country where only one out of four adults has a
bank account, microfinance is expanding at a great
rate. With an addressable market of between 1.2 and
1.5 million clients, it is and will remain an essential contributor to financial inclusion for marginalized population
groups, the fight against poverty and job creation.
Over the past decade, the “baby” has made €2m
loans that add up to a total of €1bn. Enda caters to
clients of all kinds: small farmers, young startup creators,
“For micro-, small and
people upgrading their homes,
medium-sized enterprises
parents with education to pay
for and much more. The avein Tunisia, leasing and
rage approval time is two weeks
microcredit are the two
for a first loan, and 48 hours for
a loan renewal.
primary sources of funding.”
In order to meet growing demand, Enda needs
resources. “If the number of clients continues to
increase by 8% a year, our primary constraint will be
access to refinancing,” Mr Cracknell explains. There
are limits to how much we can appeal to Tunisian
banks, given their lack of liquidity. At the same time,
the Central Bank believes we are too exposed to inter­
national lenders.” In 2014, Enda received 88% of its
new loan amounts from abroad, including from the
AFD Group, which in 2015 extended a €10m loan
to help Enda develop its farm loan offer. Meanwhile,
Proparco is examining a possible financing arrangement that could well go through in 2016.
Ahmed AbdelkefI, Tunisian economist
and businessman
44
That high degree of efficiency is
what has earned Enda its repu-
P R O PA R C O A C T I V I T Y R E P O R T 2 015
“In 2011, when the revolt led
to property damage, Enda
branches were defended by
their customers. They view
Enda as part of their human
environment, in a sense as
part of their family.”
Michael Philip Cracknell,
founder of the NGO Enda, a pioneering microfinance
organization in Tunisia
45
A tripartite
shareholding
structure
AN INCUBATOR TO UNLEASH TALENT
Every year, ESPRIT students win a variety of international technology competitions. Others go to work for
major names in Silicon Valley. To help talented students
get ahead, the school’s founders created a startup incubator on campus in 2014. “We want to give students
with an entrepreneurial bent the opportunity to test
out their ideas for technology solutions, to nurture
them and to relate them to market needs”, explains
Alaya Bettaieb, the director. Roomy work spaces,
six months of mentoring and partnerships with companies like Samsung are just a few of the ingredients in a
recipe that is yielding results. Among the first students
to have come out of the incubator are one making the
rounds in the United States, another who has joined a
startup accelerator in Dubai and yet another who has
succeeded in raising funds locally for his startup in Sfax,
the country’s second-largest city. To help the incubator
develop further, Proparco co-financed a technical assistance programme in 2015 that is managed by Mercy
Corps, an international NGO dedicated to entrepreneurship and employability for youth. “Our role is to
Tunisia
ESPRIT derives additional strength from its
mixed mode of governance. Its founders
have succeeded in bringing on board some
sixty academics and engineers (who hold
one third of the shares), along with a dozen
ICT firms and institutional investors.
In 2012, Proparco joined in, acquiring
a €2m stake in the school.
advise ESPRIT on its incubation model and connect their
initiative to market solutions in Tunisia and across the
world,” explains Bertrand Effantin, the local administrative officer. “Mercy Corps supports a similar initiative
in the Gaza Strip, which has a substantial network of
business mentors, but no technology mentors of the
kind offered by ESPRIT. It would be good to promote
sharing of experience and networking between those
two incubators.”
Connecting the incubator to the global ecosystem, to
investors, as well as “giving it firmer moorings in the
school so that it can be of value to everyone and cata­
lyse the diversity and innovation that are already pre­
sent here” are the challenges that the ESPRIT team
intends to tackle. At a time in which higher education
for young people has become a crucial issue in Africa,
Mr Ben Lakhdar entertains the hope that with support
from institutions like the AFD Group, “The ESPRIT model
can be adapted in the future to Sub-Saharan Africa, with
local people taking centre stage, at a cost adjusted to
income levels but without sacrificing quality”.
SPECIAL FEATURE
Tunisia
diploma agreements abroad, above all with French
schools. ESPRIT is also “one of the first schools in
Africa to obtain EUR-ACE – the European accreditation
for engineering programmes”, says Mohamed Jaoua,
another of the school’s initiators.
The school was created by three participants in the
reform of public higher education, where they conducted their careers: Tahar Ben Lakhdar, Naceur Ammar
and Mohamed Jaoua. “ESPRIT trains engineers for the
business world, for the development of the country,
for the creation of wealth. Our goal, our DNA, is the
employability of our graduates,” Mr Jaoua explains.
The three men share a desire to “offer general-purpose
higher education”. At ESPRIT, annual tuition fees are in
the vicinity of €2,500 (5,500 dinars). That amount, the
founders stress, should be compared with what major
French and American schools charge.
“Our aim is to narrow the social divide in Tunisia; we
don’t want education to be reserved for the wealthy.”
