From Africa

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SmartLessons is an awards program to enable IFC clients, partners, donors, and staff to share lessons learned in their day to day work. This brochure opens a door into a new kind of knowledge sharing. Instead of lengthy academic articles and formal reports, it presents first-hand and straightforward project stories with pragmatic useful analysis, written by professionals and for professionals. Through the prism of their own experience, good and bad, these authors aim to capture practical insights and lessons that could help advance development-related operations for private sector-led growth across the globe.

While IFC supports private sector development both by investing and by providing advisory services that build businesses, this brochure focuses on advisory services in particular. IFC advisory work aims to support small and medium enterprises, to improve the business enabling environment, to accelerate private participation in infrastructure, to increase access to finance, and to strengthen environmental and social responsibility. Much of IFC’s advisory services work is conducted through facilities managed by IFC but funded through partnerships with donor governments and other multilateral institutions.

DISCLAIMER IFC SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. The findings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document.

Please contact the program at smartlessons@ifc.org.

SmartLesson 1 A Platinum Opportunity! “One-Team” Approach to Business Development—The Lonmin Experience by Merunisha Ahmid

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SmartLesson 2 Supporting Private Schools to Make Quality Education Accessible in Africa: Innovative Approach to Combining Advisory Services and Investment by Sam Akyianu and Tania Scobie

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SmartLesson 3 11 Sweating the Small Stuff - Lessons from the Africa Small Scale Infrastructure Program by David Ashiagbor SmartLesson 4 Pilot Program Provides Real Lessons for Full-Scale Project in Zambia by Thilasoni Chikwanda

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SmartLesson 5 Making the Investment Climate Work for Women by Jozefina Cutura

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SmartLesson 6 Small Enterprises and HIV/AIDS by Sabine Durier

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SmartLesson 7 Southern Sudan Investment Climate Mini-diagnostic: Navigating the Landmines of PSD Reforms in a Post-Conflict Country by Nouma DioneMbaye and Catherine Masinde

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SmartLesson 8 Unlocking Mozambique’s Tourism Potential: From Understanding the Sector’s Complexities to Creating Investment Opportunities by Irene Visser

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A Platinum Opportunity! “One-Team” Approach to Business Development— The Lonmin Experience Merunisha Ahmid Successful leveraging of financial products and advisory services requires a shift in thinking. Investment Officers need to view advisory services as a means through which IFC not only enhances the development impact of its investments, but also differentiates IFC in the market – thus serving as a key tool for business development.

Introduction Advisory services are an important part of IFC’s additionality. They help generate systemic impact in IFC client countries. The challenge remains, however, to increase staff awareness, understanding, and buy-in of the significant business development opportunities afforded by leveraging advisory services and financing products into client solutions.

This note draws from a recent IFC investment in South Africa to demonstrate how an integrated approach to investment and advisory services can aid IFC’s business development and maximize development impact.

IFC advisory services and investment staff worked together to enable the Lonmin investment right from the initial project concept stage. In fact, IFC advisory services were the key driver in securing the investment.

Background In March 2007, IFC committed a $150 million investment in Lonmin Plc, one of the world’s leading platinum producers, to support its expansion projects and finance future black economic empowerment partners in South Africa. The 4 SmartLessons

investment, IFC’s largest in Africa to date, also includes a $6 million advisory services program designed to maximize the development impact of Lonmin’s mining operations in South Africa.

Under the partnership, IFC and Lonmin will implement a local economic development program to support approximately 250,000 people living in the communities surrounding Lonmin’s mining operations. The program focuses on four major areas: • Increasing the number of local suppliers and the value of local procurement contracts • Increasing the number of female workers in operational and administrative activities • Raising awareness and reducing the incidence of HIV/AIDS in Lonmin’s operations, in its supply chain, and in the broader community • Facilitating dialogue and joint planning on community infrastructure and other needs, between Lonmin, the municipality in which it is located, and the community in and around its area of operation Lonmin’s aim is to see visible signs of change on the ground within the next three years by partnering with IFC to accelerate local economic development.

Lessons Learned Integrated Approach through Using Multifunctional Team Integrating advisory services and investment requires that multifunctional teams design and deliver client solutions in a seamless manner. Rather than pitching advisory services and financial products separately to the client, IFC constituted a multidisciplinary team that collaborated on all aspects of the client proposal. IFC presented one face to the client, consistently avoiding references to the internal departments or programs.

The IFC Washington investment team made the initial contact with the client in London. They immediately informed the local South African office of the potential opportunity. The local investment team drew in a wider team, including global industry specialists from London and Washington, and advisory services staff from day one. In addition, resources from the LAC Peru Advisory Services team, as well as the World Bank team in Pretoria, were mobilized for the initial scoping exercise.

Team members were encouraged to contribute and participate across all aspects of the IFC proposal, not just in their areas of expertise. For example, it was the Social Specialist who provided the initial feedback on advisory opportunities for IFC following his attendance at a Lonmin community meeting.

This integrated approach worked throughout the process. The advance team that visited the client’s mining operations comprised IFC PEP Africa staff, which helped to identify the potential opportunities, and where IFC advisory expertise could best be leveraged. The investment and advisory teams worked together in researching the client and mapping their existing community development efforts. This enabled the team to identify the areas where IFC’s value addition would support and accelerate the client’s efforts and have the greatest impact. As a result, during the first formal client pitch, the joint IFC investment and advisory services team was able to tailor its presentation to address these specific areas.

In a similar way, both the investment appraisal and the advisory services scoping exercise were carried out with consultation across the teams. There was close collaboration in the preparation of all key documents, such as the board papers, the term sheet, and the mandate letter. The joint mandate letter was a first, and it included specific details of the proposed advisory services, including the ability for PEP Africa to recoup costs incurred in the event that the investment did not proceed.

team had access to the client, coordinated through the two primary client relationship managers.

Leveraging Advisory Services to Support Investment Business Development Lonmin had already embarked on a number of community development initiatives, to which it had allocated substantial internal resources. This clearly showed that the company shared IFC’s vision and mission to enhance and accelerate local economic development. This was an important factor in IFC’s decision to allocate its own resources and partner with Lonmin on such an ambitious program.

This shared commitment has fostered a greater appreciation of IFC’s unique value proposition by the client, enabling them to see the added value that IFC brings beyond financing. As Brad Mills, Lonmin’s chief executive officer, noted, “IFC has a tremendous track record and excellent programs and expertise in capacity-building inside communities and developing local supplier solutions. So they bring a real technical dimension to community development that we felt would be very valuable to have, supplementing our skills.”

Thus, the advisory services program design and implementation became a joint effort between Lonmin and IFC. Lonmin was not sitting back waiting for IFC to deliver a program – it has taken ownership.

At the same time, the client was made aware very early that advisory services could not be provided without an investment, and that key milestones for the proposed investment and advisory services were aligned throughout the negotiations. This helped ensure that the client focused on both aspects of the IFC offering.

To avoid “turf wars,” very clear lines of communication were established early in the process. Primary client relationship managers, one from the advisory services and one from investment services, led and coordinated the team’s activities, ensuring involvement of all members at the relevant stages of the process. All members of the SmartLessons 5

The Lonmin Project Team Stephan Vermaak, Namrata Thapar, Chris Goss, Muhammed Carim, Oscar Alvarado, John Middleton, Justin Pooley, Gravette Brown, Kent Lupberger, Bernard Chidzero, Natalie Africa, Noleen Dube, Alex Burger, Michael Hackenbruch, Thila Chikwanda, Bas Mohrmann, Merunisha Ahmid.

About the Author Merunisha Ahmid is currently the Sustainability Business Line lead in the Private Enterprise Partnership for Africa (PEP Africa), which provides IFC’s Advisory Services in Africa.

Published in May 2007.

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Supporting Private Schools To Make Quality Education Accessible In Africa: Innovative Approach To Combining Advisory Services And Investment Tanya Scobie and Sam Akyianu Governments in developing countries recognize education as the single most critical factor in achieving broadbased economic growth. However, for most developing countries, achieving the Millennium Development Goal of universal primary education by 2015 is unlikely without significant support.

There is also a growing recognition that without a strong private school sector, success will not be possible. IFC’s experience in Ghana demonstrates that with the right support, the private sector is willing and able to play a key role in the expansion of high-quality and accessible education in Africa.

Problem Statement

Background

Financing: The risk-sharing facility partially guarantees the partner bank’s portfolio of loans to schools and allows TTB to extend loans to schools on better terms and for longer tenors than exist on the market. IFC earns income on the facility by charging the partner bank 0.5% of the undisbursed amount and 3% on the exposure outstanding. TTB is required to do its own due diligence to book and monitor schools in the portfolio.

To respond to this increasing demand, private schools need access to appropriate finance and high-quality, affordable school development services.

IFC Intervention Private Enterprise Partnership for Africa (PEP Africa) initiated the Ghana Private Schools Support Program (GPSSP) to improve access to quality education in Ghana by supporting private sector participation. Under this program, IFC is providing advisory services, as well as financing, through a risk-sharing facility with a local partner bank, The Trust Bank (TTB), to help private schools operate more effectively, construct classrooms and other facilities like libraries and laboratories, and continue to attract and retain high-quality staff. The ultimate goal is to improve the quality of education they offer.

Ghana is struggling to provide basic quality education through the public system. Declining standards in public schools are in sharp contract to the improving standards associated with private schools. Demand for private schooling has increased dramatically in the past decade. Private primary schools now serve almost 20% of the enrolled population, and there is pressure on the private sector to grow further. The following quote from Advisory Services: Advisory services satisfies the proa Ghanaian father highlights a popular sentiment among gram’s overall objective of improving the capacity of Ghanaian parents today: private schools to attract finance and caters for demand through two primary activities: “Like other parents, I want to give my children the best education possible to prepare them well for the future.

• Improving the schools’ ability to operate as efEven though public education is free, private schools offective, sustainable businesses, thereby improving their risk profile. More specifically, support is fer far better education, and they are affordable.” provided in: (i) school diagnostics, strategic and business planning, and (ii) the installation of a comprehensive education management informaSmartLessons 7

tion system and associated training in accounting and financial management, human resources and training management, curriculum and learning management, and corporate governance. Schools share 40% of the cost of this assistance. IFC also produces a series of school operating manuals and has set up a local services provider to ensure sustainability after IFC’s involvement ends.

• Improving the ability of TTB to assess, process, and monitor school loans. IFC consultants provide a five-day Education SME Project Finance Course to all TTB loan officers and relevant senior management.

