Antenna has collaborated with the Swiss Agency for Development and Cooperation (SDC) to support and scale up 7 business models delivering safe water to the base of the economic pyramid in Nepal, India, Cambodia, Pakistan and Guinea. The 7 businesses developed business models targeted at point-of-use water treatment solutions such as chlorine flasks produced with WATA technology, safe water distribution services, and the production and distribution of ceramic water filters. Antenna supported the start-ups with its expertise in social marketing, business modelling, technology advice and monitoring and evaluation (M&E) activities. Another objective was to consolidate viable business models in order to replicate them in other countries and learn from experiences in providing safe water to the bottom of the pyramid through the Safe Water Business Toolbox.
General objective : Contribute to the progressive realisation of the human right to water in 5 countries (India, Cambodia, Guinea Conakry, Pakistan and Nepal) by scaling up the application of household water treatment solutions in those countries.
Beneficiaries : 3.9 million
Partners : ECCA, MinErgy & Fansa (Nepal), DA/TARA, Spring Health & Fansa (India), Hydrologic (Cambodia), PakoSwiss & Fansa (Pakistan), Tinkisso (Guinea), Aqua for All, IRC, WaterLex, EAWAG & SDC
Project duration : 2015-2018
Lessons learnt :
- Harmful subsidies : Working to provide safe water at the bottom of the pyramid often involves subsidies to a certain extent. Without subsidies it is difficult to open a market. Support is needed – be it with social marketing, R&D, consumer tests, field studies, capacity building or cheap(er) capital. A result of this programme is that we should be more precise in our definition of subsidies and aim to stop ‘harmful subsidies’ by introducing ‘smart subsidies’. Smart subsidies are those subsidies that enhance markets and do not undercut the profitability of the supply chain – especially last-mile delivery – such as public-private partnerships (PPP) with social marketing that creates the market but does not distort prices and undercut margins. R&D support, blended finance and human-centred design inputs for products and services are also welcome. Subsidies that provide products for free are harmful to the creation of safe water markets, except for samples and trial products. We have seen three examples of the negative effects of unsmart subsidies:
- By depressing consumer demand, enterprises can go out of business and prevent the local economy from flourishing.
- Businesses that receive large contracts from NGOs (who often give the products away) will often charge a price that is even higher than the market price because the NGOs can afford to pay it. It raises expectations for these businesses and, after the subsidy programme is over, it is difficult for them to revert to the lower, more equal, price, thereby obstructing the building up of supply chains and sales to middle income families and even poorer customers.
- The most adverse effect of harmful subsidies is the undermining of profitable supply chains, especially at the ‘last mile’ where delivery is costly in remote areas with customers at the bottom of the pyramid who are already a challenge to reach.
- Awareness and preparedness to risks : The start-ups in the second phase of the programme faced a variety of risks when starting to roll out their activities: financial risks, exposure to climate change, changes in regulations and political systems, etc. Exposure to such risks can immediately imply the end of an enterprise. For example, if working capital is used to pay salaries during periods of low sales, there is an elevated risk that increased demand later on might be difficult to meet as money for production is missing. Having a long-term vision for a company is key and has to go along with a risk management.
- Financial viability as a multi-triggered objective : Reaching financial viability is one of the core objectives of safe water enterprises. Experience shows that reaching this goal is connected to a variety of supporting conditions that need to be in place: a) products that people aspire to pay for and social marketing are key; b) sustainable supply chains are a necessity but also a challenge; c) breaking even with low sales volumes is hardly possible; d) young safe water enterprises are vulnerable to shocks (climate, political); e) companies must have enough reserves to pass through the ‘valley of death’, meaning they need a product portfolio; f) future earnings are a long time in the future (10-year objectives); and g) strong innovation ideas take time.
- Water utilities have a role to play in supporting the HR2W : Water utilities act as an extended distribution channel for HWTS: domestic legislation and regulation permit these institutions to engage in this additional service delivery; having leading and committed local decision-makers as champions helps in addressing water quality; and an independent facilitator is available to link all parties involved, in particular those from the public and private sectors.
- Viable businesses are being scaled and replicated : Following the positive results of 2 models (water kiosks and ceramic filters), we are replicating activities in other contexts, such as Ghana, Ethiopia and Malawi for filters (with the support of Aqua for All, IRC and iDE). In regard to water kiosks, the visit of impact investors in January 2018 demonstrated willingness to scale up the business model in India and in the region. Antenna and Spring Health have been awarded the TANSFORM programme, which opens new potential to scale operations at the kiosk level (+100 units) for 2018-2020.
- Entrepreneurial spirit is key – A new paradigm vs NGO mindset : Working with entrepreneurial spirit and vision (including key performance indicators) is really important in fostering growth, with a focus on revenue generation and better product placement. However, in the field of safe water, the main stakeholders are still NGOs and it has been particularly complicated to change mindsets. It requires time and the building of collaboration capacity to properly understand the mission of each organisation. In this perspective, the newly created SWEP (Sanitation & Water Enterprise Pact) group shall also strengthen such visibility for an improved vision of entrepreneurs working in safe water. The online toolbox will also open the door to inspiration and the replication of successful business models for PoU solutions.