World Views: Social Entrepreneurship in East Africa (Jun 04, 2012)

ZACH MESSITTE, HOST: Javier Ewing and Brett Smith, thank you for joining us on World Views today. Javier, let me start with you. Tell me, what is social entrepreneurship? How do you define what it means to be a social entrepreneur?

JAVIER EWING: Yeah, we at Excelsior have an interesting definition for social entrepreneurship, in that we focus on growing businesses and growing organizations within Africa. Given the population, nearly any type of business activity is going to have social entrepreneurship. So what I mean is that any business that is in healthcare is going to be affecting the bottom of the pyramid, so any entrepreneur that is involved in that business is going to be, by definition, a social entrepreneur. So we take a pretty broad definition of that, and are quite inclusive as to who we include in our efforts to grow the entrepreneurship sector in East Africa and in Africa more broadly.

MESSITTE: Brett, would you agree with that? How do you define what it means to be a social entrepreneur?

BRETT SMITH: I think there would be a lot of commonality, so in terms of taking a broad view, I think we would concur. If we were pushed to a definition, maybe we would go something like “innovative solutions to persistent social problems.” So, how do you take the imagination, the creativity, out of entrepreneurship and apply it to things like hunger, poverty, human trafficking – those sorts of things? So where we may have a slight discrepancy would be we may take a view that is far more socially oriented, but would be explicitly focused on that way. But inevitably, the work that Javier is doing is very much framed within that context.

MESSITTE: Let me ask you, because I saw a talk you gave where you started with the famous Chinese proverb, right? You give a man a fish; you feed him for a day. You teach a man to fish; you feed him for a lifetime. And that, in fact, what social entrepreneurship is about is not just even teaching a man to fish; it’s revolutionizing the fishing industry, right? It’s holistically understanding these kinds of problems. But, I guess the question that I have is, isn’t this kind of a top-down approach? Isn’t this sort-of saying, “Here come the MBAs!” right? Here come the guys with the fancy education, and they’re trying to tell people how to create their ventures, right? They’re trying to change a culture that may not be primed, may not yet be ready for such a change. How do you respond to that kind of criticism?

SMITH: Yeah, I would think that’s one view, is that the revolution has to come top-down. I don’t necessarily see it that way. Certainly, you could imagine lots of work that comes from the bottom up. So if we think of different sorts of innovations that have occurred bottom-up, what we might call stimulating entrepreneurship in the basis of pyramid markets, we could certainly look to prominent examples like microcredit as one example that has revolutionized the ability for people to access capital. That was not necessarily a top-down approach; quite the opposite. It was creating an opportunity for the bottom of the pyramid to actually take advantage of that opportunity.

MESSITTE: Javier, you have spent time in Kenya, you’ve worked in Kenya. How were you viewed when you came in and started working there? Here’s the outsider coming in to work. Was there that sense, or were you sort-of automatically welcomed, and was it an easy pathway forward to start working in that sense?

EWING: Yeah, I think from our standpoint, my original training is as a consultant. I was a consultant in New York for McKenzie for several years. One thing I picked up from that training is the first thing you do when you solve a problem is you have to understand the situation and get basic transparency. So we did a lot of listening, and fortunately, we were able to do listening on behalf of organizations like the World Bank, and the United Kingdom Department for International Development to understand what was happening in the marketplace. We’ve actually performed hundreds of interviews of entrepreneurs just to understand what the issues are on the ground, and what types of solutions they think would be most effective. That gave us a lot of credibility in the marketplace with the entrepreneurs, with the other stakeholders – local stakeholders such as the ministries in East Africa, as well as global stakeholders such as the World Bank – so we started with a deep respect for the local actors and the people that are, quite honestly, doing amazing things on the ground. Starting with that base of knowledge, we said, “OK, what can we do beyond that to actually build something that’s going to do a few things?” Number one, it’s going to grow local entrepreneurs, and do it in a way that creates local jobs and creates local wealth, and that will hopefully start the cycle of sustainability and keep this something that does not depend on handouts, but becomes organic over time. So, I would summarize the process as a lot of listening upfront, and that really allowed us to understand who the stakeholders are, and what was going to be effective. I would say for the most part, that we’ve found a nice place for ourselves in the ecosystem there.

MESSITTE: Brett, you referenced microcredit, but I read something that you wrote also, that you’ve gone now beyond microcredit in what’s considered cutting edge. Micro-franchising, and then this idea of the micro-consignment model. What does all this mean? From those initial steps of microcredit, where now is the thinking about how this moves forward in the next decade?

