<h1 style="text-align:center;">Back to the Source: Energy</h1>In July 2013, members from the Impact Angel Network closed an investment in <a href="http://www.dventus.com/">dVentus Technologies PLC</a>, an ISO 9001: 2008 certified high technology company of U.S. origin incorporated in Addis Ababa, Ethiopia in 2010. The investment helped dVentus to design, develop and manufacture smart grid solutions, energy efficient power generation and distribution solutions. dVentus is strategically situated to respond to the needs of the domestic and international markets with solutions specifically targeted for the clean energy, energy efficiency and smart grid technology sectors.Anticipated social impact from this investment includes millions of Ethiopians with access to more reliable, efficient electricity and the increased employment of professional and highly skilled engineering jobs. In fact, the company currently employs more than 85 hardworking, intelligent and extremely talented men and women to work on product concept design, R&amp;D, development and manufacturing in its state-of-the-art facility.&nbsp;The fostering of these bright minds and innovative companies is critical if Ethiopia hopes to achieve its goal to become a middle-income country by 2025 through increased agriculture and industry. A reliable power grid providing adequate sources of electricity to its residents and industries is a reality that Ethiopia needs to quickly put in place.While Ethiopia is equipped with access to vast renewable energy resources and has the potential to generate more than 60,000 megawatts (MW) of electric power from hydroelectric (86%), wind and solar (8%), as well as geothermal sources (6%), the country only has approximately 2,300 MW of installed generation capacity.(1) With a population of over 95 million people and projections suggesting that the total demand for power will grow by 30% per year, the country is facing an electricity deficit.(2) And of Ethiopia's 95 million citizens, about 80% live in rural areas and only 2 million (mainly urban dwellers) have access to electricity distributed by Ethiopian Electric Power’s (EEP) grid.(3) This translates to a meager rate of 23% connectivity for the entire country.(1)<figure class="image"><img src="/uploads/usaid_power_africa_graphic_545f437012.png"></figure>It will come as no surprise then that Ethiopia ranks 159th out of 190 countries in the World Bank’s <a href="http://www.doingbusiness.org/data/exploreeconomies/ethiopia/">Ease of Doing Business 2017 Report</a>, and in their <a href="http://www.enterprisesurveys.org/data/exploreeconomies/2015/Ethiopia">2015 Enterprise Survey</a>, electricity was ranked as the second highest business environment obstacle for firms. The major constraints of the power sector in Ethiopia are inadequacy of supply, poor quality of supply, poor customer service, lack of trained labor and lack of finance.(3) However, there is a clear political will in Ethiopia to ensure the fulfillment of the development goals in the Growth and Transformation Plan (GTP), as the power sector has been identified as a key in achieving these goals.Under the first GTP, the Government of Ethiopia intends to increase generation capacity to 10,000 MW upon the completion of two major hydropower plants set to become operational in 2017 and 2018.(1) The second GTP has a new, equally ambitious target to increase generation capacity to over 17,000 MW by 2020, with an overall potential of 35,000 MW by 2037.(1) This increase in generation capacity would help sustain the economic growth Ethiopia has experienced and enable it to become a regional renewable energy hub in East Africa.Assisting Ethiopia in achieving its goals under GTP is the Power Africa initiative, a multi-partner program launched by President Obama in 2013. Power Africa’s goals are to increase electricity access in sub-Saharan Africa by adding more than 30,000 megawatts of cleaner, more efficient electricity generation capacity and 60 million new home and business connections.(1) Power Africa is supporting Ethiopia’s energy goals through wide-ranging technical assistance in cooperation with the government of Sweden and Norway, the World Bank, the International Finance Corporation, European Commission, the UN, and DFID.(1) However, Ethiopia is not only looking to the public sector for assistance in developing its energy sector, but also to private investors who are seeking attractive financial and social returns, like the Impact Angel Network.<figure class="image"><img src="/uploads/bts_dventus_c693df3693.jpg"></figure>According to EEP, "the opportunities in the power sector represent about $3 to $4 billion per year. Of this, 65% is in generation, with the rest spread across transmission, universal access and engineering services."(3) The long-term goal is to maximize the country’s energy power potential, one that dVentus fully supports through its products and service offerings.dVentus’ portfolio of products includes smart electric meters, smart water meters, system solutions, generators and converters, and their service offerings range from electric power and water analysis to system design and smart grid upgrades, all in the effort to assist Ethiopia and the world beyond in sustainably powering enterprise and economic development.RENEW and the IAN are proud to be a part of dVentus’ story.

An overview and analysis of one of the key ingredients that drive many of dVentus’ product lines.

