Summary of the Workshop

Development through Women Entrepreneurship

(ETH Zurich, 14 August, 2008)

Organized by: Fiorina Mugione Enterprise Policies and Capacity Building, UNCTAD, Geneva Philipp Aerni Alternate Project Leader IP5 (NCCR Trade), Bern University of Bern (WTI) and ETH Zurich (IED) Constantine Bartel African Technology Development Forum (ATDF), Geneva

Background Small and medium-sized enterprises (SMEs) represent the backbone of local economies in most developing countries. Yet, most of these enterprises remain in the informal sector because they lack the ability to grow beyond the neighbourhood and comply with the demands of the complex business environment in the formal sector. SMEs may need more than microcredit to succeed. They need access to affordable credit and create a network of partners in the public and the private sector that actively assist them in improving their product or service to a level that meets the regulatory standards and in the effective marketing. In view of the growing importance of entrepreneurship-oriented development assistance and in response to the fact that up to 40-50% of enterprises in developing countries are owned and run by women, a workshop was held on the 14th of August at ETH Zrich to discuss this new reality with national and international stakeholders from the public and the private sector (see workshop programme and list of participants in the annex of this report). The meeting was convened by the African Technology Development Forum (ATDF). the United Nations Conference on Trade and Development (UNCTAD), The World Trade Institute (WTI) of the University of Bern and the North-South Centre of ETH Zurich. The workshop was funded by UNCTAD, WTI as well as the Foundation Walter Hochstrasser based at ETH Zurich. The overall objective of the meeting was to establish a network of businesses and investors that could support the attending award-winning women entrepreneurs from Africa in their efforts to further develop and expand their respective businesses. Such a support entails assistance in business and product development, marketing and sales advice as well as access to technology, loans and investment.

Workshop Report The need for institutions that support women entrepreneurship in Africa In his opening remarks Professor Wolfgang Kinzelbach, president of the NorthSouth Centre of ETH Zurich, noted that women entrepreneurs in Africa tend to be reliable and successful, hence the need to recognise their efforts and support them in order to fully enhance local entrepreneurship in Africa. Professor Kinzelbach particularly emphasized the pragmatic approach, the resilience, the endurance and the sense of responsibility that characterise women entrepreneurs in developing countries. They demonstrate the ability to do business in an environment that is not always conducive to their efforts to become more empowered and independent. After the opening remarks, Constantine Bartel of ATDF and Fiorina Mugione of UNCTAD introduced the audience to the ongoing activities to promote entrepreneurship in developing countries by these two institutions. Prof. Thomas Bernauer and Dr. Philipp Aerni subsequently moderated the ensuing two panel discussions. The first was composed of Swiss and African entrepreneurs whereas the second consisted mainly of Swiss and foreign institutions involved in development assistance. The goal was to identify the major bottlenecks that prevent young local entrepreneurs in Africa from succeeding in their efforts to set up a business in the formal sector and to discuss the potential of development assistance to help them overcome these bottlenecks. Finally, Dr. Ernst Thomke, successful Swiss entrepreneur and inventor of the Swatch concept, closed the workshop with some final remarks. He argued that entrepreneurs in developing countries face a lot of challenges because access to knowledge and entrepreneurship training are insufficient. Moreover the bumpy and risky road from a business idea to a marketable end-product or service involves hard work and a lot of uncertainty. A successful promotion of local entrepreneurs therefore requires a shift in perspective in development assistance. Often high interest rates for loans are strangling these inexperienced entrepreneurs in an early stage or limit their expansion. Professional coaching and the facilitation of investment in form of shares might help ease these constraints in the early stage business. He concludes that the successful promotion of local entrepreneurs in Africa can only be realized if there is more exchange and understanding between the cultures of business, academia and development cooperation. Emphasising the missing link in development strategies In his talk, Mr. Constantine Bartel gave an overview of ATDF activities, which include exchange and dissemination of information, on inventions, technologies and business opportunities as well as trends in global trade (see also www.atdforum.org). The flagship of ATDF is a free, peer-reviewed online journal that has a focused on original interdisciplinary research and especially encourages African scholars to publish their empirical research in different areas of development. Mr. Bartel also highlighted ATDFs concept of developing business ideas into marketable products. The Entrepreneurship Hub that was set up by ATDF in