That is why ESPRIT has established “a foundation
that gives high-potential young people cheques
that cover up to 100% of their tuition, depending on
social background”.
SPECIAL FEATURE
TRAINING ENGINEERS AS PART OF THE
FIGHT AGAINST UNEMPLOYMENT AND
OBSCURANTISM
The El Ghazala technopole in the suburbs north of
Tunis is home to one of the country’s top schools:
ESPRIT, which stands for the École Supérieure Privée
d’Ingénierie et de Technologie. It opened twelve
years ago, with 40 students attending. Since then,
their ranks have swollen to nearly 5,000, some of them
from all over French-speaking Africa. What distinguishes ESPRIT is that 85% of its students have jobs six
months after graduating – in a country with an unemployment rate of over 30% for people with higher education degrees. Its slogan is “Se former autrement”
(“Learning differently”). Distancing itself from the “traditional” approach to education, the
school emphasizes learning through
problem-solving, the aim of which
“Our goal, our DNA,
is to “put students in real workplace
is the employability
situations”, explains Naceur Ammar,
its director. At the present time, 15%
of our graduates.”
of Tunisia’s new engineers get their
Mohamed Jaoua,
degrees at ESPRIT, which has ten dual
co-founder of the ESPRIT school
€158
m
were
committed
by Proparco in
the Mediterranean
and the Middle East
in 2015.
Mohamed Afdhal and
Aymen Hammouda have
just turned 25 and are
both in the latest group
to go through the incubator.
Mohamed developed an
on-board automatic road
analysis service to keep
motorists informed about
traffic, roadblocks and
the like; Aymen has been
working on a telemedicine
mobile application
that provides rapid
dermatological diagnosis.
46
P R O PA R C O A C T I V I T Y R E P O R T 2 015
47
SPECIAL FEATURE
PAY S
SPECIAL FEATURE
Tunisia
Tunisia
T H É M AT I Q U E
The ESPRIT incubator was created to allow
students to develop initiatives, to give them the
opportunity to nurture their ideas and to whet
their entrepreneurial appetite.
In late 2015, the government kicked off Smart
Tunisia, a public-private partnership programme
designed to make the country an attractive hightech hub. With a cohort of 600 fourth-year ICT
students, ESPRIT has a fair amount of the talent
needed to take up that challenge.
48
P R O PA R C O A C T I V I T Y R E P O R T 2 015
49
Success story
made in Tunisia___
S
SPECIAL FEATURE
Tunisia
ince the revolution, Proparco has also
been supporting Tunisian entrepreneurs
alongside financial institutions. One
of its most successful projects to date is its
partnership with the pharmaceuticals lab Unimed. Addressing the niche market of sterile-injectable medication (e.g., ophthalmic and ENT
solutions, eye drops), Unimed has developed
a business model based on producing generic drugs sold under the Unimed brand name
and manufacturing medication for international laboratories. To win supply contracts from
Thea, Pfizer and other similar firms, the company has built up one of Africa’s most efficient
drug manufacturing facilities, earning ISO 9001,
13485 and 1001 certification.
“NONE OF THIS WOULD HAVE BEEN
POSSIBLE WITHOUT PROPARCO”
In 2011, Proparco invested €4.5m in Unimed,
alongside the Abraaj Group investment
fund. The aim was to help the company
ramp up its production capacity. Proparco also co-financed a
technical assistance programme
in 2013 for the installation of
a high-efficiency combined cycle
power production process, referred to
as trigeneration. The system, which will
be operational by the end of 2016, will
enable Unimed to optimize its power
use and “even sell excess power during
5 05 0
LATIN AMERICA AND THE CARIBBEAN
SUB-SAHARAN AFRICA
Central America and the Caribbean
MEXICO CITY
Torre Omega, piso 5,
Campos Eliseos n°345,
Col. Chapultepec Polanco,
11560 México D.F., México
Tel.: +52 55 5281 1777
[email protected]
Paul CENTENO-LAPPAS
West Africa
ABIDJAN
Boulevard François Mitterrand
01 BP 1814 Abidjan, Côte d’Ivoire
Tel.: +225 22 40 70 40
Fax: +225 22 44 21 78
[email protected]
Laurent FARGE
South America
SAO PAULO
Edificio Çiragan Office
Alameda Ministro Rocha de Azevedo, 38
11° andar, conjunto 1103
01410-000, São Paulo, SP, Brazil
Tel.: +55 11 3149-7907
Fax: +55 11 3142-9884
[email protected]
Benjamin GUERINI
ASIA
production peaks to the national electric power
company”, admits Rached Azaiez, the Chief
Technology Officer. “Unimed is engaged in
a daily drive to instil a quality-based culture
in its staff members and embed a process of
continuous improvement. Our partnership with
Proparco is also grounded in the sharing of
experience. The trigeneration project, and in
broader terms our efforts to streamline energy
consumption, would never have come about if
it hadn’t been for our lively exchanges with the
people at Proparco.”
