sierra leone market analysis

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oakley1008 Hewlett-Packard

1/1/2010

Youth Microfranchise Initiative: Market Analysis of Sierra Leone

This report analyzes the general youth labor market and includes an industry and market analysis of 8 distinct sectors and evaluates the potential of launching a microfranchise business in each. Prepared for : Prepared by:

2010

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TABLE OF CONTENTS Executive Summary ......................................................................................................................... 4

Methodology ................................................................................................................................... 6

IRC Research Objectives .............................................................................................................. 6

Research Model And Criteria ...................................................................................................... 7

Management Team ................................................................................................................. 8

Scalability ................................................................................................................................. 8

Profitability .............................................................................................................................. 8

Sierra Leone Youth Labor Market Analysis.................................................................................... 10

Youth Demographics ................................................................................................................. 10

Location ................................................................................................................................. 10

Gender Ratios ........................................................................................................................ 11

Poverty .................................................................................................................................. 11

Employment Characteristics ...................................................................................................... 12

Employment .......................................................................................................................... 12

Work Opportunities ............................................................................................................... 12

Microfranchise Business Model ................................................................................................ 13

Impact on the Youth .............................................................................................................. 14

Business Sector Analysis ................................................................................................................ 15

Mobile Banking Services ............................................................................................................ 15

Market Analysis ..................................................................................................................... 15

Demographics...................................................................................................................... 15

Industry Analysis .................................................................................................................... 17

Evaluation of Microfranchising Potential .............................................................................. 18

Conclusion ............................................................................................................................. 19

Ice .............................................................................................................................................. 20

Market Analysis ..................................................................................................................... 20



Conclusion ............................................................................................................................. 24

Water Sachets ........................................................................................................................... 25

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Market Analysis ..................................................................................................................... 25



Conclusion ............................................................................................................................. 28

Popsicles and Frozen Treats ...................................................................................................... 29

Market Analysis ..................................................................................................................... 29



Conclusion ............................................................................................................................. 31

Salon Services ............................................................................................................................ 32

Market Analysis ..................................................................................................................... 32



Conclusion ............................................................................................................................. 36

Baked Goods .............................................................................................................................. 37

Market Analysis ..................................................................................................................... 37



Conclusion ............................................................................................................................. 41

Poultry ....................................................................................................................................... 42

Market Analysis ..................................................................................................................... 43



Conclusion ............................................................................................................................. 46

Mobile Phone Credit Sales ........................................................................................................ 47

Market Analysis ..................................................................................................................... 47



Conclusion ............................................................................................................................. 49

Conclusion ..................................................................................................................................... 50

Appendix ........................................................................................................................................ 52

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EXECUTIVE SUMMARY Introduction

Sierra Leone has been plagued with high unemployment rates since the conflict, with 70%

currently unemployed. The country is listed as the poorest country in the world, and 34% of its

population is youth between the ages of 15-35. To address youth unemployment, the

International Rescue Committee (IRC) launched an innovative microfranchise project in February

2009 to provide business opportunities to unemployed youth. After evaluating this pilot, IRC

sought additional impact on youth by exploring new industries and strengthening the

microfranchising component of the project. This report provides further analysis and

recommendations necessary to expand IRC’s youth microfranchising initiative and three-year

microfranchising strategy. Based on the Fairbourne Consulting Group’s (FCG) five week in-

country analysis, this report outlines FCG’s research methodology, assesses the current youth

labor market, and makes IRC partnership recommendations based on a broad business sector

analysis.

The Youth Labor Market and Microfranchising Potential

As a result of Sierra Leone’s long conflict, many youth lack key labor skills due to the limited

educational opportunities available during that time. Combining the high percentage of youth

with low education levels and the few employment opportunities today, many youth roam idly

in the streets of Sierra Leone. Although many skilled laborers provide opportunities for

apprentices to gain skills, 50% of urban youth work as unpaid apprentices. Often times these

youth apprentices work for years under their bosses with minimal chance for advancement. In

the rural areas this ratio moves even higher to 70% as youth work on family farms without

pay.

Although most youth see self-employment as their best income opportunity, only 33% of

working youth are self-employed as compared to 50% of adults. Youth focus groups cite a lack of

capital, network, and training. While traditional businesses in the formal market often require

high levels of education, opportunities for both educated and uneducated youth remain limited.

Addressing these youth labor market issues, a microfranchising business model will increase

youth’s employment opportunity and help them to become more independent, develop self-

respect, and learn the skills necessary to operate a successful business. Microfranchsing

opportunities are well-suited for youth because they provide capital, branding, and

training. Because microfranchises are proven businesses, youth should have a greater chance at

running a successful business. As a quality microfranchise prospect, Sierra Leone's youth also

represent a strong labor class because they have more energy, are more malleable, and are

more open to new ideas than adults.

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Industry and Core Market Sectors Analysis

Initially exploring 20 different industries in Sierra Leone, FCG discovered many market

inefficiencies, thus business opportunities. Through multiple interviews with business leaders,

government officials, business associations, and investors, FCG learned that Sierra Leone was

improving its barriers to market entry for private sector investments; however, challenges still

remained for a number of industries to grow. Weak infrastructure, management capacity, and

government regulations discouraged many industries, such as tourism, agriculture, and

manufacturing. In addition, there were many political and market saturation issues with mining

and selling gold and diamonds. Although private sector development was improving, no strong

incentives appeared to encourage local private sector development, but more support was

given to imported goods.