Zambia is still in an early stage but its experience so far indicates that there are plenty of talented local entrepreneurs yet, they need assistance and coaching. Often they lack that the knowledge and experience that is required to set up a successful and growth-oriented business in the formal sector. Professional assistance, a business and innovation network as well as access to finance can increase the chances of making them succeed. A great business idea is only as good as the ability to put it into practice. Developing small businesses as a way out of poverty Ms. Fiorina Mugione presented in her talk the historical and institutional background behind the UN Women in Business Award. She also gave an overview of EMPRETEC, a pioneering programme that helps promising entrepreneurs build innovative and globally competitive small & medium sized enterprises (SMEs). The programme is run by UNCTAD. It started its activities in Latin America but is now spreading to Asia and Africa. Its main goal is to provide capacity building in business entrepreneurship. So far it had tremendous success with small businesses growing to huge ventures employing hundreds of people and contributing significantly to their national tax base. The EMPRETEC Africa Forum has rolled out programmes in Tanzania and soon in Zambia and Mozambique. The programme is advised by experts with distinguished backgrounds in the field of entrepreneurship and private sector development. Ms. Mugione also highlighted the idea and motivation behind UNCTADs Women in Business Award. The women entrepreneurs are evaluated and selected by internationally recognized technical experts. They own highly productive and innovative businesses ranging from small handicrafts to industrial food processing and from garments to running a hotel or web portal. They also provide role models for other women, spearheading a process of cultural change in their communities. In short, women entrepreneurs in developing countries are overcoming the traditional obstacles that small businesses usually encounter. Finally, Ms. Mugione introduced the audience to the three women entrepreneurs that were finally picked for the awards. Two of them formed part of the subsequent discussion panel on entrepreneurship moderated by Thomas Bernauer. Swiss and African business experience The first discussion panel constituted of Swiss and African Entrepreneurs. Thomas Bernauer started by asking the panellists to present their views on two specific questions: what motivated them to start a business and what were the main challenges they were facing as entrepreneurs in recent years. The panellists from Africa, Zuhal Ayoub (owner of a fashion accessory business in Sudan and Geneva), Sana Zaal Burgan (owner of a health services business in Jordan), and Sapphira Nyabunwa (owner of a cleaning business in Uganda), emphasized their strong desire to pursue a personal dream, the need for excelling in what one really believed in, and the need to have a source of livelihood. Zuhal Ayoub who worked for an organization where her efforts were not justly rewarded mentioned also the urgent wish to find personally more satisfying work as an important motivation.

Sana Zaal Burgan pointed out that the challenges a woman entrepreneur faces in the Middle East are very much different from Africa. As owner of a small company it's hard to grow because of the lobbing and corruption within the already established institutions of business and government. Furthermore women are still not taken seriously have to work very hard to prove the opposite. Finally she argued that the Middle East still lacks lawyers that are competent in the area of intellectual property rights and familiar with technology cases, and able to communicate in English. This would stand in strong contrast to access to finance where the Middle East has many institutions that help SME's to find a loan with low interest rate. She concludes that improving institutional environment is crucial for the success of women entrepreneurs in her region. Ms. Sapphira Nyabunwa, Managing Director - Safi Cleaning Services in Kampala, Uganda argued that staying ahead of the game is a question of survival. She employs more than 600 employees and she is in constant fear of not being able to pay their salaries. It addition she complained that interest rates for loans are very high and the costs for operating in the formal sector are also underestimated. She argues that there is no such thing as a self-sufficient business. Either you make profits that enable you to re-invest in your business and survive in the market or you make losses and go out of the market. She thinks that many development organisations often dont understand how much struggle is involved in surviving as a women entrepreneur in Africa and they can not really understand her concerns. Ms. Nyabunwa met with ATDF in Geneva. ATDF will identify key stages of development, assist in negotiations with partners and structure its financing. ATDF will also assist Safi Cleaning Services to review and elaborate the business plan and examine financial support schemes for the new activities. The main challenges that all three African entrepreneurs faced when setting up their businesses included: the lack of access to affordable credit and relevant knowledge, lack of a potential customer base, institutional uncertainty as well as inadequate support by foreign institutions. Gender-related institutional obstacles were also a problem for some women entrepreneurs especially those coming from countries where women were still not believed to have the capacity to run sustainable business ventures. Jeannine Brutschin of Novartis Foundation emphasized the importance of creating functioning health services systems in Africa and gave some examples how Novartis foundation is involved in these efforts. However, she admitted that these activities are not linked to the promotion of local entrepreneurship. Matthias He, CEO of the Swiss textile firm Okutex, explained that his company operates in the global market with significant investment in Africa. The company faces increasing challenges in the form of Asian competition (fabrication of their products by Asian firms at cheaper prices) and domestic regulation (complex tax procedures that often consume a lot of time). He further argued that continued access to affordable credit is not just a problem in African countries. Katharina Zaugg, the CEO of the Swiss business Putzen Mitenand emphasized the importance of doing business in an unconventional and innovative way by establishing a niche market. In her case, the business does not just offer cleaning services but also gives courses on ergonomic cleaning.

