Travel-Blogue Day 22: The McKinsey & Co. of Social Entrepreneurship

Posted by: Steve Hamm on August 08

Ever since Bill Gates announced a $47 million grant to TechnoServe at the World Economic Forum in Davos in January, I’ve been wondering what the organization is up to that would warrant such a big check. I had a chance to find out when I had a couple of hours of slack time in Dar es Salaam before a flight to Egypt (via Nairobi and Khartoum). The organization’s Tanzania headquarters staff had just taken up residence in new offices a few blocks from the sea. There have been some major shifts in management as well. Running the Tanzania coffee growing project, which is getting a big chunk of the Gates grant, is Tim King, a 10-year veteran of McKinsey & Co.

The person in charge of the rest of the Tanzania programs is Hillary Miller-Wise, a former journalist who apparently saw the error of her ways and is now dedicated to helping poor people.

TechnoServe was one of the pioneers of social entrepreneurship—before the label was invented, in fact. Founded by Connecticut businessman Ed Bullard in 1968, it has evolved into a mature but still fast-growing organization with 500 employees in 19 countries. Rather than handing money to people in need, it provides grassroots consulting services aimed at helping them spot business opportunities and run their businesses more successfully. While other helping-hand organizations typically take a situation that exists and try to make it better, TechnoServe spots new or expanded business opportunities and helps farmers, primarily, figure out how to take advantage of them.

The coffee project was pioneered six years ago by a couple of other TechnoServers, Paul Stewart, who now is starting up the same program in Rwanda, and Adolph Kumburu, who runs the program on the ground in the north of Tanzania. These fellows noted that about 3 million households in East Africa depend on coffee growing for all or part of their income. They had near-perfect altitude, temperature, and soil conditions, and most of them grew Arabica beans, the better of the two main commercial varieties. Still, their crops fetched an average of six cents less than the world commodity prices for such beans on the New York Commodity Exchange.

Kumburu and Stewart decided to figure out how these farmers could ride the specialty coffee wave created by the likes of retailers Starbucks and Peets. Previously, large wet mill factories—where the beans are separated from the fuit and dried—had been built in East Africa, mimicking the approach that had been successful in Latin America. But it turned out that this didn’t fit with the realities on the ground in East Africa. Most of the growers were small farmers who produced meager crops and were widely scattered. It was too far for them to carry their beans to the processing plant on their backs, so they were dependent on middlemen to buy from them, usually at a low price, and carry their beans to the factory.

The two TechnoServers came up with the idea of helping groups of growers in a geographic area to band together and build their own small processing plants. This way, 200 farmers could make something happen and take control of their own destiny. The smaller factories cost about $8,000, and the operating costs were low. TechnoServe helped them get financing and it set up a trading operation, KILICAFE, to aggregate the supply from the farmer groups and sell it at favorable prices to major customers including Starbucks. Six years later, there are 10,000 farmers with 56 factories participating and many more waiting in line. Fifteen new factories are expected to be established this year.

Now, with the Gates money, they’re expanding the program within Tanzania, and moving in a major way into Rwanda and Kenya. “”The Gates Foundation is changing the rules of the game,” Hillary told me. “They’re aggressive on metrics and targets, and they’re very interested in scale.”

But there are many hurdles on the way to large scale operations. TechnoServe launched a new program of providing basic business lessons for farmers three months ago. At the first such meeting, in Mbinga, in the southern end of Tanzania, they began by asking 50 farmers how many of them had ever calculated their annual sales. Only one said he had. And it turned out on closer inspection that he had done it wrong. The lesson here: “Basic business education has to be our first step,” said King.

One bit of information I found shocking: Many of these farmers have never tasted coffee. So the East African Fine Coffee Association, a trade group TechnoServe supports, is going into the remote villages with coffee “cupping” gear to give the farmers a basic understanding of the product they’re creating.

It’s a long road from teaching a Tanzanian farmer how to slurp coffee to bring out the taste to creating a sophisticated businessperson. But this organization seems to have a level-headed approach that can take them there eventually—with potentially outstanding results for the people and economies of East Africa.

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