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Back to the Source: Energy

<h1 style="text-align:center;">The Best of 2016</h1>The RENEW team wishes you all a happy New Year! As 2017 is newly minted and we look to the future, the RENEW team would like to take a moment and reflect on some of our favorite (and most popular) thought-content pieces of 2016:The Rise of Private Equity in East Africa: This is an analysis of the current state and future state of private equity in the East Africa region, as well as the country of Ethiopia. This content piece examines the regional trends from the previous seven years, looks at the prospects of growth in private equity investment in Ethiopia, and explains how the rise of the global impact investor plays an integral role in this investment.Never Forget Africa: RENEW experienced some exciting growth this year by expanding our team, including Justin Reesor, our Operations Manager. In his introductory blog, Justin tells the story of his journey to RENEW, which started as a promise he made to himself during a college cross-cultural trip to South Africa to ‘Never Forget Africa’. Read Justin’s inspiring blog, and don't forget to check out <a href="../2016/going-against-grain.html">Tristan Pelham-Webb</a> or <a href="../2016/africa-final-frontier.html">Prasoon Raghuwanshi’s</a> equally compelling personal stories as well.10 Things You Should Know About Ethiopia's Business Environment: The World Bank published its 2015 Enterprise Survey on Ethiopia, which outlines some very interesting information about the biggest obstacles private sector companies face in Ethiopia. The RENEW team compiled 10 key takeaways, focusing our analysis on the outliers – indicators that differed significantly in Ethiopia compared to the general region of sub-Saharan Africa (SSA). Some of the findings may come as a surprise so be sure to <a href="/newsroom/10-things-you-should-know-about-ethiopias-business-environment">read more</a>.Member of the IAN Visit Ethiopia: 2016 kicked off with an exciting start! In mid-February, RENEW hosted an Econ-Tourism Trip for members of the Impact Angel Network from San Francisco, Los Angeles and Minneapolis. The group met with many Ethiopian entrepreneurs, from both RENEW’s portfolio and investment pipeline, and visited a number of businesses in and around Addis Ababa. Read more about their experience and consider joining us this upcoming February 2017 for our annual Econ-Tourism trip!UHNW Millennials and Impact Investing: Impact investing is gaining popularity across all generations, and none more so than with millennials, who are expected to inherit some $59 trillion in the coming decades. In this content piece, the RENEW team takes a closer look at what UHNW millennials value most, as well as the interactions between millennials, their parents and their advisors.Read more or tune into RENEW's Investing On The Frontier podcast on millennials.<figure class="image image-style-align-right"><img src="/uploads/2016_feb_econ_tourism_bd05a0e087.jpg"></figure>

The RENEW team reflects on our favorite and most popular content pieces from 2016.

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The Best of 2016

<h1 style="text-align:justify;">Tom Scriven, General Counsel and Partner of RENEW LLC, has earned the prestigious Chartered Financial Analyst® (CFA®) designation.</h1><figure class="image"><img src="/uploads/cfalogo_registered_aa0e3db8b0.jpg"></figure>The CFA charter represents a tradition of upholding the highest standards of education and integrity in the investment profession. The charter is recognized globally by employers, investment professionals and investors as the definitive standard by which to measure the competence, integrity and dedication of serious investment professionals.As an attorney and consultant, Tom has advised U.S. and international clients on transactions and projects that aim to optimize financial and/or social returns. His work includes attracting and supporting investments in frontier markets, financial analysis and strategic planning. Prior to joining RENEW, Tom served as an associate with the law firm Morgan, Lewis &amp; Bockius. In this capacity, he advised prominent private equity clients and other leading financial services firms, and Global 500 companies involved in mergers and acquisitions, joint venture transactions, government investigations and private litigation. Tom received his J.D. from the University of Virginia School of Law and his bachelor's degree, summa cum laude, in political science from Houghton College. He studied finance at the University of Michigan, Dearborn College of Business.“I am honored to become a CFA charterholder,” Scriven said, “and to apply the principles and knowledge learned during the last three years of rigorous study and exams to support investments in promising companies in sub-Saharan Africa.”About CFA Institute: The <a href="https://www.cfainstitute.org/">CFA Institute</a> is the global association for investment professionals. It administers the CFA and CIPM curriculum and exam programs worldwide; publishes research; conducts professional development programs; and sets voluntary, ethics-based professional and performance-reporting standards for the investment industry. CFA Institute has more than 115,000 members, who include the world’s more than 100,000 CFA charterholders, in 138 countries and territories, as well as 138 affiliated professional societies in 60 countries and territories. More information may be found at <a href="http://www.cfainstitute.org/">www.cfainstitute.org</a>.About RENEW: RENEW is an experienced facilitator of an innovative investment model that brings the development community, the host government, foreign investors, and local companies together around a shared common interest: to grow the private sector in African economies while creating lasting change for its communities through job creation and positive social impact. RENEW’s public-private partnership model lowers the transaction costs, which normally prevent foreign investors from investing in SMEs located in frontier markets. RENEW organizes and supports medium-sized investments made by the Impact Angel Network (IAN), the largest North American-based impact angel network for Africa. RENEW acts as the IAN’s in-country support team and provides consulting and investment services that span across all aspects of the investment process. RENEW’s model seeks to reduce the costs and risks foreign investors experience when investing in developing countries, and to increase the local awareness and strength of the business community in an effort to attract larger equity investments for its companies.

RENEW is excited to share the great news.