Based on FCG’s research and meetings organizations such as the Minister of Trade, Sierra Leone

Investment Public Access, the First Lady of Sierra Leone, and a variety of other business

association, 8 sectors were chosen out of over 20 to determine which would make a good

microfrachise business opportunity. These 8 industries included: mobile banking services, ice,

water sachets, popsicles and frozen treats, salon services, baked goods, poultry, mobile phone

credit sales. FCG explored these industries and businesses that operate in the formal and

informal markets, have innovative products or services, or are in high demand.

Recommendations

After analyzing 8 business sectors for their microfranchise potential, FCG recommends IRC

further develop relationships with the businesses Splash and Ice Ice Baby. By developing

partnerships with these two businesses, IRC will be able to tap into the following 4 businesses

sectors: mobile banking, ice, water sachets, and popsicles. Based on this robust market analysis

and exploration of the major businesses in Sierra Leone, Splash and Ice Ice Baby show the

greatest potential for working with IRC to create 3000 youth microfranchisees over the next

three years. As mutually beneficial partnerships, these businesses will create youth

employment opportunities, and IRC’s youth microfranchisees will help these businesses deepen

their distribution channels and improve the brand their products and services.

FCG also recommends Splash and Ice Ice Baby as optimal IRC partners because of their strong

management teams, potential scalability and profitability for both the microfranchisors and

microfranchisees. Both management teams of these potential partners run efficient businesses

and are very innovative, welcoming partnerships with IRC and FCG. They are excited about

creating new employment opportunities for youth in Sierra Leone and addressing the youth

unemployment disparity. Since both of these partners receive financial and management

support and oversight from Manocap, a Sierra Leone based venture capital firm, FCG is

confident that these businesses will maintain a strong, long-term market presence in Sierra

Leone through adequate capitalization.

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METHODOLOGY

IRC RESEARCH OBJECTIVES

IRC evaluations of the 2009 microfranshing pilot project showed that 96% of the youth plugged

into the microfranchise systems were either profitable or at least broke even. Further

evaluations found the benefit to the youth was much greater than the money they were

earning. Their self-confidence and outlook on life was also significantly higher compared to non

IRC microfranchise youth in Sierra Leone. While the IRC found much success in their pilot

project, they also wanted to overcome the unintended challenges they encountered.

Hoping to develop more quality business partnerships, ensure the success of every

microfranchisee, and scale the youth microfranchising initiative, IRC engaged the Fairbourne

Consulting Group (FCG) due to its firm’s expertise with developing microfranchises in emerging

markets. IRC employed FCG to undertake a five-week analysis in Sierra Leone to conduct market

research and identify viable business partners in the three regions of Western Urban

(Freetown), Kenema, and Bo Districts. Due to similarities in the markets, and resource

constraints, FCG’s analysis is based primarily on data gathered in Freetown and Kenema. FCG’s

team of four experts was led by, Jason Fairbourne, the author of multiple microfranchising texts

and articles. At the request of IRC, FCG was tasked to complete the following key objectives:

1. Identification of businesses for three-year micro-franchise strategy;

2. Business conversion and definition of path to scale for micro-franchises;

3. Definition of cost-efficiency and sustainability plans for micro-franchises

In this market analysis report, we address objective #1, sub-questions a. through f., while two

separate microfranchising business plans will address objective #1, sub-question g., and

objectives #2 and #3 in more detail. More specifically, this analysis addresses objective #1 along

with the following sub-questions from IRC in mind:

1. Identification of businesses for three-year micro-franchise strategy;

a. What sectors should microfranchise development in Sierra Leone focus on, and

why?

b. What products and services currently demonstrate unmet demand, at scale?

c. What are the supply chain, regulatory, or financial constraints to production,

processing or sale of these products?

d. Who are the market actors engaged in each of the specific product/ service sectors?

e. Is there value added to products or services as they move through the chain? If so

how and what are the monetary values of these additions?

f. Which businesses demonstrate potential for microfranchise operations in the

products or services identified, at scale? What are the specific criteria that are used

to make this decision?

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Microfranchise

Opportunities

Profitability

Scalability

Manage-ment

g. What are the specific strengths and weaknesses of these models in comparison to

other international youth-inclusive microfranchising models? Please identify three

comparable models that are youth-inclusive or set in conflict-affected countries and

describe the strengths and weaknesses of the strategy proposed.

RESEARCH MODEL AND CRITERIA

We used a flexible methodology for conducting market assessments and understanding the

business landscape in Sierra Leone.

First, we used a fluid process that allowed us

to adapt our daily agendas to be most efficient

with our limited time in country. The fluidity

allowed us to tailor our daily objectives as we

learned new information to meet the most

pressing needs. We set an initial agenda for

the first few days and modified daily activities

as we progressed. The reason for the fluidity

of our methods is we did not want to limit

ourselves to a set plan designed in the US. As

we learned, we better understood the right questions to ask, and who to ask, so we wanted to

be fluid enough to adapt with the process. As shown above, the data gathering and processing

is cyclical in nature allowing us to immediately apply new information to guide our analysis.

