Published on: Aug 25, 2020
Scaling impact by fostering productive use
Achieving impact, even if limited, is not really difficult. There are enough people who donate a loose dollar, euro or franc for a good cause during the Christmas season. Many of these well-intentioned donations end up in one or the other school project in Tanzania, hospital in Nepal or water filter in Mozambique. These projects are important, especially for the people who benefit from them. Unfortunately, the impact is limited both geographically and in regards to numbers of beneficiaries.
Scaling impact, on the other hand, is a difficult task. Fortunately, there are now enough investors for who profit is not the only consideration. They also want their investments to have ecological or social benefits, following a middle course between a donation and a pure profit investment. These investors are often more willing to take risks than their purely profit-oriented colleagues. Our own investors, for example, all emphasised the importance of the good cause, with the profit being secondary. I am certain, of course, that everyone wouldn’t be unhappy if they earned some money with their investment. Do good and make money with it — this is the motto of the hour.
A small paradise with unused potential
I don’t really think of all this when I reflect on the island of Lelepa in the South Pacific country of Vanuatu, together with Paramount Village Chief Reuben Natamatewia.
Lelepa, the small paradise. Crystal-clear waters, palm trees and smiling faces.
Why is there no real infrastructure on the island? No toilets, no drinking water, even though a part of the island is listed as a UNESCO World Heritage site. Shouldn’t this attract some financially strong tourists? Surely not without water and toilets. Why do the island’s fishermen have to drive to the capital Port Vila, twenty-five kilometers away, in order to fetch ice to cool the fish they caught? The many ripe mangos could also be dried and sold so that they don’t rot on the ground. Chief Reuben complains that the chicks on his chicken farm freeze because he doesn’t have an infrared lamp. The many mamas on the island who produce souvenirs and tools would be much more efficient if they had electric sewing machines.
Wherever we look, there is a lot of unused potential. The people are not really in a bad way. What they have is just enough for survival. At least as long as no cyclone wreaks havoc on the island.
No matter which of the SDGs we look at, there is almost always a link to electricity.
While I’m walking around the island with the chief, I wonder what it looks like on the 60 other inhabited islands of Vanuatu. They are similar to Lelepa, I recon. Vanuatu’s islands main problem seems to be lack of fresh water, sanitation and above all: electricity. For me, these are missing key elements par excellence. I have seen it again and again in many projects in Africa: Clean water and electricity are the necessary foundations. Without these, there is no impact.
Big Impact Investment: the most important ingredients
How do you get impact investors to use their money to help create stable power supply on sixty islands in Vanuatu? So that fish can be cooled, mangos dried, water pumped, souvenirs sewn and chicks warmed? Our answer: through innovation, transparency and a large portion of trust.
Innovation is needed to create tailored technologies and business models, aligned to the situation of the rural population, with the possibility of a small, but solid return.
Three main ingredients for big imapct investment: Innovation, Transparency and Trust!
Transparency is essential to show investors that their money is truly working for the cause they invested in. That the technologies run, the business model works and the impact is right. This can be done, for example, through the use of cloud-based monitoring systems, as done on Lelepa.
Finally, trust is necessary in order to be able to survive difficult periods with patience, to face difficulties openly and to think long-term. Impact takes time, it doesn’t happen over night.
Once these three foundations are in place, all that remains is for the government of the project country to play its part. Unclear policies and strongly fluctuating currencies are poison for impact investments. In the worst case not only the investment is lost, but impact is not achieved, either. This is the nightmare of every impact investor. Governments can help to create clear conditions and a climate conducive to investments.
Once these three foundations are in place, all that remains is for the government of the project country to play its part. Unclear policies and strongly fluctuating currencies are poison for impact investments.
But if all these elements are given, nothing stands in the way of scaling at large. Not even in Vanuatu! I have calculated it briefly: It would take around USD 12 million to electrify all inhabited islands of Vanuatu. For a large-scale investor, this is not a lot of money. Since the money goes to infrastructure and not some insecure digital project, it’s quite safe. The key lies in the business model and here the fish, chicks and mangos of our friend Chief Reuben and all his colleagues play an important role. If the chief can generate more income with the help of electricity, the demand for electricity will gradually grow, too. Small businesses are important anchor customers, which is why we actively promote them in our models. One example is how we integrate the purchase of the first freezers into the Lelepa business model, then renting them out on a daily basis. This increases the local value added and enhances income generation, which is encouraging. Courage for change. Courage for impact.
We see it in every single one of our projects. It seems as if electricity is not only energy from the socket, but also electrifies the local population. Whether in Angola, Mali or Vanuatu. Wherever we can bring electricity thanks to impact investments, energy brings about positive changes. Impact investors help to scale this energy and thus make it accessible to a massively larger community.