1. W. K. Kellogg Foundation Africa Program Helping people help themselves Presentation to the Africa SMME Conference and Awards Gold Reef City Hotel, Ormonde, Johannesburg, South Africa

2. Outline of Presentation The WKKF Africa Program What the Program is about Prior Investments Lessons learnt since inception in SA Current Focus within Economic Opportunities & Relevance to SMMEs WKKF s new Investment Products Conclusion

3. What is WKKF Africa about? Helping people to help themselves To support the social and economic transformation of Southern Africa; Reverse the cycle of rural poverty and; Build healthy, viable, and sustainable rural communities

4. How do we achieve the social and economic transformation? Civic engagement; Economic opportunities (EO); Skills and leadership development; Health and well being for families, women and youth.

5. Prior Investments in Economic Opportunities-(EO) Focus on community driven, bottom-up interventions –Building the capacity of rural businesses in agriculture & non-agricultural sectors –Strengthening commodity associations Major Investments included: –agriculture; –art and craft; –eco-tourism; and – rural finance

6. Lessons There is great potential to leverage agricultural and cultural products to improve the livelihoods of rural people With appropriate support, communities can become the agents of their development There s visible progress and impact at community level

7. However …, Some Challenges Impact on a few: Production levels low Quality of product inconstant Many lack requisite skills –to establish, manage and grow businesses- –Poor understanding of the business and value-chain Poor understanding and access to markets; – No representation in export markets Poor access to financing Weak organization of rural producers High number of failed SMMEs

8. Current Economic Investment focus Market-led Approach Objective to support co-creation of wealth with rural producers, entrepreneurs & communities Focus on partnership building along value chain of specific commodities with high market potential An integrated business development approach –market analysis, organized commodity associations, supported by input finance and supplies, & policies on land and financing

9. Current Economic Opportunity focus cont.. Approach beneficiates commodities; commercializes; increases asset-base Private sector and government partnerships critical Approach has wide range of applications

10. Application of model-Cultural Industries Objective to invest in the value chain: –To enable access to local and global markets for artisan products –The gathering of credible and non distorted feedback form host markets –Invest in product development and innovation cycle; –Packaging, warehousing and distribution of goods in export; –To support local producers and entrepreneurs to acquire equity in businesses that sell their produce Support an infrastructure for partnerships and enabling policy and programmes frameworks

11. Example: Meropa Heritage Business Venture Partnership between professional designer, local entrepreneurs and rural crafters Designs and manufactures high- quality African fashion for women Combines African tradition and modern technology and design

12. Participation in the value chain Rural Women involved from production to fashion shows Traditional art forms and techniques incorporated into modern fashion and décor A growing international interest for product made by the company Higher quality commands higher prices.

13. Co-creation of wealth through Partnership 700 rural women trained to do high-quality beadwork on garments; They get a better price for their products marketed by the company Through WKKFs investments and involvement….. Rural women acquire a stake in the design, marketing and distribution company.

14. Lessons Learnt The benefits of technical partners in rural enterprises; Financial risk taken by entrepreneurs needed, beside sweat equity; Importance of community champions in rural ventures; Practical sector knowledge and business expertise necessary.

15. WKKF s (New) APPROACH Goal to : –co-create wealth with entrepreneurs and communities through partnership building; –establishment of an infrastructure for partnerships along the value chain of rural commodities; –Build local capacity to play a substantive role in the sector Support through regular grant, and or Mission Based Investing

16. Social Venture Fund A 10 year rural development equity fund of $ 100 millions To demonstrate that social impact and market returns are mutually achievable Main focus: agriculture and rural development (art & craft; eco-tourism) Geographic coverage: Southern Africa Priority to countries covered by the Kellogg Foundation

17. Key Features of the Fund Partnership between WKKF and SANLAM; Strategy Partners Ltd, is selected as Fund Manager. SANLAM and the Foundation sit on the board, investment and management committees; They contribute to deal flow generation;

18. Investment Criteria: Social Impact Consistent with African culture and values; Build on existing natural and human resources and provide appropriate stewardship; Encourage growth of family/community enterprise; Provide action oriented skill building; and Create jobs, partnerships and profit sharing. Grow a rural middle class and opportunities for shareholding

19. Investment Criteria: Financial Impact Transfer both business and financial skills Rate of return--20-25% in Rand terms Quality of deal flow Quality of management and governance Diversification Vertical integration: primary and secondary production, supply chain, marketing, tertiary Balance between late/early stage investments Scale

20. Venture Fund s Expected Outcomes Successful rural ventures: –solid market connections; qualified management and marketing systems. A network of rural institutions and entrepreneurs: –to participate in the value addition processes An asset base for rural producers and communities: –regular income streams, & shareholding in lucrative companies.

21. Conclusion Empowerment through co-creation of wealth; Mindset shifts: –Focus on what we have, not what we don t. New partnership arrangements and intervention tools: –Business, rural communities, government –Funding, mentoring, asset development; –Triple bottom line Build on the energy and aspirations of women and youth.