Second, we conducted research with a large range of participants including: government

officials, businesses, consumers, IRC youth groups, non IRC youth groups, households, and

informal entrepreneurs. The purpose of the initial scoping was to (a) identify potential products

and services from a range of sectors, which demonstrated unmet demand; and (b) identify

successful businesses which were providing these goods and services.

Third, we created a shortlist of twenty potential

micro-franchise partners and/or sectors. At the end

of each day, we would report our new findings and re-

evaluate these industries based on any new

information. By the end of the first two weeks of

analysis, the most promising eight industries were:

mobile banking (Splash, Zap), popsicles, water, ice (Ice

Ice Baby), salon services (Jemna), poultry (Yewe

Poultry Farms), bakeries (School Bakery, Lebanese, J1,

Red Lions, Lumley), and top-up (Balani and Son’s,

Africell, Zain, Comium).

Fourth, we assessed these eight industries further and

evaluated potential partnerships in each one. Only

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two potential partnerships passed our microfranchising model criteria. This process involved

cataloguing and ranking potential business partners in each industry on the basis of their ability

to meet three core requirements. Through the assessment we found that there were many

business opportunities in Sierra Leone, but not all were poised for microfranchising and thus did

not make it through all three filters. Our three microfranchising filters or criteria were;

Management Team, Scalability, and Profitability.

MANAGEMENT TEAM For the Management team we analyzed the skill sets of key management positions. We asked

ourselves questions like:

Does the manager have ability to run a large scale business?

o Can he/she manage managers?

o Do they see value in using a microfranchise model?

o Are they willing to make management changes to meet needs of a

microfranchise business?

o Are they willing to allocate resources to make it work?

o What is there level of commitment?

o Are they trainable?

If they do not have the ability are they willing to relinquish power and hire a manager

above them?

Do they have the bandwidth to grow their business?

o Are there key staff and managers that need to be hired before adding the

microfranchise systems?

o How many hours do they put into their business?

o Are they innovative problem solvers?

Do they have a vision that a microfranchise model can help them scale their business?

SCALABILITY While the management team questions filter the ability of management to scale, our scalability

questions filter consumer needs and the overall market demand. We interviewed consumers on

the streets, in their homes, in focus groups, in taxis, anywhere and everywhere to get a pulse on

the needs and wants for the final eight industries. This is the primary question this filter

answers: Is there enough need for this product or service to scale large enough and provide

microfranchise opportunities to thousands of youth. If we felt it only had the ability to scale to

hundreds we crossed it off the list. Good businesses like hair salons fell short on this filter.

PROFITABILITY To ensure these businesses would be profitable to both the microfranchisees and the

microfranchisor, we asked questions about wages and cost structures. As a result of our

analysis, we determined that the average daily wage for youth was LE 20,000. Most youth

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considered LE 20,000 a day, which is USD $5, a good salary. We also interviewed youth that

were making roughly LE 5,000 a day profit in Kenema and were very happy to have that. While

we hope youth will maximize their profit earning potential, we have only set a daily income of LE

20,000 as a minimum goal. We also asked ourselves questions like:

How much value add does this business bring to the youth, compared to other options?

o How much more would the youth earn by entering into this business as opposed

to selling top-up (a business that anyone can enter if they have some capital)?

o Do the youth learn any skill sets? What are they? Are they transferable? (selling

top-up for example does not require a lot of training or add much experience)

o Is there room for growth?

Can they afford to add employees?

Is there a limit to the growth potential?

Do they earn enough money?

What equipment costs would they have?

Would it engage the youth or is it a boring mind-numbing business?

How innovative is the business – is it unique and differentiated from other businesses?

Will it push the youth to new boundaries and build confidence?

Using these three filters, our experience in other emerging markets, and our analysis of each

potential industry, we were able to determine the best microfranchising opportunities in Sierra

Leone’s current market.

Though our time to research the complete business sector was limited to just five weeks in

Sierra Leone, having four consultants in-country, and the ability to hit the ground running, we

were able to increase the volume of meetings and maximize our research from day one. This

entire analysis was also made possible due to IRC’s in-country staff as they provided a solid

foundation and support to our consultancy. Their initial youth microfranchise pilot and business

sector network was key to our preliminary understanding of the business sector and youth

employment. The IRC staff also arranged numerous meetings and focus groups with the most

knowledgeable business leaders and market players, including youth. In addition, IRC provided

necessary feedback as we conducted our analysis.

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SIERRA LEONE YOUTH LABOR MARKET ANALYSIS In order to better understand the major factors we

would need to consider in developing our youth

microfranchising models, in addition to showing the

impact microfranchising has on youth, we analyzed

Sierra Leone’s youth labor market.

Today, youth ages 15-35 represent 34% of the

country’s 6,300,000 people (all statistics in this

section come from Statistics Sierra Leone Census

2004). These youth face numerous changes in this

post-conflict state. Due to the closure of many

schools and the general inoperability of the

government to maintain social programs during the war, most of these youth lack the education

to create meaningful value in their communities. This lack of education and skill development

results in high underemployment rates where youth are unable to make money beyond a basic

sustenance level. This precludes the ability to improve their situation or to be able to afford

caring for a family, thus making them perpetual “youth.”

This is a particularly important issue to address as history has shown that unemployed and

underemployed youth, frustrated with their situation and lack of control, turn to violence to

achieve a sense of power. This phenomenon is highly relevant in Sierra Leone, where the

Revolutionary United Front (RUF) was composed primarily of disenchanted youth. Although the

war has ended, this key catalyst of the war has still not been entirely addressed.