Achievements to Date Despite facing initial fundraising and human resource challenges, the GPSSP has made great strides. The pilot phase began in the first quarter of 2005 with funding from IFC and the African Development Bank.

IFC has helped 17 schools develop business plans, which have resulted in TTB disbursing US$1,724,000 to 11 schools. This puts the utilization of the facility at over 70%, and ahead of target. Pending applications give rise to a potential additional demand of $1.8 million on the risk-sharing facility, which is more than what remains.

IFC has also delivered a series of six workshops and held a seminar informing schools of pending legislation governing private schools.

ready to receive and utilize funding effectively. Advisory services in Ghana did not begin in earnest until six months after the investment agreement was signed.

This was due to (i) fundraising challenges, (ii) the institutional transition from APDF to PEP Africa, and (ii) the fact that it was the first program of this type and so it underwent various revisions of the scope of work.

In Kenya, the advisory services program will begin two months after the signing due solely to fundraising delays.

It is impossible to raise funds for a program that is not certain to proceed, so PEP Africa does not begin the process until a mandate is signed with the investment client.

This provides a very short window, and means that the bank is unable to begin disbursements until much later.

The bank, however, has to continue paying fees to IFC on the unutilized guarantee. Raising pooled funding will allow PEP Africa to begin the preliminary advisory services work (strategic and business planning support to the schools) in advance of the facility’s signing in order to ensure rapid ramp-up.

2. Misconceptions create challenges for fundraising.

To date, we have been hampered by the deep-seated perception among traditional bilateral donors that private education is exclusively elitist. Until we can prove the pro-poor impact of the program beyond doubt, fundraising will be focused on non-traditional donors such as foundations. This will start in earnest in early 2007, and will be significantly bolstered by a video documentary on Ghana Schools that is currently under preparation.

The program’s success has also been recognized by the Additionally, we are designing and implementing a rigfinancial sector. Three other banks have asked to join the orous impact evaluation for Kenya Schools, which we GPSSP. Based on the success in Ghana, IFC is plan- hope will demonstrate a link between this program and ning to scale up the program to a pan-African one. The improved educational outcomes. This will be extremely first spin-off has been signed with K-Rep Bank in Ke- helpful in future fundraising efforts. nya, targeting slum-located private schools. IFC’s Board of Directors strongly supports the planned roll-outs for Senegal, Mali, Liberia, Nigeria, Uganda, Tanzania, and Mozambique in FY07 and FY08. The GPSSP has won the IFC 2006 Corporate Award for innovation and development impact.

Smart Lessons 1. The advisory services must begin before the investment agreement is signed.

The schools need to be prepped to identify their weaknesses as a business. This ensures that they are actually 8 SmartLessons

3. Integrating investment and advisory services is effective.

The previous development best practice was to separate financing and advisory services, out of fear that the loan clients would attribute their poor repayment to the “poor advice and training” offered by IFC. The GPSSP demonstrates that investment and advisory services can be integrated successfully, and TTB has repeatedly expressed its appreciation for the advisory services that helped its business grow rapidly and sustainably. Importantly, the partner bank provides loan funds to the schools at its own discretion, and the advisory services is provided indirectly through private consultants.

4. Finding appropriately qualified consultants is critical.

became the face of the program in Ghana, which helped to drive the program’s acceptance and fully capitalize on IFC’s local presence.

6. Careful school selection is critical.

Indiscriminate solicitation of schools in the first batch of the pilot phase resulted in a large proportion (approximately 50%) of applicants being turned down by TTB. The target schools in the second batch were screened more carefully by a team composed of the program manager and representatives of TTB to ensure that they passed a minimum set of criteria for lending. Criteria included the number of students enrolled, layout of the school and ability to cope with expansion, past performance in terms of revenue, and ability of parents to continue paying fees. This resulted in a far higher success rate (approximately 90%).

Consultants should have experience, in-depth knowledge, and peer respect in the education sector. When this 7. Fostering competition among banks improves the is achieved from the beginning, the advisory services will impact of the program. be more effective in identifying issues that need to be tackled and in gaining the confidence of client schools. Working with a single bank was necessary during the pilot phase, but for a full-scale initiative, the program should be expanded to more banks. TTB proved an ex5. IFC’s local presence and global knowledge work cellent partner for the GPSSP, but working with just one together well. bank has slowed delivery of the loans, fostered a percepGlobal expertise is critical in providing overall program tion that TTB is receiving preferential treatment from management, procuring and managing international PEP Africa, and not exploited the benefits of competiconsultants, and ensuring the credibility of the program tion. Including other banks in the program is important to IFC management and the international community. both for dealing with this perception and for increasing the competitive offer of the banks to the schools for greater impact and outreach.

Conclusion The GPSSP has demonstrated the potential inherent in combining IFC’s investment products and advisory services, in the schools market in particular. It has also provided a successful formula for application in other basic service sectors where IFC can use local banks as an intermediary for providing smaller-scale loans. SME businesses generally require much more advisory services prior to financing, and IFC has developed this innovative way of combining advisory services with investment for improved effectiveness. Opportunities in these areas Local knowledge and management are equally critical. In are being investigated in other parts of IFC as a result of Ghana, the appointment of a local program manager in the success of this program. the first quarter of 2006 had a significant impact on the progress of the project. Within a short space of time, he SmartLessons 9

About the Authors Tanya Scobie, Health and Education Sector Operations Officer, PEP Africa. Tanya has over 10 years of experience in education investment, advisory services and policy.

For the last six years, she has been with IFC working on education investment with Health and Education Department, and leading advisory services work in health and education for PEP Africa. She now divides her time between PEP Africa, with primary focus on the Africa Schools program, and the Advisory Services Department, working on health and education publicprivate partnerships.

Sam Akyianu, Operations Officer, GPSSP, PEP Africa/ Accra. Samuel is a Finance and Business development specialist with over twelve years of experience. He joined PEP Africa a year ago to manage the Ghana Schools program. His prior experience includes managing an investment fund and Business Development Services program for USAID Projects (TechnoServe).

Published in January 2007.

10  SmartLessons

Sweating the Small Stuff Lessons from the Africa Small Scale Infrastructure Programme David Ashiagbor In 2005, PEP Africa decided to support improved access to water and electricity in small towns in Africa through increased private sector participation. Two years later, we have yet to launch a program, despite commitments of donor funding in principle. Why has this proven so difficult when this is an area in which IFC has clear advantages? What could we have done differently?

The Opportunities We soon identified opportunities in Tanzania and Uganda (water) and Madagascar and Uganda (electricity).

These countries were selected based on a desk review of their policies and programs in those sectors.

The Challenge The lack of adequate infrastructure is a major impediment to economic growth and prosperity in Africa. At the most basic level it means that the majority of the rural population does not have access to safe water or reliable and safe energy supplies. For businesses, poor infrastructure translates to higher costs of doing business and a lack of competitiveness.

The Africa Small Scale Infrastructure Programme (SSIP) is a joint initiative of IFC’s Advisory Services Department (CAS) and Private Enterprise Partnership for Africa (PEP Africa). We raised $200,000 from multiple donors and trust funds to support program development. Our target was to design and launch two programs within six months that would provide 45,000 people with access to clean water and 30,000 people with access to electricity over 3 years. Under these programs, IFC would:

Tanzania Water: Tanzania had recently adopted a policy which expressly sought to encourage private sector participation in the water sector. Dar es Salaam’s water system had recently been the subject of a concession agreement with Bi Water, a U.K. firm. Although this public-private partnership was experiencing some problems, the general view was that these teething problems would be resolved. By supporting the development of new public-private partnerships in other towns, IFC would help to demonstrate that they were an effective of means of improving service delivery. The Dar es Salaam concession collapsed in a spectacular fashion in the middle of our discussions with the government. It has taken a year to get things back on track. Today, we have an “in principle” commitment of funding from the Swiss (Seco), and a revised proposal is being prepared for final approval by the government and Seco’s board.

• Provide assistance to governments, local authorities, and regulatory agencies to identify, structure, and bid out opportunities for local companies to operate and manage small-town utility systems; • Provide a package of assistance to build the capacity of private operators to take on large contracts and the complex obligations of public private partnerships; • Work with local financial institutions to develop their capacity to evaluate water sector projects; and Uganda Water Program: Uganda started experiment• Develop risk sharing / credit enhancement facili- ing with private sector management of small-town water ties to enable local banks to provide term finance systems in the late nineties. By 2005, 15 private operato the private operators.

SmartLessons 11

tors were managing systems in close to 60 towns under management contracts. This experience was widely seen as successful – access to water had reportedly increased from 60 percent in 1998 to 87 percent in 2002 in urban areas and from 42 percent to 52 percent in rural areas.

The government was keen to explore ways of harnessing the strengths of the private sector to contribute to the achievement of the Millennium Development Goals (MDGs). They were particularly interested in attracting private sector investment into the sector. Public resources alone could not provide the estimated $410 million in investment required to meet the MDGs. Preliminary discussions had been held with the Global Programme for Output-Based Aid (GPOBA) on the design of a pilot program for Uganda. IFC could provide a comprehensive program addressing access to finance and capacity building for the operators as well as transaction structuring issues. To date, IFC has provided limited training to private operators in support of GPOBA. Our overall proposal is being revised to take account of new donor programs which have come on-stream since discussions began.

Uganda Rural Electricity: The World Bank had been working with Uganda since 2001 to expand access to electricity through private sector participation. Under this program, the institutional framework (Rural Electrification Agency, Regulatory Authority) had been set up. However, few if any private schemes had successfully finalized negotiations with the authorities, obtained commercial funding, and proceeded to implementation.

IFC could provide the combination of capacity building and financing for the private operators and transaction support to assist in bringing selected projects to closure.

On completion of the needs assessment and selection of the priority projects, the government informed IFC of a proposed change in policy, which meant that the majority of projects selected were no longer viable. The new policy took a year to clarify. A new needs assessment has been completed that will serve as the basis for moving forward.

egy was to design a separate rural electrification program to complement these mandates. The program would support the newly created Rural Electrification Agency in fulfilling its mandate of structuring transactions and providing capacity building services to local operators.

As due diligence on the CAS mandates has progressed, it has become clear that the situation of the energy sector has deteriorated significantly in the last year or so.

Success of the restructuring exercise (including the CAS mandates and the proposed PEP program) depends on tough political decisions regarding tariffs and coverage, which are currently under discussion with the government.