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Tom Scriven Earns Prestigious Chartered Financial Analyst® Designation

<h1 style="text-align:center;">The Angel Investment Exchange</h1>Thursday evening brought a stellar crowd to RENEW's new office on the second floor of Galani Cafe in Jacros, where we officially launched RENEW's Angel Investment Exchange (also referred to as “The Exchange”), and kicked off the Accelerating Business Growth project that is undertaken with financial support of the Government of Canada, provided through Global Affairs Canada. Thanks to everyone who came out to celebrate the launch, and to the Embassy of Canada in Ethiopia for co-sponsoring the event.The Exchange, the focal point of the five-year ABG project, will bring local SMEs through an intensive executive management-training program and help them connect with international investors and markets. The goal is for businesses to scale into market leaders, enabling them to play a stronger role in the Ethiopian economy and create sustainable job growth.<figure class="image"><img src="/uploads/gac_abg_launch_party1_6b46781e00.jpg"></figure>Whether you were able to attend the event to learn more about the project or not, we wanted to follow up with information about what's next...City Partners: We are currently signing memorandums of understanding with City Partners in Addis Ababa and Hawassa. Other cities in Ethiopia will be coming soon. If you are interested in being a City Partner to learn about private equity and in turn help companies become investment ready, please contact Bethlehem Bogale at <a href="mailto:bbogale@renewcapital.com">bbogale@renewcapital.com</a>Businesses: Want to learn more about our Investment Challenge? Plan to attend our Investment Challenge meeting on Thursday, December 8, 2016 at The Exchange. RSVP to Bethlehem Bogale at <a href="mailto:bbogale@renewcapital.com">bbogale@renewcapital.com</a>.CFO 100: Are you a senior accountant with your company? Interested in expanding and growing your business acumen and financial skills? Stay tuned for more information regarding how you can participate in CFO 100.Investment Pitch: In February 2017, a select group of businesses will showcase their investment plan to members of the Impact Angel Network who will be visiting Addis Ababa. Interested in presenting? Be sure to attend an Investment Challenge meeting beforehand.We look forward to working with you to accelerate business growth in Ethiopia!

A toast to the official launch of the ABG Project!

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The Angel Investment Exchange

<h1 style="text-align:center;">Tebita’s Contribution to Humanity</h1>One of our favorite things to do at RENEW is to share the accomplishments achieved by our portfolio companies with our members and the greater impact investing community. While there are several that come to mind across the portfolio, this blog will take a closer look at East Africa Emergency Services LTD (EAES) and their most noteworthy client, Tebita Ambulance and Pre-Hospital Emergency Service PLC (Tebita), the first and only private ambulance service in Ethiopia.Members of RENEW's global Impact Angel Network (IAN) closed an investment in EAES in May 2015. EAES serves providers of emergency medical services and training in East Africa, Ethiopia in particular, in order to ensure that international and domestic clients have access to reliable, high-quality emergency care. EAES works in partnership with local firms such as Tebita by offering business development, procurement and administrative support. The investment seeks to help medical service companies operate more efficiently and to free them up to focus on their core functions, primarily caring for patients in crisis. In meeting this need, EAES and Tebita, together, aim to improve access to quality emergency services for thousands across East Africa. And they have been doing just that.<figure class="image"><img src="/uploads/eaestebita_blog_e8ef63b97b.jpg"></figure>Looking back at 2016, the Tebita/EAES partnership has produced positive social impact in Ethiopia by not only providing critical emergency services and ultimately saving lives, but also by educating the local and global communities on the ability individuals can have, be they bystander, emergency responder or angel investor, in changing the course of emergency care in Ethiopia. Here are just a few examples:<ol><li>To date, Tebita has a fleet of eleven ambulances, has provided ambulance services to more than 40,000 clients and emergency training to more than 25,000 trainees. “Tebita” is Amharic for “drop,” a message to force every citizen to think about his or her drop of contribution to humanity. And there is no one who believes in this idea more than Tebita’s CEO and founder, Kibret Abebe Tuffa.</li><li>In June 2016, Kibret attended Europe’s leading forum on international development - European Development Days. As a panelist, Kibret spoke on Tebita’s fight to save lives, as well as the role that social enterprises can have in furthering development goals. “Without responsible private sector involvement, tackling social problems is like clapping with one hand.”</li><li>In October 2016, Ethiopia’s Minister of Health, Dr. Kesete Brehane Admasu, honored EAES and Tebita with the “Extraordinary Award For Dedication and Exceptional Contribution On Health And Social Service in Ethiopia” at their annual conference, and named Kibret an Ambassador of Health and Social Service. Tebita is the only private sector company to be recognized with this award.</li></ol><figure class="image"><img src="/uploads/eaestebita_blog2_25922f3a89.jpg"></figure>RENEW and the IAN are proud to be part of EAES and Tebita’s amazing and impactful story, and we hope that everyone finds inspiration in the actions Kibret takes every single day to positively change and save lives of so many.

Celebrating how one company has saved and positively changed the lives of so many.