The IRC is attempting to address this issue in part by helping youth become employed through

microfranchise businesses. The microfranchise business model addresses many of the key

constraints often faced in these markets. The model offers microfranchisee business owners a

proven turn-key business, differentiated products, and a comprehensive training program. Thus,

those that lack education or entrepreneurial talent can successfully provide value to the market

while developing human capital at the same time.

YOUTH DEMOGRAPHICS

LOCATION Young people tend to be more urbanized than the rest

of the Sierra Leone population as shown to the left.

Youth originally relocated to the urban areas during

the war for protection. After the war, research

indicates that youth continue to migrate in search of

better income opportunities. This in part is driven by

the social controls of rural elders – land is controlled by

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-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Rural 25-35

Rural 15-24

Urban 25-35

Urban 15-24

Youth Gender by Location

Male Female

a few elite families that use their positions to extract unpaid labor from rural youth. These

reasons may indicate why urbanized youth have expressed strong resolutions not to leave urban

areas.

GENDER RATIOS As with most populations, young women

outnumber young men in Sierra Leone.

However, the differences in ratios are

particularly high in rural areas. This is possibly

explained by three effects. During the war,

young men had a higher incidence of death as

compared to women, men are often selected

over women to receive educational

opportunities available only in urban centers,

and it appears that proportionally more men

migrated during the war.

It is important to note differences between when men and women become parents within a

family unit. Even compared to other sub-Sahara African countries, youth pregnancy in Sierra

Leone is high among women with 17% of 16 year olds and 47% of 18 year olds having at least

one child. Many of these women marry at earlier ages (50% by age 19 and 71% by age 24),

particularly in rural areas where arranged marriages and traditions dominate.

Men on the other hand do not marry until much later in life (50% by age 27 and 85% by 35). This

is in part due to the cultural responsibility placed on men to provide for the high cost of

supporting a family. Achieving this level of income can take a long time for men, as they work to

gain education, experience, and stronger

social networks. In rural areas, many men

are dependent on the local elders to be able

to marry, often requiring that they provide

free labor to future in-laws in order to “pay”

for their wives. Marriage delays often result

in social exclusion and ultimately, violence.

POVERTY Given Sierra Leone’s low Human

Development ranking of 180 out of 182, it is

no surprise that poverty is prevalent.

Among youth, poverty incidence is

particularly high due to lack of education,

weak social networks, and few employment

opportunities.

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0%10%20%30%40%50%60%70%80%

15-19 20-24 25-35 36-65 15-19 20-24 25-35 36-65

Men Women

Unemployment Profiles of Labor Force

Completely Inactive Unemployed Home Duties

Focus groups and interviews have shown that most youth contribute very little to their families.

This results in additional burden to the income producing members of the family and promotes

a lack of respect for those youth. The emotional impact of poverty therefore may play a more

important emotional and social stability role for youth. It appears that by simply reducing the

financial burden on their family, youth gain more respect from others and from themselves.

EMPLOYMENT CHARACTERISTICS

EMPLOYMENT 25% of young men are neither

working or in school. Unemployment

is the highest for men between the

ages of 20-24 at 30%. That age span

is considered a time of transition for

youth as they finish up school and/or

feel additional social pressure to

become more financially

independent.

As shown above, many young men are completely inactive, while those that are actively

searching for a job (unemployed) or performing house work (home duties) still make up a large

percentage of the youth labor force. As would be expected with earlier marriages and child

barring, women tend to have higher unemployment rates, though they are primarily busy doing

house work.

Differences occur in employment rates between rural and urban areas. 70% of rural 20-24 year

olds have work compared to only 40% of their urban counterparts. This difference declines with

age such that by 35, labor participation rates are the same. These differences are driven by rural

youth leaving school sooner and working on the family farm, while urban youth face fewer job

opportunities.

WORK OPPORTUNITIES Work opportunities for youth fall into the following categories:

Unpaid Labor: More than 50% of urban youth are employed in unpaid labor

(apprenticeships) with 70% of rural youth engaged in unpaid agricultural activities

(primarily family farms). Although unpaid labor rates decline with age, 33% of men work

for free, while 40% of women work for free in their husbands’ shops and stalls. While

workers within a family do share household expenses, many are unable to become

independent income earners.

Self-employment: Most youth see self-employment as their best employment option.

Although this leads to increasing self-employment with age, only 33% of working youth

are self-employed, compared to 50% of adults. Urban youth and men are more likely to

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operate their own business, though this gap also declines over time with more than 50%

of the labor force operating their own businesses. A key finding is that many youth feel

that they lack sufficient capital and access to cheaper inputs to help their business

operate efficiently, be productive, and ultimately competitive. 25% of all unemployed

would like to start their own business. 30% of unemployed youth would like to start

their own business, though this declines to only 16% by age 25-35.

Wage Employment: Wage employment is very rare and predominately an urban male

phenomenon. Given that wage employment increases with age, even when controlling

for education across ages, it appears that wage labor markets value experience over

education. Youth also indicate that labor market connections often trump merit in hiring

decisions. 70% of all unemployed would prefer wage labor, which may be an indication

of entrepreneurial drive in the economy.

