Presentation on theme: "“ Investing in Sustainable Businesses Promoting Early Childhood Development.” The ECD Ecosystems Funds of Africa A regional pilot fund of $50M for East."— Presentation transcript:
“ Investing in Sustainable Businesses Promoting Early Childhood Development.” The ECD Ecosystems Funds of Africa A regional pilot fund of $50M for East Africa Potential second generational fund of $272M for Africa Team Members: Brian Dempsey Chas Gore Peterson Mutahi
Executive Summary INVEST Early childhood development PROMOTE Increased accessibility to quality goods and services Education, early learning health and childcare Disease prevention Nutritious foods Clean water ITC Ancillary goods and services TARGET MDGs of poverty, maternal & child health Infectious and water born diseases Malnutrition Childhood and maternal morbidity Lack of early childhood education Preventive and orphan care ADDRESS 25-30 high impact, innovative portfolio companies Build scale Enhance access Increase affordability HOW? Identified a priority pipeline of USD 50M of investments Commercial viability is central to fund strategy
Timing Ripe for ECD funding GDP Growth in Africa Key Themes African population expected to double to 2B by 2050. 422M Africans currently under age 15. 33M babies expected in 2011. All eventually need education, food, water, housing, clothing Private Schools in Africa currently service 10% to 40% plus of students and up to more than 50% in urban slums. Industry with annul turnover of $ 8.4B and one of the biggest global business opportunities for double bottom line investing. Education Expenditures Expected to Rise Improving economic conditions is enabling increased expenditure by governments and individuals Average GDP growth is ranging from 4.1% in Kenya to 6.9% in Tanzania Population growth historical average in Africa is 2.5% Donors and philanthropists continue funding support Increased access of ECD goods and services through innovative models
Health care expenditure in SSA is expected to grow from $16.7 billion in 2005 to $35 billion in 2016. Annual growth rate of 7.1 percent per annum. $25–$30 billion in incremental investment required for the increased demand in physical assets (hospitals, clinics, distribution warehouses, etc.) African heads of state pledged to allocate 15 percent of their national budgets to health care in 2005. The private sector has potential to deliver between 45 and 70 percent of the needed increase in capacity. Investment Opportunities in Health Care
Government resources and charitable donations are insufficient to address the world’s social problems. A new alternative for channeling large-scale private capital for social benefit, aimed at improving the lives of the poor and vulnerable in emerging markets and mitigating climate change. Of a sample of 24 high impact investors, by J.P. Morgan in 2010, a total of 1105 investments were made, totaling 2.5 billion USD Who are Impact Investors? High Impact Investing Development finance institutions Private foundations Large-scale financial institutions Private wealth managers Commercial banks Retirement fund managers Boutique investment funds Companies Community development finance institutions
Project Demand for High Impact Investments Housing, rural water delivery, maternal health, primary education and financial services — for the portion of the global population earning less than $3,000 a year, offers the potential over the next 10 years for invested capital of $400bn– $1 trillion and profit of $183– $667bn.
Obstacles to ECD Development… Stagnation Conflict Weak economic performance Fragmented policies Lack of legislation Political Infighting Lack of political will Corruption High Costs and no Quality Insufficient supply and distribution Poor public service delivery Shortages Limited capacity Provide Entries For Private Sector Demand for ECD products outstrips population and GDP growth Innovation leads to increased productivity and efficiencies Price reductions and greater proximity due to increased competition will improve service delivery and increase demand Population growth and urbanization strain public educational and health systems and infrastructure challenges thwart rural outreach Chronic under-penetration levels provide numerous points of entry for new players in segments such as E-Learning, health diagnostics, distribution and retail of nutritious food and vitamins and education and communications Public private partnerships (PPPs) increase resources available to the private sector and reduce delivery costs and improve service and quality Mass-market strategies highlighted latent lower income commercial opportunities in various ECD sectors including nutritious foods, vitamins, clean water, mosquito nets, alternative energy for household lighting and refrigeration
Development Impact Investing in young children would likely improve the chances of these children to succeed later in life. The completion rates in the primary years, as well as the primary gross enrollment rates, are positively affected by the level at which countries invest in the early years in nutrition, health, preschools, and childhood care. Improvement in education improves lifelong human capital, investments in the early years would contribute to the longer-term economic development of Sub-Saharan African countries. High economic returns on investments in education Enhanced school readiness, enrollment, and completion; Later age of motherhood for young women (that is, reduced birthrate); and improved family situations, including the empowerment of women. Each year of schooling translates into a 10% increase in an individual potential income. At a national level, each year of additional schooling leads to a 1% increase in annual GDP. This year an estimated 1.8 million children’s lives in sub-Saharan Africa could be saved if their mothers had at least a secondary education.
