[Cause Exploration Prizes] Social Enterprises in Africa

This essay was submitted to Open Philanthropy's Cause Exploration Prizes contest.

In a nutshell

• What is the problem?

Social entreprises in Africa build and maintain single service delivery models for their organizations, which is initially costly and unsustainable, forcing them to seek subsidies or bundle products to until they achieve a sustanable model.

• What are possible interventions? 

Outsourcing.

Bundling products and services.

Seeking subsidies.

Going into upmarket client segments.

Limiting the reach into deep rural and marginalized areas.

• Who else is working on this? 

Outsourcing companies.

Companies leveraging the gig economy.

The problem

The past decade of development and social enterprise investments in Africa has highlighted two recurring paths: 1) Often, single-service programs run through subsidies until the desired goals are reached, and the program is closed or becomes unsustainable; 2) Alternatively, those programs that seek sustainability, more often than not, are forced to begin adding new product and service offerings or take over increasingly large parts of the value chain (i.e., procurement, logistics, credit, etc.). While the latter can be an effective path to sustainability, there is a massive time and financial cost associated with the gradual ramp-up until a comprehensive and financially efficient product offering is reached.

Possible Interventions

• Outsourcing

Many social enterprises, especially post COVID-19, are outsourcing third-party  companies to perform services or create goods that were traditionally performed in-house by the company's staff as a cost-cutting measure.

• Product bundling through strategic partnerships

Many social enterprises resort to grouping several products together and selling them as a single unit for one price. This strategy is used to encourage customers to buy products that they need but do not see the sufficient value to trigger them to invest. For instance, many tech-enabled advisory products targeting smallholder farmers are unsustainable because, even though they are affordable to end customers, the cost of setting up a single-purpose distribuion channel would render the solution economically unviable. Therefore, they partner with organizations with viable offering, such as lending institutions, and embed their agronomy advisory to credit, which are together distributed by village agents. 

• Seeking subsidies

Social enterprises can leverage subsidies through philanthropic investments or government subsidies to lower the costs of offering innovative solutions to people in need or increase the uptake of their solution by the target group. A good example is an insuretech offering agriculture insurance to smallhlders. They would require premium subsidies from the government to generate enough revenue to sustain the product in rural areas. 

• Limiting the reach into deep rural and marginalized areas and going upmarket.

A lot of social entrepreneurs set out to serve the most marginalised members of society whene they start their companies. However, they discover the cost of sustaining operations is quite steep, especially in comparison to the revenue they generate per customer. Without subsidies or product bundling, many of these entrepreneurs tend to start targeting urban and peri-urban markets where the costs of operations are significantly lower and the revenue per client is higher than rural markets. As a result, marginalized communities are left out of the picture and have to resort to coping mechanisms to get by. For instance, we see social impactful organizations such One Acre Fund now targeting large scale farmers as well, to remain competitive and sustainable. 

What could a philanthropist support?

Philanttorpists can:

• Support studies

As we mentioned previously, there is deficiency in data shedding light on the actual costs of single service delivery models required to assess the potential impacts of multi-delivery channel. It’s not that the data is not available, it’s just that the data is not publicly avaiable since most social entreprises are not public or publicly traded institituions. However, investors can estimates the distribution and customer acquisition costs of the innovations they fund through financial reports. 

• Measure and monitor the cost of distribution of the innovations they fund

Philanthropists may track the distribution costs of the solutions they fund as a key performance indicator, based on the different target locations and products. We believe that customer acquisition and product distribution costs are a significant spending for start ups in Africa, espeically those serving marginalized customers in hard to reach areas. 

• Offer funding and technical assistance support to organizations tackling the distribution challenges in marginalized communities.

Providing technical assistance to innovative organizations creating multi-purpose delivery channels could improve the outcomes of impact investments per dollar, espeically in the hard-to-reach areas where most organizations don’t even venture into due to the high costs of acquiring customers with low purchasing power. Investing in such organizations is like investing in constructing the roads into these communities, so that other organizations can drive there.

• Influence policy 

Deleloping marginalized areas and ensuring that the populations there have access to essential goods and services are largely the responsibility of the government. Therefore, philanthropic efforts might focus running pilot and scaling projects, generating critical insights and providing decision makers in the government with the evidence and resources to craft effective rural development policies.

How cost effective could spending in this area be?

While we have not investigated the overall cost of single service delivery models vs multi-purpose delivery channels, there’s widespread agreement that the needs of communities are intertwined, and creating a multi-service delivery model with service integrations that focus on the whole customer journey maximizes the strength of product offerings, reduces prices, minimizes confusion, gains trust, and, ultimately, improves the quality of life. 

Who else is working on this?