Formal Sector Employment: Only 10% of labor in Sierra Leone is a formal sector wage

job with benefits. Workers in this sector are more educated and are predominately

urban and male, even compared to comparably educated women. As education level

increases, unfortunately so does unemployment. However, the likelihood of being

employed in the formal sector also increases with education such that once a highly

educated individual finds a job, it will most likely be in the formal sector.

Most people move from one work sector to another, improving their situation over time, with a

wage position as the end goal. Many youth start their own business and over time are able to go

back to school and get more education and/or make more connections with other wage earners,

thereby increasing their chances of acquiring a wage paying job. Strong educational

backgrounds are required for formal sector employment, while experience and connections

appear to be the biggest influences to achieving a wage paying job.

MICROFRANCHISE BUSINESS MODEL

The youth labor market is an important part of the overall economy and social structure of the

country. Long term growth and development will depend on having a strong, experienced labor

force well into the future. In order to make up for the lost years of the civil war, when few

educational and work opportunities existed, youth today need even more opportunities so that

they gain the necessary skills to develop into the next generation of leaders in Sierra Leone.

As a microfranchise prospect, youth represent a strong labor class. Youth typically have more

energy, fewer family responsibilities, and potentially more ambition than adults. They can

endure longer work hours and travel distances. This is important because a core part of

microfranchising is the model’s ability to drive wider distribution through microfranchisees that

are able to sell to the last mile.

Youth are also more malleable and open to new ideas than adults. This makes them more

optimistic about their potential success and they are more teachable, making it easier to

transfer successful business practices within the microfranchise. Given that strong systems are a

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key component to a successful microfranchise system, having youth that adhere to a

microfranchise system’s guidelines is crucial.

IMPACT ON THE YOUTH A microfranchising business model helps youth to become more independent, develop self-

respect, and learn the skills necessary to operate a successful business.

Microfranchise businesses around the world have demonstrated the ability to provide

individuals with better, more reliable jobs. Research of several microfranchises in Bangladesh,

Ghana, and Guatemala have indicated that although microfranchisees don’t always earn the

most as compared to stand alone enterprises, they do have a much tighter profitability band,

indicating much less risk for the microfranchisee. This is important in developing countries as a

bad week for the business can have dire consequences on a family. We have seen countless

individuals go from earning $1-2 per day before joining a microfranchise business to earning

$20-30 per day. This dramatic increase in income has a large impact on the overall welfare of

the family and the independence of the microfranchisee.

In focus groups with youth, we found a stark contrast between those that were part of the IRC

Youth Microfranchise Initiative and those that were not. Youth employed in the program cited

multiple benefits. Youth felt like they were contributing to their families, or at the very least

independent from their families for their care. Others referenced an increased amount of

respect from their family and community and how their status within the community had

changed from idler to contributing member. Many youth also enjoyed the freedom associated

with having extra money. All demonstrated an increased level of self-respect and self-worth.

Youth not part of the program, however, were more pessimistic and frustrated with their

situation. They also appeared to be more prone to expect others to help them as opposed to

being independent.

Although most youth see self-employment as their best income opportunity, only 33% of

working youth are self-employed as compared to 50% of adults. The youth we met with often

cited lack of capital, network, and training. A microfranchise business model solves these issues.

Most microfranchises are set up with financing as part of the package through either

microcredit or consignment sales. Microfranchisees are immediately plugged into the broader

market and have the opportunity to leverage a strong brand/product to develop their own

business relationships. Finally, training is a core component to any microfranchise. In order to

operate smoothly and increase sales, microfranchisees are trained on their products, best sales

practices, and general business operations. This addition to their human capital improves their

potential for success within the microfranchise and greater society.

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BUSINESS SECTOR ANALYSIS After exploring over 20 business sectors in Sierra Leone, eight sectors met our first pass criteria

for viable youth microfranchise options and thus warranted further analysis. The Business Sector

Analysis section outlines each sector’s products and/or services, analyzes the market and

industry dynamics, and evaluates its microfranchise potential. Finally, each sector summary

concludes with our recommendations regarding its viability as a youth microfranchise business.

MOBILE BANKING SERVICES

Mobile banking is currently one of the hottest economic growth and development opportunities

in emerging markets. With the recent success of M-PESA in Kenya, more organizations,

governments and companies are looking at the potential of mobile banking. This is a big

opportunity in Africa as over 40% of Africans own at least one cell phone. M-PESA, a mobile

banking solution provided by Safricom in Kenya, is currently the largest player in Africa with over

8 million active customers, representing an 18.4% country penetration rate, and a 38.3%

penetration rate of total cell Kenyan cell phone users

(The Economist, September 2009). One recent study

by Olga Morawczynski, an ethnographer at the

University of Edinburgh who has studied M-PESA in

detail, found that mobile banking has saved E-PESA

users enough in time, travel, and fees so as to

increase their incomes by 5-30%.

The basic mobile banking services simply allow people to transfer funds via their cell phones.

Applications may include but are not limited to remittance transfer, payroll, shopping, non-

interest paying saving accounts, utility and school fee payments, etc. In part, mobile phones act

like debit cards. The service reduces the need to carry cash, which can be unsafe and

cumbersome. This is important for countries like Sierra Leone where inflation has led to paper

currency with little value, resulting in the need to carry large quantities of cash.

MARKET ANALYSIS DEMOGRAPHICS

Currently, users include mostly more educated and technology savvy

consumers and businesses. Customers will need to make enough

money to own a cell phone and to justify the transfer fees. Most

users are urban based, though as the services rolls out, it is expected

that usage among rural users will grow significantly.

