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Tackling the world’s biggest problems with social enterprise

Written by Hugh Whalan (BCom (Liberal Studies) ’06)
CEO, PEG Africa

Hugh Whalan (left) and co-founder Nate Heller (right) celebrating after raising their last funding round

Hugh Whalan (left) and co-founder Nate Heller (right) celebrating after raising their last funding round

The problems facing the world’s poorest consumers are large and complex. If we have any hope of reaching the four billion people who lack safe access to water, energy and housing, we need all the resources we can possibly muster.

In 2014 I co-founded PEG Africa to sell products and services, including solar home energy systems, to underserved consumers in West Africa. Since then we have reached close to 200,000 people with our products, employing 600 people in two countries and raising $25 million from investors in the process.

Our customers tend to be illiterate farmers and fishermen, who live in mud huts with thatched roofs, far from paved roads, electricity and running water, and earn between $5 and $10 a day.

My co-founder and I are among a group of social entrepreneurs in Africa who are building a business model that serves some of the poorest people on the planet while producing a financial return that can attract significant capital. Given the hugely positive change we’re bringing to our customers’ lives, it’s surprising to me how often I get challenged about our for-profit approach.

While these questions are well intentioned, I initially found them unsettling because they go far beyond healthy scepticism about the business model itself. They made me doubt whether I should be working within this market at all.

While I have stayed the course, I sometimes fear that other budding social entrepreneurs may choose the path of least resistance and start up in developed markets that need them less. The absolute worst thing that could happen for the poorest people on earth is for the next generation of superstar entrepreneurs to end up in Silicon Valley rather than trying to address the problems of the four billion people who need them the most.

So next time you overhear – or consider asking – one of the questions below, here are some thoughts to consider.

Kwame says the solar light allows him to study at night

Kwame says the solar light allows him to study at night

Surely you can’t make money working with the world’s poorest populations?

Even the world’s poorest people are consumers. Like you and me, they make decisions about what to buy every waking hour. Collectively, they spend more than $5 trillion a year1 – roughly equal to the GDP of the third-largest economy in the world.

There is an obvious market opportunity here, and Coca-Cola is a great example of a company that has seized it. Coke is the biggest employer in Africa, and is planning to spend $12 billion this decade to fuel its growth in the region.2 If Coke can sell sugary soft drinks at 40 cents a pop to villagers who don’t need them, there is plenty of room for companies to sell far more meaningful products that they actually do need.

Do you feel like you’re taking advantage, by making money from third-world markets?

The status quo for poor consumers is that they routinely pay a lot more for essential products and services than anyone else. This is known as ‘the poverty penalty’. A 2002 World Resources Institute report noted that urban slum dwellers in India without access to municipal water pay anywhere from four to 100 times as much for drinking water as do middle- and upper-class households. In Lima, Peru, a poor family pays 20 times what the middle class pays.

Another example is the cost of credit in Africa, which can be 100 times more for poor families who do not have access to formal financial institutions. For these people, loan sharks with usurious terms are the only viable option when they need to borrow funds. Crazy, isn’t it?

So the idea that it is morally wrong to generate profits by delivering better products and services to the world’s poor is unfounded. The best way to eliminate the poverty penalty is to have companies competing to provide goods and services to these consumers, as competition brings prices down and creates choice.

Kwame outside of his home in the Eastern Region of Ghana

Kwame outside of his home in the Eastern Region of Ghana

Wouldn’t charities do a better job of meeting the needs of the world’s poorest populations?

Charity is appropriate in certain situations. However, when poor consumers are already paying for a service or product, and there is already a market established, charity is not the solution. Charity at its worst is a handout that encourages inactivity and stymies initiative.

Ingrid Munro has an interesting perspective on this idea. She founded Jamii Bora Bank, a successful microfinance institution in Kenya that provides credit and housing services to the poorest and most disenfranchised people. Jamii Bora’s identified core clients were, in Ingrid’s own words, “beggars, prostitutes and thieves”. Ingrid chose to give her clients a hand up rather than a handout. She explained her approach in a 2008 interview:

“[The poor] don’t need charity … If we keep saying, “I feel very sorry for you because you can’t manage this yourself,” [the poor] start thinking to [themselves], “I should feel sorry for [myself] because I can’t manage on my own.” But if we say to you, “You can make it. You have talents” … [and if] you see [that] some of your friends who were begging beside you on the same street now walk around in nice dresses, their children are in school, they eat three meals a day, they live in a better house, then you also dare to dream that that is possible for [you too].”3

So where to next?

We have big ambitions for PEG Africa to reach millions of people. In 2016, we were honoured to be recognised by the London Stock Exchange as one of the fastest growing companies in Africa, which also served as a validation of the work we are doing, and will continue to do.

https://www.pegafrica.com/

Hugh Whalan has established several energy and financing businesses in West Africa over the past decade. He has been recognised as one of Australia’s Top 30 under 30 entrepreneurs and, in 2015, was named a Young Global Leader by the World Economic Forum.


1. Allen Hammond, William J Kramer, Julia Tran, Rob Katz and Courtland Walker, 2007, ‘The next 4 billion: Market size and business strategy at the base of the pyramid’, World Resources Institute, www.wri.org/publication/next-4-billion
2. Duane Stanford, 2010, ‘Africa: Coke’s last frontier’, Bloomberg Businessweek, www.bloomberg.com/news/articles/2010-10-28/africa-cokes-last-frontier
 3. ‘Kenyan crisis shouldn’t hide importance of ladders out of poverty’, 2008, RESULTS, www.results.org/newsroom/ kenyan_crisis_shouldnt_hide_importance_of_ladders_out_of_poverty