• Philanthropic organizations

Philanthropic interest in rural development appears to be limited but growing rapidly with over 80% of social investment in Africa from 2015 to 2019, going towards financial inclusion, smallholder agriculture and clean energy solutions for off-grid households, all largely targeting rural communities. 

• Government

Governments are the facilitators of rural development, playing key roles in through law enforcement, policy formulation and implementation, and providing administrative services with external assistance. 

What we have done

FlexGiG onboards and profiles agents across Africa via its mobile app, driving visibility to its existing and potential partners on agents available for their solutions across Africa. FlexGiG assigns its top talents to understand each customer's needs deeply, adapt clients’ strategies into local contexts, and select suitable agents with skill and precision. The recruited agents will be the trusted link between our partners and customers, ensuring our partners' products successfully reach the right markets, whatever their solutions may be. FlexGiG helps its partners recruit suitable agents for their business needs basing on agents’ education level, experience, psychometric profile, past performance ratings, and proximity to project location.

FlexGiG then works with the partner to develop a project training curriculum, performance targets, deliverables, performance indicator dashboards, and smart contract incentive structures for agents selected to carry out the assignment. FlexGiG runs soft pilots for the client to assess the quality of work before signing off a full-scale roll-out. FlexGiG will take full ownership of the project for the customer and agent output, providing complete customer visibility of the project activities through API system integrations, live dashboards, and scheduled communications and reports. 

To ensure we always deliver results, FlexGiG is always resourceful in providing its partners with all the necessary access to knowledge, advice, relationships, and on-the-ground logistics.

From mid-April, when we formed, to date, FlexGiG has registered its entity in Kenya, set up a basic IT infrastructure (website, mobile app, web platform, G-suite, digital learning platform for agent remote training), a strategic partnership with one organization, has gathered a database of over 5,000 agents across 5 countries in Africa, has created 10 jobs and has onboarded one corporate client. 

Potential risks and downsides

We have identified a number of potential risks and downsides to funding multi-purpose delivery channels in Africa, including

• Hesitance by corporates to engage gig workers. Corporate and SME usage of gig workers is still developing, as is the uptake of online professional services. This is especially true among corporations due to their misperception that these workers are of poor quality
• No gig workers in rural areas. Online gig work is also limited to urban areas, despite the efforts of government and other development actors to introduce youth in rural areas to digital skills and employment. Poor network coverage or connectivity quality, little information, and low awareness and trust in gig work limit penetration in these geographies.
• Social protection for workers. The failure of the trade union movement to fully adapt to deindustrialization and decentralization of labor greatly reduces the bargaining power of workers relative to capital.
• Regulatroy uncertainty. Gig economy and multi-purpose delivery channels is a new arena for legislation and regulation. As gig workers rise, governments will enact new legislation for their taxation and social benefits. Some laws may limit the work that companies can outsource in the international gig economy. Also, data protection laws are getting more stringent, and multinational companies are very cautious about sharing the key information required to implement their core activities with other parties outside their organization.
• Ethical concerns. Ethical concerns as gig economy companies are widely criticized for unethical practices such as low pay, precarity, stressful and dangerous working conditions, one-sided contracts, and a lack of social protection.
• Limited research into gig economy. To date, little is known about the size and impact of the gig economy in low- and middle-income countries, limiting investments into the sector.
• Limited tech infrastructure in rural infrastructure may limit the spread and reach of gig workers, leaving certain portions of the population still unserved or underserved.
• Women face societal and occupational barriers that may limit their participation in the gig economy. Social norms and occupational segregation – the tendency for women to be employed in some sectors and not others – have significantly limited women’s engagement in gig work.

Our process and next steps

FlexGiG targets SMEs and multinationals seeking to expand their businesses in new or existing markets in Africa. As a strategic partner, FlexGiG safeguards the interests of its customers  by providing integrated services and solutions customized to fit their specific market exploration and expansion needs and a clear commitment to measuring, improving, and reporting on relevant project performance indicators. 

Our next steps is to build upon the operational pillars that allow FlexGiG to make it easier for social entreprises aot bring products in new unserved or underserved markets, where FlexGiG would assist them market, sell, distribute, and develop best partnerships and brand positions effectively and cost-efficiently. The 3 pillars we are building 

1. People
2. Partners
3. Technology
   
    

• People

FlexGiG provides a digital platform upon which the company is built that brings together the supply and creates demand for service providers and agents across Africa. They bring a range of skills, knowledge, experiences, and relationships to the table for FlexGiG’s partners. FlexGiG intermediates with project management services to ensure the partners’ expectations concerning quality, performance, and compliance standards are satisfied. 

FlexGiG’s service provider agents typically fall into four segments: 1) Free agent who derives primary income from independent work; 2) Casual earner who supplements income by choosing independent work; 3) Reluctant who lives off independent work but prefers traditional jobs and; 4) Financially strapped who works out of necessity. They choose FlexGiG because;

1. They demand more flexibility in how they work,
2. They are diversifying their income streams,
3. They want more control over their location,
4. They lack experience or technical training required for formal jobs and need job exposure and career advancements,
5. They want to be their boss
6. There are no job opportunities in their location that digitalization provides.
7. They want a better work-life balance.