Today there are only 200,000 bank accounts among Sierra Leone’s

6.3 million, compared with the 1.5 million mobile phone users. Akin

to other countries in Africa, mobile telecommunications are

leapfrogging archaic technologies; youth as well as adults use cell phones. Although youth are

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more technologically savvy and likely to adopt new mobile phone applications quickly, adults

who account for the majority of small business and farm owners could stand to profit the most

from mobile banking solutions.

CONSUMER NEEDS/WANTS AND PREFERENCES

Awareness is one of the largest problems facing mobile banking in Sierra Leone. People are

unfamiliar with banking in general given the low banking penetration in the country and they

typically lack the education to understand how the system operates. Although many people in

Freetown had heard of Splash and Zap, the two solutions provided, few know where or how to

use the service.

People do not trust or like banks in Sierra Leone. Countless individuals store money under their

beds and in other unsecure areas rather than depositing it in the bank. This bleeds over into the

mobile banking sector as people get comfortable with the system and trust that it will operate

correctly – ensuring that they always have access to their money.

Currently, there is limited benefit to the customer due to the few other registered customers. As

more and more people use mobile banking solutions, it is expected that there will fast growth

due to network effects and ease of use. However, the service must be available to thousands of

customers with hundreds of physical access point before it reaches exponential usage growth

rates.

MARKET SIZE AND GROWTH

Currently the market size is small, with very few users. Splash currently has 25,000 users and the

competing offering Zap by Zain is also now just raising awareness of its product. Using M-PESA

as a guide, number of mobile banking users in Sierra Leone could reach 600,000 (40% of 1.5

million cell phone users). This estimate might even be low, given that M-PESA is tied into

Safaricom and only works on that network. M-PESA transfers around $200 million every month

with an average transaction size of $18 in Kenya among its 8 million users.

Using similar statistics to M-PESA would result in a potential $5.4 million market size per year in

the next year or two, assuming 3% transaction fees on $15 million in transfers per month. If

Sierra Leone mobile phone penetration hit the same 40% as the rest of Africa (2.52 million Sierra

Leoneans), that alone would grow the market to $22.7 million per year. Although this may seem

like a much lower market size, this does not account for other additional services, nor is it

expected that more than 2-3 players will operate in this market. In addition, there is still

significant growth in this market given that M-PESA is currently signing up 10,000 new users per

day.

17 | P a g e

INDUSTRY ANALYSIS ECONOMY TYPE

Mobile banking sits within the finance industry; however, it decentralizes traditional banking

into the informal markets and is considered one type of “banking for the unbanked.” While

many poor have access to mobile phones, there are still many without bank accounts or

education regarding how to save money. Hence, mobile banking has the potential to change the

financial industry as it becomes more prevalent and possibly redefine the demand for banking

services in the emerging markets.

MARKET PLAYERS AND COMPETITION

Currently in Sierra Leone, only two companies offer mobile banking services. These include Zap

by Zain, a mobile payments service that only operates on the Zain network and a few large

businesses, like one of the local gas station networks. The other is the new start-up Splash,

which is funded by ManoCap and works with all three of the major telecommunications

companies in Sierra Leone: Zain, Africell, and Comium. Customers can substitute either by

simply transferring air time units to one another. Although it appears from talking to people that

this is uncommon, we did meet a couple individuals that transferred money to the provinces in

this manner.

Perhaps the greater threat comes from outside of the country. M-PESA is currently working with

a number of banks to expand its presence in other African countries. MTN recently launched a

mobile payments service in Uganda with Stanbic Bank. So far the trial has been successful and

resulted in expansion to Ghana with 20 other countries on the expansion list (“Beyond Voice”,

The Economist, 2009). Other potential entrants include Gcash and Smart Money in the

Philippines, Wizzit in South Africa, and Celpay and Mobile Transactions Zambia Limited in

Zambia.

SUPPLY CHAIN

Mobile banking agents provide a very simple service to their customers. First, customers

deposit money with a mobile phone agent. The mobile phone agent then transfers the amount

minus a small fee to the customer’s mobile phone and both will receive an electronic SMS as a

Large Bank “Agent of

Last Resort” w/reserves

Customer Agent Transaction

Point for Customers

Super Agent Capital and

Management Support

Mobile Banking System Provides banking system, training, certification

18 | P a g e

receipt of the transaction. From there, the customer uses their electronic credit by dialing

certain numbers and using their security id or password. They can pay bills that are set up with

the service, transfer money to family or friends, or pay for additional phone minutes out of their

mobile phone’s balance.

Mobile banking systems are simply a software and mobile texting platform that sits on top of

the transaction network. The networks are designed to keep the virtual cash as liquid as

possible for the customer, this being the key to generating revenue for the mobile banking unit

as it derives its incomes from fees. Each layer of the network, from the Bank to the Super Agent,

to the Agent, carry increasing amounts of cash, so that if the Agent runs out of cash to handle

transactions, the customer or the Agent can always resort back to the Super Agent or Bank.

EVALUATION OF MICROFRANCHISING POTENTIAL

PARTNERSHIP

We have strong partnership opportunities with Splash. They have

an experienced management team that is capable of managing a

large scale business. In addition, they have access to capital from

a venture capital fund, ManoCap, which has invested USD $2

million to date, while currently raising another $1 million for a

third round of funding projected to close at the end of this year.

