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AIF’s ‘Africa Feeding Africa’ Inclusive Model: Sustainability with a Commercial Business Model?

CASE STUDY, ENTREPRENEURSHIP & STARTUPS
ET CASES, 13 Pages
AUTHOR(S) : Bala Bharathi Yelamanchi, Vandana Jayakumar and Syed Abdul Samad

Case Preview

AIF’s ‘Africa Feeding Africa’ Inclusive Model: Sustainability with a Commercial Business Model?

“The world needs smallholder farmers. AIF can do its part by making rural livelihoods more sustainable.”1

- Amar Ali, CEO of Africa Improved Foods

On September 22, 2019, Amar Ali, CEO of Africa Improved Foods (AIF), Rwanda, received Corporate Social Intrapreneur of the Year Award from Schwab Foundation for Social Entrepreneurship. Amar Ali had led AIF to become a purpose-driven social enterprise in Rwanda, manufacturing high quality, fortified and nutritious complementary foods. He boasts of an inclusive business model that aimed to reduce poverty, create jobs and address stunting and malnutrition through partnerships. Through a value-chain approach, AIF aimed to benefit all the three segments of stakeholders – Rwandan smallholder farmers, employees and consumers. Amar Ali planned to combat malnutrition in Africa by producing nutritious foods in Africa, using African crops, by the African companies, to feed Africans, instead of complete dependence on foreign aid.

However, access to finance had been a major barrier for the growth of nutritious foods in the region. To address the funding challenge, AIF was formed through first-of-its-kind, innovative Public-Private Partnership (PPP) model in the region, by establishing a state-of-art facility in Kigali, capital city of Rwanda. .......

AFRICA IMPROVED FOODS - A SOCIAL INNOVATION AT RWANDA

wanda, an African country ravaged by a 1994 genocide which claimed a million people, had achieved significant development since late 2000s2, regained political stability and emerged as one of the fastest growing economies in Central Africa.3 However, in an attempt to rebuild the economy, there was increasing dependence on foreign aid which amounted to a big chunk of around 30-40% of the government budget.4 Also, humanitarian aid which lacked essential micronutrients led to significant increase in malnutrition rates. Consequently, malnutrition remained a key public health concern in Rwanda and was put at the forefront of GoR’s Vision 2020 Agenda......

Finally, in 2015, in-principle agreements were signed by a consortium of four partners in Amsterdam and Africa Improved Foods (Holding) BV was founded. Subsequently, Africa Improved Foods Rwanda was established as a joint venture between GoR and the consortium with AIF having 92% equity stake and GoR having 8% stake (Exhibit II). The four main equity sponsors were: (a) Royal DSM, the majority shareholder of the venture; (b) International Finance Corporation (IFC),.......

AIF’s ‘AFRICA FEEDING AFRICA’ BUSINESS MODEL

AIF was established with an objective to manufacture affordable, nutritious and high-quality food products sourced locally to improve maternal and child health status in Rwanda and across Africa. It featured an inclusive business model that addressed the nutrition problems of African populace with African resources (Exhibit IV). “Our vision is for Africa to feed Africa,” ..............

AIF’s Products (Institutional Products & Commercial Products)

Institutional Products for Institutional Customers - AIF mainly produced porridge flours (with added milk, vitamins and minerals) meeting the nutritional demands of different population segments such as pregnant and lactating mothers, older infants and young children for the critical first
1,000 days of their lives. AIF predominantly ..........

Commercial Products for Commercial Customers

To make AIF’s products affordable to its non-profit programmes, the company launched a range of commercial products under the ‘Nootri’ brand. The Nootri-range included Nootri Toto (for young children), Nootri Mama (for pregnant mothers) (Exhibit V) and Nootri Family (for whole family), which were made available across East Africa. ............

Building a Locally Sustainable Model

Local Sourcing of Raw Materials and Training Intervention with Farmers: In an attempt to help promote agriculture in Rwanda, Amar Ali decided to source everything locally, which had a substantial impact on the economy. The factory needed 28,000 metric tons of maize and 12,000 metric tons of soy annually.20 These raw materials were directly sourced from Rwandan farmers instead of traders. Within one-and-half ..................