SMITH: So I think if you look at microcredit, it is a tool, and that’s all it is. It’s not a value proposition against or for microcredit. Microcredit is a value-neutral tool. What microcredit is very good at is providing access to capital to people who have existing businesses, or who have some propensity to build a business. In terms of poverty alleviation, that only works if in fact the entrepreneur has those skills or those abilities already innate. So what micro-franchising would do is take a step beyond and say, “OK, if it’s not just access to capital, perhaps it’s this business opportunity.” It’s a business in a box, if you will. So micro-franchising would be sort-of a second step in that. In both cases though, both microcredit and micro-franchising, you’re going to ask the entrepreneur to take a tremendous amount of risk, when they may or may not have the skills present. That’s not likely to be a very appealing value proposition. So micro-consignment goes a step further, and rather than be on opposite sides of the table, it gets people on the same side of the table. They can sign the goods or services out to micro-entrepreneurs who take it out to rural villagers, and they sell basic products – eyeglasses, water filtration buckets, and these sorts of things. A wonderful organization called Community Enterprise Solutions, and founder Greg Van Kirk, who has built and developed this model – the beauty is not just in terms of learning or being a first step on the ladder of entrepreneurship at the base of the pyramid. The beauty is also on the flip side: what happens when microcredit goes wrong? If you can’t pay back that loan, there are significant consequences. In micro-consignment, it begins with the Hippocratic Oath: first do no harm. So if the micro-entrepreneur doesn’t sell anything, they simply return the inventory, and are simply out-timed.

MESSITTE: So, how do you define success? What then is success in this kind of a model?

SMITH: Sure. So first off, it’s defined by the micro-entrepreneur themselves. But typically what success looks like [are] increases in terms of living wages, of living standards; of increasing that standard of living. Often, we view it as a first step, because having learned those skills, they’re able to take that next step, and are better-prepared to become a micro-franchisee, or to actually take a microcredit loan because of the business skills they’ve learned in being a consignment agent.

MESSITTE: We’ve talked on this show before with other guests about the growing role of China in the developing world as a foreign direct investor. This is a new development, really, of the last decade. How do what you all are saying, how does this model compete with foreign direct investment? If a Chinese businessman comes in and is ready to make a significant investment in Africa and Latin America, why shouldn’t that person go immediately towards the foreign direct investment?

EWING: With foreign direct investment, the way we think about it is there’s capital, and then what comes along with that capital. So what capabilities come along with that? The interesting thing about China, at least what we observed, is they not only bring the capital in terms of funds, they bring the capital equipment, skills and capabilities. So it becomes an irresistible package for African governments, which are a resource constraint. They don’t necessarily have the yellow equipment to build the roads and other large-scale infrastructure projects. The question we have to ask ourselves is, “OK, so what is being left behind as well?” So have we trained local subcontractors, and given them a set of skills and capabilities? If that’s happening, then that’s great, because then you’re creating the next round, and creating a greater round of competitiveness. And what I’m saying is it applies to Chinese companies, as well as South African countries, British companies, and American companies. So, what are you bringing along with that package of goods and services to actually build the next set of capabilities for the country?

MESSITTE: You’re listening to World Views on KGOU, and we’re talking with Javier Ewing, who is the managing director of the Excelsior Firm in New York, and also with the Center for African and Mid-Market Expansion, and we’re also talking with Brett Smith, who’s the director of the Institute for Entrepreneurship at Miami University in Ohio. Brett, following up here on what we were just talking about, how can you compete with other businesses that are only focused on maximizing profit, vs. this idea of trying to solve socio-economic questions? Isn’t there a market motive that will push towards this idea that maximizing profit is the fundamental basis of how to do business?

SMITH: I think it’s an interesting question. Even if we go back in time, and look at work of the United Nations. There was this push to become “Trade-Not-Aid.” We began to push very heavily toward this business focus, and there’s nothing wrong with that. There’s nothing inherently wrong with that. The question is what’s most appropriate for the situation and point and time? And often, what is most appropriate is some combination of aid and trade. Aid often works much like the consignment model works, as a first step to allow people to begin to build capabilities at which point market mechanisms can begin to take over, and can employ some of the business discipline you refer to. So I think often we look at this as kind of a dichotomy, an either/or, and I think it’s much more of a blended integration strategy that tends to be more effective at development over time.

