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Committee on Creation of Science-Based Industries in Developing Countries, National Research Council

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria

NATIONAL ACADEMIES PRESS

Contents

Summary...................................................................................11 Introduction............................................................................11Nigeria...................................................................................13Filling the Gaps: Three Technologies to Meet Three Major Needs............................15Doing Business with the Poor..............................................................192 Methodology.............................................................................26Hypothetical Case Studies.................................................................28Nigerian Adaptation,......................................................................293 The Case Studies........................................................................31Solar Photovoltaics.......................................................................31Financing the Enterprise..................................................................36Water Purification........................................................................37Antimalarial Artemisinin Combination Therapy (ACT)........................................454 Meeting Needs...........................................................................55Mobilizing the Private Sector to Provide Public Goods.....................................57The Special Case of Artemisinin...........................................................59Linking Science-Based Enterprises to Research.............................................615 Recommendations.........................................................................63Incentives for Private Companies to Provide Public Goods and Services.....................63The Challenge of Artemisinin Combination Therapies........................................66Consumer Education and Training...........................................................67The Role of Philanthropic Foundations and Donor Agencies..................................68The Role of the Nigerian Academy of Science...............................................70Appendixes: Workshop Reports..............................................................75A Solar Photovoltaics: Hypothetical Case Study............................................77B Water Purification: Hypothetical Case Study.............................................90C Artemisinin-Based Malaria Therapy: Hypothetical Case Study..............................108

Chapter One

This report is the product of collaboration between the U.S. National Academies and the Nigerian Academy of Science. Nigeria is an example of a mostly rural developing country whose government is unable to provide some basic services, such as potable piped water and electric power, to a large proportion of the population in an affordable manner. In other developing countries, many of these services are available from private, profit-making companies using readily accessible technologies. This report examines how Nigeria can mobilize private companies to provide some basic services that might be sustainable and cost-effective for government, company, and consumer.

In Nigeria, about two-thirds of the population lacks safe water and access to the electricity grid. A similar proportion lacks effective treatment for malaria, a major cause of child mortality and loss of productivity. Because the government does not provide malaria drugs (or other medicines as well), most people buy their medicines privately. However, in Africa the malaria parasite has become immune to the existing low-cost drugs, and, as for HIV/AIDS, the newer, more effective treatment is too expensive for the majority of patients. In response to this problem, the international community, including the World Health Organization (WHO) and World Bank, has been exploring ways to subsidize these drugs, which, if successful, will expand manufacturing opportunities for the new products.

The word sustainable is generally applied in the international development context to solutions that do not depend on donor funds or ongoing government financial support. Services provided by private enterprises may be considered sustainable when the enterprises are able to make a profit. People without electrical power, safe water, and effective medicines are usually poor, but any firms that provide the poor with these essential services must be able to profit from doing so. Thus, they would require a business model designed for serving a large number of clients who have very little disposable income. The extremely dense urban environment and highly dispersed rural communities that characterize the bottom of the economic pyramid in the developing world require a new approach. Some companies have developed such models and do relatively well in other countries. Elements of these business models include the following:

a focus on the price performance of products and markets

incorporation of innovative hybrid solutions that use advanced technologies blended with the existing culture and with products designed to work in hostile environments characterized by, among other things, an irregular power supply, contaminated water, low skill levels, and unreliable infrastructure

an emphasis on reducing, conserving, and recycling resources, especially packaging

adoption of innovative processes for local manufacture

application of innovative methods of financing, distribution, and marketing

Microcredit, service contracts, and franchising opportunities also are important elements of the business models.

As limiting as the conditions in developing countries seem to be, the great advantage is the huge number of potential clients. An estimated 100 million Nigerians lack safe water, electric power in the home, and effective malaria therapy, or more than the total populations of all but a handful of countries. In India and other big countries with large numbers of poor people, companies (including multinationals) aiming at the customer base at the wide bottom of the economic pyramid have produced new, innovative products and services at substantial profit to themselves as well as with benefits for their customers.

This study aims to demonstrate that for the three examples chosen-solar electric power, safe household water, and effective malaria therapy-it should be possible to make a profit providing these products in Nigeria without direct government support (although for malaria drugs, a global subsidy of some kind probably would be needed). Nevertheless, actions the government might take to encourage private sector participation and extend the benefits to large segments of the population are described in this report.

METHODOLOGY

The methodology used to demonstrate the viability of the business models is called a hypothetical case study. It was originally devised as part of the knowledge assessment methodology prepared by the U.S. National Academies for the World Bank to identify opportunities for developing countries to find niches in global markets by exploiting technologies not yet in use in the countries.

A workshop was held on each of the selected technologies (solar energy, December 8-9, 2005, in Lagos; safe water, December 12-13, 2005, in Lagos; malaria therapy, April 24-25, 2006, in Paris). The workshops were designed to exploit the...