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SCALING UP

Though AIF was recognized for its sustainable business practices, Amar Ali’s path was not without challenges. Rwanda being a country plagued with uncertain weather conditions such as drought, floods, poor rainfall, etc., Amar Ali found it challenging to procure the raw material from local sources alone, especially during times of recurring famine as Rwandan farmers could not deliver adequate quality and quantity. He had to depend ...............

Replicating the Model in the Region

Leading global economists suggested that improving nutrition is the best investment that can be made in global health and economic development. That is what GoR and its partners did when they invested in the US$60 million facility and established AIF. With this initiative, Amar Ali aimed to break the continuous cycle of malnutrition, f............

Scaling up AIF Rwanda

It was said that for every US dollar invested in nutrition, the country would yield US$16. However, a study of 300 African SMEs revealed that access to finance was the top barrier to the growth and delivery of nutritious foods in Africa.36 GoR and DSM faced a similar challenge when they searched for corporate partners to fund the venture (AIF) – given the social nature of its business .........

Furthermore, business with institutional buyers like WFP and GoR did not prove to be a viable business model, as AIF had to align its prices with the lower European prices. Also, with rising raw material prices due to bad weather conditions and poor harvest in the African region, AIF was losing money on its institutional business. .........

 

Assignment Questions

I. Considering the benefits and challenges of PPP model, discuss the reasons behind creation of a social innovation like AIF trough PPP model.

II.

III. ..................

Exhibits & Annexures

Exhibit I: Rwandan Malnourished Children Below the Age of Five (2010-2014/15)

Exhibit II: Structure of AIF

Exhibit III: AIF Holding and Partners’ Investments

Exhibit IV: AIF’s Inclusive Business Model

Exhibit V: AIF’s Products Catering to Pregnant and Lactating Women and Older Infants

Exhibit VI: Africa Improved Foods Ltd.’s Revenue

Exhibit VII: Competitors of AIF

 

Teaching Note Preview

AIF’s ‘Africa Feeding Africa’ Inclusive Model: Sustainability with a Commercial Business Model?

Synopsis

This case study is primarily meant to understand the role of Public Private Partnership (PPP) in creating an inclusive business model in a developing country context. It profiles the story of Africa Improved Foods (AIF), a purpose-driven social enterprise in Rwanda, manufacturing high quality, fortified and nutritious complementary foods. Founded in 2015, AIF is led by Amar Ali, its CEO, who boasts of an inclusive business model that aims to reduce poverty, create jobs and address stunting and malnutrition through partnerships. Amar Ali planned to combat malnutrition by curbing foreign aid and producing nutritious foods in Africa, using African crops, by the African companies, to feed Africans.

Formed through PPP model, AIF serves its non-profit programs through two of its biggest accounts – UN’s World Food Program and Government of Rwanda. It also produces a range of commercial products – Nootri brand – which accounts for a meagre 5% of its total production. Amar Ali aims to quickly boost the proportion of commercial products to become profitable enough ........

Target Audience

This case study offers scope for multidisciplinary learning for MBA students, Post Graduate students in Sociology, Executive MBA students, or other short course executives. It can be used in any of the following courses:

  • Entrepreneurship Course  – To understand the concept of for-profit social entrepreneurship, managing social-business tensions in social enterprises and multi-stakeholder partnership model
  • Strategic Management Course – To understand business models, social innovation, and ‘growth’, ‘diversification’ and ‘expansion’ strategies. Some of the topics that can be covered include Public Private Partnership model, inclusive business model and sustainability
  • Organizational Behavior Course – To understand the concept of responsive and responsible leadership

RESEARCH METHODS

This case study has been developed based on secondary research. Secondary data was collected from various online sources such as case organization, annual reports, industry reports, news articles, YouTube videos, journals and textbooks.

TEACHING PLAN AND TIMING

This case study can be orchestrated interactively using videos, presentations and classroom debates. The instructor can make the discussion lively and participative by forming teams. Classroom discussion can be aligned as per the assignment questions. The indicative Board Plan is given in
Exhibit (TN)-I, for a 90-minute session. ........

ANALYSIS OF ASSIGNMENT QUESTIONS

I.    Considering the benefits and challenges of PPP model, discuss the reasons behind creation of a social innovation like AIF trough PPP model.
The instructor can begin the classroom discussion by posing questions such as what is PPP model and its significance, what are the benefits and challenges of creating a social innovation through PPP route, etc. The discussion highlights could be the following:
  • PPP model is defined as a Public-Private Partnership which is a collaboration between the government and two or more private sector companies for the delivery of goods and/or services to the public...............
.................
.................
 