Lessons Learned 1. Don’t put all your eggs in one basket

We made a conscious decision to focus on these four programs and not to pursue new leads or market the program in other countries. Our priority was to get at least one program up and running before marketing it widely. Given the longer time frame associated with advisory services work (15 months average from signing to completion) and its high-risk nature (40 percent of CAS proposals result in a signed mandate), we should perhaps Madagascar Rural Electricity: IFC’s Advisory Services have taken up more of the leads we had, thus reducing Department (CAS) is working on two mandates in the vulnerability to external events. The collapse of the Dar electricity sector in Madagascar. The first involves advis- es Salaam PPP, for example, meant that the government ing the government on structuring and implementing a was understandably reluctant to discuss entering into public-private partnership (PPP) for JIRAMA, the com- new PPPs, never mind a program whose main purpose bined water and electricity utility. The second focuses on was to encourage them. Similarly, a change in policy in helping the government to structure and bid out a num- Uganda meant that we had to review the list of projects ber of independent power producer projects. The strat- selected for support after a year of discussions.

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2. Build internal coalitions Other parts of the Bank Group were doing similar work and dealing with the same government counterparts. We should have coordinated much better within IFC (Infrastructure Department, various SME programs and initiatives) and the Bank Group as a whole (Water and Sanitation Program, GPOBA). Our efforts in Uganda Water for example, might have benefited from much closer collaboration with GPOBA. We have provided limited capacity building in support of that program, but we could have done much more with better coordination. Building internal coalitions and support for new initiatives is at least as important as obtaining client and donor buy-in and helps to improve the quality of the final product. The Group’s credibility in the eyes of the client also improves when we speak with one voice.

governments, raise donor funding, recruit staff, and have them on the ground, all within six months.

Developing new ideas in any industry is a long process requiring time and resources, often in direct proportion to the degree of innovation and number of stakeholders involved. This should be taken into account when targets are set, and phased approaches should be used where short-term results are required.

5. Stakeholder relationships require careful management

Moves toward increased donor coordination and Sector Wide Approaches (SWAPs), etc., mean that we have to convince multiple stakeholders and manage multiple and often complex relationships. We had assumed that once the governments were convinced and the program 3. Half a loaf is (sometimes) better than none supported objectives that donors subscribed to, the donors would fall in line. We assumed that having agreed We had a number of opportunities where we could have in principle with our initial proposal, all stakeholders latched onto ongoing initiatives by providing just one or would actively support us. In Uganda Water, we found two components of the proposed program. In Uganda that some donors were preparing programs which were Water, for example, we could have focused on provid- identical to some of our components, a fact which was ing capacity building and access to finance for the pri- not disclosed to us until the final stakeholder workshop, vate operators to complement GPOBA. We chose not to where we expected the proposal to be approved. They actively pursue these options, holding out instead for a had apparently been waiting for confirmation of their fully integrated program. We believed that the ability to funding for close to a year and so were reluctant to disbring all these elements together under one coordinated cuss their proposal. program was a strength unique to IFC. Experience suggests that it may sometimes be better to enter new markets with a simpler product and then build on it from there. The Ghana Private Schools Support Programme, for example, started with IFC running a few training seminars. It is today a fully integrated program providing capacity building for schools, both in terms of improving their curriculum and management practices, a risk-sharing facility, and training for local banks.

4. New product development is a long-term investment

Conclusion

PEP Africa and CAS remain committed to the Africa Small Scale Infrastructure Programme. Following a recent review, management decided to continue to support the initiative – extra resources (primarily staff) have been made available, and discussions engaged with other parts of the Group (Infrastructure Department, GPOBA, Performance Based Grant Initiative, etc.) which should hopefully lead to increased collaboration and improved chances of success.

Our initial objective was to design and launch two SSIP programs within six months. With hindsight, this was clearly overambitious. The average CAS mandate takes 15 months from signature to closure – many projects take longer. These are in the cases where the government has already decided to pursue private sector participation and pay fees to IFC. Here we were trying to convince SmartLessons 13

About the Author David Ashiagbor was the PEP Africa Operations Officer responsible for the Small Scale Infrastructure Programme from 2005 to 2007. He had previously worked for APDF in Abidjan and Douala and now works for the Commonwealth Secretariat in London.

Published in May 2007.

14  SmartLessons

Pilot Program Provides Real Lessons for a Full-Scale Project in Zambia Thilasoni Chikwanda

1. Industry Background

This also adds to costs and, coupled with the high cost of transport, since Zambia is a landlocked country, makes The Copperbelt Province in Zambia, one of the world’s the Zambian copper mines among the highest-cost promajor copper-producing regions, is currently ramping ducers in the world. These factors have resulted in the up its production to former levels following the repriva- mines coming under considerable pressure from intertization of the industry in the late 1990s to early 2000s, nal stakeholders, the government, and the local business during which state-owned mines have had their ma- community to: jority stakes sold to private multinational corporations • Increase capacity for the value-added vertical sup(MNCs). International mining companies have invested ply chain on locally procurable goods and services more than US$1 billion in the region, enabling copper to meet increased mining capacity. production to rise from lows of around 200,000 metric tonnes per annum when the industry was under nation• Reduce operating costs by sourcing locally, where alization during the 1970s, ‘80s and ‘90s, to an estimated feasible, and support social investment and CSR 800,000 metric tonnes per annum in 2008. activities undertaken by the mines and hence improving 2. Supply Chain Problem ˏˏ License to operate / license to grow ˏˏ Contributing to economic and social develThe mining industry’s local opment, healthy environment and stable soState ownership eroded supply chain in the Copthe capacity of the minciety perbelt was well developed ing and industrial sector • Implement developmental commitments as specifollowing nationalization in the ‘70s but eroded befied in respective agreements signed by the mines of the copper industry. tween the late ‘70s and the with the government.

‘90s due to the decline in mining output that resultFigure 1 ed from nationalization. Despite the intentions of the newly privatized mines to procure Pilot Phase locally, the companies have been SME Sector Study forced to obtain many finished Individually tailored inputs on the global market.

Supplier Development IFC / APDF

The full-scale Linkages Program will incorporate the lessons learned in the pilot phase.

KCM / KSSDP

25 SMEs

Full ScalePhase IFC / PEP

6 Mining Companies /CSSDP

CSID Supply Chain study - Segmentation according to sectors

> 100 SMEs

Sub –sector specific, supplier development & qualification, supplier finance and pooling of procurement

SmartLessons 15

Against this backdrop, the mining companies have expressed a collective desire to build capacity among local mining suppliers, which will not only drive efficiencies and reduce costs in the industry’s supply chain, but also facilitate general economic development in the community. For their part, the local mine suppliers wish to forge stronger commercial ties with the international mining companies, based on the timely delivery of reasonably priced, high-quality goods and services.

• 20 local consultants trained in diagnostic process and provision of Business Development Services (BDS).

• Turnover of monitored pilot group up 50 percent.

• Total assets increased 118 percent, and SMEs invested US$2,550,000.

• Total employment increased by 22 percent, or 548 workers.

IFC and the mining industry have teamed up to build Full-Scale Program capacity in the local supply chain, starting with a pilot Based on the success of this pilot program, a full-scale program and leading to a full-scale program. program, now called Copperbelt SME Suppliers Development Programme (CSSDP), was launched in 2006.

The IFC Advisory Services Solution KCM Pilot Program The timing of the program is a result of the critical mass Aiming to improve the ca- of mining activity on the Copperbelt resulting from Implementing a pilot pacity of the local SMEs to investment in the sector and large resource companies Linkages Program pointed the way to a meet the industry’s procure- operating in a relatively accessible geographical locality. potential solution. ment requirements, the Afri- This creates an environment that: can Project Development Fa• Allows the suppliers and the mining industry to cility (APDF, now PEP-Africa) introduced the Konkola capitalize on economies of scale.

Copper Mines (KCM)—later acquired by Anglo Ameri• Enables suppliers to take advantage of alternate can Corporation—SME markets (e.g, six major mines in the Copperbelt, and growing).

Suppliers Development Programme (KSSDP). This was • Allows suppliers to expand at relatively low cost a two-year pilot program budgeted at US$300,000. (since the mines operate within close proximity) During the pilot program (2003-5), the following was and improve their services and product range. achieved: • Allows a programmatic (i.e., a cluster development) approach to supply chain development • 23 SMEs taken through diagnostic process and provided with technical support and training.

Figure 2: The KCM Pilot, KSSDP SME Diagnostics

KCM selects strategic SME suppliers based on end-user departments’ recommendations

IFC APDF –Training, Mentoring and Technical Assistance 1

KCM Procurement Contracts – KCM sets target and monitors

Design/implement SME business and technical training, consultancies, and mentoring. Collaborate with financial institutions.

Improved performance and growth of enterprises

16 SmartLessons

• The full-scale Linkages Program includes an analysis of the supply subsector (carried out by the University of Witwatersrand) which identifies the type of businesses that offer mining companies the best advantage in terms of local value-added. The analysis looks at a number of factors, including i) employment potential, ii) market size, iii) existing capacity, iv) growth potential, v)diversification potential, and vi) technical limits. The leading sectors were civil engineering and health and safety equipment (contact author for more details).

The need therefore exists for suppliers to equip themselves with marketing skills and competitive advantages and to think and operate with long-term strategies and vision, as well as manage staffing and operational expansion with prudence. CSSDP is a response to the above opportunity and a structured and inclusive approach to SME supplier development that has been developed to strengthen and grow local suppliers and bring efficiency to the copper industry’s supply chain.

Figure 3: Full-Scale Project, CSSDP Analyze key supply subsectors that will allow mining companies to benefit from increased local value-added – Set targets Identify industry partners and pool procurement contracts

Identify target SMEs and conduct diagnostics

Explore industry management system adjustments: Analyze industry procurement systems, local suppliers, and local content issues Make it company policy to maximize local procurement Bridge financing and cash-flow alleviation solutions

Technical training, consultancies, mentoring, feasibility studies and financing proposals Supplier finance facility/ credit

SMEs improve pricing, quality, financial management, and delivery – M&E system in place Award of corporate contracts

SA access to finance

Repeat contracts Market diversification

Pilot vs. Full-Scale Project The CSSDP program builds on lessons learned from the earlier project with KCM and KSSDP, and will differ from previous approaches in several ways:

• CSSDP will see the inclusion of several corporate partners that represent the broad majority of operators in the Copperbelt area; this will allow for synergies not reached previously.

