THE ROLE OF BUSINESS IN ALLEVIATING POVERTY

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					   THE ROLE OF BUSINESS IN ALLEVIATING POVERTY
  THE POOR AS A SOURCE OF INNOVATION AND WEALTH CREATION

                                            Henry I Onaga & Chris Ogbalu

    Henry Onaga is currently the Managing Director of Cell Communications Limited, one of the leading Private Telecom
    Operators (PTOs) in Nigeria. He had his Bachelors Degree in Accountancy, and a Master of Business Administration (MBA)
    degree in Marketing. Henry had worked in various sectors spanning the public and private sectors. They include: Civil
    Service, Finance Company, Food & Beverages, Advertising, Oil Servicing and Telecommunications.

    Chris Ogbalu is currently the Executive Director, Corporate & Legal Services of Cell communications Limited. He had been
    the pioneer Company Secretary and Legal Adviser for over five years. He has a Bachelor of Science (B.Sc.) in Political
    Science, in addition to his LLB., BL and LLM from two top Nigerian Universities. He has diverse experience in various
    sectors of the economy including manufacturing, Banking, Professional Services and Telecommunications. He is a
    Congress Fellow of the Centre for International Legal studies, Austria and is on the faculty Board of the prestigious ESUT
    Business School.



Investing in Poor Markets to Create New Business Opportunities – A Case Study of Cell
Communications Limited’s “Self Employment Scheme – A Project Targeted At the Teeming
Unemployed Youth and Women in Nigeria

It is a great pleasure and privilege to be given this opportunity to address this highly esteemed
global audience.

It will be apt to first examine the issues that led to the scheme that primarily targeted the poor
masses in Nigeria, after apprising ourselves with the nature of poverty and the debilitating factors
that still threaten to impoverish the greater part of the population of Africans.

Who are the Poor in our Midst (NIGERIA)

This is not intended to bore the audience with what they already know about the poor and poverty
itself, but rather an attempt to have a functional definition of poverty especially as it relates to
Nigeria. I am aware that often times we are inundated with grim pictures of dying infants and their
mothers in some parts of Africa where they are either experiencing plague, famine, war, pestilence
or other forms of natural disasters.

Quite obviously, they typify the extreme cases of people whose lives hang on the precipice. Yet
there are those, who paradoxically live in societies where no wars or such other pestilences exist
but rather live in the midst of plenty, yet are not sure where their next meal will come from. This
alludes to the fact that people exist at different levels of poverty, and are also invariably faced with
different levels of needs. In some cases, their needs may be an absolute need to survive, due to
the absence of food, shelter, clothing and healthcare. It is pertinent to point out at this juncture,
that poverty is a symptom rather than a natural state, to enable us appreciate the amorphous
nature that it can, at times manifest itself in.

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In developed economies, people are considered poor when their social conditions are such that
they cannot achieve the higher other needs as espoused by Maslow, but are still able to meet
their basic needs of food, shelter, clothing, etc. I posit that different type of poverty exists in
developing and under-developed economies.

Let us pause a moment to reflect the life of a child who is born to a homeless parents, who have
been driven to the brinks of life, and by implication live like vagabonds; and who by the virtue of his
birth will be forced to start fending for himself at a tender age, and will never know the luxury of
education and decent living. Perhaps, we may neither spare a thought for the hazards that
naturally confront such folks nor do we imagine the multiplier effect, inherent in the nature of this
type of endemic and abject poverty. Such is the lot of many Nigerian children, who have become
scavengers in most of our sprawling cities, like Lagos, Kano, Onitsha etc.

At the risk of sounding political, we are well aware that the greatest problem facing Africa today
is that of the failed or failing states. People are poor in some of these climes, not by choice but
as a result of the fact that they have been caught in the web of what I will describe as a somewhat
antagonistic relationship with the state and the organized business sector.

The above attempts to capture the type of poverty in Nigeria, just to enable us appreciate its
implications for businesses. The social consequences of allowing such festering poverty to get
entrenched in our developing economies will be a subject for a full discourse and cannot be
captured in this expose.

Why Develop a Pro-Poor Business Model

Businesses in developing and under-developed economies are continually being confronted by
myriad of problems directly related to poverty. It follows therefore that businesses ought to
confront headlong the hydra-headed monster called poverty, and desist from the paternalistic
approach of occasional handouts, which only weakens the resolve of both the private sector and
the governments to address the real issues.

Some call it business at the bottom of the pyramid, others “pro-poor business”, yet others call it
creating sustainable livelihoods. Whatever the name, the primary aim and focus remain the
same- inclusive and dynamic businesses, which serve the needs of the poor through profitable
commercial activities. This no doubt requires a lot of creative thinking on the part of captains of
businesses and their strategists. The litmus test for them should actually be to ascertain that
their wealth creation strategies are symbiotic, such that while aiming to tackle and uproot poverty
from its roots, it equally ensures that the primary aim for the existence of the business, profit, is
not compromised in any way.