Capacity building and financing opportunities for African SME The second panel chaired by Philipp Aerni consisted of actors involved in development assistance. It included representatives of SIFEM (Swiss Investment Fund for Emerging Markets), Credit Suisse, Millennium Challenge Corporation, Swissaid and ETH Zurich. Philipp Aerni argued in his opening remarks that African entrepreneurs must be considered an integral part of sustainable development because they facilitate homegrown development, generate income and employment in the formal sector and eventually become influential agents of institutional change because they pay taxes and hold governments accountable for decisions that make life difficult for domestic SMEs. As such, these entrepreneurs also help creating an empowered middle class that actively participates in politics and thus eventually contributes to active and functioning democracy. Aerni asked the institutional stakeholders in the panel to address the question of how they facilitate partnerships between Swiss and African entrepreneurs, and how they promote local entrepreneurship as a way of fighting poverty in developing countries. Ms. Andrea Heinzer of SIFEM portrayed her organisation as a specialized investment advisor providing long-term finance to emerging markets private equity funds and financial institutions that invest in small and medium-sized enterprises (SMEs). SIFEM manages over USD 450 million of which USD 300 million is committed to 40 private equity funds spread over 30 countries. The largest share of investment is in Asia, followed by Africa and Eastern Europe. SIFEM acknowledges the lack of investment in small and medium enterprise (SME) by both corporate finance and microfinance business models. SIFEM therefore addresses a financing gap in the capital markets by investing in funds that finance SMEs. However, SIFEM does not invest directly in entrepreneurs in Africa. The representative from Credit Suisse, Dr. Erna Karrer-Redi highlighted the activities of her company with regard to its micro-finance programme. She stated that there was a demand from the investors' side to "do good" but also to achieve a moderate financial return with the money used for poor but economically active people, hence the micro-finance concept. Participants noted that the interest rates and terms of borrowing from the microfinance institutions were still not favourable. In this context, Erna Karrer emphasized that the relatively high interest rates in microfinance relate to the risks involved, the many steps required in the value chain and the implied costs to run a sustainable business, as well as research and due diligence costs. Ms. Karrer also noted that the micro-finance sector was performing well and that the industry shows a very low default rate. She suggested to consider microcredit as one enabler in order to enhance innovative business and that complementary solutions are welcome. Entrepreneurship through Good governance and investment in people Ms. Magda ISMAIL of the Millennium Challenge Corporation (MCC) gave an overview of MCC activities. She stated that the organization is run by the US government and mostly partners with governments in developing countries that meet certain criteria of good governance. Governments that meet the criteria and come up with a proposal for a long-term development strategy get access to