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Tebita’s Contribution to Humanity

<h1 style="text-align:center;">Accelerating Business Growth Project</h1>As many of you know, RENEW operates under an innovative public-private partnership that allows us to do smaller investments than traditional private equity investors on the continent of Africa. This model helps bridge the financing gap and addresses the economic "missing middle" that stalls economic growth in most frontier markets. Under this type of partnership, the development community covers some of RENEW's operating expenses so RENEW can provide members of the IAN high-quality investment management services without charging exorbitant fees relative to the size of the investments being considered. Starting in 2013, RENEW began testing this business model with the U.S. Government, which resulted in seven investments and 1,100 jobs supported by the IAN's portfolio. But, that was just the start - investments take years to develop and nurture. So, thanks to the Canadian Government through Global Affairs Canada (GAC), RENEW will be able to scale up our support for the IAN and continue providing high-quality investment services in Ethiopia for the next five years under the Accelerating Business Growth (ABG) program.The goal if this partnership is to ultimately increase awareness and understanding of private equity investing in Ethiopia, increase the number of investments being made in Ethiopian SMEs by addressing the current financing gap, and create sustainable job growth.THE EXCHANGE:RENEW is pleased to officially announce the launch of a vital investment and business acceleration project. The project, formally called Accelerating Business Growth (ABG), is made possible through the public-private partnership between RENEW and Global Affairs Canada (GAC). ABG includes a number of strategic components including a national Investment Challenge, Finance Incubators and The Angel Investment Exchange (also referred to as “The Exchange”). The Exchange will be the focal point of the project and the goal of the Investment Challenge. The Exchange will bring high potential companies, called small and medium enterprises (SMEs), through an intensive executive management-training program and help them connect with international investors and markets. The goal is for businesses to scale into market leaders enabling them to play a stronger role in the Ethiopian economy.<figure class="image"><img src="/uploads/training_26f9c8d0ca.jpg"></figure>The Exchange aims to support 50 companies, which will be selected during the Investment Challenge, over the course of the next 5 years. The Exchange will focus on building financial management, environmental social and governance best practices, legal, operations and marketing strategies. “Most companies in Ethiopia, even large companies, agree that they would benefit from additional management disciplines and training to compete in the international market. After years of working with companies in Ethiopia and making our share of mistakes, we’ve found some of the secrets to success for companies. The Exchange will be the place where we work with companies to understand these secrets. For those willing to do the hard work, success is almost guaranteed,” says Matthew Davis, partner at RENEW. These “secrets” will help companies transform into market leaders and ultimately lead to sustainable job creation for low-skilled workers, including women and young adults, through a dynamic and growing small and medium business sector in Ethiopia.WHY RENEW:RENEW is an experienced facilitator of an innovative investment model that brings the development community, the host government, foreign investors, and local companies together around a shared common interest: to grow the private sector in African economies while creating lasting change for its communities through job creation and positive social impact. RENEW’s public-private partnership model lowers the transaction costs, which normally prevent foreign investors from investing in SMEs located in frontier markets. RENEW organizes and supports medium-sized investments made by the Impact Angel Network (IAN), the largest North American-based impact angel network for Africa. RENEW acts as the IAN’s in-country support team and provides consulting and investment services that span across all aspects of the investment process. RENEW’s model seeks to reduce the costs and risks foreign investors experience when investing in developing countries, and to increase the local awareness and strength of the business community in an effort to attract larger equity investments for its companies.<figure class="image"><img src="/uploads/canadian_crew_5ac4b431f7.jpg"><figcaption>Photographed: Ambassador Philip Baker, Parliament Secretary Karina Gould, members of their team, as well as members of the Mama Fresh and RENEW teams.</figcaption></figure>BLENDED FINANCE:A growing school of thought proposes that SMEs in developing countries are key drivers of long-term stability and growth. By providing jobs, paying taxes, and producing, buying and selling local goods and services, SMEs act as the backbone or engine of an economy. Unfortunately, SMEs struggle to grow in many developing countries, and as a result, microbusinesses and large conglomerates dominate the country’s economic pyramid. While the excitement for SMEs is there, both from public and private sector actors, many aid-centric projects are underperforming and few investments are being made into SMEs in developing countries by private investors - leading to a financing gap or what is commonly referred to as a “missing middle”. RENEW is pioneering an innovative public-private partnership model that stimulates direct investments into promising SMEs. RENEW recently partnered with the Canadian Government to implement a novel approach that leverages the private sector to create sustainable economic development.The public-private partnership model (where the interests of the development community so clearly align with the local private sector and the investment community) represents a new field of development that is rapidly growing. The type of financing RENEW and GAC are helping mobilize – broadly called <a href="https://renewcapital.com/blog/2016/blended-finance">blended finance</a> – offers investors the opportunity to create sustainable social impact and financial returns through investments in companies that operate in high impact and fast growing countries, such as Ethiopia. These trends, along with Ethiopia's rapidly expanding private sector, could help position ABG to be a flagship project in the development sector.Our investment strategy closely aligns with the goal and targets in the Ethiopian Government’s Growth and Transformation Plan II and the government's overall desire to help Ethiopia industrialize and become a middle-income country by 2025.

RENEW to work with Global Affairs Canada in Ethiopia under new public-private partnership.