Deploy Mass Market Solutions and Efficiency Gains to increase access to quality ECD goods and services for lower income groups Adapting products to accommodate consumers’ cash flow patterns and variations. Harnessing technological advancements to reduce unit product costs to the consumer. Maximising product-consumer proximity. A focus on customer service and marketing. Enhance market research and intelligence capacity. DealsType of InvesteeAverage Deal Size ($) Total Deal Size ($) 5Venture Capital Seed0.077M0.385M 5Early Stage Private Equity or VC0.9M4.5M 8Joint Ventures for Private Equity expansion finance 2.125M17M 8Private Equity expansion capital for African Companies 1.9m15.5M 2Grants/Debt for FBOs and Non Profits 5M10M 28Total$47.385M Deal Flow
Deal Flow Impacting ECD Ecosystem Sector Pre and primary schools Emerging Educational Technologies Nutritious Foods and Beverages Health Services Targeted at Mothers and Under Fives Disease Prevention Services and Goods Communication, Information and Health Care Technologies Alternative Energy Targeted for Household Lighting and Refrigeration Clean Water and Hygienic Services Mobile Telephony Cash Transfer Services ITC and Educational Schools and Training Institutions Educational and Health Promotion Services Media Services for Education and Health Microfinance and financial services Health insurance for Low income populations Telemedicine
Education – Test Prep Provider Business overview US based company with a wholly owned Kenyan subsidiary Led by a UCLA trained NYC charter school teacher who has spent three years teaching in Kenya and is fluent in Luo, MPREP has created a mobile platform for primary school students, schools and parents. MPrep couples low-tech mobile applications – widely available to the masses – with top-quality study materials, to provide poor students with affordable, individualized study tools that track their progress. Particular focus on rural students who cannot afford the upfront costs of books and, as a result, fail the primary school exit exam. Students need more accessible, affordable, and engaging study tools. MPrep uses mobile phones to provide radically better study tools to kids in developing countries. These tools cost less than books, are easier to buy, and are much more engaging. MPrep will initially target the grade 7 & 8 students in Kenya. Families spend roughly $70 on test prep for 8th graders over the course of the year, a total of ~$140m. This equates to a market opportunity of roughly 400m students (>$30b) in developing countries worldwide. Seed Capital
Low Cost Education Provider Business overview The World’s first network of ultra-low cost, private primary schools planning to education over one million children for under $4 per month. Bridge International is a private US Company with a Kenyan subsidiary. Conceived by three Americans including successful Silicon Glen educational software entrepreneurs Began operations in Kenya in 2009 Expanded to serve 18,000 primary schools children in 60 schools Fees of $4.00 per month which enables any low income community to send 85% of children to school Bridge currently employs 1,000 staff and hires from the local communities including 200 back office employees. All payments are cashless, from parents to Bridge, from Bridge to all vendors and all employee pay. Bridge buys land, designs, builds, operates, and staffs all its facilities. 90% of its schools are located within 900 meters of its students homes. Average school size is 400 students. Bridge believes operating a network of schools supported by a strong central headquarters provides the scale, experience and capacity to invest in systems of management, support, training and innovation that allows individual schools to dramatically increase their effectiveness. Bridge is completely IT Driven. From research, to land purchase and construction, recruiting and training,, to instruction and operations. Early Stage
Disease Control Textiles Business overview European based company focusing on emergency response and disease control products. Aim to reduce child mortality, improve maternal health, and combat HIV, malaria, and other diseases. Current products include PermaNet (bednets), LifeStraw (water purification), ZeroFly and ZeroVector to give shelter and protect against vector borne disease, and CarePack (interventions for HIV-infected people). Proposed transaction Expansion capital required to improve regional distribution and reduce costs of producing key products. 2.5M USD for 25% equity stake Improve R&D of key products to impact disease control sector. Funding required to expand into more sub- Saharan African countries and impact least developed and most affected areas. Joint Venture
Text Book Printing and Distribution Business overview Provide access to textbooks through in-country printing facilities Aim at providing one book for every child through locally established modern print facilities. Reduce cost of current textbooks by 50% and improve quality. Focus of creating employment and craftsmanship in an improved graphic industry in developing countries. Uganda based plant with expansion opportunities in Congo-Brazzaville, Liberia, Zambia, Tanzania, Malawi, Ethiopia, and Rwanda. Proposed transaction Capex for plant construction, production, training, and delivery of books to government schools. 5M USD for 49% of equity Joint Venture