the MCCs millennium development funds that are handed out in the form of grants. The MCC is based on the principle that aid is most effective when it reinforces good governance, economic freedom and investments in people. MCCs mission is to reduce global poverty through the promotion of sustainable economic growth. Ms. Ismail discussed the 17 different policy indicators (including Civil Liberties, Accountability, Rule of Law, Public Expenditure on Health, Girls' Primary Education Completion Rate, Business Start Up, Inflation Economic Freedom, Economic Freedom, Fiscal Policy Economic Freedom, Land Rights and Access etc) that make up the eligibility criteria for countries to receive assistance from the MCC. Peter Tschumi who represented the Swiss Agency for Development and Cooperation (SDC), emphasized that SDC supports "Entrepreneurship" in many of its priority cooperation countries in Latin America, Africa, Asia and South Eastern Europe. The thematic focus relies on systemic approaches to private sector development that intends to integrate the poor into market dynamics. Business Environment, development of value chains and local economic development are typical working fields. SDC mostly works with both the government and the private sector (often through business associations) and cooperates also with the civil society that works as advocacy group for the underprivileged. Mr. Tschumi argued that women have more often difficulties not only in participating in labour markets but also finding decent and productive work. Hence SDC's development interventions seek to promote more inclusive labour markets and work opportunities that are cognisant and responsive to gender specific causes of exclusion. Ms. Caroline Morel, executive director of Swissaid, gave an overview of Swissaid activities in developing countries. The institution has 60 years of existence and its mainly involved in the mission of fighting poverty, mostly targeting women, as well as the poorest and marginalised people. It promotes organic agriculture, local knowledge development as well as capacity building. She acknowledged the important role of women entrepreneurship but also emphasized that Swissaid has a focus on the very poor that face very difficult conditions that hardly have access to functioning markets. Finally Bernard Lehmann, professor of agricultural economics at ETH Zurich highlighted the need to move from a merely self-sufficient to a more marketbased approach in African agriculture. He noted that the limiting factors to development could be analyzed from the institutional level considering that political instability is often hindering rural development because of war, corruption, and lack of funds for land reform. The other aspect affecting development are the personal priorities of most people in Africa, their training is geared towards being employed rather than being entrepreneurs. In addition, they also lack the knowledge and business-orientated skills to engage formally in business innovation and activity.

Main conclusions of the meeting The workshop participants identified the following challenges faced by local entrepreneurs in developing countries and Africa in particular: Implications for SMEs 1. High cost of finance and access to credit: the interest rates and terms of borrowing from the micro-finance institutions are not favourable. This high loan floor effectively bars entrepreneurs to start or expand businesses. It was suggested that young African entrepreneurs should be supported by institutions that invest in them as shareholders rather than interest-charging lenders. This would allow them to survive the early and most risky stage of business development when entrepreneurs are confronting with large expenses but no revenues. Lack of entrepreneurial infrastructure. This includes lack or even absence of adequate financing products, credit guarantee schemes, and venture capital for Start-up companies. Where Start-Up capital exists, communication structures are often deficient. Access to technology. Most entrepreneurs lack the business network that would enable them to learn about useful and affordable technologies that would help them upgrade their business. Absence of Entrepreneurship education. Even though many African governments are setting up institutions to promote entrepreneurship, there is still an absence of entrepreneurship culture at African institutions of higher education. They are hardly connected to the local private sector and lack incentives to do so. An entrepreneurial university consisting mostly of professors with a practical experience in local business could be of great help. High Transaction Costs: Local markets are often largey informal in nature and lack rules that would ensure the enforcement of contracts. Moreover public sector services that would contribute to functioning markets are unreliable. The insufficient integration and cooperation between the relevant governance institutions and the local private sector help explain the high transaction costs involved.

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Implications for new institutions that would like to promote entrepreneurship in developing countries (e.g. EMPRETEC, ATDF) 6. Business management competence and entrepreneurial capacity must be built up in developing countries. However, entrepreneurship cannot just be taught but must be experienced. It is essential a trialand-error procedure. This experience (what works and what does not work) must then be passed on as practical knowledge in the education system. Business Development Services (BDS) are necessary to support individual businesses at affordable costs - including through mentoring to become more efficient;

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The registration process for new businesses is often burdensome and time intensive. Institutional reform is necessary that allows entrepreneurs to just deal with a single government agency that is in charged of dealing with all the paper work related to registration. Well researched and relevant market information as well as timely communication of changing opportunities and challenges in export and domestic markets is highly relevant for making the right business decisions. Multisectoral marketing boards could assume such a role.

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Impacts and Follow-up of the meeting The meeting provided a platform for knowledge sharing between the (women) entrepreneurs and the subsequent joint dinner in Zurich proved to be a viable mechanism for networking. The meeting brought together a specialist network committed to the establishment and growth of SMEs in Africa. By discussing common challenges and solutions, similar process of establishing, managing and marketing companies successfully emerged. The impact of the meeting can be assessed on its ability of the Business Women to develop new business networks, a concrete follow-up, development of a business partnerships or accessing capital as a direct result of the meeting Timeline for next business award Preparations are underway to continue the Women in Business Award. A timeline has been prepared to institutionalise with the next Award Ceremony tentatively scheduled to be held in November 2009 during the Enterprise Week, a global initiative to promote entrepreneurship.