To achieve this, we will first take a look at the benefits that a business can derive if its policies are
geared towards empowering the poor before looking at the benefits to the poor.

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Benefit to Business
  a) Creating New Business Opportunities – Available statistics show that more than two-
     thirds of the world population live on less than two dollars ($2.00) per day. Projections and
     demographic trends indicate that by 2050, more than 85% of the world’s population will fall
     within this category. This portends an abysmal decline in effective demand. By empowering
     the poor, businesses naturally create new business opportunities by raising effective demand
     and consumption levels.

  b) Co-operation with Local Communities & Avoiding Crisis Resulting From Perceived
     CSR Misconduct – Host communities are increasingly waking up to the altruistic import of
     the maxim “Give a child a fish, and you have fed him for one day, but teach a child to fish,
     and you have fed him for a lifetime”. Equally giving impetus to this is the fact that some
     unscrupulous community leaders have been feeding fat on the handouts that hitherto formed
     the CSR of corporate bodies. A good example exists in the Niger- Delta region of Nigeria,
     which is the treasure base of the nation yet inhabits the most impoverished communities in
     our land. Their blessings have conversely become their burden and the cause of their
     frequent crisis. Organizations which set out to empower these communities through basic
     education and skills acquisition, often times enjoy the co-operation of these communities
     and their sons and daughters employed by them are better equipped to handle delicate
     issues involving their people. The seeming stability enjoyed by these businesses impacts
     on their profitability.

  c) Attracting and Retaining Quality Investors & Partners – Investors are attracted to
     businesses that have shown signs of stability and are less likely to attract societal, regulatory
     and governmental sanctions. A good barometer for investors to gauge the wealth of
     businesses, other than their financials, is to seek the opinions of these important
     stakeholders. With quality investors and investments, the future of any business is
     substantially secured.

  d) Government support & Political Capital - It is obvious that businesses that empower
     the poor strike a compelling partnership with the government. Most of the time, politicians
     take undeserved credit for attracting such private investments etc.


Benefits to the Poor
 a) Job Creation – Businesses whose products and services address basic and common
    needs can enter the bottom of the pyramid market segments more effectively, and with a
    deeper social impact through partnerships with highly innovative community groups. They
    can scale their impact significantly by leveraging their expertise and experience in developing
    skills and engaging such community groups actively in delivering their products and services.
    This way, communities are better served, if an increasing number of people engaged in the
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      business are people from their immediate neighborhoods, giving it a local flavour and a
      compelling sense of stake in the business.

 b) Training, Education and Skills enhancement – Organizations that are truly desirous of
    empowering their host communities start by providing social amenities for educating and
    training the people. This is achieved through funding schools and scholarship schemes.
    Education is by far the biggest investment in the life of any individual or group and as such
    raises the standard of living of a people.

 c) Community Development – Through basic empowerment in terms of education and job
    creation, the community systematically grows out of the crutches of poverty. Beyond the
    occasional CSR embarked upon by businesses, empowered indigenes gradually but steadily
    develop their communities by training other relatives of theirs and embarking on micro
    projects that eventually add up to improving the lot of their communities.


The Self-Employment Scheme of Cell Communications Limited, Lagos,
Nigeria
More than anything else, the liberalization of the telecommunications sector of the Nigerian
economy created a revolution that affirmed the desire of Nigerians to move at pace with modern
technological trends. With this came competition and its attendant demand on businesses to
adapt their strategic choices to the complexities and dynamics of the market. In order to entrench
itself and capture the neglected bottom of the pyramid segment, Cell communications Limited
came up with the above scheme targeted at the teeming unemployed youth and women.

The scheme was conceived as a wealth creation model while aiming to improve the monthly
turnover of our business. The pilot scheme was designed to empower 2000 candidates by providing
them the following:

 •   A tabletop fixed wireless terminal phone

 •   A table

 •   A chair

 •   A canopy

With this, they are empowered to commence the operation of business centers. The projection is
that the investment will be recovered over a period of six months, through equal monthly instalmental
payments.

  • The total investment per candidate is approximately $200 and all that is required is for a
      candidate to be eligible for the scheme is for him/her to provide a guarantor. The guarantor
      must be a senior civil servant, a corporate executive in a blue chip company or a professional

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      of repute.

Before we came up with this, we commissioned a market intelligence to enable us appraise
that sector of the market, to enable us to address the issues that might arise in executing
the project. It is important that we look at the issues thrown up by our market intelligence,
which were indeed the guiding principles considered as necessary towards achieving a
market based solution.

