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Social Enterprise Perspectives: FATE Takes HBSers to Heart of Nigeria's Economic Hardship

Organization: FATE Foundation
Location: Lagos, Nigeria

We rubbed elbows with foreign dignitaries while attending a 4th of July party at the American Ambassador’s House, found ourselves amid an angry mob of rioters taking the law into their own hands, sipped tea with the Nigerian President, taught young Nigerian entrepreneurs about business plans and organizational structures, and now hope to have brought long lasting change in the companies that we worked for.

These are just a handful of the things we experienced as we acclimated ourselves to our new lives in Africa’s most populous city: Lagos, Nigeria. We would spend the next 10 weeks there with help from the Social Enterprise Summer Fellowship Program.

We had both been hired by FATE Foundation, a Nigerian nonprofit organization whose purpose is to promote private sector development in Nigeria through entrepreneurship. FATE Foundation was created in March 2000 by an HBS graduate and an LCA case protagonist, Fola Adeola (remember the final from last year?) with the belief that Nigerian youth can directly tackle the high rates of unemployment and poverty in their country through entrepreneurship. FATE’s mission is to foster wealth creation by promoting entrepreneurial development. In addition to conducting classes and offering support services for aspiring entrepreneurs, FATE sponsors an internship program each summer bringing MBA students to Nigeria in order to consult for more experienced entrepreneurs, instruct classes for their aspiring entrepreneurs, and learn about the unique business environment. The two of us were joined by three other MBA interns from BU, Columbia and NYU.

Nigeria is the most populous country in Africa with over 130 million inhabitants, of which approximately 15 million reside in Lagos. Presently, the country is very heterogeneous with over 250 ethnic groups, the three largest being the Hausa, Yoruba and Igbo which account for approximately 40% of the population. There are two major religions: Islam in the North and Christianity in the South. Nigeria’s stability has been repeatedly threatened by the fighting between these different groups. It is also a land of severe wealth disparity with GNP per capita of $390 USD and approximately 60% of the population earning below $1 a day with little hope of drastic change in the years to come. The middle class is non-existent. A British colony until 1960, Nigeria has had a rocky history since, suffering from massacres, severe conflicts between regions, corrupt federal military regimes, assassinations and fraudulent elections. Since 1999, the country has been governed by a democracy headed by President Olusegun Obasanjo. He is known outside of Nigeria for his claim to aggressively fight corruption and implement economic reforms. One of his tenets is to improve the development of sectors outside the oil industry which currently contributes to a third of the nation’s GDP.

The two of us shared an apartment with the other interns in the upscale neighborhood of Ikoyi, known for its large but often run down colonial mansions. Although we lived more comfortably than a vast majority of the population, life was not without its challenges.

Each morning we hoped there would be enough water for showers. Like most other buildings, our apartment complex did not have running water, but instead relied on water tanks fixed on the roof. These tanks would last about a week and it soon became apparent that there was no one responsible for monitoring the water levels. As a precaution, we often filled a bucket of water at night. This would be enough for each of us to take a refreshing wet towel bath if water ran out.

Blackouts were to be expected and could occur several times throughout the day with no advance notice. And planning something as simple as buying groceries involved complex TOM process diagrams, coordinating our schedules with each other and our drivers, because markets and small grocery stores were not within walking distance from home – FATE preferred that we didn’t take taxis alone and would not allow us to drive.

Although this might sound luxurious, a driver in Lagos is a necessity. Given the large size of the city, the distances to work or to anywhere else are large. One of the interns had an average commute of 90 miles per day. Public transportation exists but can be unsafe for both foreigners and locals. So why not get a car and drive it yourself? Well, if you’ve experienced Lagos traffic you’d be hesitant to drive anyway: no lights, no turn signals, and people cut off each other in all directions at high speeds. By the end of the summer, all of the interns had experienced some road trauma, ranging from a collision with an “Okata” (a name for the hundreds of reckless motorbikes which turn driving into a Star Wars video game), to minor bumps, to experiencing a major accident which totaled two vehicles but luckily did not cause any serious injuries. However, if this does not discourage you and you’re willing to wait two weeks, pay 5,000 Naira (roughly $40 USD) and provide a picture, we know someone who can get you a Nigerian driver’s license – no test required!