Figure 4: CSSDP Organization Structure Copperbelt Mining Companies

KCM

Strategic Partners IFC/Wold Bank Chamber of Mines Other donors

Mining Linkages Management Unit

BDS & Finance Providers Training

Mopani

Forst Quantum

J&W

EPCM Project Manager

NFC

Multinational OEMs

Local Suppliers (Manufacturers & Service Providers)

SmartLessons 17

• In addition to providing financial contributions, each corporate partner will be encouraged to institutionalize core linkage principles and apply them within their respective procurement and management systems. This will ensure the sustainability of the program after its closure.

• CSSDP addresses issues dealing with SME access to finance. The program will develop a supplier finance facility and actively facilitate relations with banks, industry, and SMEs to seek “risk-spread” solutions for SME finance needs.

3. Lessons Learned

growth: most SMEs came to realize that they needed first to carry out a capacity building program and that there were other means of enhancing their business, such as increasing sales and reducing costs to improve internal cash generation.

Over the longer term, however, access to finance is essential if the impact and growth of enterprises under a linkages program are to be maximized. Where this is not possible, SMEs should look at other ways to support their growth and potential, such as through structure payment terms with corporate partners.

Demand–or Supply–Driven Business Development Services and Training?

When Do We Need a Pilot?

In uncertain situations where there are unknown factors Assistance to SMEs should not be prescriptive, and the – e.g., the ability of SMEs to produce quality goods, the project management team should allow the BDS providwillingness of a large MNC procurement department to ers, SMEs, and mines to determine the best business sowork with SMEs, and the capability of service provid- lutions. This involves working with the mines and SMEs ers. In and of itself, a pilot program has no value except to identify and prioritize as a pointer for the main project. Clear and complete Prioritize the business what they are doing right or development needs of (baseline to completion) M&E analysis during the pilot could do better.

SMEs, and encourage is essential for this. investment in training.

How Should We Structure a Pilot Program?

Small to minimal use of resources, but large enough to simulate what would happen on a larger scale. Short- What about the Cost and Quality of BDS? term, so we don’t waste time if the main project is vi- First of all, the pilot is an opportunity to assess the qualable. ity of BDS providers, particularly locally procured ones, and establish the rules of the game (e.g., competitive What Are the Advantages of Industry Concentration? bidding) before going on to the main project. If quality Substantial economic ac- BDS providers are available in the host country, advisory tivity in an area resulting service contracts should be awarded after a competitive An industry cluster offers sizable benefits for from investment in the bidding process during which the SMEs are allowed to Linkages Programs. sector by several large negotiate with the BDS providers to achieve realistic resource companies that market-based prices. This prevents the program from inare operating in a relatively accessible geographic locality flating BDS costs, thus making these services unafford(i.e., a growing industry cluster) creates an environment able afterward. under which SMEs have a stronger base upon which to Should the Pilot Be 100 Percent Funded, or Costplan their growth and expansion. shared?

This will depend on how confident or engaged the particHow Important Is Access to Finance?

At the inception of the ipants are on the objectives and prospects of the projects. pilot program, almost ev- However, the cost arrangement will be your measure of Access to finance reinery SME sought finance engagement, and the grant element in the cost should forces the benefits of caas a means to enhance not exceed 60 percent. In the case of KSSDP, although pacity building. their business. However, SMEs in the Copperbelt could afford to pay the BDS the SME diagnostics providers, they often did not appreciate their value. The (i.e., SWOT analysis) process showed SMEs that lack of pilot program helped the SMEs revalue the cost-benefit additional finance is not the only factor hindering their equation.

18 SmartLessons

Continuous Tracking and Quality of M&E Indicators Productivity, investment, pricing, quality, and Monitoring key indicareliability of service must tors is important, along be the key drivers of with regular feedback. the Linkages Program.

Also, the project team should work closely with end user departments, which in turn should directly track and report on these indicators, giving regular feedback to the project team and the SMEs. This helps keep all parties engaged in a continuous improvement process.

The quality of M&E is extremely important, as it gives us the information we need in planning and implementing the main project (or even whether to proceed with it at all). Just because it’s a small pilot doesn’t mean we can forget about M&E. M&E is essential to understanding the dynamics of what we are doing and to bring on board other participants, as in the transition from KSSDP to CSSDP. Procurement and Contracts

The industry partners’ commitment to providing Never promise contracts long-term contracts, thus or access to finance. facilitating long-term finance, is normally subject to certain qualifications. As the risk aversion of the corporate partners may be high, it is important to have wellstructured performance contracts, and the SMEs should be clear about the qualifications required to consummate the trade. This aspect was not well addressed in the pilot program. With this as a foundation, the full-scale Linkages Program is bound to have a substantial impact in developing SME capacity in Zambia’s Copperbelt.

About the Author Thilasoni Chikwanda has been working with the SME Departments and APDF since 2002. He joined IFC PEP Africa in March 2005 as an Operations Officer, Linkages as well as supported the Advisory Services Business Development team in developing PEP business in Zambia. In June 2006 he joined the PEP team in Johannesburg as Operations Officer for the Oil, Gas, and Mining sector. He has 10 years’ experience in mining, manufacturing, agribusiness, and consulting. Thilasoni holds a degree in Engineering with Business Finance (Industrial Engineering) obtained from the University College London and the London School of Economics.

Published in August 2006.

SmartLessons 19

Making the Investment Climate Work for Women Jozefina Cutura

Project Title: Timeline:

Cost:

Gender and Growth Assessment (GGA) in Uganda October 2004-November 2005 (report completion and publication) May 2005-present (advocacy for implementing recommended reforms) US$215,00 for assessment and implementation; funded by IFC Gender Entrepreneur ship Markets (GEM) and Foreign Investment Advisory Service (FIAS)

How can investment climate reforms benefit Uganda was the pilot country for the tool, where a GGA was completed in May 2005 at the request of the Minwomen? - GGA rationale & background

ister of Finance. Working closely with local counterparts in both government and civil society, the GEM/ FIAS/World Bank team applied a “gender lens” to the FIAS 2003 Administrative Barriers report and assessed business start-up, access to finance, access to land, taxation, customs, and access to justice. The GGA found that women are disproportionately affected by red tape and corruption (see figure 1). The GGA also found that women entrepreneurs respond well to a simplification in the registration and licensing system and are willing to comply once it becomes feasible for them. The report argued that the country could gain up to 2 percentage points of growth per year by addressing gender inequalities. The GGA recommended, among other things, applying a more radical approach to deregulation and to the reform of the Companies Act and the Chattels Transfer Act, reforming labor laws to enact health and safety standards, and increasing women’s access to land and site development.

Women in African countries are entrepreneurial and make a significant contribution to the continent’s economy. According to estimates, their businesses account for over a third of all firms, and the majority of businesses in the informal sector. However, women-owned businesses tend to be smaller, have less revenue, and fewer employees. A variety of barriers in the legal and regulatory environment prevent them from accessing formal financing, growing their businesses, creating jobs, and making a greater contribution to economic growth. The expansion of those businesses represents one of the greatest potential sources of economic growth for the region, but unlocking that potential requires identifying and addressing the constraints that particularly affect them. To address this issue, GEM, in collaboration with FIAS and the World Bank, developed a GGA tool which examines links between gender and economic growth, as well as legal and regulatory barriers that particularly impact women entrepreneurs. By collaborating with key stakeholders, the report develops a prioritized agenda for re- Just a report? – From drafting the assessment form through a matrix of recommendations. to implementing reforms Figure 1

The process required the team to engage with key country counterparts not only in identifying critical issues but also in outlining actions and strategies for taking the recommendations forward. To build local capacity in Uganda, the team held a two-day workshop on advocacy and public-private dialogue – key components needed to implement the recommendations. During the workshop 20 SmartLessons

a GGA Coalition with representatives of seven women’s organizations was formed to take the recommendations forward through lobbying and advocacy. The Coalition’s members focus on thematic areas of the GGA according to their technical area of expertise. Even though legislative reform is a complex and time-consuming process, and impacts are expected to be observed over several years, some positive results have already emerged: • GGA recommendations have been incorporated into Uganda’s Private Sector Development Strategy 2005-2009 (UP3) and the National Gender Strategy 2005-2014.

• As a result of the evidence in the GGA, project counterparts in the Ministry of Finance engaged the lawyer on the GGA team to redraft a number of Acts, which are awaiting approval by the Attorney General, including the Companies Bill, the Personal Property Securities, the Insolvency Bill, and the Tradesmark Bill. The reform of the Companies Bill, for example, would simplify registration procedures and thus make it easier for women to formalize their businesses.

• Reform of labor laws through the Employment Bill, the Occupational Safety & Health Bill, the Labor Dispute Bill, and the Labor Unions Bill were passed in March 2006 and are awaiting the assent of the President. Following lobbying from the GGA Coalition, GGA recommendations were incorporated in the four bills.

• With access to formal financing being the key issue for women, GEM is exploring the option of extending a line of credit to a Ugandan bank to target women entrepreneurs, and is designing accompanying training for businesswomen to support this intervention.

• The GGA was published in November 2005 as part of the World Bank’s Directions in Development Series, and GEM has developed the process as a tool for replication. A second GGA, undertaken in Kenya at the request of the Ministry of Trade and Industry, has been adopted as an integral part of Kenya’s first Private Sector Development Strategy. The process is also underway in Ghana and Tanzania. A complementary advocacy tool, the Voices of Women Entrepreneurs report, showcases successful women entrepreneurs as role models.

Lessons Learned - A GGA can get the action going …

The GGA is a groundbreaking tool and a model that can be replicated in other countries.

Given the lack of existing research on the link between gender and economic growth, as well as the legal, regulatory and administrative barriers that particularly impact women in business across Sub-Saharan Africa, the GGA has emerged as an effective tool for bridging this gap in existing diagnostic instruments and highlighting key policy implications, especially in relation to promoting private-sector-led growth, and pro-poor or “shared” growth. The report brings together technical analysis and in-depth knowledge of gender issues, alongside country policy instruments and options, and is thus a piece of gender-specific analytical work on issues which might otherwise receive little or no attention in general investment climate work. The GGA’s emphasis on the link between gender inequality and economic growth, and the argument that the recommended reforms will benefit not just women but society as a whole, is a persuasive way to win support for reforms from the widest possible constitutency. The report also highlights the importance of sex-disaggregated data at the firm level, which Investment Climate Surveys did not collect until recently and which is an essential step in analyzing gender-differentiated impacts and priorities. It is recognized, however, that more work is needed to strengthen the conceptual and methodological foundations of analysis of gender/ growth linkages. The large interest from other countries that the GGA process generated and its requested replication in other African countries are strong indicators of the demand for the product.

It is key to have a country request and a commited and influential counterpart.