For its agents; FlexGiG provides capacity building, offers, bonuses, and incentives to independently contract with FlexGiG via the digital platform and implement projects. Capacity building a remote workforce requires FlexGiG to reimagine its learning programs and integrate “learning moments” in a seamless gig agent journey. 

FlexGIG uses a boundless digital “learning as a journey” approach that starts even before the agents start work and continues for all the upskilling and engagement they will need during their partnership with FlexGiG. The system provides a balance where agents would be able to learn at a pace they’re comfortable with and at their point of need, which can only be done through digital solutions that are always-on. The training must be designed with the agent at heart (see graphic) because remote learning requires greater self-discipline and motivation. Consequently, the design of each course puts the agents' experience at the core to make learning delightful, fun, motivating, and engaging, as shown in the graphic below;

We encode the following attributes in digital learning to ensure agents get the most out of FlexGiG’s remote digital-learning offerings:

1. Bite-sized chunks of microlearning to maximize knowledge retention;
2. Experiential “hands-on” experience even though they are virtual;
3. Social elements that involve learning in collaboration with other agents;
4. Games and competitions induce a sense of fun, achievement, and friendly competition.

FlexGiG can continue empowering agents to produce sustained performance and success for the wide variety of FlexGiG’s partners at scale by incorporating a flexible, scalable, and customized digital learning solution. The learning platform also provides a centralized hub for agents’ access to engaging learning content, capacity-building resources, updates, and other support items that encourage agents to immerse themselves within their roles and continuously work to attain professional growth. Conversely, an engaged, empowered, and knowledgeable team that continues to innovate can withstand evolving industry changes and client/project needs. 

• Partners
• Technology

FlexGiG partners outsource to FlexGiG geographically-tethered work that requires it to happen in specific places and at specific times. In other words, work that they cannot outsource over the internet (constrained by the internet’s physical infrastructure) nor conveniently conduct themselves due to geographic constraints such as distance and the local political economy. FlexGiG connects them with workers who need to be in the right place and at the right time to complete the geographically tethered tasks such as; sales, marketing, training, customer registrations, research, data collection, price reporting, competitor analysis, after-sale services, and assessments. Through a partnership with FlexGiG, organizations;

1. Cut costs on staff recruitment and retention initiatives such as wages, benefits, training, workspace, transport, and equipment (e.g., tablets, motorcycles, etc.)
2. Can find the best workers in target markets without physical and managerial constraints
3. Fill specific roles that would be cost-inefficient to hire full-time staff.
4. Can better adapt to workload seasonality 
5. Access to a more diverse and dispersed workforce
6. Cost-efficiently set up and run shorter-term and deadline-tight projects such as field research, data collection, market analysis, merchandising, product development, and pilots.

FlexGiG’s business model is designed to intermediate and address the following concerns that prevent SMEs and multinationals from engaging the gig economy workers;

1. Limited knowledge transfer and skills development capacity of gig workers
2. More difficulty building organization culture and developing long term relationship with clients
3. More challenges to training and quality management
4. Some gig workers take on too much work and have competing priorities with multiple firms/companies
5. Availability and loyalty of gig workers may not be as high as for employees
6. In many jurisdictions, gig workers are required to use their own technological devices, and this could result in greater technology and cybersecurity risks
   
    

FlexGiG business model relies on a suite of cutting-edge digital infrastructure platform that include; 

1. Web Platform and Mobile app - Currently, FlexGiG has developed and manages a digital labour platform that  allow it to access a pool of on-demand workers to offer its partners tailored market-linkage, advisory and on-ground logistics services for their market expansion. In the future, FlexGiG will further develop the app to provide a more robust infrastructure and a core architecture that governs the interaction possibilities between different demand-side and supply-side user groups, driven by network effects to draw in users.
2. Payments infrastructure - FlexGig will develop need technology functions embedded in banking and new mobile wallet payment platforms to facilitate payments, establishing trust mechanisms between the company and its decentralized workforce. We’ll encode a myriad of performance management features that impose regulations and nudges on the quality and volume of agent output such as real-time location tracking and timing of every agent.
3. FlexGiG will build its products and services on top of this globalized stack of infrastructures  such as the IP addressing system, the GPS, Google Maps as a base layer, the Apple and Google Android phone operating systems, and cloud management information systems and storage to scale relatively quickly and easily adapt to market conditions and contexts. The use of algorithms will keep the costs low while providing a new way to manage a geographically dispersed and scalable workforce. Jobs are assigned and evaluated through code and data without human intervention.