This essay was originally written for the Peter Drucker Challenge 2016. Current events such as the closure of Bridge Academies in Uganda and an increasing threat of closure in Kenya have prompted me to post this. I have been wondering whether 'the powers that be' are ambivalent about social ventures until the point where they disrupt the status quo; then hell hath no fury like a cartel boss scorned...
Entrepreneurship is the new cool. It is a word that inspires thoughts of celebrity-like status when one considers ‘unicorns’ such as Facebook, Uber and WeWork that have disrupted traditional business models in communication, transport and real estate. This high profile status of entrepreneurship is not only limited to developed nations. The power of entrepreneurship to be a disruptor in recent times is clear in sub-Saharan Africa, and Kenya in particular. Riding high on the ‘Africa Rising’ narrative, Kenya is continuously making its mark in the world as a regional hub of innovation and entrepreneurship. When one hears ‘Kenya’ and ‘innovation’ in one breath, one cannot help but think of M-pesa and the way necessity has bred innovation. M-pesa is not a one-off blip in the Kenyan entrepreneurial landscape. Entrepreneurship is maturing and beginning to attract recognition. While early ventures were supported largely by grants; a surge in venture capitalist funding has seen Kenya ranked the 3rd investment destination; receiving USD 47.4m in funding for startups in 2015.
However, beyond the glamour of the technological innovations are a different brand of entrepreneurs who are committed to the less sexy work of addressing social problems such as inequality in education opportunities, inaccessibility of healthcare, and youth unemployment, among others. These social entrepreneurs rarely make a large splash in the media but they have been deftly filling the gaps left by the public sector. They have gradually risen to a point where they are now attracting attention; and with it, raising questions on the appropriateness of for-profit ventures in providing basic social services. One school of thought argues that for-profit initiatives can only be exploitative. Another camp feels that these businesses are playing important roles that governments have neglected. They are bred, after all, from necessity.
There isn’t a lack of necessity in Kenya. In stark contrast with the rise of the ‘Silicon Savannah’ are the social problems that plague Kenya. Despite having some of the highest school enrollment rates in Africa, the education sector is mired with quality concerns, that have fanned other social problems such as poverty and unemployment. For instance, among unemployed youth, 90% lack relevant vocational skills and are therefore unemployable. In the health sector, while strides have been made to curb communicable diseases such as HIV/AIDS, malaria and TB, Kenyans are facing the ticking time bomb that is non-communicable diseases (NCDs). Currently, NCDs account for 26% of the mortality; and this is expected to increase to 36% by 2030. This picture of fundamental social and economic problems, and a growing entrepreneurial spirit; suggests great opportunity for entrepreneurs to make a difference.
Social entrepreneurship could well be a lifeline. Social impact initiatives that have previously been donor funded face a sustainability quagmire with the declining state of donor funding. Official Donor Aid (ODA) has stagnated at 0.3% of Gross National Income (GNI) between 2012 and 2014. ODA is expected to decline in the long term with 2/3 of the countries in Sub Saharan Africa expected to receive 4% less aid in 2017 than they did in 2014. Developed nations are faced with greater domestic problems since the 2008 Economic Crisis and have less to spare. It does not help that previous lack of transparency and corruption has made most donors wary of supporting state-run programs. For instance, USD 46 million shillings set aside for the Free Primary Education program in Kenya went missing, prompting several donors such as the UK’s DFID to withdraw funds. Increasingly funders are looking for new ways to achieve impact.
Entrepreneurs have been quick to fill the gap left by the public and NGO sector. For instance, Bridge International Academies have grown into the largest private primary school chain in Africa with 400+ schools primarily aimed at bridging the access gap in the educational sector. Jacaranda Health has, on a lower scale, moved to fill the gap in providing access to pre-natal, obstetric and post-natal care. The significance of this is clear when viewed in the context that in Kenya, maternal mortality stands at 488 per 100,000 live births, compared to an average of 239 in developing nations. Another social enterprise has found a way to provide sanitary toilets and economic opportunities for the urban poor. Social entrepreneurship is also evident in the energy sector, access to financing, and agriculture. With its rising significance, there has been a rise in support for social entrepreneurs by impact focused accelerators and hubs, impact focused investment funds and management consultants who specialize in developing best practice for social enterprises.
So far, it seems clear that entrepreneurship can not only address social needs, but is already doing a good job at it. However, a more imperative question seems to be ‘Will society allow entrepreneurs to address social needs?’ The experience of Bridge International Academies would make an interesting study on the role of for-profit entrepreneurial ventures that want to tackle social problems. Born out of the idea that pro-poor solutions require scale to be sustainable, Bridge has set up 400 nursery and primary schools across Africa. The backing of high profile investors like the IFC, Bill and Melinda Gates Foundation and CDC, among others, is a rubber stamp of approval. However, particularly in Kenya, Bridge has faced numerous hurdles. In 2015, the Ministry of Education chose to implement ‘informal schools’ guidelines that had been outlined in 2009 but had not been enforced hence. A key requirement in the guidelines was that 30% of teachers in an informal school were required to be formally trained. This poses serious challenges to Bridges low-cost model that is driven in part by hiring untrained teachers and giving them on-the-job training. Trained teachers are expected to require higher pay than the USD 120 monthly salary currently paid to Bridge’s tutors. Taking a cue from the ministry, teachers’ unions and NGOs have called for the closure of the schools over quality concerns, despite the fact that they serve over 100,000 slum dwelling children.
The IFC and other development agencies have been criticized for investing in for-profit ventures rather than funding state run programs not only in education but also in health. While some of the criticism is justified, continuously pumping money in corrupt state run programs or unsustainable donor funded initiatives seems highly unwise; especially when entrepreneurial ventures like Bridge achieve more impact, with fewer resources.
Ory Okolloh, co-founder of Ushahidi and Uzalendo, activist and Director of Investments at Omidyar Network is as close to an expert on entrepreneurship in Kenya as you can get. Speaking on the issue of entrepreneurship having to take on social needs that the government ought to take care of during a Quartz Afruca Forum, she succinctly summarized that: ‘We can’t entrepreneur ourselves around everything.’ She elaborated on the fact that in developed nations; public schools, hospitals and power companies work seamlessly. Why then is it that Africans are expected and encouraged to maneuver around getting basic services through creative innovation? Her conclusion was that entrepreneurship on its own is not enough. Innovators and entrepreneurs need to do the additional (and less glamorous) work of guiding the government so as to influence public policy. Using learnings from the field, they can inform government decisions and work towards a public sector that works.
My take on this is that entrepreneurship should not have to provide basic social services that are universal rights. It is unfortunate that a child in an urban slum has to learn by rote because he/she cannot access teachers who are qualified to teach creatively. Even more unfortunate is the fact that the child is getting better quality education that what the government can provide. This is proven not only by data-based evaluations, but by the fact that poor families living on less than USD 2 a day are willing to set aside USD 6 a month to pay for tuition at a private school.
However, this is the reality. When the choice is rote learning or no education at all, suddenly it becomes an easier choice to make. Entrepreneurship can address social needs but it is unlikely to do so as effectively as a well-run public sector in a developed nation. However, before the public sector in Kenya ever plays catch-up, entrepreneurship will continue to play a vital role. In fact, there may be a silver lining beneath this. Africa is renowned for leapfrogging technologies, and jumping from crawling all the way to running. The innovative solutions that African entrepreneurs come up with may serve populations more effectively than anything that the government can come up with. The unique challenges in service delivery call for agility, and entrepreneurs are anything if not agile.