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Accelerating Business Growth Project

<h1 style="text-align:center;">Blended Finance 101</h1>MINDING THE GAP:In 2015, the United Nations released a multi-faceted plan of action for the world to meet 17 Sustainable Development Goals (SDG) and 169 targets by the year 2030. These goals range from clean water and sanitation to gender equality and quality education, with one of the more ambitious goals being the complete eradication of poverty, in all of its forms. It will require an enormous undertaking to achieve all 17 SDGs, and part of the challenge lies with the funding gap that is present in most developing countries, which is estimated to be “between $1.9 trillion and $3.1 trillion each year between now and 2030.”* The development community at large recognizes that significant additional financial resources will need to be mobilized over the coming 15 years. However, current political climates across many developed countries hint at foreign aid cuts instead of increases, raising the question “where will this needed capital come from?”<figure class="image"><img src="/uploads/un_sdg_0_51da451f50.png"></figure>CUE THE PRIVATE SECTOR:It is the belief of many that private sector investment will play an important role in assisting frontier economies address the development funding gap that they are currently facing. The reason is that many private investors (from equity funds to investment bankers) are increasingly looking to developing countries for their next investment opportunity. Emerging markets have historically offered strong investment returns, something that has not been ignored by savvy investors. “Private equity investment in emerging markets reached $57 billion in 2014, with increased interest from LPs resulting in fundraising totals far exceeding previous years.”**Emerging markets are truly on the cusp of a “perfect storm” for economic growth - young demographics, a growing middle class and increasing incomes - which will likely continue to translate to spectacular economic growth, even in the double digits for some countries. In fact, overall growth rates in frontier markets are exceeding that of developed, “with projections of market growth of 4.0% in 2015 and 4.5% in 2016, compared to 2.0% and 2.2% for advanced economies over the same period.”**So, let’s recap: we have a development funding gap, a need for traditional aid needs to be delivered in more effective ways, and a private sector that is increasingly becoming a major player in economic growth for frontier markets. What happens next?THE BLENDING OF TWO FINANCES:Development funders and private sector actors are joining forces under what is commonly being referred to as blended finance. You’re probably saying to yourself, “Great! Another buzzword I have to memorize” and wondering how the substance and meaning behind this phrase differs from others like “venture philanthropy” or “impact investing”? <a href="https://www.linkedin.com/in/joanmlarrea">Joan Larrea</a>, CEO of Convergence, does a great job in defining this relatively new term in her publication in <a href="http://impactalpha.com/sizing-up-blended-finance-a-guide-to-a-new-financing-approach-to-fuel-sustainable-development/">Impact Alpha</a>, Sizing Up ‘Blended Finance’: A Guide to a New Financing Approach to Fuel Sustainable Development:“Boiled down, blended finance simply encourages more private sector investment by being strategic with the money already at work from official development assistance and philanthropic sources. Blended finance transactions combine funding from development institutions, philanthropic entities, and profit-seeking investors and puts that capital to work in a way that is aligned with the UN’s Sustainable Development Goals (SDGs).”Joan goes on to elaborate that there are three defining characteristics in any blended finance activity, including 1) the deal is intended to yield a financial return, 2) the transaction contributes towards achieving SDGs in a frontier economy, and 3) the development funders are the catalytic force behind the deal.It is this third point where a lot of the magic happens. Investment opportunities that normally be passed over by large venture capital firms (for being too small), or passed over by microfinance institutions (for being too large), are now seeing the light of day. What’s painfully obvious but often overlooked is that these small- to medium-sized enterprises (SMEs) represent the backbone of any developing or developed economy, and without them, a missing middle in the economic pyramid is created, resulting in unstable or stagnant growth. Finally, with the assistance of governments, foundations, donor agencies, development and commercial banks, and private investors, these SMEs are given access to much-needed capital, which in turn allows them to scale operations, create sustainable jobs, grow into market leaders and attract additional sources of financing.KEY STAKEHOLDERS &amp; PLAYERS:There are several key stakeholders in the blended finance field. Governments agencies, such as USAID, GAC or DFID, and philanthropic institutions, such as the Bill &amp; Melinda Gates Foundation or The Rockefeller Foundation, play an important role given their higher tolerance for investment risk and lower return expectations (relative to commercial or investment banks). These institutions deploy their capital using a range of investment instruments and securities, accounting for $135.2 billion in OECD Official Development Assistance in 2014.**Blended finance provides private sector investors and lenders the opportunity to reduce the uncertainty and costs related to high-risk investments in an emerging market by leveraging the financial support, project administration, and local expertise that development funders can provide, allowing for a wider range of investment activities to take place.**This relationship between the private sector and public sector can also be categorized under a public-private partnership model, which RENEW and the Impact Angel Network currently use in Ethiopia. By working with development funders who cover the high transactions costs of operating in an emerging market, RENEW is able to manage a diverse portfolio of companies, be our investors eyes and ears on the ground in-country, source an exciting pipeline of investment opportunities and connect U.S. angel investors with driven entrepreneurs, all without charging a management fee.If you’re interested in learning more about RENEW, the Impact Angel Network or our unique business model, then be sure to stay tuned for an upcoming announcement of a new partnership between RENEW that pretty perfectly exhibits the power of blended finance.

How the “blending” of development funding and private sector investments could lead to sustainable economic growth.