ANNEX MEETING PROGRAME

Date: 14 August 2008 / Venue: ETH Zurich, Universittstr. 16, Building CHN, Room G42 14:00
Welcoming Remarks

Wolfgang KINZELBACH
Professor of Hydromechanics and President of the North-South Centre at ETH Zurich

14:10

African Technology Development Forum (ATDF) and business development

Constantine BARTEL, Director ATDF

14:30
Small Businesses as a Way out of Poverty: An Introduction to the UN Women in Business Award

Fiorina MUGIONE
Chief Enterprise Policies and Capacity Building, UNCTAD

15:00

Discussion with Swiss and African Entrepreneurs (Moderation: Prof. Thomas BERNAUER, eth zurich): Zuhal AYOUB, APHRODEZA Matthias HEE, CEO of Ocutex AG Sana Zaal BURGAN, founder Med Grant Health Services Jeannine BRUTSCHIN, Novartis Foundation Sapphira NYABUNWA CEO Safi Cleaning Services LTD. Katharina ZAUGG CEO, Mitenand Putzen GmbH

16:00 16:15

Coffee/Tea Break Open Discussion (Moderation Philipp AERNI) Peter TSCHUMI, Head Employment and Income, DEZA, Bern. Magda ISMAIL, Millennium Challenge Corporation, USA Erna KARRER-RUEDI, CREDIT SUISSE, Zurich Andrea HEINZER, SIFEM, SECO, Bern Caroline MOREL, Executive Director, Swissaid, Bern Bernard LEHMANN, Professor at ETH Zurich

17:30

Closing Remarks and Follow-up (Dr. Ernst Thomke)

LIST OF PARTICIPANTS
Name ACATRINEI, Nicoleta (ETH Zurich) * AEBI, Adrian (Aebi Management Partner) AERNI, Philipp (ATDF, ETH Zurich) * AOUKILI, Karima (UNCTAD) AYOUB, Zuhal BAGRI, Jas (ICTSD) BARTEL, Constantine (ATDF) BERNAUER, Thomas (ETH Zurich) BRUTSCHIN, Jeannine (Novartis Foundation) BURGAN, Sana Zaal ERNST, Barbara (Entrepreneur) GRAEDEL, Isabelle HEE, Matthias (OKUTEX) HEINZER, Andrea (SECO) HINTERBERGER, Hans (Prof. ETH Zurich) ISMAIL, Magda (MCC) KARRER-REDI, Erna E. (Credit Suisse) KATAMBA, Julian KINZELBACH, Wolfgang (ETH Zurich) KONDE, Victor (ATDF, UNCTAD) LEHMANN, Bernard (Prof., ETH Zurich) MOREL, Caroline (Swissaid) MUGIONE, Fiorina NYABUNWA, Saphira RTTIMANN, Susanne (Okutex AG) SABUNE, Jolly (Africa Online) STURM, Andreas (Ellipson) Sugathan, Mahesh (ICTSD) juliankatamba@yahoo.co.uk wolfgang.kinzelbach@ifu.baug.ethz.ch victor.konde@unctad.org lehmann@ethz.ch c.morel@swissaid.ch Fiorina.Mugione@unctad.org info@saficleaners.com info@okutex.ch cdo@africaonline.co.ug sturm@ellipson.com smahesh@ictsd.ch a.heinzer@sifem.ch hinterbe@inf.ethz.ch ismailm@mcc.gov Email nacatrinei@ethz.ch a.aebi@bluewin.ch aernip@ethz.ch Karima.Aoukili@unctad.org zuhal@aphrodeza.com jbagri@ictsd.ch bartelc@atdforum.org thbe0520@ethz.ch jeannine.brutschin@novartis.com sburgan@johealth.com ernst@preclinbiosystems.com igraedel@yahoo.com

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Name THOMKE, Ernst TSCHUMI, Peter (DEZA) VEHNAMAKI, Mika VISSER, Caroline (IRF) ZAUGG, Katharina

Email ernst_thomke@bluewin.ch Peter.Tschumi@deza.admin.ch mika.vehnamaki@formin.fi cvisser@irfnet.org mitenand-putzen@magnet.ch

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