The fact that a GGA process is conducted at the request of a government Ministry, such as a Ministry of Finance or Trade, is important for ensuring country ownership and determination to act on its recommendations from the outset, while facilitating stronger grounding in current government initiatives. In Uganda, it was the Ministry of Finance that requested sex-dissagregated information, thus allowing the team to make the case that women are disproprotionately affected by red tape and corruption.

It was also at the Ministry’s request that several laws that the GGA identified as needing changing were redrafted.

SmartLessons 21

Consultative process is costly but essential, as it takes into account diverse views, allows women’s voices to be heard, and ensures buy-in and follow-up.

One of the defining characteristics of the GGA is its consultative nature. Initial findings and recommendations were formulated by consulting broadly with a variety of stakeholders, which helped ensure stakeholder buy-in and commitment to the process. The report’s recommendations as drafted were designed to be taken forward by local organizations. Yet, given the complex and technical nature of the project, it was necessary to engage international consultants, who are costly but have the needed expertise in international best practice in investment climate reform. They worked with local counterparts to ensure knowledge transfer in both directions. As a diagnostic assessment that is conducted by international consultants but that needs to be implemented by local organizations operating in the country, the consultative process of the GGA was essential for effective implementation. Yet the consultations and the need to engage international consultants raised project costs, as several trips to Uganda were needed to seek input and negotiate consensus with stakeholders.

There is a need to have local counterparts who will take the lead on implementation.

In this case, a coalition of seven Ugandan women’s organizations spontaneously formed to take the report’s recommendations forward. The fact that they worked on this for a year with no resources indicates its high usefulness to the Ugandan women.

A highly complex project of this nature requires extensive collaboration across different parts of the World Bank Group.

Since this is a complex product that demands skills from various parts of the organization - an understanding of World Bank processes, private sector development, investment climate issues and how they impact on women entrepreneurs - collaboration between IFC, FIAS, and the World Bank was essential. For example, World Bank participation was crucial to determine project timing and points of entry, and potential links with budget support (PRSC) and other investment operations, with which World Bank counterparts are more familiar. With increasing demand for more coordination within the World Bank Group, this project is a good example of such collaboration.

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But future GGAs can do some things differently Make sure that the project design provides for strengthening the capacity of local partners to implement reforms through funding, advice, and oversight.

Despite some positive results, the Coalition members have not been able to take the needed work forward as fully as possible. Since the report’s launch in May 2005, the Coalition has been mainly a locally driven initiative of the seven member organizations that have worked on a voluntary basis. They have suffered from poor local capacity and lack of sustained on-the-ground initiative.

Some of the laws examined by the GGA are technical and not easy to understand, and a lot of time had to be spent with Coalition members in raising their awareness about technical issues and best practice in advocacy. While the team conducted an advocacy workshop following the report’s launch and sponsored several Coalition members to attend international fora on public-private dialogue to build local capacity, this proved insufficient. A financial commitment was necessary for Coalition members to be able to allocate time and resources to the process. By providing funding through a small grant, advisory, and oversight, GEM now hopes to enhance the capacity and technical ability of the member organizations to lobby more effectively for GGA recommendations. Continued support and oversight as well as the requirement for quarterly reporting through a performance-based grant seek to ensure that the Coalition follows through with the proposed agenda. In addition, there is the risk that the other stakeholders slated to implement reforms may not be sufficiently committed to including gender issues in their reform agenda. While some stakeholders may appear supportive in principle, they may not in practice allocate sufficient attention or resources to the required reform effort.

Ensure local World Bank/IFC office buy-in and support for the project.

Even though the Coalition’s activities aim to link to ongoing programs in the country, in the absence of a local IFC office, better World Bank country support for the initiative should have been ensured at the program design stage. The World Bank Uganda office has played an advisory role and provided technical support where necessary to the Coalition. However, this has occurred in an informal, ad-hoc manner, and is dependent on the

personal interest of staff in devoting time to a project for which no provisions are made in their work plan. The program manager had envisaged that the Bank country office would work with local groups on implementation.

But this did not happen, due to a lack of local resources and capacity and because of disruptions occasioned by personnel changes. Greater clarity on the respective roles and responsibilities of the Washington, DC and Kampala offices, and formal commitments to allocate resources for the project, such as staff time and financing, for example, by including the follow-up as a formal part of the supervision of the Private Sector Development Project, would have helped to ensure stronger and more timely follow-up of the recommendations.

Plan early for implementation and follow-up.

The initial focus of this projet was on designing and con- ducting the assessement. It would have been appropriate to consider during the project design stage the follow-up work required after report completion, so as to avoid delays and ensure better implementation of the recommendations. Future GGAs will include a provison for advocacy and implementation component from the start.

About the Author Jozefina Cutura, GEM Program Officer, in charge of knowledge management and GEM’s work on the business enabling environment. Prior to joining GEM, she published studies evaluating the World Bank’s involvement in global programs, and worked on projects that focused on women’s participation in village governance and decentralization in conflictaffected areas of Indonesia. Jozefina earned her B.A. in International Relations from Stanford University and a Master in Public Policy from Harvard University’s Kennedy School of Government.

Published in August 2006.

Explore donor interest in funding the assessment and implementation.

The Uganda GGA was funded internally. Following the report’s publication, a number of donors expressed interest in replicating the approach in other countries. During the project design and assessment stage, the team engaged with donors by presenting the GGA findings to the Private Sector Development Donor Group but did not follow up on possibilities for other donors to support implementation. This is now occurring in the GGA in Kenya, which has been annexed to the country’s PSD Strategy. which is to be basket-funded by donors. Future projects should take advantage of donor interest in this area.

SmartLessons 23

Small Enterprises and HIV/AIDS Sabine Durier HIV/AIDS is a critical obstacle for the sustained competitiveness of small enterprises in sub-saharan africa, but is grossly overlooked as a business risk. Ifc against aids has developed a training program targeting small enterprises in order to build their capacity to mitigate the impact of HIV/AIDS on their businesses: "managing HIV/AIDS in your workplace." This paper summarizes our lessons learned in working with small businesses on HIV/AIDS.

HIV/AIDS: The Business Case for Action for SMEs Businesses feel the impact of the AIDS epidemic most clearly through their workforce, with direct concequences for a company’s bottom line. These include increased medical expenditures and health insurance costs, funeral and death benefits, as well as higher recruitment and training needs due to lost personnel. Companies experience other financial impacts as a result of higher absenteeism and staff turnover, reduced productivity, declining morale, and a shrinking consumer base. While the companies’ revenues shrink, their costs of doing business rise due to disruptions in the supply chain, which is also affected.

For small and medium enterprises (SMEs), AIDS can even endanger the viability of companies. In South Africa, HIV/AIDS has been identified as one of the three factors that cause the failure of nearly 80 percent of startup SMEs every year.1,2 A new study, focusing on how owners’ health status (including HIV/AIDS) affects micro and small enterprises in Durban, South Africa, leads to similar conclusions. The authors investigated the connections between the health of the owner of a micro and small enterprise (MSE) and the MSE’s growth, survival, or exit. The results show that poor baseline health and declines in health over time are both significantly associated with subsequent business closure. Poor health of the small businesses owners led to the closure of these businesses. An additional cause for concern was that these businesses were not replaced by new ones.3 The smaller the company, the less likely it is to report any program against HIV/AIDS for its workforce. Indeed, lack of capacity to address HIV/AIDS is a critical problem for SMEs. In a 2005 Grant Thornton survey of 300 South African businesses employing 50−250 people, many owners said that they already had felt the impact of “Disease forcing enterprises to the wall, say researchers,” Business Day, South Africa, July 11, 2001.

2 S. Van Eeden, S. Viviers, and D. Venter, “An Exploratory Study of Selected Problems Encountered by Small Businesses in a South African Context,” Journal of African Business, vol. 5, no. 1 (2004): 45–72.

3 LW Chao, M. Pauly, H. Szrek, N. Sousa Pereira, F. Bundred, C. Cross, and J. Gow, Poor Health Kills Small Business: Illness And Microenterprises in South Africa (Health Affairs 26, no. 2, 2007).

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24 SmartLessons

HIV/AIDS through staff dying or taking increased sick The training aimed to help participants achieve five obleave.4 However, most owners said they lacked the time, jectives: money, and know-how to implement an HIV/AIDS strategy.

1. Separate facts from myths about HIV/AIDS. Additionally, according to a report from Boston University’s Center for International Health, SMEs pay much more for HIV/AIDS services per employee than do large businesses. The primary reasons are fixed costs incurred by service providers and the additional costs of marketing and delivering services to SMEs. The absence of economies of scale in delivering services to SMEs can result in service providers charging an SME client up to four times more than a large client per covered employee for the same services.5

2. Realize the impact of HIV/AIDS on their businesses, their employees, and their communities by learning the business case for action.

3. Understand the process used to create an HIV/ AIDS program in the workplace.

4. Develop preliminary action plans for their companies. This meant: Visible senior management commitment to the issue; the appointment of an AIDS program coordinator; the appointment of an AIDS Committee; the endorsement of an HIV/AIDS policy; and a series of basic interventions aimed at promoting awareness and prevention of HIV/AIDS among employees, notably through peer education.

As a result, HIV/AIDS is a critical obstacle to the sustained competitiveness of SMEs, but tends to be grossly overlooked by those enterprises as a business risk. In 5. Become aware of nongovernmental organization Africa, where the SME sector often accounts for most of (NGO) resources available for implementation. a country’s private sector, IFC Against AIDS has developed a specific program targeting SMEs which aims at building their capacity to mitigate the impact of HIV/ Between February 2004 and June 2005, 20 training sesAIDS on their businesses: “Managing HIV/AIDS in sions were delivered to 152 participating companies. The training was conducted in Kenya, Mozambique, South Your Workplace.”

Africa, and Tanzania. As the pilot phase was rolled out, it elucidated a number of lessons that have implications for Pilot Project the expansion of the pilot across a wider audience.

In February 2004, in conjunction with the Africa Project Lessons Learned from the Pilot Development Facility (APDF), IFC Against AIDS began a pilot training project for SMEs on HIV/AIDS. This 1. Accurate knowledge about HIV and AIDS pilot was made possible by a 2004 grant of US$80,000 generally remains poor, including in countries from the Netherlands Trust Fund that covered training where we operate. facilitation and logistics (the amount was not entirely After realizing how disruptive this was to the progused). Staff costs involved in designing and delivering ress of some training sessions, program staff signifithe training were covered by IFC Against AIDS’ budcantly revised the curriculum to accommodate a first get. IFC’s Africa Department contributed staff time and module dedicated to the disease. We have found that knowledge to implement the trainings. Participants were participants are eager to learn more about the virus chosen among SMEs which had participated in APDF and the epidemic, and are pleased to have an opporprograms or business linkages efforts. The participating tunity to ask questions to a knowledgeable facilitator; companies had to commit staff time and to subsequently this module also helps in breaking the glass between implement HIV/AIDS interventions in their enterprisparticipants and the facilitator and establishes a solid es. basis of credibility within the group.

