Straight talk: Grants are needed to develop scalable community-based Forest Landscape Restoration (FLR) business models to achieve AFR100
By Fraser Brown
One of the hot topics at AFR100’s (as a contribution to the Bonn Challenge) inaugural event held in Addis Ababa on 11 and 12 October 2016 was, of course, finance. And with estimates that AFR100’s partners are earmarking more than USD $1 billion in development finance and more than $540 million in private sector impact investment to support restoration activities, it was particularly good during the finance track to hear about examples of investment hitting the ground.
But a clear picture emerged in the underlying stories that another dimension is needed.
Community forestry is now an established, well-understood discipline, and agroforestry is now almost universally accepted as an important part of the solution to sustainable smallholder farming, but finance for communities engaged in either or both has been slow to materialise. This could be changing. Nairobi-based venture capital firm Novastar Ventures’ co-founder and CEO Andrew Carruthers proudly endorsed their Kenyan based investee Komaza’s model whose CEO Tevis Howard inspired the AFR100 audience with ideas about creating a large, highly successful and sustainable company, akin to the “Google of restoration”.
Backed itself by a who’s who of development and impact finance, Mr Carruthers explained what Novastar looks for— “Entrepreneurs with the character, competence and ambition to build businesses that can transform markets and grow rapidly to scale”, and how it operates — “Novastar employs multiple rounds of small investments to iterate a new business model, then either backs rapid growth, or pulls out”.
It was easy to see why Komaza’s innovative “micro-forestry” model with its goal of becoming Africa’s largest forestry company fits the bill. With the support of its investors, Komaza (now ten years in operation) aims to double its staff and substantially expand its smallholder outgrower operations in the coming months.
Similarly, during an event last month in Sweden Neil Bridgland, Managing Director of Tanzania based ethically-traded timber business Sound and Fair announced that the company had received debt-finance from Finnfund – something that in common with Komaza had taken many years and much grant-support to achieve. The Eco Innovation Foundation organised the above-mentioned event (“Fair Wood Showcase” 27th and 28th September 2016) in Stockholm and is backed by a SIDA grant through WWF to implement “Fair Wood” as a global project aiming to create a global market for tropical wood from native forest under control by local smallholders/villages. It is a fantastic initiative.
From the perspective afforded by observing these community focused pioneers’ journeys, a fundraising lifecycle is beginning to emerge. Look at Komaza for example – along the way it has received $2.9m in grants, $750k in long-term concessional finance, and $2.9m of convertible debt following a clear evolutionary path as the business has developed.
Proponents of all such businesses complain about the inaccessibility of mainstream development finance. So what funding infrastructure really exists to get them to a level of scale where they can realistically access impact investment or Development Finance Institution type resources? There needs to be a clear and understandable pathway for FLR businesses to grow and it might be AFR100’s (and the Bonn Challenge more generally) first big task to illuminate this if it exists, or create it if it does not. Novastar’s model was a good fit for Komaza, however, the alternative to Google-like businesses for restoration is a more direct finance solution for smallholders themselves.
F3 Life is another Kenyan company that has successfully piloted a new genre of eco-credit to smallholder farmers. Its contingent credit model offers increasing loan amounts to farmers over time on condition that agroforestry measures are employed and, of course, that the loans are serviced well. The challenge in this model then becomes one of monitoring and mobilizing existing financial services providers to lend in this way, and it is certainly a model that suits farmers connected to well-organised value chains best. But, however different its business model is to Komaza and others, it has also followed a similar path to becoming a success now attracting the attention of investors globally because grants have been fundamental to its succeeding.
How exactly will African community-focused FLR enterprises harness the USD $1.54 billion “on offer”? More to the point; what is the corresponding level of grant support needed, where will this come from, and how will it be accessed?
Fraser Brown through Net-Positive Solutions supports Bonn Challenge implementation globally primarily through figuring out how to make the connection between global finance and Forest Landscape Restoration opportunities on the ground. Focusing on community-centric approaches, he has worked as a consultant with IUCN (current), the World Agroforestry Centre (ICRAF), and UNDP.
See related Blog
What will it take to restore 100 million hectares of land in Africa?
Download AFR100 Overview document