MESSITTE: Switching just a little bit – talk a little bit, either of you here, on this question of what social entrepreneurship can play on issues like personal liberty, human rights, human trafficking, genocide, international security, these kinds of questions, which are things which we talk frequently about on this show. Does it move beyond just these individualized examples? How does it ripple out into these societies?

EWING: They’re hand in hand. We take the example in Kenya. The organization Ushahidi creating crowdsourcing software. The original impetus of that was right out of the 2007-2008 election violence. There you had a crisis situation, but the organization was able to leverage some of the innovation that was taking place in Kenya around development in information and communication technology. We see these things as being hand-in-hand. The capabilities of software development, for example, provided the Kenyan people, the East African people, and people around the world, with additional avenues to have a voice, and to share information in these times of crisis. So social entrepreneurship in that way, through this non-profit effort, leveraging the entrepreneurs and innovation that’s taking place in Kenya actually was able to change lives. A fantastic example there, in Kenya.

MESSITTE: Do you see that too, Brett? This idea that it has the ability, when done appropriately, when there’s success, to actually change lives, and change society?

SMITH: I think that’s right. So if we pick up on Javier’s point about the ripple effect and the possible large-scale ramifications, I think that’s absolutely the case. I think often we’ve become very micro-focused on social entrepreneurship maybe needs to include some business discipline. Not necessarily. The focus of social entrepreneurship, and the reason many people pursue it, is about social value creation, and the social impact that you can create. So the business discipline assumes that there needs to be some sustainability for the organization. Maybe it’s the sustainability of the impact that matters more, and as in the case of Javier, it’s the impact of eliminating that violence and tackling that violence that matters more than whether or not there’s a business model underlying it.

MESSITTE: I want to ask you both, and particularly you, Brett, because you work at a university. This is a hot topic at universities around the United States in particular. There are lots of young people here at the University of Oklahoma, the Center for the Creation of Economic Wealth, there are lots of these centers now around the country. Why are young Americans so drawn to this? What is it about this generation that really draws them to this issue? You see these photos. This is now becoming part of the undergraduate college experience, right? Everyone has to have an app that they’re developing overseas; I mean this is becoming part of the lexicon of getting an undergraduate degree in the United States. Why? Why is this resonating?

SMITH: It’s a great question, and if we look back not so long ago. Five years ago this was not the case.

MESSITTE: Right.

SMITH: So this has been a relatively recent emergence. We launched our program in 2006, and we looked around. There were no other undergraduate programs at the time. What has happened over time is, at least in the narrative anecdotal words of our students, they’ve seen a way to combine meaning and money. They’ve found a way to do something with their life, and do something that also creates some income. So there’s this merging that’s going on, and in many cases social entrepreneurship was founded in business schools. So it was an odd place for it to come from, but it gave business students, as an example, one way to say “Wow, that’s something I hadn’t considered.” It also gave other students from around the university a way to say, “Wow, that’s not really how we envisioned the business school.” So it’s really allowed an opportunity for a wide range of students, coming at issues from very different perspectives, to congregate around this common issue of how to make the world a better place.

MESSITTE: Javier, I have to tell you, if I had a dime for every student who basically wants to have the job that you have right now, I would be a very wealthy man. How did you move into this career? How did you develop your interest to move into this kind of career?

EWING: Yeah, I think from our standpoint it’s a bit of that partnership of how social entrepreneurship works, and it’s the public/private partnership. In developing these economies, there’s a role for universities to play, particularly in the developing world, as a hub in which the business activities can revolve around. So we’re working with partners both in the United States at the Wharton School at the University of Pennsylvania, my alma mater, as well as the Strathmore University Business School in Kenya, as the center point to which we’re developing these activities around. And I think the reason why universities are so important is that, at the beginning, it’s about skill development, and idea development, and that takes place in a very solid way at universities. The question that we are tackling with this, how do we make sure we have other stakeholders in the system? We talked about access to finance. Do we have the right finance partners to take these ideas to fruition? Both for-profit ideas and social ideas, because even the social enterprises need to make sure they have the right access to finance to have impact. But using the university as really the hub to foster those activities, and we’re taking the model that we see at the University of Oklahoma, and at other universities in the United States, Silicon Valley in California, Boston around some of the healthcare sciences work, and transporting that model into Africa.

MESSITTE: Well, Javier Ewing and Brett Smith, thank you very much for joining us on World Views today.

EWING: Thank you.

SMITH: Thank you, it’s our pleasure.

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