Nutritious Foods Manufacturer Business overview Manufacturer of Fortified Foods Local provider of Plump Nut product from Nutriset Manufacturing Facility in Nairobi Focus on providing solution for acute and chronic malnutrition in refugee camps, school feeding programs, public schools, and HIV Proposed transaction Support production and distribution of RUTF product to famine affected areas Expansion capital with equity of 2.5M for 35% Possible income note of 1M Private Equity expansion capital for African Companies
Maternal and Pediatric Care Business overview 10 year old independent non profit operating two hospitals 300 beds serving over 350,00 patients p.a. Men’s and women’s wards, surgeries, pediatrics, neonatal ICU, perinatal and eye and dental clinics. 35,000 admissions per annum Delivers 12,000 babies per years with 14,500 maternity admissions Conducts 390,000 lab exams, 17,000 major and minor surgeries, 8,000 endoscopies, 30,000 X-Rays, 34,000 ultrasounds, and 25,000 eye and dental exams with 360 staff including 30 Doctors, 18 clinical officer and 85 nurses in the two hospitals Low costs, slim margins and high volumes lead to 11.6% operating surplus for 2011. Admissions, Consultation, Lab Test and Generic Drug= $ 4.00 Deliveries at USD 35.00 and C-Sections at $ 75.00 with two-night stay. Proposed transaction Expansion Capital of $5.3M sought for Construction of 120 bed Maternity and Pediatric Center Grant or soft loan sought in local currencies based on performance repayments. Grants/Debt for FBOs and Non Profits
Maternity Hospital Business overview Non-government/non-profit organization providing medical, preventative, curative and rehabilitative as well as community based services to people with disabilities. Up to 120,000 people with disabilities and their caregivers are served by CCBRT each year. Comprised of: Disability hospital (eye and orthopaedic departments, physiotherapy, plastic surgery department for burns and cleft lip/palate, orthopaedic workshop) and an extensive community based rehabilitation program. Main target group are lower income groups who cannot otherwise access quality services. CCBRT subsidizes high quality services to the poor on a sustainable basis through higher fees paid by those who can afford it (7 per cent of CCBRT’s patients). CCBRT Maternity and Neonatal Hospital, ( Baobab) will be a referral hospital to the DSM region and the eastern zone. CCBRT will also develop the capacity of existing key health facilities to offer specialized services focusing on preventing disabilities. Proposed transaction Seeking $ 4,2M in expansion capital to complete 1st round of $16,5M financing for construction, project implementation and HR of 60 bed obstetric, 34 bed gynecological and 110 cot neonatal wards with 12 delivery sutites and 6 operating theatres. Grants or soft commercial loans with six month grace period sought over five year term with declining balances based on “equity kicker” performance fees. Grants/Debt for FBOs and Non Profits
ECD Fund of Funds. What is it? Four separate asset classes have been proposed with total demand for capital estimated on a regional East African basis at $47.38M and $272M Africa wide. Each type of asset class, ranging from seed venture capital to private equity early stage and expansion capital, to debt has distinctive financing, deal structuring, and exit characteristics. Characteristics of a fund of funds: Separate asset classes Pool of capital Different returns and risks Provides portfolio diversification Allows investor choice between assets Provides balanced returns
Fund Structure Regional Fund of Funds Seed Capital Venture & start-up capital 0.385M USD fund 5-10 Companies 12%-15% targeted return 1.75 x return on capital Average 50K-100K Investment size Early Stage Expansion 4.5M USD fund 5%-10% targeted return 5-10 companies 1x return on capital Average 250-500K USD investment size Expansion Capital 32.5M USD fund 16 joint ventures and expansion opportunities 15%-25% targeted return Average 2.5M USD investment size Expansion FinanceEarly StageFaith Based NGO Seed Capital Total of 28 – 50 Companies Estimated total return: 7-14% Expansion Capital Grants and low interest debt 0%-5% targeted return 10 million USD fund 2.5M-5M average investment size
ASSET CLASS SIZE & RETURN Asset Sizes Asset Return
Other Investment Structure Options Pioneered by AECF, its supports business innovation through open ‘windows’ of business plan competitions. AECF has invested 120 M in three years in 140 companies representing different sectors ‘Windows’ target a specific sectors in education and health development ‘Call for proposal’ to a geographic region, where companies can apply with a business plan for a project. The widest possible range of businesses are eligible for support All windows are competitions, open only to for-profit companies. A third party runs the competition over a set period of time. Successful applicants will receive donor supported capital up to a maximum dependent on the window they are applying too. Development Windows Regional funds Create local endowment fund of 25M invested in Government Treasuries. Use earning of 16% per annum to fund businesses. Donors determine investments Hire Asset Manager and your own team / or do deal with locals.