Splash’s management also sees the value of designing a

microfranchise model to scale their services; thus, strengthening

the commitment to see the IRC youth succeed.

SCALABILITY

There is a lot of potential for mobile banking to be successful in Sierra Leone. Building out the

strong transaction network outlined in the Supply Chain section will be crucial to achieving that

success. This network of Agents will require that at least thousand people are ready throughout

the country to provide liquidity for customers. Splash recognizes this and is focused on building

and supporting this network. This provides a real opportunity to employ hundreds, if not

thousands of youth through a microfranchise model. In many aspects, this business should scale

to a similarly to the mobile air time reseller market, such that a Splash agent can be found

within a certain distance from any customer.

Splash is also exploring a number of other verticals such as payroll services and becoming Sharia

compliant, which would give them better access to the large Muslim population that accounts

for 60% of Sierra Leone.

SUSTAINABILITY/PROFITABILITY

Mobile banking has the possibility to be profitable to both the microfranchisees and the

microfranchisor. We see good potential for IRC microfranchisees to get involved in an emerging

industry and build a large clientele before the industry explodes and the market is saturated

with youth mobile banking agents. While the cost for Splash agents to offer mobile banking

19 | P a g e

services may be fairly low, we expect each youth agent to have a high earning potential, with a

percentage of transactions being paid as a commission. According to Splash, Agents should

make L 20,000 (~$5) per day if they service at least 7 transactions. In addition, microfranchisees

will be able to sell mobile phone air time at a much better rate through Splash then they could

get from airtime wholesalers, thus increasing their earnings.

CONCLUSION Due to the mobile banking industry’s current management team, scalability, and profit earning

potential, we recommend using mobile banking as one of the project’s sectors. In particular, we

recommend IRC partner with Splash as the best microfranchising partner. Since Splash envisions

developing a deep distribution system with mobile banking and its services, it will make a great

partner. This service distribution network represents an enormous opportunity for youth

microfranchisees to become mobile banking agents throughout Sierra Leone.

In addition, Splash has already expressed interest to work with IRC and Fairbourne Consulting

Group to develop the microfranchising system. Manocap, the local venture capital firm funding

Splash has also offered its backing and support. This is an enormous opportunity that will

benefit both the youth microfranchisees and Splash.

20 | P a g e

ICE

In Sierra Leone the temperature remains fairly constant throughout the year, hitting 95 degrees

Fahrenheit during the dry season and not dropping much below 70 degrees during the wet

season. There is an obvious need to keep items cool. Ice is used in this market much more as an

input for other businesses rather than direct consumption by the end user. Consumers demand

ice-cold water and soda from vendors. Fishermen need large quantities of ice to transport their

catch. Frozen treat vendors require ice to sell their products as well. To that end there are

different kinds of ice – cubed ice, block ice, and packing ice. The highest cost of producing and

distributing ice is fuel and energy. Thus, ice is very much a commodity product that can

fluctuate in price based on energy costs.

MARKET ANALYSIS

DEMOGRAPHICS

Ice is primarily sold to two customer groups – fishermen and street vendors, with only a minimal

amount going to restaurants and hotels. Ice Ice Baby, the largest producer of ice in Sierra Leone

estimates that half of their sales can be attributed to fishermen (packing ice) and the other half

to street vendors (crushed ice).

Fishermen in Tombo (1 hour outside of Freetown) order ice in large quantities as needed to

keep their catches cool for resale. Fishermen prefer either shaved or crushed ice, as it is the

best form of ice for packing fish. Street vendors are less discriminate about what type of ice

they have to keep their beverages cool. When questioned almost all street vendors purchased

ice to keep soda, ginger beer, and water cool for resale. Hotel and restaurants are occasionally

in need of cubed ice for drinks and tend to make higher purchases on the weekends. Many

hotels have their own ice producing equipment and will only request ice when their machines

are broken.

When there is a power outage, there is a high demand for ice because almost everyone loses

the ability to keep things cold and small informal producers lack the power needed to

21 | P a g e

manufacture ice. However, Ice Ice Baby, the largest ice producer in the country with capacity of

28 tons of ice daily has a high output generator to meet all of its energy needs.


Fishermen need ice to cool fish, street vendors to cool their inventory of beverages, and hotel

owners to prepare drinks for tourists. The important common denominator with these three

distinct customer groups is that these are business-to-business transactions. Little to no ice is

sold direct to consumers for their cooling needs.

Customers prefer specific types of ice (blocked, cubed, crushed, shaved) based upon their

business needs. All customers demand “strong” cold ice. Upon distributing ice, many

customers at the end of the distribution route tend to complain about ice quality as some of the

ice was melted after a few hours of transport. However, left with no real alternative options to

purchase ice, customers quickly purchase what ice remains.


Current estimated revenue just for ice is

$880,000 annually per conversation with

Amadeus, Ice Ice Baby’s General Manager.

He provided sales amounts for the dry

season at 11.2 million Leones daily, and we

estimated the wet season at half that. There

is also opportunity for deeper distribution

within Freetown, possibly 3 times the current

5-kilo bags distribution which is half of the

current revenue, so an additional $1,320,000. Total estimated market size on current routes

with deeper distribution is $2,200,000. Building out new production facilities in 4 other sites to

establish a larger network of 5 total facilities to blanket the country could bring the total

estimated nationwide market size to $11 million.

