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Conducting a “not for loss” business in the WASH sector in Ethiopia

Published on: 18/03/2019

WASH businesses that are attempting to enter both water and sanitation markets worldwide are frequently not what you'd call "business as usual". Many of them are social enterprises started by passionate people who put people before profit and exist primarily to meet a specific challenge.

There are plenty of enterprises in the WASH sector right here in East Africa; Sanivation, Basic Water Needs, AquaClara ... the list could go on. They typically present themselves as a social enterprise on their websites, while at the same time having a legal registration as a regular business in their country of operation.

In Ethiopia, like many countries, the categories "NGO" and "Business" are well understood as opposites; crudely put, NGOs are there to 'give' while businesses are there to 'take'. Here, a WASH enterprise that claims to be 'social' doesn't fit. At worst, it's assumed that you are attempting to 'take' while pretending to 'give'! Well, that's worse than either an NGO or a business! At least a real business doesn't hide its intentions! Even though our attempts to stress the difference raised a few eyebrows, a WASH enterprise is still a legitimate business.

In my first blog I spoke of my involvement with the development of MINCH water filters in Ethiopia. At several points in this journey our team has met with various state officials (past and present) from the Ministry of Science and Technology (MoST), the Ministry of Health (MoH) and the Ministry of Water, Irrigation and Electricity (MoWIE). Our typical 'pitch' is that here we have a product that is proudly Ethiopian, for Ethiopians, and which we eventually want to make as cheap and accessible as we can while building our business. The response is overwhelmingly positive. And then come the issues of pricing and profit.

The WASH sector in Ethiopia has come to be associated with the building of free latrines, or the distribution of free point-of-use devices or chemicals by either public authorities, NGOs, or a partnership of both. The operative word being 'free'. So you can appreciate the problem; into these frameworks of thinking steps a business, having a dubious claim to put people before profit, wanting to deal directly with the end user, charge them for a product that gives them access to a basic right (access to clean water in this case), keep the whole thing financially sustained without outside funds, and grow the operation to serve more and more people.

As I reflect on our own challenges in setting up a "not for loss" business in the WASH sector in Ethiopia, I wonder whether things would have been different if we'd been able to clearly demonstrate our people before profit nature, officially, in Ethiopia. Would that have an impact on how our business was registered, regulated, perceived and maybe even supported by the authorities? Would that have given us both a framework for talking round the key issues of how to regulate the product and the pricing?

Worldwide there is growing recognition of 'social enterprise' as a distinct legal business class. The Community Interest Company (CIC) registration that exists in the UK is a great example. Assets of a CIC are protected by law and can only be used for the social purpose, not transferred to members or shareholders. But as companies are legally constrained to act socially, they attract the kind of investors that I'd argue we need in the WASH sector. Impact investors. I'm not alone in feeling the need to signal a 'different' kind of WASH business. I read a blog that AquaClara, operating in Kenya, has gained the B Corporation certification. Indicating that they are conducting their business to high environmental and ethical standards. Thumbs up! We need more of this.

Although there are thousands of social enterprises in Ethiopia and elsewhere in Africa, no African country has a separate business classification yet that explicitly recognises what a social enterprise is with its legal framework defining the privileges and obligations. While Kenya and South Africa are arguably further ahead in understanding and encouraging social enterprise, there are signs that Ethiopia, in collaboration with Social Enterprise UK and the British Council, is taking social enterprise increasingly seriously. Significantly, Addis Ababa will host the Social Enterprise World Forum in October 2019! Yes! Really! This has got to be the best opportunity to highlight the challenges and opportunities that social enterprise represents as the best of both what NGOs and businesses have to offer Ethiopia. And surely, Ethiopia can't host this forum without making some commitments at home.

Those who know Ethiopia may be gloomily fearing an onslaught of complex and confusing regulatory bureaucracy by which the authorities distinguish genuine social businesses from those that are just trying it on. But let's be positive and patient. Without legally defining such a business classification, how can it benefit from the incentives and encouragements that the sector needs? With the right kind of support and engagement we might just go one better than the 'enabling environment' that NGOs have recently been asking for. Could the creation of a legal classification for social enterprises possibly pave the way for an 'attractive environment'? One where WASH businesses and social enterprises are encouraged and certified to do what they do best - put people before profit ..... and thrive doing it!

This is an ongoing series of blogs and publications by IRC under the USAID Transform WASH project. Please click here for all IRC’s work on this project.

USAID TRANSFORM WASH sets out to improve water, sanitation and hygiene (WASH) outcomes in Ethiopia by increasing access to and sustained use of a wide spectrum of affordable WASH products and services, with a focus on sanitation. It does so by transforming the market for low-cost, high quality WASH products and services: stimulating demand at community level, strengthening supply chains, and building the enabling environment for a vibrant private market.

USAID TRANSFORM WASH is a USAID-funded project implemented by PSI in collaboration with SNV, Plan International, and IRC. The consortium is working closely with government agencies including the Ministry of Health, the Ministry of Water, Irrigation and Electricity, the National WASH Coordination Office and regional governments.

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