• home
  •  

    The Need for Good Information

     

     
     
    International Trade Forum - Issue 4/2009 
     

    © bamboobike.org 

    It might seem obvious that a multinational commercial organization wanting to make a contribution to social development can best do so by using its core competencies. For some organizations, like, say, construction or utilities companies, the potential contribution is clear. But in professional services organizations like KPMG, we have to be a little more creative in working out how best to use our skills.

    Our core purpose is to support sustainable communities around the world. At its most basic, that purpose is focused on those with the least resources and the greatest need for economic opportunity and basic services that build education, health care and good governance. One approach we have found is to apply our skills and experience in evaluating and assessing commercial enterprises, to provide reliable information to investors and others interested in helping to develop a particular area.

    Since 2007 we have been working with the Millennium Cities Initiative (MCI), an urban counterpart to the Millennium Villages Project. MCI seeks to help selected mid-sized cities across sub-Saharan Africa to formulate integrated city development strategies, including attracting foreign investment to stimulate economic growth and development.

    MCI is led by Professor Jeffrey Sachs, Director of the Earth Institute and special adviser on the Millennium Development Goals to the United Nations Secretary-General.

    Our firm's professionals work with MCI to provide reliable investment reports that highlight commercially viable business opportunities in the regions surrounding the millennium cities.

    To date, we have produced four Millennium City reports (Kumasi in Ghana, Kisumu in Kenya, State of Ondo in Nigeria and Blantyre in Malawi) and two industry reports: sugar production in Kisumu and bamboo bike production in Kumasi.

    The bamboo bike project is particularly interesting. Studies confirmed that bicycles generally represent the best mode of transport for rural Ghanaians, but the machines available in the country are often of poor quality and unsuitable for local needs. Making better and more useful bicycles, using locally grown bamboo for the frames, presents an opportunity both to improve the standard of living for rural Ghanaians and to create jobs for inhabitants of the rural areas near Kumasi. But would it work as a commercial enterprise?

    Our analysis of the local market, and of the costs of producing and marketing these machines, suggests that the potential profitability of a bamboo bicycle facility depends on the scale of the operation. As an illustration, the five-year net present value (NPV) of a bicycle producer capturing approximately 7 per cent of the actual current market (i.e., the annual production and sale of 20,000 bamboo bicycles) is approximately US$ 50,000.

    A more aggressive scenario, capturing 50 per cent of the market (i.e., annual production and sale of 333,333 bamboo bicycles) would yield a five-year NPV of nearly US$ 4 million. This is crucial information for anyone considering setting up a venture of this kind, not least for government agencies wanting to attract commercial investors.

    More conventionally, our report on Ondo State in Nigeria provides detailed information on the wide range of agricultural, mineral and energy investment opportunities in the region, but warns investors to factor in "…poor infrastructure facilities which significantly increase cost of production, a high level of government bureaucracy and complicated procedures for obtaining requisite licenses and permits".

    Similarly, our work on the Kisumu region of Kenya identified "…significant potential to commercialize the agricultural and livestock sectors including processing products within the region".

    Good information is an absolute prerequisite for any public-private partnership that is intended to facilitate local and regional trade and deliver transformation. We believe that the work we are doing with MCI demonstrates how a professional services business can apply its skills to deliver market-effective knowledge. Bringing together investors, entrepreneurs and governments for the benefit of people in the regions and industries we have studied, and creating employment and the potential for changed lives and new opportunities.