KEY LEARNINGS

The instructor can conclude the case discussion by highlighting the main background concepts discussed through the case - AIF’s PPP model, AIF’s inclusive business model, its scalability prospects, AIF’s suggested growth and expansion strategies and most importantly, the commercial viability of AIF model......

Exhibits

Exhibit (TN)-I: BOARD plan for a 90 minutes’ session

Exhibit (TN)-II: Pros and Cons of PPP Model

Exhibit (TN)-III: Africa Improved Foods’ Contribution to SDGs

Exhibit (TN)-IV: Inclusive Business Model - Maximizing Social and Economic Value

Exhibit (TN)-V: AIF’s Inclusive Business Model - Integrating BoP People in the Value Chain

Exhibit (TN)-VI: The Range of Social Entrepreneurship

Exhibit (TN)-VII: Social-Business Tensions in Social Enterprises

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Abstract

On September 22, 2019, Amar Ali (the case protagonist), CEO of Africa Improved Foods (AIF), Rwanda, received Corporate Social Intrapreneur of the Year Award from Schwab Foundation for Social Entrepreneurship. Amar Ali had led AIF to become a purpose-driven social enterprise in Rwanda, manufacturing high quality, fortified and nutritious complementary foods. He boasts of an inclusive business model that aimed to reduce poverty, create jobs and address stunting and malnutrition through partnerships. Through a value-chain approach, AIF aimed to benefit all the three segments of stakeholders – Rwandan smallholder farmers, employees and consumers. Amar Ali planned to combat malnutrition in Africa by producing nutritious foods in Africa, using African crops, by the African companies, to feed Africans, instead of complete dependence on foreign aid.

Though Rwanda has one of the highest malnutrition incidence rates – at 44% – it has progressed significantly in terms of political stability and economic progress in the last two decades, thanks to the Government of Rwanda’s (GoR) emphasis on boosting exports and promoting an enabling environment for business. However, access to finance had been a major barrier for the growth of nutritious foods in the region. To address the funding challenge, AIF was formed through first-of-its-kind, innovative Public-Private Partnership (PPP) model in the region, by establishing a state-of-art facility in Kigali, capital city of Rwanda.

AIF serves its non-profit programs through two of its biggest accounts – UN’s World Food Program and GoR. It also produces a range of commercial products – Nootri brand – which accounts for a meagre 5% of its total production. Amar Ali plans to quickly boost the proportion of commercial products to become profitable enough to cross-subsidize its non-profit programs. Should Amar Ali focus on boosting the commercial business segment or should he find additional sources of investments to support the growth of the not-for-profit business segment? What are the challenges in choosing either of the two alternatives? How can he overcome them?

Teaching Objectives

  • To understand the dynamics of PPP model by analysing AIF’s partnership structure and the challenges thereof
  • To understand AIF’s inclusive business model and its scalability challenges
  • To debate on the strategies by which AIF can achieve commercial success and in turn boost the not-for-profit business

Core Theoretical Frameworks

  • Public Private Partnership Framework – Addressing the funding challenge of social enterprises like AIF
  • Inclusive Business Model – Integrating the Bottom of the Pyramid (BoP) population into the value chain
  • Growth Strategy – Growing the commercial business segment to support the not-for-profit business
  • Range of Social Entrepreneurship – Examining AIF as a social enterprise, considering both social and commercial elements
  • Social-Business Tensions in Social Enterprises – Managing social-business tensions in a social enterprise
  • NCVO’s Income Spectrum – Identifying the right income mix for an organization based on the risks involved in each of the available income sources

Case Structure

  • Introduction – This section introduces AIF, the protagonist of the case study (Amar Ali) and the company’s decision dilemma in brief.
  • Africa Improved Foods - A Social Innovation at Rwanda – This section profiles the inception of AIF as a PPP model. In the backdrop of addressing the malnutrition challenges in Rwanda, it elaborates on how AIF’s mission helps in fulfilling the Sustainable Development Goals (SDGs)
  • AIF’s ‘Africa Feeding Africa’ Business Model – This section captures AIF’s inclusive business model
  • Scaling Up – This section enables a debate on the need to boost the commercial business of AIF to feed/support the not-for-profit business segment. How can AIF secure funding and also change the consumer perception towards AIF products to achieve scale and commercial success?


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