4 minute read 26 Apr 2018

How local franchises can safeguard Ethiopian food security

By

EY Global

Multidisciplinary professional services organization

4 minute read 26 Apr 2018

Show resources

Scalable franchise business models are creating a new generation of entrepreneurs and tackling the problem of malnutrition in Ethiopia.

Ethiopia is in the grip of one of the worst droughts in its recent history. According to government and humanitarian agencies, some 10.2 million people need emergency food assistance, as acute malnutrition (especially in children) rises sharply across the country.

The impacts on health, education and the economy are devastating. The World Food Programme recently reported that two in five Ethiopian children suffer from stunted growth, while 28% of all childhood mortality is caused by under-nutrition.

As a consequence, Ethiopia loses around 16.5% of its GDP per year, holding back prospects for sustainable growth, prosperity and transformation that are so desperately needed.

Over the last decade, the country has done much to combat the problem of food scarcity, and some progress has been made – but the problem persists.

With such a long history of food insecurity and reliance on humanitarian assistance and food aid programs, Ethiopia has typically struggled to develop sustainable (and scalable) models of localized food production. But the situation is changing. Where government and charity have been struggling to deliver a long-term solution to this ongoing challenge, could business provide alternative approaches?

Encouraging entrepreneurs to tackle the issue of malnutrition

Of particular importance is livestock production, specifically poultry, which is raised by some 60% of all Ethiopian smallholders and provides an excellent source of protein. The problem is that many local breeds take a year to reach market weight, produce a limited yield of eggs, and tend to be overly susceptible to disease.

Specializing in more resilient breeds, one of the country’s largest poultry producers is championing a franchise model in an effort to solve this problem – a model that directly addresses food security and healthy diet, while also supporting entrepreneurs and creating jobs.

Rather than raise the chickens themselves, EthioChicken supplies their agents with day-old chicks, which can then be matured and their eggs or meat sold. This can realize an annual profit of up to $120 per agent – a significant contribution to household budgets in a country with an average per capita income of just $470 a year.

This ability to generate revenue is essential, but the firm never loses sight of its social purpose. As Co-CEO, Joseph Shields, explains: “Our focus goes beyond profit growth – we’re also concerned about producing a source of protein to make a difference in our country. We want to continue to scale our business, so that we can help keep more children healthy.”

An African person stands next to a flock of chickens in a courtyard with low brick walls

Building success through scalability

As Shields says, scale is crucial. Having distributed more than a million chicks via their network of 140 agents since 2010, the company’s ambition is to double the number of chicks it produces to two million a year within three years.

To achieve this, they’ve had to address a range of operational inefficiencies and administrative processes, which were hampering growth. As Shields explains: “We needed an accurate, real-time view of our entire organization – for example, we wanted our finance department to be able to ‘talk’ to HR, and the warehouse to be linked to sales. That way we could produce operational, sales and financial information including KPIs in real time, and better identify risks such as waste and theft.”

This was where consultants Jack Goldstein and Selamawit Bekele came in. The front line of a team drawn from EY’s UK and Ethiopian member firms, they worked with the company to determine the most effective Enterprise Resource Planning (ERP) system to put in place, and identify improvements for existing company processes, policies and data management.

“We now have a strategy paper that covers an assessment of our current situation, recommendations for an ERP system, budgets and timescales,” says Shields. In addition, the team was able to identify and prioritize over 100 cost and efficiency improvement opportunities, accompanied by an implementation plan.

Better business, better nutrition

With these issues addressed, the plan now is to try to expand into southern Ethiopia and replicate the success they’ve had so far. They will also be managing another two production facilities, taking the total to five, and attempting to meet their ambitious chick distribution targets.

By enabling local entrepreneurs to thrive, the company hopes to tackle the broader problems of malnutrition and food security, and thereby improve the life chances of children, improve health outcomes, and build a better economy for all.

The bigger these kinds of businesses grow, and the greater success they have, the more nutritious food and new opportunities for earning a living will be available to poor families, boosting their long-term health and economic potential. The bigger hope is that the more this socially conscious approach to encouraging entrepreneurship can be shown to succeed, the more it will be able to act as a model and inspiration for others in the poorest parts of the world.

Summary

By enabling local entrepreneurs to thrive, businesses could vastly improve the health and economies in the poorest parts of the world.

About this article

By

EY Global

Multidisciplinary professional services organization