A Case for Impact Investing, Cont.
By Matthew Davis, CFA | Sat Mar 28 2009
What if the solution to global poverty didn’t rest in the hands of a few Harvard economists, or executives from the World Bank, or some leading development experts on retainer in Ghana? Not in a massive government building, nor within the ivy-laden walls of a university, nor at the podium of the United Nations. What if the solution is in the mind of a Ugandan seed producer and a business-savvy American? RENEW believes that a significant piece of the poverty puzzle can be solved when such a tourist meets a passionate, hard-working entrepreneur — particularly when this happens 100,000 times over.
In our January 23, 2009 post, we met the Ugandan entrepreneur. Now let’s meet our tourist. Keep in mind, it may be you or someone you know. They’re your neighbor down the road, your friend Tom. The one that just took that safari last summer. If you were traveling with him, this is what you may have seen…
After an amazing journey through some of the most rugged and beautiful land on the planet, and seeing a spectacular range of wildlife, Tom was convinced that he and his family had truly experienced Africa. On his way back from the reserve, his kids got thirsty, so Tom stopped by a small store on the roadside to get some drinks. Stepping out of the Land Rover, he was immediately surrounded by a group of children begging for money. Because Tom’s a compassionate person, and because he just spent $5,000 on a safari, guilt causes him to hand over some spare change from his pocket. The four children scuffle to divvy up the loot.
As he walked into the store, three vendors immediately surrounded him trying to get Tom to buy from them – “all the stores are the same,” Tom thought. Trying his best to drown out their pleas, he finally found what seemed acceptable and bought four warm Cokes. After he handed off a few bills from his wallet to the lucky vendor, he noticed the other two peacefully turn away and return to their respective perches, waiting for the next tourist to come by. As Tom climbed back into his SUV and headed for the airport, he was noticeably distant, gripped with cognitive dissonance — Africa is beautiful and full of potential, and yet gripped in poverty.
You watch Tom contemplate this dilemma in his head, idly staring out the window at the distant city skyline. You notice that Tom seemed troubled during the entire flight home. After what seemed to be hours of squirming in his seat, Tom leaned over to his wife and started with his famous “what if.” You’ve seen this before — Tom starts in: “What if those were our kids on the street?” “What if I was that vendor and that was my business?” “What if I hadn’t been raised on Elm Street, but in a back ally of Nairobi?” “What if I didn’t get an education, or have that amazing teacher?” He asks these, not expecting an answer, but searching for resolution.
His thoughts wander back to what it was like growing up in America. He went to high school, fell in love and graduated from college. He worked for a good company, and after a few years of making a name for himself, he and some friends had an idea. They wrote out a business plan, moonlighted for a few months, scrounged up some money from friends and family, and went full-time to work on their dream. They got the business going, and then got a loan from a local bank. Ten years later they sold the company, made a few million and went their separate ways. Tom was now trying to spend some much deserved time with his family. His kids had been talking about Africa ever since they saw some movie in school about the civil war in Sudan, and they pleaded with him to take them on an adventure. Just excited to see his children interested in something other than Xbox or American Idol, Tom jumped at the opportunity; he was ready for an adventure too. So he contacted his travel agent, booked a flight and there they were in Africa…
Now we get to ask “what if.” What if Tom had a way to deal with his dilemma? What if he were able to shift his association of Africa with poverty to Africa with opportunity? What if he were able to zoom out, and see the economic development that could occur if provided the right support? What if Tom had not gotten out of his Land Rover, and instead, driven to the industrial park on the outskirts of the city? What if Tom would have met the business owner in need of capital and support (Read that story
)? After all, she had employed the mothers of the children Tom had met that day. What if they had a conversation, and the owner told a story of a vision she had to start a company that employed women and supported a growing industry in her country, one that would provide seeds and jobs to thousands of small farmers?
But instead: she sadly explains that she had to let some of her workers go last month. The interest rates on the bank loan she had to take to meet the demand of a contract that didn’t yield the profit she needed to keep the employees on once the contract was over.
Here’s the secret that the scholars, economists and experts haven’t grasped: The solution to poverty will become clear when Tom, and the thousands of others who have had similar experiences, meet the business owner and begin a business relationship; one that unlocks the vision and potential within the entrepreneur, and addresses the dilemma within Tom. The interaction, and thousands like it, will shift the way that we in the West see Africa. But first, Tom must encounter the entrepreneur.