Private Sector Led Development: Creating Partners for Aid Investments

Nov 05 2018

Perscitus International has launched several private sector-driven initiatives that seek to create profitable businesses, enable opportunities for broader economic ecosystem growth and create partnerships that can work with government funded programs. We aim to provide the venues, vehicles and tools that lead to the impactful, self-sustaining and scalable development that responsible investors seek.

Large development investment organizations such as U.S. Agency for International Development (USAID) look for capable, innovative, and trustworthy private partners. These “partnerships” are government funded and managed, and are implemented through contracts to execute and oversee application of funds. Ideally, development investments would yield a virtuous, self-sustaining, endogenous process energized through an economic, cultural, and political ecosystem where the original risk recedes and fades away while revenue is generated for reinvestment.

Often the places that USAID, Millenium Challenge Corporation (MCC) and other foreign aid agencies invest in may not have the basic pre-conditions required to trigger sustainable development. In many cases, the impact of government monies invested may be constrained by theoretical logical frameworks, program structures and criteria divorced from local realities and decontextualized expenditure limitations, in addition to finite investment periods, such as MCC’s 5-year compacts.

The Perscitus model builds on location-specific capacity and potential and is buttressed by a thorough stakeholder analysis focused on how local stakeholders understand a set of interrelated needs and how they interact with each other and with external development agents. The Perscitus team then identifies context-specific solution sets that can be provided by the private sector. They involve a variable mix of technology inputs and a business model that addresses the specific problem identified and which local investors have skin in the game.

A fully developed business model includes human and physical/natural resources assessments, geo-economic and geopolitical analyses and in-depth risk analyses and risk reduction strategies. Finally, Perscitus invests in and develops businesses that will generate growth or that offer spin-offs with potential to grow. The Oniva® is a perfect example to illustrate our model.

Oniva® is an automotive design and manufacturing company we have established to manufacture vehicles in West Africa for specific niche markets: intercity transport and refrigerated small cargo sectors. These markets are generally served with used station wagons or minivans that transport passengers and their goods and packages. The vehicles used are not designed for the realities of African road systems and seasons, nor are they designed to carry the loads to which they are subjected.

Because African countries tend to have high vehicle import taxes, newer and more adapted vehicles are unaffordable for the average customer. A new $8,000 car will sell for more than twice as much in Africa. Used cars are hard to maintain due to a lack of trained mechanics and access to spare parts. Plus, they are never in prime condition, are less safe and are more polluting. Once subjected to overloading and African roads, they become increasingly dangerous and uncomfortable. Traditional car assembly in-country requires large markets, enormous capital investments, and heavy steady energy, water and waste management. A typical $100 million investment in traditional steel bodied cars is not amortizable when markets are small.

Perscitus has designed an innovative vehicle that is not made of steel and does not require the heavy capital investments in machinery that traditional car manufacturing or assembly requires ($10 million vs. $100 million). It can be built and sold at a significant profit for the same price as a used car typically retails in West Africa. The vehicle is designed to endure the local road and weather conditions. Its body is naturally insulated allowing traditional existing cooling systems to keep the cargo area cool and reduce the 60% of spoilage typical of fruits and vegetables in this region.

A group of local investors involved in the transport and logistics sectors covers 50% of the investment. Some investors are also the customers, assuring a market to launch production. Seeing clear economic and political benefits, the government provides in-kind investment and reduced fees and taxes. Perscitus has also planned partnerships with local technical schools for training and managed risks in innovative ways through the labor force of 200, company and investment structures and a context-specific business model.

Oniva® will create a broader self-sustaining ecosystem by engendering opportunities for several spin-off start-ups to support an increasingly nationalized supply chain and to add value through technology add-ons to or in support of the vehicles. This ecosystem provides local private sector partners with which USAID, MCC or others can work. The profit-for-impact motive facilitates local business ownership, employment creation and self-sufficiency and drives a virtuous cycle. Perscitus calls it Profitable Development.