  •    Designing products and services that tap into the wealth of the poor – Our research
       revealed that most of those who fit into our description of the poor cannot afford to own a
       telephone. Equally revealing was the fact that most working class people who own phones
       are not able to buy airtime, which came in denominations that they can ill-afford. With this
       critical mass resorting to business centers to make phone calls, a business case was
       easily made for a model that places the company’s phones at such strategic points.

  •    Logic behind the business model – Success in business requires not only affordable
       products, but also re-thinking each step along the value chain, from production and distribution
       to pricing, promotion and delivery to consumers. The individuals targeted by this scheme
       live amongst the poor and by implication service them directly, quite unlike when they
       needed to walk long distances or enter transport to get to the better established business
       centers, to make telephone calls.

  •    Leveraging the power of communities – Interventions that contribute to increasing the
       income of small and micro-producers often have the synergistic effect of increasing the
       demand for goods and services of such low-income communities. Experience has shown
       that such micro producers who genuinely utilized their micro credits were able to grow
       their businesses to such levels, where they own chains of business centers and are in turn
       able to engage their relations or other enterprising individuals. This gradually raises the
       income level of the communities and by implication their consumption level, and ultimately
       increases the demand for the company’s products and services.

The Challenges Encountered

It might be interesting to note that, albeit the project was very popular and acceptable, the
execution was dogged by so many challenges, which in itself threw more light on some other
factors which conspire to impede the ability of some of the participants to eke a living from this
kind of direct support. They include:

  • Quality of Guarantors & Documentations Required for Appraisal of Candidates:
  • The biggest challenge, which though was anticipated, proved to be far beyond our estimation,
      was the quality of guarantors being presented by applicants to the scheme. A lot of them
      thought erroneously that the few junior civil servants in their midst were indeed people of

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        good means and proudly brought them forward to stand as guarantors for them. The time,
        resources and personnel required to verify the claims of these potential guarantors was
        easily beyond our projection, and it became most discouraging when 75% of the search
        conducted revealed inconsistencies in their records and outright falsehood. This marred
        the entire process and instigated management decision to cut down on the number of
        beneficiaries for the pilot scheme by 50%.

Limited Individual Purchasing Power

 •      It was equally observed that despite the micro credit advanced to them as start-up capital,
        most of them were still not able to subscribe to the higher products that will increase their
        profitability (like booster cards), thereby rendering their retail prices a little unattractive.
        Equally worrisome was the fact that effective demand within their neighborhoods remained
        low due to their very low or at times non-existent purchasing power.

Activities of Local Governments/Municipal Councils

     • It was observed that most local governments imposed various forms of levies and fees for all
        manner of business activities and constituted task forces to enforce their bye-laws. Many
        of the participants reported the seizure of their mobile office equipment and products by
        these menacing and ruthless task forces, under the guise of revenue drives. Our intervention
        to explain that the project was a social scheme aimed at assisting their electorates yielded
        little or no dividends.

     • The Federal Government had made very feeble efforts towards sanitizing and streamlining
        taxes and levies amongst the three tiers of government, but really achieved nothing due to
        the fact that it is yet to achieve fiscal discipline on its own.

Tiny/Small Individual Transactions:

 •       Another huge but less obvious challenge, is that of achieving scale of economies with tiny
        individual transactions that consume both documentation and personnel. Any business
        would opt to deal with a few customers who can make the same turnover or even more,
        rather than go through the trouble of dealing with thousands of customers with its attendant
        risks and complexities.


The Way Forward
There is no gain-saying that a lot still needs to be done in this area by so many businesses. It is
obvious that most businesses that fail to achieve the visions and missions of their promoters in
most part of Africa did not fail as a result of wrong policies, weak management or lack of strategic
focus, but rather as a result of the ever declining purchasing power of the consumers.


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In Cell Communications Limited we remain convinced and unrepentant about a pro-poor business
policy, not because of the so many awards we won as a result of the scheme, but because we
know that the challenge of the entrepreneurs of the next two decades will be more on how to
improve the consumption level (purchasing power) at the bottom of the pyramid.


Conclusion
There is undoubtedly so much potential wealth at the bottom of the pyramid, but businesses
must begin to articulate strategic plans that will facilitate the harnessing of these resources. A
good starting point will be a deliberate educational policy that will provide basic education to the
impoverished population of Africa, thereby making them a fertile ground for skills acquisition.

Corporate social responsibility in the manner it is being practiced currently, has become an old
hat which has lost its relevance, and can hardly achieve any meaningful purpose in terms of
wealth creation. Organizations desirous of stamping their authority in the market place in future
must begin to identify with the neglected segment of the poor. It requires patience and more so,
a lot of financial engineering, as the gains may not be immediate, but sure to come.

The challenge for all of us, particularly the multinationals and developed economies, is to refrain
from throwing occasional gifts and handouts to the poor, but to find more enduring and creative
ways of applying these resources to empower them. This way, we will secure the future of these
multi-billion dollar companies, and make the world a better place to live in.




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