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Blended Finance 101

<h1 style="text-align:center;">Back to the Source: Cotton</h1>In December 2015, members of the Impact Angel Network closed an investment in a family-owned textile and apparel manufacturing facility, Desta PLC. Established in 1992, Desta PLC is a multi-faceted company that oversees several production lines, including embroidery, knitting, cut-and-sew, fabric and garment manufacturing. The company’s dedication to quality and timely service has garnered trust and confidence from domestic and international customers.One could say, though, that this dedication is not only applied to Desta’s customers but its employees as well. At any given time, Desta employs more than 550 individuals, mostly young men and women, and ensure that each day they have access to a healthy subsidized meal, a fair wage, a medical nurse, team trainings and opportunities for advancement. Desta is committed to the fair treatment of its employees and adherence to guiding principles of sustainability, setting it apart from the trajectory this industry has taken in many other low and middle-income countries. Desta is accredited by international standard and compliance organizations. It passed an audit by BSCI (Business Social Compliance Initiative), proof that Desta has created suitable working conditions and takes care of employees. In addition, Desta undergoes a social audit twice a year by SGS, a leading inspection and certification company headquartered in Switzerland. Worldwide Response Accredited Production has also certified the company.<figure class="image"><img src="/uploads/cotton_blog5_216389c621.jpg"></figure>The company’s commitment to sustainability and corporate responsibility is assisting Desta in becoming a market leader in an industry that is just now starting to take hold in Ethiopia and the East Africa region. While the first textile mill in Ethiopia was established nearly 80 years ago, the entire cotton-textile-apparel (CTA) value-chain has been one of the country’s least developed industries, only marginally contributing to the country’s GDP. The reasons for this are many, but two significant causes are lower cotton cultivation rates and a lack of vertical integration across the value chain (1).If you know anything about Ethiopia and the important role that agriculture plays in its GDP, this may actually come as a surprise. While cotton has long been considered a “cash crop” that is grown by commercial and smallholder farmers alike, cotton cultivation has yet to reach its full potential. Ethiopia currently cultivates only 3% of the total 2.6 million hectares that are suitable for cotton production, and out of 84,000 hectares of land that are under cotton cultivation, only 35,000 hectares are irrigated while the remaining is rain-fed (2). This translates directly into the country’s export figures. In 2012, total CTA exports amounted to roughly $27.2M, of which only $4.7M was directly from cotton production (1) - as a comparison point, coffee exports for the same year amounted to $694.6M (3). In addition to lower cultivation rates, up to 70% of cotton that is grown in Ethiopia and the East Africa region is exported to other countries (1). To date, only a handful of textile and garment manufacturers are vertically integrated from “dirt to shirt,” leaving the remaining facilities to import costly raw materials from other countries and stunting the overall textile industry (1).Bringing this point closer to home, 60-70% of what Desta produces is made from 100% cotton or a cotton blend. Of these cotton products, only about 20% is actually made from locally grown Ethiopian cotton, while the remaining 80% is made from imported cotton or polyester-cotton blends. However, this reliance on expensive imports may not be for long. Global sourcing for apparel is currently undergoing a significant realignment due to a rise in labor wages in China, the world’s largest textile exporter; buyers are now looking elsewhere to source apparel (1). So, where might these buyers be looking? You guessed it - Ethiopia.<figure class="image"><img src="/uploads/dsc_0159_10ddd9e6bc.jpg"></figure> To put this in context, the East Africa region currently produces approximately $1B in cotton products (cotton fiber through apparel) on an annual basis, whereas China exported $159.6B in garments alone in 2012 (1). “If one-half of one percent of China’s current garment exports were to relocate, this would represent a near doubling in the value of all CTA exports from East Africa” (1). And Ethiopia is well positioned to take advantage of this shift. The country is rapidly becoming a top destination for textile manufacturing on account of competitive labor costs, government incentives, and low energy costs. Companies such as H&amp;M, Tesco, Gap, Belk, and Walmart, among others, are now sourcing textile products from the country (4).In light of these global shifts, the government of Ethiopia has recently taken steps to further ensure the future success of the sector in naming the CTA industry, across the entire value chain, as a priority sector under the Growth and Transformation Plan II (GTP II). According to <a href="http://allafrica.com/stories/201607151027.html">AllAfrica</a>, the country plans to “increase cotton output from the land productivity level of 15 quintals/ha in 2015 to 28 quintals/ha by 2020. In the long-term, Ethiopia has set out to become self-sufficient in lint cotton supply” by the completion of GTP II. The country is also taking advantage of initiatives such as the Africa Growth and Opportunity Act (AGOA), Common Markets of East Africa (COMESA) and other bilateral trade agreements with Western countries that offer free trade benefits and access to the global and regional markets. And to ensure that facilities are taking full advantage of these agreements, the Ethiopian government has established a National AGOA Center under the Ministry of Trade to help companies better utilize AGOA.In strengthening the cotton cultivation segment of the CTA value chain, Ethiopia will not only support full integration of the important textile industry (one that is expected to significantly contribute towards Ethiopia’s future GDP), but it will also positively affect food and income security for rural populations. “In addition to production for the value chain, by-products include cotton oil and cotton seedcake for home use and cattle feed. Cotton production for smallholder farmers has a strongly positive impact on food security through raising rural incomes. It is highly suitable to be grown in rotation with other staple crops and provides the cash necessary for the farmer to invest more heavily in food crops” (1)All in all, the continued development of the CTA value-chain not only positively affects textile manufacturers, like Desta PLC, but it will also economically benefit the country and the lives of the farmers who are involved in cotton cultivation.