Grant Thornton, International Business Owners Survey, 2005. www.grantthorntonibos.com.

5 P. Connelly and S. Rosen, Can Small and Medium Enterprises in South Africa Provide HIV/AIDS Services to their Employees? A Market Analysis (Boston: Center for International Health and Development, Boston University School of Public Health, 2004).

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2. Similarly, SMEs are largely unaware of the risks and impacts of HIV/AIDS on their businesses Thorough presentations and exercises about the business case for action are required to ensure their SmartLessons 25

involvement and motivation and take a large portion of the training. Participants are invited to reflect on hypothetical situations and case studies based on other health conditions. This gently brings participants to reflect on the impact of poor health on business, which includes HIV/AIDS. 3. Offering simply a one-day training, no matter how appreciated the session was, led to poor followup across the participating SMEs. To ensure continued mobilization and action by the participants, sustained engagement is required, i.e., through periodic follow-up sessions as a group and sustained engagement of the participants on an individual basis. This is possible thanks to dedicated resources from IFC, through the involvement of a Program Officer from the IFC Against AIDS team who can oversee the process or be directly involved with the participants, and through the development of local partnerships. Indeed, the program seeks the participation of NGOs operating in the area of health and HIV/AIDS, business associations, or chambers of commerce. In the future, an active “train the trainer” approach will be developed with such organizations as the program develops further.

4. Regular evaluation of progress ensures that the training is not just a one-off exercise and also creates a support group among participants.

Therefore an innovation brought up by the pilot program rests in following up throughout the 12 months after the initial training session has taken place. In the initial training, the facilitator monitors closely the module where participants establish a preliminary Roadmap for Action for their own company. At the end of the training, the plans are gathered for future evaluations. Through periodic half-day followup sessions with the participants, the program seeks to provide further guidance to the participants on their plans.

5. The ideal beneficiary group is SMEs with over 35 employees: With companies of this size, the training is likely to attract both the company’s owner/senior manager during the introductory session (“business case drive”) and the person responsible for personnel issues; in addition, those companies have the required basic management capacity and structure (human 26 SmartLessons

resources function, training initiatives) to engage in an HIV/AIDS management strategy and the implementation of awareness, prevention and care referral interventions. The ideal training cohort size is 15-18 SMEs with a maximum of 25 participants. Targeting human resources managers results in the highest turnout and best participation and results.

6. It is necessary to undertake a networked approach with SMEs, playing an intermediary role, i.e. identifying NGOs, and/or public services, hence making it easier for participants to become part of a larger network in which they can access the services they need.

By incorporating local partners, the learning gains local context and also leads to greater credibility. The training is also greatly enriched when NGO representatives and people living with HIV/AIDS (PLWHA) participate, thus providing business participants with fantastic resources and perspectives on the issue.

7. A baseline needs to be established at the beginning of the program to enable monitoring and evaluation later.

For example, implementing a baseline knowledge, attitude, practices, and behavior (KAPB) survey among employees of the participating SMEs is important to assess employee knowledge of HIV/AIDS, plan effective programs, and measure the subsequent success of interventions. Companies can gather anecdotal, qualitative evidence of behaviors, attitudes, risk factors, knowledge gaps, as well as their evolution, through commissioned or internally provided KAPB questionnaires. This information will be critical for developing appropriate training modules and peer education objectives. A KAPB survey performed by an outside party is likely to result in more candid responses from respondents and ensure better objectivity but tends to be more expensive. If the questionnaire is administered internally, it should focus on questions related to knowledge of HIV/AIDS and not venture into issues of behavior and practices: Quite understandably, employees would feel very uncomfortable discussing questions related to their sexual behavior or practices with other co-workers.

Because KAPB surveys performed by outside parties tend to lead to higher quality information and offer significant economies of scale, IFC Against AIDS is considering retaining a few organizations across

sub-Saharan Africa that can administer surveys for In conclusion, the significance of engaging small private its clients. entrepreneurs against HIV/AIDS should not be underestimated: It offers countless opportunities to leverage the IFC Against AIDS Efforts with SMEs Moving untapped leadership and role of SMEs to increase the Forward reach of HIV/AIDS prevention messages and care referrals. The fact that employers have access to their employ1. IFC Against AIDS delivers its SME training ees, that is, an adult population which is hard to reach program in association with other IFC advisory through the traditional avenues of health awareness camservices offerings that are linked to IFC investments: paigns, is their strongest comparative advantage in the 2. Integrated within appropriate Linkages programs fight against HIV/AIDS. – Among IFC Against AIDS current active projects, the Linkages program is also involved with Mozal, For more information about IFC’s engagement on HIV/ Lonmin, and Ahafo through supplier development AIDS across Africa and India, please consult: www.ifc.org/ifcagainstaids programs.

Bundled with our Guidance core product for financial sector clients which have a sizable SME portfolio.

Selectivity is key for the successful implementation of this integration: IFC Against AIDS can most effectively offer its training program to some categories of SMEs. The ideal constituency for the IFC Against AIDS SME training program is enterprises with more than 35 employees, as this gives more guarantees that the enterprises have the appropriate infrastructure to effectively recognize HIV/ AIDS as a business issue and address it. Outreach efforts to the community of employees and families of smaller enterprises are better delivered by a trained NGO and/or service provider, a process which we also facilitate.

About the Author Sabine Durier joined IFC in 2000. She progressively raised awareness in the Corporation about the impacts of AIDS on business in developing countries and established a corporate initiative that promotes HIV/AIDS awareness, prevention, and treatment programs with IFC clients. She is now the Program Leader of “IFC Against AIDS” for the Corporation, a team of six individuals dedicated to the issue. The program was created because many companies feel the need to do something against this epidemic that affects their workers and community, but do not know where to start. IFC Against AIDS sits down with client companies and provides on-the-ground guidance to establish corporate HIV/AIDS action plans based on the specific needs and resources of the company, as well as existing good practices and experiences.

As far as IFC’s role is concerned, it has become clear to the IFC Against AIDS team that the corporation has enormous leverage with larger clients for them to extend their HIV/AIDS programs to their supply chain, distributors, etc. It is critical that IFC brings the issue of HIV/AIDS programs into the supply chain (for example, through the development of business linkages programs) as early as possible, and that engagement in this area is part of the cooperation agreement with the main sponsor. The latter can help tremendously by selecting the participating SMEs, conveying the importance of HIV/ AIDS as a business competitiveness issue, and facilitating logistics of introductory sessions and subsequent training sessions. In addition, the participating SMEs need to make a clear commitment to the program through dedicated staff time to their program, commitment to a one-year process, and completion of key interventions in their workplace, such as the training of volunteer employees into a group of peer educators.

Published in July 2007.

SmartLessons 27

Southern Sudan Investment Climate Mini-Diagnostic: Navigating The Land Mines Of Psd Reforms In A Post-Conflict Country Catherine K. Masinde And Nouma Dione-Mbaye The Minister of Finance and the Minister of Commerce, Trade, and Supply of Sudan requested Foreign Investment Advisory Service (FIAS) support to undertake diagnostic work in the investment climate as part of the ongoing preparation of proposals to the Multi Donor Trust Fund (MDTF) on private sector development. The diagnostic, which was carried out by FIAS, is expected to lead to activities which improve the investment climate in Southern Sudan.

What are the issues facing Southern Sudan?

On January 9, 2005, the Sudanese Government and the Sudan’s People Liberation Army/Movement or SPLA/M signed the Comprehensive Peace Agreement ending the second Sudanese Civil War. Under the agreement the Sudanese government agreed to give autonomy to the region and to share oil revenues. In addition, the peace agreement provides for a referendum in 2011 which could allow Southern Sudan to become a sovereign state and therefore reshape the continent’s map.

In the short term however, the Government of Southern Sudan (GOSS) must quickly provide tangible peace dividends1 to its people, particularly the rural poor. In fact, the GOSS must also provide a peaceful and secure environment for its people to enjoy these dividends. This imperative is at the heart of any and all actions taken by the government to attract and retain investments in the region. Translated into policy on investment, this means that the GOSS is expected to: i) provide income-earning opportunities directly to the people of South Sudan; ii) To many people in Southern Sudan, particularly the poor, the peace dividend is taken to mean benefits they stand to derive in the immediate term from cessation of hostilities, especially access to services such as health, education, and health, and the right to earn a living either through wages or self-employment. In reality, the government will be able to deliver on these expectations only over the medium to long term. In the meantime, however, some strategic and visible improvements are important as a way of demonstrating the GOSS’ commitment to deliver tangible benefits in the near term while focusing too on long-term sustainable growth.

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revive and expand sectors where the poor, especially the rural poor and women, are active; iii) stimulate new investment into key catalytic sectors such as telecommunications, electricity, infrastructure, information and communications technology (ICT), etc., iv) generate long-term, sustainable growth, and v) actively protect the interests of the people of Southern Sudan.

Currently, the GOSS is in the process of establishing its legal and regulatory framework for investment. However, the government is made up mostly of ex-SLPA officers with very limited understanding of private sector development (PSD) issues, and does not have the resources to adequately develop this framework. Hence, the role of IFC is critical in providing advisory services to the GOSS for the development of a sound investment framework.

In particular, FIAS can review a country’s policy, legal, and regulatory environment and recommend measures that will address all the identified issues. In addition, FIAS has a comparative advantage, since it has conducted such reviews in many countries and has accumulated best practices that can benefit Southern Sudan.

How did we design the intervention?

FIAS has recently developed a new approach for first engagement: the mini-diagnostic, which has been designed to reduce the time and cost to do a general overview analysis of barriers to investment and private sector development and an assessment of what FIAS can offer the country while following the same FIAS standard data collection approach (see table 1). The mini-diagnostic has been used by FIAS in many post-conflict countries, including Liberia, Sierra Leone, Rwanda, and Afghanistan.

This project consisted of a general assessment of the usual suspects inhibiting private sector development and investment: the legal framework, start-up procedures, tax and customs regimes, and land issues. Recognizing

Mini-diagnostic

Standard Administrative Barrier Review

Particularly suited for post-conflict countries: quickly identifies high-impact solutions which can deliver both political and developmental dividents to sustain the peace.

