It’s the profit, stupid

June 25th, 2014

I enjoyed a delightful lunch today with energy sector colleagues exploring how to kick start the small scale private sector for energy services. Private sector development is all the rage at the moment and there is no end of projects and programmes to support private sector development.
However they all seem to share the same flaw – the dominant methodology is to subsidise private enterprises. I guess that’s what happens when you get public sector staff trying to target the private sector.

There seems to be a lack of attention to the core of the private sector – profit. How do business models deliver a profit? Is there a market for the product? Are people willing and able to buy?

The conversation then moved on to payment by results, where private companies are paid for delivering social goods. For example a solar lantern seller might receive payments per household with increased access to lighting. However this just props up an otherwise unsustainable market. As soon as the donor money goes, the business model is no longer viable.

Profit as results


This led me to reflect on how else public money might stimulate and reward successful business models. How about an approach where successful businesses are rewarded. You could take a payment by results approach, but define results as profitability or rate of return rather than households served? Or alternatively, a competition where the most successful business model wins capital funding. It’s still subsidising, but focussing on accelerating businesses that have demonstrated success rather than fitting a predefined (internationally imported) definition of what model or technology should be used.

Imagine that.

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Other posts in አዲስቀን (Addis/New Days)

It’s the profit, stupid

June 25th, 2014

I enjoyed a delightful lunch today with energy sector colleagues exploring how to kick start the small scale private sector for energy services. Private sector development is all the rage at the moment and there is no end of projects and programmes to support private sector development.
However they all seem to share the same flaw – the dominant methodology is to subsidise private enterprises. I guess that’s what happens when you get public sector staff trying to target the private sector.

There seems to be a lack of attention to the core of the private sector – profit. How do business models deliver a profit? Is there a market for the product? Are people willing and able to buy?

The conversation then moved on to payment by results, where private companies are paid for delivering social goods. For example a solar lantern seller might receive payments per household with increased access to lighting. However this just props up an otherwise unsustainable market. As soon as the donor money goes, the business model is no longer viable.

Profit as results


This led me to reflect on how else public money might stimulate and reward successful business models. How about an approach where successful businesses are rewarded. You could take a payment by results approach, but define results as profitability or rate of return rather than households served? Or alternatively, a competition where the most successful business model wins capital funding. It’s still subsidising, but focussing on accelerating businesses that have demonstrated success rather than fitting a predefined (internationally imported) definition of what model or technology should be used.

Imagine that.

Why Expats?

January 22nd, 2014

Magritte - Son of Man

Was reading: Why Expats? | AidSpeak, about the false dichotomy between local and expat. It sparked me to posting about something that’s been in the back of my mind for a while – public policy delivery, specifically in developing countries. The development world is largely focussed on developing and delivery public policy – so, education, health, security, energy, etc. Yet development professionals by and large have a ‘development’ background – it’s relatively rare to find development agency staff with real world public policy experience. People who have worked on education policy in their country, or who have worked in the NHS, or for an energy regulator. Granted, there are contextual issues in a developing country, like low salaries, staff retention issues – but these are issues we face around the world (albeit at different scales). Surely a career in developing and delivering health policy in South Korea is of more value than a Masters degree in Development Studies?

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Enkuan adderesachu

January 7th, 2014

Melkam Genna! Happy Ethiopian Christmas (Genna). Ethiopian Orthodox Christians celebrate Christmas on 7th January (Tahesas 28/29 by the Ethiopian calendar) – typically by slaughtering an animal and feasting with family and friends. We were privileged this year to be invited to two Genna feasts – one at a friend’s and another at a local guesthouse where other friends were staying. I learnt that we greet each other at this time of year by saying ‘Enkuan adderesachu’, which roughly translates as ‘give thanks for bringing us here ‘ and to which the response is ‘enkuan abro adderesachen’ – ‘give thanks for us arriving together’.

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Sharing the Search

January 1st, 2014

My new year’s resolution is ‘Screw connectivity, post more’, so hold me to it!

I joined GGGI because I believe that the dominant economic models of our time are broken and that our future lies in evolving new models. That’s easy to say, but is it a utopian ideal where we have our cake and eat it? More seasoned professionals who have worked on economic development will tell me it’s not possible, that it’s all been tried before and what we have is the only choice.

But what if it’s not? I am a dreamer, but also as an engineer, I’m grounded in practicality. The only way we’ll find out if it’s possible is to act as if it were and see what happens. That’s what excites me about Ethiopia – there is a genuine desire to do it, to find a new way of growing, that is sustainable without compromising. I don’t have the answers, but no one does – that is the very nature of a paradigm shift. You can’t comprehend it until you’ve been through it.

So, in the spirit of my new year’s resolution, I will attempt to share the journey, to open up the search – a thousand mile journey begins with a single step, this is mine.