The RENEW team takes a closer look at the cotton, textile, apparel value chain and its role in Ethiopia’s economy.

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Back to the Source: Cotton

<h1 style="text-align:center;">Back to the Source: Coffee</h1>&nbsp;AN INTRODUCTION TO KAFFAKaffa, Ethiopia, from which the term “coffee” is derived, is the birthplace of coffee, according to many experts including <a href="http://www.ncausa.org/About-Coffee/History-of-Coffee">The National Coffee Association</a>. To this day, the Kaffa region in the southwestern part of Ethiopia remains one of the strongest coffee-producing regions in the country.The legend goes that Kaldi, an Ethiopian goat herder, first discovered coffee after he noticed his goats became energetic upon eating cherries from a certain tree. Kaldi shared this knowledge with the monks of a local monastery, who made a drink with the berries and enjoyed its invigorating properties. Soon, the findings of coffee spread from Ethiopia to the Arabian Peninsula and then on to Europe. The earliest credible evidence of either coffee drinking or knowledge of the coffee tree appears in the middle of the 15th century, in the Sufi monasteries of Yemen.(1) By the 16th century, coffee had reached the rest of the Middle East, Persia, Turkey and Northern Africa before spreading to Europe, Indonesia, and finally to the Americas.<figure class="image"><img src="/uploads/dsc_0854_4341a7fdef.jpg"></figure>As it has been since the 16th century, Ethiopia remains one of the largest producers of Arabica coffee beans in the world. RENEW and the Impact Angel Network (IAN) are proud to be a part of this important tradition through our investment in METAD Agricultural Development PLC (METAD), an Ethiopian specialty coffee company founded in 2012 by Aman Adinew. With a vision for crop-to-cup coffee, METAD aims to not only strengthen Ethiopia’s coffee reputation amongst sophisticated consumers in the international market, but also help local farmers improve the quality and value of their harvested crop. In pursuit of this vision, METAD seeks to become the leading specialty coffee brand by offering global and domestic consumers with the highest quality, 100% Ethiopian Arabica coffee.METAD’s coffee cultivation, harvesting and primary processing occurs at farm sites 75 kilometers beyond Yirgacheffe, deep in the heart of some of Ethiopia’s best coffee country. METAD’s 200-hectare Hambela and Gedeb farm and processing sites include washing stations, a dry mill, a huller, beds for sun drying, and warehouses for storage to handle all of the pre- and post-harvesting coffee activities.<figure class="image"><img src="/uploads/view_of_hambela_processing_site_0_5b205d80d6.jpg"></figure>COFFEE CULTIVATIONAs a whole, coffee's production process and value chain are very complex, much like viticulture. The two main species of coffee grown for coffee production today are Arabica and Robusta, with Arabica coffee being indigenous to the mountains of the southwestern highlands of Ethiopia.The Ethiopian coffee value chain starts with farms, like METAD, that grow and harvest red cherries - the coffee fruit and seed (see photo below). Farms either sell the harvested cherries to independent processors or process the crop themselves. A processor has two options: 1) select the highest quality red cherries and dry them on raised drying beds (what is called sun-dried, unwashed or natural coffee) and hull them on location, or 2) remove the pulp from the coffee cherries by using a wet mill and dry the coffee seeds, covered in their parchment. These two types of processing techniques, also known as primary processing, are crucial to the ultimate quality and character of the coffee.In Ethiopia, the processor then sells the dried coffee seeds (or beans) to exporters on the Ethiopia Commodity Exchange (ECX) platform. The exporter cleans, polishes, and bags the coffee beans for export shipping. Finally, an importer, broker or roaster imports the coffee beans into the consuming country, after which they will be roasted and be made ready for consumption.<figure class="image"><img src="/uploads/bts_metad_56d665a740.jpg"></figure>WHAT MAKES SPECIALTY COFFEE "SPECIAL"?Coffee can be broadly defined as specialty or commercial grade. Specialty coffee, a term first coined back in 1978 by Erna Knutsen of Knutsen Coffee Ltd., in the simplest definition refers to special geographic microclimates that produce beans with unique flavor profiles.(2) There is a fundamental understanding that specialty coffee beans will always be well prepared, freshly roasted, and properly brewed; one that the Specialty Coffee Association of American (SCAA) has standardized and enforced. The SCAA is considered to be the world’s coffee authority and the largest coffee trade association, with nearly 5,000 members located in more than 40 countries who represent every segment of the specialty coffee industry.The SCAA defines specialty coffee in its green stage as “coffee that is free of primary defects, has no “quakers” (under-ripe or under-developed attributes), is properly sized and dried, presents in the cup free of faults and taints and has distinctive attributes.”(3) In general terms, “specialty coffee is coffee from a known geographic origin that commands a premium price above commercial grade coffee due to its high quality and particular attributes that it possesses.”(4) In the case of METAD, the company produces Yirgacheffe specialty coffee, the quality of which METAD continually ensures at its coffee lab, the first and only private, state-of-the-art coffee quality control facility on the African continent that is <a href="http://www.prnewswire.com/news-releases/metadkabu-coffee-quality-laboratory-becomes-africas-first-private-specialty-coffee-association-of-america-certified-lab-208654311.html">certified by the SCAA</a>. Specialty coffee from this region is considered to be, by some, the highest quality in the world - an opinion that has been gaining popularity over the past several years.