April 22, 2010

A Three-Day Discussion Regarding Social Venture Capital and Social Enterprises

Through the efforts of the Florida Association for Volunteer Action in the Caribbean and the Americas, Inc. (FAVACA), a Florida-based nonprofit organization serving the needs of the people in Haïti and throughout the Caribbean for over 25 years, I had the pleasure of attending the Social Venture Capital/Social Enterprise Conference Miami (SVC/SE, Miami 2010), which was held in Miami Beach, Florida from March 17-19, 2010. Part of the SVC/SE, Miami 2010 conference was the Sustainable Haïti conference, referred as a “conference within a conference,” which brought together social entrepreneurs and social investors, U.S. government officials, nongovernmental organizations (NGOs), Haïtian Diaspora, Haïtian government officials, faith-based groups, and corporations with a presence in Haïti. The purpose of SVC/SE, Miami 2010 was to promote economic development within Latin America and the Caribbean by utilizing social venture capital and social enterprise. Over 700 people attended from 30 plus countries and approximately 240 speakers participated on 110 panels and workshops during the three day event. I participated on two panels: Social Entrepreneurship in Post-Earthquake Haïti and Social Venture Capital as a Tool for Growth.

Several excellent discussions that took place as a result of well-planned presentations or side conversations during session breaks. I made several points during my two presentations, but the one that garnered the most responses is the failure of NGOs’ ability to achieve long-term solutions. (I recognize that not all NGOs are ineffective, but those operating with clearly defined deliverables and benchmarks for success are too few in the world.) While many NGOs attending the conference agree that the aid model is largely ineffective, I find their reluctance to reform their respective operating model very disturbing. To become effective in eradicating poverty in the developing world, NGOs should partner with the private sector in implementing a long-term sustainable solution. For small and medium-sized enterprises (SMEs) with operations in a developing country, I recommend that NGOs collaborate with these businesses by providing job training, education, health and essential life skills that will ensure that workers remain healthy and properly trained to participate in a formal economy. These skills will pass from generation to generation, thus breaking the cycle of poverty.

While I have addressed my criticisms of the microfinance model implemented by most microfinance institutions (MFIs) in this blog, I focused my presentations in Miami on the need for job creation in addition to supporting entrepreneurship through microfinance. I recognize there are several benefits of microfinance in some of the world’s most undeveloped regions, but there are not enough measured results to justify the amount of money invested into MFIs. Microloans provide short-term debt financing, but does not necessarily create long-term enterprises. In addition to providing working capital to entrepreneurs, investments in developing nations should focus on job-creation through equity financing (microcapital). Moreover, I recommend that MFIs work with businesses in industrialized markets by creating a partnership strategy to open an office or plant with local populations in developing nations, thereby establishing a partnership that many underserved entrepreneurs. (Photo of Marc Roger (left) and Aaron Rose (right): Benjamin Wilkinson/HAITI ONWARD)

SMEs in industrialized markets should receive microcapital from MFIs to help stimulate business expansion into developing nations. Three conditions must be stipulated with these investments: SMEs must use local populations and provide fair compensation, implement microsavings mechanisms for the employees, and establish a health insurance program with NGOs or for-profit insurance providers. The number of employment opportunities in developing nations will grow exponentially with strategic partners located in industrialized markets.

I also discussed my experience of being presented with an investment opportunity to revitalize a factory located outside of Les Cayes, Haïti that produces vetiver oil. My visit to the factory was a side trip during my time serving as a consultant to evaluate Haïti's strategy to utilize tourism for social and economic development (see "Haïti: Pearl of the Caribbean" and "Haïti: Using Tourism as a Means for Sustainable Social and Economic Development").

Distilled from the roots of vetiver grass, the aromatic oil is widely used to scent household products to everything from detergents, soaps, and cleaners, to window coverings, baskets, and matts. It may be used to treat skin problems. And as a natural anti-inflammatory it is recommended to remedy arthritis, muscular aches and pains, rheumatism, sprains, swelling, muscle or joint stiffness, and similar problems.

During my visit to the dilapidated factory, I was provided details on how my investment would be used to modernize the distillery. The pitch, however, failed to address a key questions such as: How will the oil be transported to the port in Haïti's capital of Port-au-Prince, which is located several hours away (assuming that gangs do not steal the barrels off the trucks)? Is the sea port in a condition that allows for rapid loading of products on cargo ships? (I should note that while we were not stopped by gangs or corrupt police during the drive between Port-au-Prince and Les Cayes, a bridge over a major river was out and there was a wait of several hours to drive through the river.)

In addition, while France was once a leader in the production of products that uses vetiver oil, most of these products are now manufactured in Asia. Do the factory owners have the resources to connect with Asian buyers? Answers to these questions can be done through better collaboration between NGOs, governments, and the private sector. After some consideration, I passed on the opportunity to invest in the vetiver oil distillery.