No country or regional preference: can be used in any country at any stage of diagnosis

Suitable for small, nascent countries which need quick results on their reform agenda: logistically more feasible than in bigger countries.

Can be conducted virtually in any country.

Cost-effective approach: one-week mission with a maximum of three staff and/or consultants.

Takes longer and is more costly: on average, it takes six months with a minimum of 2 missions and a larger group of experts.

Focus on strategic issues from the outset: in consultation with both private and public sectors.

Covers a broad range of issues: usually a comprehensive range of areas of investor interface with the public sector.

Delivery of an aide-memoire at the end of the mission: though lacking in depth, it distills the major issues and presents the authorities with a manageable menu of options.

Longer analytical process: in-depth analysis of major issues, but the final report takes months to prepare.

Fast transition from diagnostics to solution desing and implementation: demonstrates to the government and private sector FIAS’s expertise, flexibility, and ability to move quickly.

Slower transition to solution design and implementation: possible risk of loss of momentum and focus.

the special circumstances of Southern Sudan, FIAS has adopted this approach to respond in a flexible manner to the GOSS request. In April 2006, FIAS put together a team of three experts to cover business registration, tax and customs, and land. Since the mini-diagnostic is quite flexible, it allowed the team to fine-tune the approach as the mission progressed. For example, the team quickly identified public-private dialogue as one aspect that needed further attention. In addition, the team decided to conduct a quick review of the draft New Sudan 2004 Investment Code, as this was an area the GOSS Ministry of Constitutional Affairs needed assistance with. Lastly, the team conducted separate workshops with the public and the private sectors to disseminate the mission findings and present the mission aide-memoire.

What is the outcome?

A small set of strategic recommendations were made and presented. These were chosen by the team on the basis of a) demand from key players, including donors working in-country; b) opportunity and feasibility (political environment); c) strategic and catalytic nature; and d) the fact that the World Bank Group, through the MDTF, and others have some best-practice knowledge and are able to support the initiative early. Already, there is evidence of traction for the project:

• The diagnostic itself has generated an open discussion about fundamental constraints in the investment climate, such as the GOSS decision to freeze the company registration process since December 2005. The GOSS Minister of Legal and Constitutional Affairs has requested FIAS assistance in revising the Investment Code and the Companies Act and in strengthening the Companies Registry.

• Finally, the team has successfully engaged with the private sector, through the newly established Chamber of Commerce of Southern Sudan; for the first time, the private sector was consulted and during the private sector workshop, all supported the findings of the mini-diagnostic. We anticipate that the Chamber of Commerce will continue to use the project as its main communication channel until such time that the public-private dialogue process is fully established.

What is the impact?

It seems too early to discuss the impact of this intervention, especially at this stage of the process. In view of the delicate political situation between the government of Southern Sudan and the National Government, and the severe constraints this region faces, it is clear that the impact of any intervention will take years to materialSmartLessons 29

ize. However, the potential for major gains is significant, given that the recommendations were selected by the team to provide early building blocks to longer term reform (e.g., establishment of a sound investment policy framework), especially considering the possibility that in 5 years, Southern Sudan may become a sovereign state and the government of Southern Sudan seems committed to draft its own laws and regulations.

for the intervention. However, working with sole champions presents some major risks; if there is a government reshuffling for example, the pressure for reform may be lost with the departure of those individuals. Therefore, a better strategy is to build influential constituencies of support: e.g., under-secretaries, directors, and large private sector groups. These influential constituencies can keep the pressure for reform and continue to engage with decision makers on investment climate issues. In postconflict countries it is quite important to build these What have we learned? constituencies, as the political environment can be quite volatile, and changes in the government organization are Lesson 1: Early engagement in post-conflict regions more common. In Southern Sudan, FIAS met with difis necessary to accelerate PSD reforms and therefore ferent layers of the government to assess their commiteconomic growth. ment for PSD reform and build these constituencies. By The key for sustaining peace is to quickly provide peace the end of the mission, the team was able to establish an dividends to large sections of the impoverished popula- interministerial committee comprised of under-secretartion. Aid money, although necessary, cannot provide for ies and directors of relevant ministries and to build the the government revenues that are badly needed to cover basis of public and private dialogue mechanisms. government long-term expenditures. Undoubtedly, the private sector can play an important role as an engine for Lesson 3: Capacity building is an integral part of the growth and job creation. However, the policy environ- diagnostics process. ment must be conducive for domestic and foreign investments. Therefore, it is important that donors help The “how do we do it” questions are the most critical. governments in post-conflict regions establish a modern Consequently, being equipped with a menu of best pracand conducive investment policy framework. Following tice examples which can be tailored to the particular this principle, FIAS, under its mini-diagnostic approach, needs of a country is crucial. The worst crime in these has increased its intervention in post-conflict regions/ situations is for the government to feel that they are becountries in the last 18 months with projects in Rwanda, ing given recycled advice! The diagnostic exercise thereSierra Leone, Liberia, and now Southern Sudan. Con- fore becomes a “training” process which must be handled trary to many other post-conflict regions/countries which with sensitivity. must be rebuilt, Southern Sudan must be built from scratch, and hence the need for massive investments. For Lesson 4: Diagnostics for implementation is a vital example, there are no hotel facilities, and most of the tool. government officials and the international community representatives still live in camps (land allocation for in- It is critical that from the moment we, as providers of advestment has been suspended in order to resolve issues visory services, engage in a country, we demonstrate our arising from the provisions of the Comprehensive Peace long-term commitment to implementation. In post-conAgreement). In addition, many investors have identified flict countries this principle holds more truth. In Southprofitable projects; however, the suspension of company ern Sudan for example, FIAS identified major investregistration constitutes perhaps one of the most critical ment climate constraints, developed a menu of options, and drafted terms of reference (TORs) for each option constraints to new investments at the moment. during the mission or shortly after. The team was keen to communicate to both the public and the private secLesson 2: Building influential constituencies of tors that FIAS will be returning to help the government support is a great strategy to sustain any reform quickly design solutions and implement them. Such an process. approach helps sustain the momentum for reform and strengthens government-donors’ relationship.

In most instances, we identify stakeholder management as the process of identifying champions, such as ministers, 30 SmartLessons

Lesson 5: The more the people are informed, the greater the chances for support for reform.

About the Authors Catherine K. Masinde has been a Private Sector Development Specialist at FIAS since August 2005.

She previously worked in the UK Department for International Development (DFID) as a Private Sector Development Advisor for 10 years. Prior to joining DFID, Dr. Masinde was a senior lecturer for 14 years at the University of Nairobi, where she taught Marketing and Business Strategy. She has completed her PhD in Private Sector Development and Growth.

The team met with various public and private representatives, including foreign investors, foreign workers, and South Sudanese Diaspora representatives. It is important that we communicate the objectives of our interventions and assess potential emerging issues, including potential areas of conflicts. For example, the team was able to assess the sensitivity of land issues, one of the most difficult post-conflict issues to tackle, and fine-tune its approach so as not to agitate any land ownership conflict. So instead of recommending big decisions on land allocation within Juba town, the most sensitive of all, it was recommended that special economic zones be established through a public-private partnership intervention within the MDTF just outside Juba town where land issues are less sensitive. This way, investors would have access to sites which are also fully serviced, thus achieving a quick win which does not rock the political boat!

Lesson 6: Empathy and not lectures is crucial.

Nouma Dione-Mbaye is an extended-term consultant at FIAS. Prior to her assignment at FIAS in January 2005, she worked as a consultant in the Environmental and Sustainable Development Department of the World Bank Institute. She holds a master’s in International Finance from the University of Maryland.

Published in August 2006.

In post-conflict countries, it is crucial to be extremely diplomatic. In many instances, the government comprises ex-military officers or generals who don’t receive orders but rather give them. Also, the fragile political environment calls for astute balancing of “factional interests” because, despite the peace, these will persist for some time. In Southern Sudan, the team had to navigate around difficult situations which could have impeded the intervention. These government officials have difficulty understanding investment climate issues, and they are still focused on the political dialogue with the Northern government. The transition from a control-oriented government approach to a facilitation approach is difficult, and as advisory services providers we must be careful not to be perceived as a “new imperialist force.” As many Southern Sudanese officials told us, they have fought for the right to control their land and resources, and they would not let any institution or country impose its views on their government’s policies. The team was anxious to demonstrate respect for their struggle and at the same time commitment to help them create the New Sudan vision they aspire to.

SmartLessons 31

Unlocking Mozambique’s Tourism Potential: From Understanding The Sector’s Complexities To Creating Investment Opportunities Irene Visser IFC’s SEATIP, the South East African Tourism Invest- SEATIP helped understand the sectors ment Program, aimed to accelerate private investment in complexities the tourism sector in Mozambique, using tourism routes as a platform for tourism development.

SEATIP was originally launched as a program aiming to SEATIP was launched in 2003. The program was direct- accelerate public and private sector investment in susly executed by CAF and was not part of APDF, IFC’s tainable tourism in Mozambique, using tourism routes former advisory services facility for Africa. SEATIP was as a platform for tourism planning and development. funded in two separate phases with Dutch Trust Funds, totaling approximately US$200,000. The program rented an office close to the Ministry of Tourism in Maputo and was staffed with a program manager, an analyst, and an assistant. All staff were hired as short-term consultants.

SEATIP was taken over by PEP Africa, following that organization’s establishment in July 2005. Shortly after, it was decided that the program would be discontinued under IFC’s management. A final SEATIP phase, SEATIP Restructuring, with a budget of US$40,000, was launched, aiming to transfer the leadership of the program to the Ministry of Tourism. Simultaneously, IFC prepared for its follow-up on Tourism Sector Program - the Mozambique Anchor Tourism Investment Program - that aims to proactively create investment opportunities in coastal tourism aligned to the SEATIP tourism routes.

SEATIP developed the concept of the “‘Great Africa Route,” a tourism route uniting Mozambique’s southern coastline with the Kruger National Park and other tourism highlights in South Africa as well as Swaziland. Central to the route is its “bush-beach” connection, linking the nature-based tourism experience of the hinterland with the unique experience offered by Mozambique’s tropical coastline.

SEATIP has provided critical research into the enabling environment for tourism in Mozambique. It confirmed the immense opportunity represented by Mozambique’s extraordinary resource potential. At the same time it made the many constraints facing the sector explicit.