16% ANNUAL REVENUE GROWTH
Unimed recorded 16% annual revenue growth in
the period from 2011 to 2014. “In the post-re­
volutionary environment, which proved detri­
mental to many companies, that gives you
an idea of our financial health,” comments
Mr Azaiez, visibly delighted. Unimed
today ranks among the top ten Tunisian manufacturers in terms of sales,
with 40% of the total ear ned
from exports. For the future,
Mr Azaiez has two basic objectives: “Take Unimed’s specializa­
tion to a higher level and derive 50%
of our revenue from exports five years
down the road.” Based on the company’s
track record, Proparco has elected to sell
its shares ahead of the public listing of
Unimed on the Tunis Stock Exchange.
P R O PA R C O A C T I V I T Y R E P O R T 2 015
North and Southeast Asia
BANGKOK
Exchange Tower,
Unit 3501-02, 35th floor
388 Sukhumvit Road, Klongtoey
Bangkok 10110, Thailand
Tel.: +66 2 663 60 90
Fax: +66 2 663 60 77
[email protected]
Melody SANG
South Asia
DELHI
19 A Rajdoot Marg,
Chanakya Puri
New Delhi - 11021, India
Tel.: +91 11 42 79 37 00
Fax: +91 11 42 79 37 01
[email protected]
Sébastien FLEURY
MEDITERRANEAN
AND MIDDLE EAST
North Africa
CASABLANCA
15, avenue Mers-Sultan
20130 Casablanca, Morocco
Tel.: +212 522 29 53 97
Fax: +212 522 29 53 98
[email protected]
Olivier LUC
Central Africa
DOUALA
96, rue Flatters
Immeuble Flatters,
2e étage, Suite 201
BP 2283 Douala, Cameroon
Tel.: +237 233 42 06 24
Fax: +237 33 42 06 25
[email protected]
Thomas HUSSON
East Africa
NAIROBI
Top Plaza, 4th floor
Kindaruma Road, Off Ngong Road
P.O. BOX 45955
00100 Nairobi, Kenya
Tel.: +254 20 271 12 34
Fax: +254 20 259 29 08
[email protected]
Damien BRAUD
Southern Africa, Mauritius
and Indian Ocean
JOHANNESBURG
Ballywoods Office Park,
Ironwood House, 1st Floor
29 Ballyclare Drive, Bryanston
P.O. Box 130067, Bryanston 2021
South Africa
Tel.: +27 11 540 71 00
Fax: +27 11 540 71 17
[email protected]
Denis SIREYJOL
Nigeria
LAGOS
C/o Consulate General of France
1, Oyinkan Abayomi Drive
Ikoyi, Lagos, Nigeria
Tel.: +234 816 387 8459
[email protected]
Olivier FOLLIN
Coordination and editing
Anne-Gaël Chapuis, Karim Bourtel
(pp.13-27 & 31-49),
Sarah Morsi (pp.28-30),
Pauline Domachowski.
Design, layout and production
Entrecom.
Graphics
Entrecom – Jérémy Vitté
Photo credits
P.12-15: Mathieu Young
P.16: Mathieu Young/
Rachel Ambrose
P.18: Cobra
P.20-27: Reza Akram
P.28-29: Baptiste de Ville d’Avray/
hanslucas.com
P.31-33 and 35-36:
Eduardo Muñoz for the AFD
P.34 and 35:
Franck Galbrun for the AFD
P.37-40: Sanergy
P. 42-43 and 45-49: Yosr Hmam
P. 44: Augustin Le Gall
This report has been printed using
vegetal and non-mineral inks. PEFC
certification guarantees that the
harvesting of the wood from which the
paper fibres used here were made did
not to contribute to deforestation and
helped preserve the environmental,
social and economic benefits that
forests provide.
Proparco, a limited company share
capital of 693,079,200 euros.
Registered in the Paris Trade and
Companies Register under number
310 792 205
Copyright: June 2016
Middle East, Central Asia, Caucasus,
East and South Europe
ISTANBUL
Büyükdere Cad. Yapi Kredi
Plaza C Blok, Levent, Istanbul, Turkey
Tel.: +902 122 833 111
Guillaume BARBEROUSSE
51
P R O P A R C O A C T I V I T Y R E P O R T 2015
P R O P A R C O A C T I V I T Y R E P O R T 2015
Panorama
2015
P R O PA R C O
On the ground
with private players
P R O PA R C O, G R O U P E A G E N C E F R A N Ç A I S E D E D É V E L O P P E M E N T
Tel: +33 (0)1 53 44 31 08 – Fax: +33 (0)1 53 44 38 38
151, rue Saint-Honoré – 75001 Paris
www.proparco.fr