Other speakers at the Miami conference talked about the need to establish a bond market in countries like Haïti to finance infrastructure development, credit ratings for investment instruments to help developing countries modernize their financial systems to compete in a rapidly global economy, and establish full currency convertibility measures.

A fellow panelist, Marc Roger, a consultant based in Port-au-Prince, noted that every developing country has a blue-chip company. More collaboration among the governments of developing nations, NGOs, and the local population should take place to attract additional blue-chip enterprises. Furthermore, according to Mr. Roger, there should be a better focus on establishing business incubators to create small and medium-sized enterprises, and NGOs and the private sector must work together in establishing a legal framework that includes a judicial process for business disputes, fair employment laws, and regulations to protect natural resources.

I want to thank FAVACA for their generous sponsorship of the SVC/SE, Miami 2010 and I wish to express my gratitude and appreciation to John Rosser of DVK L3C for organizing this important event, which was very timely considering Haïti’s devastating earthquake that occurred this past January. I am pleased to be a participant and honored to share the podium with a distinguished group of speakers with a wide array of knowledge and experiences.

And I conclude this post by sharing a video produced at the Sustainable Haïti conference where I and others provide our insights for a new model to promote sustainable development in Haïti.

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

April 18, 2010

IBM and Saudi Arabia Government to Collaborate on Developing New Technology to Reduce Water and Energy Costs

On April 8, 2010, IBM and the King Abdulaziz City for Science and Technology (KACST), Saudi Arabia’s national research and development organization, “announced a research collaboration aimed at creating a water desalination plant powered by solar electricity, which could significantly reduce water and energy costs.” (Photo of a concentrated photovoltaics unit at IBM Research courtesy of IBM)

IBM’s announcement explains that “a new, energy efficient desalination plant with an expected production capacity of 30,000 cubic meters per day will be built in the city of Al Khafji to serve 100,000 people.” Moreover, “KACST plans to power the plant with the ultra-high concentrator photovoltaic (UHCPV) technology that is being jointly developed by IBM and KACST; this technology is capable of operating a CPV system at a concentration greater than 1,500 suns. Inside the plant, the desalination process will hinge on another IBM-KACST jointly developed technology, a nanomembrane that filters out salts as well as potentially harmful toxins in water while using less energy than other forms of water purification.”

Reverse osmosis and thermal technology, operating at a cost ranging from 2.5 to 5.5 Saudi Riyals per cubic meter, are the two most commonly used methods for seawater desalination, according to KACST scientists. The goal of this project is to significantly reduce the cost of desalinating seawater at these plants by combining solar power with the new nanomembrane.

“Because over 97 percent of the world’s water is in the oceans, turning salt water into fresh water cost effectively and energy efficiently offers tremendous potential for addressing the growing worldwide demand for clean water. One of the most efficient means of desalination is reverse osmosis. But there are obstacles to unlocking this reserve -- principally bio-fouling, degradation by chlorine and low flux challenges. The KACST / IBM joint research focuses on improving polymeric membranes through nanoscale modification of polymer properties to make desalination much more efficient and much less costly.”

April 6, 2010

AT&T ZERO Charger Helps End Wasted Electricity and Reduce Landfill Waste

According to the United States Department of Energy, the total amount of electricity that flows through internal and external power adapters is nearly 470 billion kWh per year or about 12 percent of the nation’s annual electricity consumption. During the process these devices consume about 120 billion kWh per year of electricity and turn it into heat, costing the nation over $12 billion in electric bills. Continuing the theme of energy conservation in this blog, AT&T announced that it will make available in its U.S. stores in a mobile phone charger that “does not waste power when left plugged in, and improves charging efficiency when powering a device.” (Photo: AT&T)

According to a March 17, 2010 press release, “The AT&T ZERO Charger will also make life easier for customers, with a ‘block and cable’ design for maximum interchangeability, allowing them to use the same charger for future handsets and will, over time, cut the number of chargers produced, thus reducing future landfill waste.” Partnering with Irwindale, California-based Superior Communications, “the AT&T ZERO charger works by automatically sensing when a mobile phone is not plugged up to the charger and cutting the power supply from the wall socket. The charger will be sold in packaging with 100% recycled paper. AT&T recently announced a transition to smaller and more eco-friendly packaging for the wireless device accessories sold in AT&T stores. This change will eliminate more than 60 percent of the paper and more than 30 percent of the plastic previously used for AT&T’s accessory products.”

AT&T notes that when conventional chargers are left plugged in, even when not actively charging a mobile device, can draw as much as 5 to 20 times more energy than stored in the battery. “Adding to its efficiency, the AT&T ZERO Charger can be used to charge many existing and future handheld devices — all from one outlet,” explains a Superior Communications press release. “Over time, this will help reduce the number of chargers produced and discarded to minimize impact on the environment.” This innovative device has a 5-star efficiency rating, which exceeds the standards set by GSMA and the ZERO charger is AT&T’s first step toward full GSMA compliance. (Photo: Superior Communications)