The difficult and troublesome availability of land and the lengthy and at times not transparent land application and licensing procedures have repeatedly chased away quality investors. As a result, Mozambique has failed to attract many quality investors. Realized investments are This paper describes how the broad scope of SEATIP, often small, not necessarily backed up by experienced although necessary to set the stage for tourism develop- and professional operators, and in many cases not conment, needed to be reshaped into a more investment-fo- firmed best practices in the industry. The quality of the cused program. The paper provides useful lessons learned created product in general does not match the quality of from SEATIP and shows how they were incorporated in the environment. Hence, the sector has also not delivthe design of the follow-on program, the Mozambique ered on its objectives for job creation and community participation.

Anchor Tourism Investment Program.

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The SEATIP Objective: Accelerate public and private sector investment in well-planned and sustainable tourism in Mozambique, using tourism routes as a platform for tourism planning and development.

SEATIP was very comprehensive and involved multiple implementation components: 1. Integrated development planning and sustainable tourism development 2. SME participation and linkage programs 3. Community participation 4. Investment promotion and facilitation 5. Investment enabling environment for tourism 6. Marketing of tourism routes 7. Regional integration 8. Financing of sustainable tourism projects

Although based on a powerful concept, SEATIP never In programs where the government is an impordelivered tangible results, but it has no doubt been an imtant counterpart, it is essential to achieve up-front portant catalyst in placing tourism higher up the develinstitutional commitment to the program. Always opment agenda of donors and the government. SEATIP insist on a formal agreement between IFC and the main institutional partner outlining respective rewas one of the first donor-supported programs in Mosponsibilities, and make sure a clear counterpart is zambique that focused entirely on the development of appointed. tourism. It played a catalytic role in the recognition that tourism can indeed have an important role in poverty alleviation and rural development. And it made the many facets of tourism development explicit. But despite its Direct management by long-term IFC staff is essential great vision, SEATIP never managed to actually deliver for program success. on its promises.

SEATIP was implemented by short-term consultants only. Although the program was an IFC program, no Lessons Learned from SEATIP IFC staff were involved in daily management, and IFC’s specialized advisory services staff, under APDF at the It is essential for sector-focused advisory services to be time, had no formal role at all in program design or clearly embedded in the national context. implementation. In the view of the Mozambican stakeholders, a short-term consultant acting as the program Despite SEATIP’s being fully in line with government manager represented IFC. On various occasions this led strategy, there was never a clear ministerial counterpart to situations where elevated expectations of IFC and the to the SEATIP implementation unit. Tourism routes SEATIP program were created but IFC was unable to and regional integration are key themes in the national deliver. tourism strategy, and SEATIP directly addressed these national focal points for Mozambique’s southern region.

The government has always supported the concept, but An IFC advisory services program can’t be the answer no formal agreement between SEATIP and the Ministry to all the problems a sector is facing. of Tourism existed. As a result, SEATIP “floated” in between the various departments of the ministry, and the The SEATIP concept was very comprehensive in its setup. The original concept addressed issues as broad as marprogram had no real mandate. keting, institutional coordination, planning, investment SmartLessons 33

promotion, and community participation. SEATIP not Understanding investment constraints does not only tried to understand all these issues; it also tried to automatically generate investment leads. provide solutions to them.

IFC is perceived primarily as an investment institution.

Many of the issues identified by SEATIP were already Despite SEATIP’s focus on analysis and facilitation, many addressed by existing government programs. IFC is not a stakeholders wanted it to be an investment program. The national institution with the authority to address overall name, South East African Investment Program, was a sector issues. Many of the activities originally articulat- misnomer, strongly suggesting that the program could ed under SEATIP did not have much to do with IFC’s actually invest in tourism projects. IFC was also hopcore capacity as a catalyst for private sector development. ing to generate leads for its own investment through the Overall, the program was overambitious and unfocused program. However, there was no special credit line or incentives available to any investment projects coming out of SEATIP. Leads were evaluated as per normal IFC Clear leadership and responsibility within a single credit criteria. and despite some being strong SME opIFC department with advisory service expertise are portunities, none led to an IFC investment. important to ensure a program is properly managed and embedded in IFC. Programs cannot be implemented solely by short-term consultants.

Implementation should be undertaken primarily

by IFC staff.

The Mozambique tourism anchor investments program aims to create investment opportunities

SEATIP provided important insights in the sector’s complexities and confirmed the economic opportunity represented by the tourism sector. However, it also proved that a more focused, more investment-oriented approach Tourism is spatial in nature; tourists move from entry is required to unlock the sector’s potential. points along routes to destinations. SEATIP, using tourism routes as a platform for tourism development, folBe clear about the scope of advisory services prolowed the inherent spatial nature of tourism. Tourism is gram and manage expectations. If generating infurther dependent on the overall development of a spevestment is a goal, consider including a purposeful cific area, such as infrastructure provision, availability of financial solution. transport and other services, and the availability of skilled human resources. The existence of sound planning procedures is critical for tourism to thrive. SEATIP correctly The Mozambique Tourism Anchor Investment Proidentified the lack of sound planning frameworks in Mo- gram aims to create investment opportunities. It is bazambique as a key deterrent to the controlled develop- sically a project development facility, aiming to create ment of the sector. With no clear institutional mandate new projects and investment opportunities. During its or alignment, combined with the large program area, design, a conscious effort was made to avoid the misSEATIP did not manage to influence planning proce- takes and problems of SEATIP. This new program plans dures or infrastructure provision in the program area. to stimulate investment in Mozambique’s tourism sector by taking a practical, hands-on approach through proactive project development in selected tourism zones Lesson learned: In sector-focused advisory services, supported by complementary advisory services in SME do not try to incorporate all issues in one single IFC program. It is important to fully understand linkages and community development. The program will the sector and the problems it is facing, but when identify, package, promote, and market opportunities in it comes to program design, stay close to IFC’s key three Tourism Anchor Sites to international and national strength: understanding private sector needs, develinvestors, while overcoming bureaucratic hurdles (such oping strong projects, and mobilizing investment. as licensing and concessions) that are currently impeding the development of a business-friendly investment climate. It is also hoped that the creation of successful tourGeographical focus is essential for tourism sector advisory service programs to be successful.

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ism projects will have a significant demonstration effect.

The program is in three phases: The first phase – Site Selection and Detailed Design - was launched in September 2006. This phase will select the three project sites and design the institutional as well as management and coordination structure of the program. The second phase will encompass the actual development and marketing of the Tourism Anchor Sites. This phase will have a duration of approximately two years. The last phase – the SME Linkage and Community Tourism Phase, to be launched once investors have committed –will ensure that local SMEs and communities will effectively participate in and benefit from the created opportunities.

The lessons learned from SEATIP provided critical inputs in the design of the Anchor Program, as follows: • Institutional embedment – The Anchor Projects will have an institutional home in the Ministry of Tourism. A signed Memorandum of Understanding between the Ministry of Tourism and IFC sets out a clear base for cooperation.

• Geographic and thematic focus – Aware that it cannot be comprehensive, the program will focus on three areas only and have a specific and limited goal: creating actual projects and investment opportunities.

• Implementation by PEP Africa – The program is clearly an IFC advisory services program under PEP Africa. Full-time IFC staff will be hired for program implementation, and the program will be closely supervised by PEP Africa’s tourism specialist.

• Fit with IFC strategy – The program directly delivers on all three pillars of the IFC Africa Strategy.

First, it addresses the “business enabling environment” with a focus on access to land and investment authorization procedures. IFC’s second pillar, “proactive creation of investment opportunities,” is core to the program. The last strategic pillar, “SME development and support,” will be fully integrated in the program through the SME Linkage component. The program is expected to generate investment opportunities for IFC as well as other investors.

• World Bank integration – The program is furthermore fully integrated within the World Bank Group portfolio in Mozambique. It is complementary to the World Bank - supported Trans-

frontier Conservation Areas Tourism Development Program (TFCA-TDP), which focuses on the creation of TFCAs in southern Mozambique.

It acts upon recent studies of the World Bank’s Foreign Investment Advisory Services group – the Tourism Value Chain Analysis and Tax and Licensing study. And it will work closely with the Mozambique SME Investment Program, potentially creating leads in the tourism sector for the program’s consideration.

• Management of scope and expectations - The program’s main goal is to attract key industry players in Mozambique’s tourism sector. We expect that the program will have a demonstration effect on the sector as a whole and will lead to an overall increase in quality investment. The program is not an investment facility, nor is it a solution to all the problems the tourism sector faces, and it will not be marketed as such.

Conclusion IFC’s approach to advisory services in the tourism sector in Mozambique has evolved from understanding the sector’s complexities to creating actual projects and investment opportunities. SEATIP made the tourism opportunity explicit, but it also demonstrated that a broad advisory services program that addresses multiple development constraints in a relatively large geographic area does not necessarily translate into tangible results.

The Mozambique Tourism Anchor Investment Program is focused in scope and geographical area – it emphasizes the creation of tourism projects and investment opportunities at three locations. With valuable lessons learned built into its program design, the program is focused and realistic and designed to make a difference by creating new projects and mobilizing investment in Mozambique’s emerging tourism sector.

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About the Authors Irene Visser is IFC/PEP Africa’s Sector Operations Officer for the Tourism Sector. She joined PEP Africa in April 2005 and is responsible for program design and management for PEP Africa’s tourism programs. Prior to joining IFC she was a Manager at KPMG Southern Africa responsible for strategy, marketing, and tourism and advisor to the Mozambican Ministry of Tourism. In that capacity she developed the National Tourism Policy and the Strategic Plan for the Development of Tourism in Mozambique. She has an MSc in Product Development from Delft University of Technology (the Netherlands) and an MBA from Warwick University (UK).

Published in August 2006.

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IFC PEP Africa was established in 2005 to stimulate private sector growth. With a track record of delivering programs with tangible development results, PEP Africa builds partnerships with donors, governments, and the private sector to design and deliver advisory services that improve the investment climate, mobilize private sector investment, and enhance the competitiveness of smalland medium-sized businesses.

IFC PEP Africa’s operating strategy is characterized by its market approach to programs targeting client needs; partnerships with public and private partners to promote sustainable private sector investment and growth that create jobs and improve African livelihoods; and local presence to capitalize on local knowledge and networks that help deliver more effectively.

The five main business areas of IFC PEP Africa are as follows: • Improving the investment and business climate • Promoting access to finance • Supporting private sector provision of infrastructure • Building sector and firm competitiveness • Strengthening environmental and social responsibility Regional Office Contact: Bernard Chidzero, General Manager, PEP Africa 14 Fricker Road, Illovo 2196 Johannesburg, South Africa Tel: (27-11) 731-3000 Fax: (27-11) 268-0074