The drive to work served as a constant reminder of the poverty that we were hoping to alleviate through our grassroots economic development. As we sat in traffic, children as young as three would tap on our car windows, begging for food or money. Street peddlers would also walk from car-to-car selling everything from peanuts to rubber car mats, and live chickens.

Doing business in Nigeria is vastly different from conducting business in more developed Western economies. First, the cost of running a business is about 30% higher due to the lack of infrastructure. Second, Nigeria has a cash economy, which makes the logistics of collecting cash from customers a nightmare. For example, the poor post system and lack of credit and online payment mechanisms make it difficult to collect a bill from a customer in another city. This lack of credit systems also makes it difficult to manage working capital because there are next to no payables periods: almost everything is cash and carry. Some companies are required to borrow money in order to run their companies until they are able to generate revenues through the sale of product. This also means that a company needs to send its finance department to the bank every morning to have money to pay its suppliers for the day. Third, there are limited capital markets and extremely high interest rates. This is sometimes mitigated by some government programs targeted at promoting small and medium enterprises in certain sectors including agriculture and manufacturing.

Fourth, political unrest has left the general population with inconsistent levels of education, health care, and rules of law and has resulted in an “every man for himself” attitude leading to corruption and an environment of distrust. The educated few generally opt for professions which involve little geographic attachment. As a result, industries such as agriculture, mining or manufacturing do not attract talent with know-how and suffer from lack of qualified management. These difficulties translated into the challenges we faced at work, including: introducing cost accounting to isolate unprofitable customers as a result of payment transactions costs, learning to distill complex business ideas into a language that employees with limited formal education can understand, decreasing interest expenses, learning to educate our customers or teach management how to train its staff.

In the evenings, we split our time between three sets of friends, those from our jobs (working class Nigerians), friends-of-friends from b-school and of FATE Foundation (upper-class Nigerians), and U.S. Consulate staff -the U.S. community is small in Lagos. Our Nigerian friends introduced us to the local culture and taught us what true hospitality is like. They took us to busy markets where we admired the beautiful fabrics and jewelry and tasted
delicious pineapples, mangoes and coconuts. We dined at restaurants serving traditional cuisine, including the all-time favorite, fried plantains, as well as goat or fish soups, rice, chicken and pepper soup (very spicy as the name indicates). We were even invited to a Nigerian engagement party which brought over 500 people together to eat, drink and celebrate. We partook in intimate family dinners, hung out at the swanky clubs on Victoria Island, and explored Lagos and its vicinity.

We also spent time with friends from the U.S. Consulate with whom we rode in armored cars with police escorts as we traveled through other parts of West Africa. These unique experiences gave us access to a 360-degree view of the frustrations, biases and ideas for potential solutions surrounding the problem of poverty. As you may recall, the African debt relief issue was a hot topic this summer given the Gleneagles G8. With this topic in mind, we asked ourselves why poverty still exists, despite the fact that the West and NGOs have given more than $1 trillion in aid and subsidies to emerging economies in the past 50 years? What should be the role of the private sector in alleviating poverty? Should the upper class have any responsibilities toward helping those less fortunate? Is it possible to reform a corrupt government and a mentality of short-term thinking? These conversations we had with our friends have helped shape our views on economic development.

Working in a third-world country requires lots of patience. No matter how hard we tried to plan our days, it was inevitable that something would derail those plans. Power outages, lack of running water, traffic jams due to floods and being stopped and hassled by corrupt police were just some of the uncontrollable variables that we encountered.

Coping with these constraints was frustrating as they prevented us from getting things done as quickly and efficiently as we would have in the U.S. However, the redeeming factor was by far the enthusiasm and optimism we found in our colleagues and our friends. Despite years of suffering under military rule and a corrupt democracy, we still saw a drive in the Nigerian people to survive and succeed. Their resilience and incredible sense of optimism was a great motivator and reinforced our view that with some more work, the future looks hopeful.

October 31, 2005
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