<figure class="image"><img src="/uploads/dsc_0739_1_998d048eb3.jpg"></figure>Demand for coffee is poised to hit a record in 2017, as people around the world and in developed markets are increasing their java consumption. Global coffee consumption is expected to grow by 1.2% over the upcoming year, leading to higher prices for coffee beans. “The price for Arabica coffee futures was up 20% in June 2016, marking the biggest monthly gain since February 2014.”(5) Citigroup even estimates that Arabica coffee prices could reach $1.50 per pound by the second half of 2017. To meet this increasing demand for high-quality coffee, international roasters are seeking out traceable and single-source producers in smaller sub-regions of the world. Similar to wine, consumers are willing to buy coffee at a premium if it’s from specific regions, is certified fair trade or organic, is naturally sun-dried, etc. According to a survey conducted by the National Coffee Association, the retail value of the U.S. coffee market alone is estimated to be $48 billion dollars with specialty comprising approximately 55% value share.(6) It is these overall trends that suggest sustained momentum for specialty coffee growth.BRINGING IT BACK TO THE SOURCEIt’s no wonder that with Ethiopia being the epicenter of Arabica coffee, and it ranking among some of the fastest-growing economies in the world, the country is quickly becoming a target for foreign investors seeking attractive returns in the coffee value-chain, as well as domestic and export market opportunities. In fact, coffee is one of Ethiopia’s largest export commodities, with over 55% of the coffee produced in the country sent outside its borders.(7)According to a <a href="https://d3n8a8pro7vhmx.cloudfront.net/eatradehub/pages/860/attachments/original/1433149069/Ethiopian_Coffee_Industry_Value_Chain_Analysis_2010.pdf?1433149069">USAID analysis</a> of the Ethiopian coffee value-chain, coffee generates “70 percent of Ethiopia‘s foreign exchange earnings and provides livelihoods for 15 million Ethiopian smallholder farmers.” The industry employs several hundred thousand workers in processing coffee cherries across hundreds of washing stations and hulling mills around the country.In Ethiopia, government institutions are responsible for the state coffee plantations with approximately 8,000 permanent employees and an estimated 50,000 seasonal jobs.(8) Coffee generates a considerable number of employment opportunities on farms, in the processing plants and in the transport sector. In Ethiopia, coffee constitutes a very important source of seasonal employment for many poor people and most agro-processing employees are women. Altogether, METAD employs 38 permanent staff and several-hundred seasonal staff, 70% or more of which are women. Additionally, they have purchased from, partnered with and/or supported more than 3,500 out growers to provide best practices on growing, harvesting and selling coffee. METAD also creates further social impact in the community surrounding the farm sites by sponsoring a school with over 600 children, constructing new community facilities (such as a school and community center) and working with development partners to build and install new wells.<figure class="image"><img src="/uploads/used_b2a1709f7c.jpg"></figure>Smallholder farmers, those whose plots are less than five hectares (ha), account for 95% of the country’s coffee output.(9) In fact, “average plot sizes do not exceed two ha,” wherein coffee yields remain stubbornly low compared to that of Colombia (1/3 their yield) and that of Costa Rica (1/4 their yield).(10) The country’s remaining 5% of output is produced by plantations, which average more than 50 ha in planted area, and which have been privatized by the government in recent years.”(11) However, because of the predominance of smallholders, the average yield per hectare for all cultivated land is no more than 700 to 800 kg.(12)According to the USDA Foreign Agricultural Service’s <a href="http://gain.fas.usda.gov/Recent GAIN Publications/Coffee Annual_Addis Ababa_Ethiopia_5-12-2014.pdf">2014 Ethiopia Coffee Annual Report</a>, the major reasons for the low coffee production are:<ol><li>Ethiopian coffee farm management system and agronomic practices are traditional and fail to inject new technologies into the country’s coffee production system. In addition, extension services provided to smallholder farmers are inadequate.</li><li>Inadequate use of improved seeds as the supply is limited to areas located near coffee research centers and universities in the country.”</li><li>Historically, there has been a lack of a designated government institution to provide technical support for coffee production. At one time, there was a specialized government agency supporting the production and marketing of coffee. However, it was “dissolved many years ago, leaving the sector with little institutional and technical support from the government.</li></ol>The Government of Ethiopia, though, has recently noted this problem and plans to restructure the coffee development sector by making it a priority value-chain under its Growth &amp; Transformation Plan II - increasing yields from 700 kg/ha to more than 1,100 kg/ha.(12)Ethiopia truly has the potential to increase coffee production and productivity as it has all the necessary “ingredients” including suitable elevation, temperature, soil fertility and sufficient rainfall in coffee growing regions of the country. With the right financial support and guidance, the country could become the number one coffee producer in the world. And METAD, with its clear vision and passionate entrepreneur, is uniquely positioned to become a market leader in Ethiopia’s specialty coffee industry.&nbsp;

Developing Ethiopia’s specialty
coffee sector.

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An analysis and overview of one of Ethiopia’s oldest and most lucrative value chains.