[June 27, 2011] Low-Income Business Models Africa's Lifeline Tweet Nairobi, Jun 27, 2011 (The East African/All Africa Global Media via COMTEX) -- Business models focusing on low-income earners can help cut poverty in Africa where more than 500 million people are living on less than $2 a day. A new study by Monitor Group shows that although struggling, these market business models are thriving in Africa and if the success of the few is copied, it can complement foreign aid and government policies rallying to achieve the 2015 anti- poverty Millennium Development Goals. Ghana's Voltic Cool Pac, currently the country's leading producer of bottled water for middle-income consumers came up with a model that worked for the country. In 2001, Voltic launched a new water sachet product, Cool Pac, tailored specifically to low-income consumers. It proved challenging as hundreds of informal competitors were already serving the market, and getting the small-size, branded water sachets to the intended market from centralised manufacturing plants via traditional channels was simply not economical. Voltic made radical changes to its business model, decentralising production through joint ventures, establishing a separate brand, and optimising sales by using informal street hawkers to peddle the $0.03 500ml sachets. Voltic's success saw private equity firm Aureos make two successful investments in Voltic beginning in 2004, and in 2009, SABMiller acquired Voltic. "Today, an existing network of approximately 10,000 street hawkers sells nearly 480,000 Cool Pac sachets daily," reads part of the study. The agricultural sector, can open avenues like involving farmers in processing of products and getting a ready market enabling them to fetch high prices. Uganda's Afro-Kai, a grain trading company engages more than 9,000 farmers through the trade, aggregation, processing, and transport of sorghum, barley, cassava, groundnuts and maize. The company has also been contracted by Nile Breweries as its barley and sorghum handler, processor and third-party extension service provider. This relationship, which guarantees a forward price and purchase of all outputs, enables Afro-Kai to contract with small farmers to increase productivity and volume of out put by providing seeds at a subsidised rate, offering timely cash payment, and providing access to a guaranteed market. Afro-Kai has a significant impact on participating farmers, increasing their profit by an estimated 32 per cent according to the study. Kenya's M-Pesa is also a market model that has created jobs for the disadvantaged. M-Pesa has 11,000 agents and employs more than 40,000 Kenyans in M-Pesa joint ventures with the banks and government. "The agents act as cash-in or cash-out points as they buy and sell this e-money, they earn a commission for each transaction," says Safaricom. Information communication and technology can also be used as a model to sell impact sourcing services to clients based in other developed regions like United States and United Kingdom. The Rockefeller Foundation's Poverty Reduction through Information and Digital Employment project shows that impact sourcing, employs people at the base of the pyramid as principal workers in business process outsourcing centres, located in low-income areas of cities and rural towns. The employees meet the data entry, XML conversion and digital preservation needs of publishers, libraries, content hosts, academic researchers and businesses globally. African countries emerging as BPO destinations include Kenya, South Africa,Egypt, Morocco and Ghana. ICT board of Kenya for example aims at creating 80,000 jobs by 2014 through BPO, as the sector remains one of the major flagships of Kenya's Vision 2030. Digital Divide Data, an outsourcing company with operations in Laos and Cambodia also said it chose to make its first African investment in Kenya because of the excellent standard of English. "There's close proximity to potential customers in Europe and the vibrant local and regional economy that we expect will be the mainstay of the company's revenue model, " explained DDD CEO Jeremy Hockenstein. With such potential in Africa, the study suggests a strong business case for Impact Sourcing, which can provide high-quality, reliable services at prices that are at least competitive with traditional BPO centers and, in some cases, almost 40 per cent lower than what traditional providers can offer. [ Back To TMCnet.com's Homepage ]