Self Help Africa: Why Only Profits Can Cure Poverty

Self Help Africa: Why Only Profits Can Cure Poverty

May 21, 2013
Originally published in Forbes

The importance of profiting from one’s efforts ought to be an easy concept to embrace. It is why humans no longer live in caves. If an endeavor—any endeavor—produces more value than it consumes, it will not only pay for itself, but create the means for growth. In contrast, endeavors that persistently generate losses are destined to wither and die.

Africa has long been a place where charity goes to die. Developed countries have been pumping charity into Africa for as long as photos of starving children have been used to capture our sympathy. Tragically, most of this aid has been wasted, either stolen by corrupt local politicians or handed out in a way that traps people in a state of dependency that only generates more need for aid. The result? A continent mired in poverty, where economic growth seems an elusive goal.

As the Wall Street Journal reported several years ago “Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population—over 350 million people—live on less than a dollar a day, a figure that has nearly doubled in two decades.” The reason is clear. Most of this aid has been distributed by governments to governments, lining the pockets of kleptocrats whose benighted economic policies keep their people in poverty.

Many Non-governmental Organizations (NGOs) have learned to bypass governments and deliver aid directly to the needy. This is a good start. Yet for cultural reasons, the people that support and run these NGOs are usually wary of—and often even hostile to—free market concepts. They praise sustainability while deriding profits. Yet without profits, the ability to sustain, scale, and replicate programs is limited by donors’ willingness and ability to continue giving. Worse, the lack of the profit motive undermines the opportunity to help poor Africans help themselves by working their way out of poverty.

Fortunately, all NGOs are not created equal. Self Help Africa is an NGO of a different bent. It calls itself a “non-profit in the business of helping others to make one.” Dedicated to empowering rural Africans to achieve economic independence, the organization’s focus is on bootstrapping self-sustaining endeavors at the local level. It offers training in everything from bookkeeping to beekeeping, to help people meet not only local consumption needs but to generate cash crops and go-to-market strategies that will produce that key ingredient of sustainability—profits. Think of it as venture charity with a pay-it-forward component.

A good example is a Self Help Africa program in Malawi that is designed to help a village diversify its agricultural efforts while shifting from subsistence to cash crops. One pilot family received a loan of three pigs, two females and one male, and a crash course on hog farming. To discharge their debt, the family simply had to pass on the first litter of piglets to two other families, who signed up for the same deal. Any litter that came along after that was theirs, adding pork chops to their diet or pigs they could sell.

Meanwhile, peanut farming, a cash crop well matched to both climate and market conditions, was introduced into the village for the first time. Properly bagged nuts are largely nonperishable, travel well, and do not have to be sold at peak harvest time, so they can be held back until better prices can be obtained. Program participants, who are treated like businessmen and not beneficiaries, pay for their initial seed stock and training by returning seeds the next season. How does Self Help Africa know when it has succeeded? When it can move on to the next village with a fresh load of seeds and pigs, leaving profitable businesses behind.

Broader initiatives include training programs to help turn small scale agribusinesses into investible enterprises that can attract outside capital and generate real economic growth—the basis for advancement in other areas, including infrastructure and education. This requires the introduction of modern accounting, planning, management, and reporting practices as well as economies of scale.

When I spoke to Self Help Africa’s head of U.S. operations to compliment him not just on his programs but on his profit-centric message, he replied  “I would like to get to the point where I am not just pitching venture capitalists for their philanthropic dollars. I would love to be pitching them for their investment dollars. Africa is not just a continent of need. It is a continent of opportunity.”