There is opportunity for exponential growth in the ice market, as producers cannot meet

demand both in and outside Freetown. Within Freetown deeper distribution networks would

greatly expand the customer base to many street vendors in need of ice. Riding alongside Ice

Ice Baby’s salesmen on a daily distribution route to Waterloo in Freetown, literally hundreds of

customers were calling for ice from the side of the road and yet did not receive ice as the truck

only stopped at specific locations. Outside of Freetown there are many customers whose needs

for ice are not being met. In addition, should Ice Ice Baby be able to reduce the cost of its ice, it

may be able to further grow the overall market size. In the long run however, it is expected that

ice sales will decline as power becomes cheaper and more reliable within the country.

22 | P a g e

INDUSTRY ANALYSIS

INDUSTRY TYPE

Ice production is primarily a manufacturing and distribution sector. Core competencies and

resources related to both are important for success in this sector. Strong players have access to

large ice production facilities and the ability to keep them consistently operating. Refrigerated

or insulated trucks for distribution are also necessary. Finally, quality of the product produced

through those processes is important to building trust in the market.


Competition in the ice market is not intense as the market absorbs all ice that can be produced.

There is room for much more capacity. Whether that capacity comes from current market

players or new entrants, it will be a function of capital costs to set up facilities and distribution

routes with trucks. First movers that can set up deep distribution routes and build a strong

brand will capture significant market share. Currently, Ice Ice Baby is the only major player in

this industry. There are many small and informal local vendors as well. However, customers

clearly prefer Ice Ice Baby due to product quality and brand recognition. These producers sell

minimal amounts as they have limited capacity to pay the utility bills to freeze and store ice.

Ice Ice Baby is the only company that is certified by the Ministry of Health to sell ice for

consumption. Other ice producers were shut down due to poor water quality earlier in 2010.

Remarkably, the company is also certified by the European Union to service the fishermen in the

event the fishermen can export fish.

SUPPLY CHAIN

The production capacity outside of Freetown is rather

limited. Therefore, Ice Ice Baby will ship it as far as

Tombo and Makeni. No other established company is

servicing the ice needs of communities past Makeni. The

transport costs combined with Ice Ice Baby’s limited

number of trucks discourages transport of the product

farther than Makeni. The company is eager to expand

into these areas and could build another facility in the

region to do so when ready.

Distribution in and around Freetown follows more of an “ice cream man” distribution route.

The ice truck follows a daily route in the morning making stops in strategic locations to meet

street vendors to sell 5-kilo bags of crushed ice (Le 2700). As traffic is a big problem on the road

to Waterloo the ice truck is limited on where it can stop to avoid being ticketed by the police.

Many customers will call to the truck from the side of the road requesting ice, but the truck will

not stop.

23 | P a g e

Once the truck is stopped many vendors will run up to the truck to purchase the product. In the

case of Ice Ice Baby, the truck will make as many as 12 stops before making it out to Waterloo.

It is possible that all of the ice will be sold out before even making it out there. The salesman on

the ice truck typically reserves ice for customers that routinely purchase larger quantities.

Otherwise, it is likely that the ice truck will arrive in Waterloo with no ice.


PARTNERSHIP

Ice Ice Baby is a willing and strong partner. As mentioned, the company is the only company

approved by the Ministry of Health to produce and sell purified ice. The company is well

capitalized with 6 trucks and the capacity to produce 28 tons of ice each day. Ice Ice Baby may

very well be the strongest brand for any local product in Sierra Leone. There is also a strong

management team in place with oversight by Manocap, a local venture capital firm. Most

importantly, Ice Ice Baby is willing to pursue a microfranchising model with the end goal of

setting up a cold chain distribution system. Once the cold chain distribution system is set up, Ice

Ice Baby can distribute more cold and frozen products like water and popsicles.

SCALABILITY

Scaling will require some capital expenditures, be it lighter trucks and/or strategically located

storage facilities. Deeper distribution from these strategic points will also require some

pushcarts or possibly bicycles and coolers for the microfranchisees. These costs should not be

an obstacle to Ice Ice Baby, given their backing by ManoCap, and ManoCap’s commitment to

developing those distribution channels.


Ice is in very high demand and there is not sufficient supply for the market. The first mover to

establish deep distribution will open up and capture market share. Managing capital

expenditure and growth of the distribution network will be a critical factor in the overall

profitability. Developing a cold chain distribution system to sell products complimentary to ice

like water and popsicles will make the business even more profitable.

Water Purification

Process

Freezing Process Cubed Shaved Crushed

Distributio

n Trucks

Power

Business Customers

Hotels Fish

Businesses Drink Vendors

24 | P a g e

CONCLUSION We highly recommend that IRC further develop

their relationship and partnership with Ice Ice

Baby in the ice selling industry. Due to Ice Ice

Baby’s high quality management team and

potential scalability and profitability, it provides a

great opportunity for IRC’s youth

microfranchisees. Microfranchising is also well

matched for the needs of Ice Ice Baby since the

company envisions developing a cold chain

distribution system. With this distribution network and support, Ice Ice Baby’s cold/frozen

products will more easily be sold throughout Sierra Leone.

In addition, Ice Ice Baby has already partnered with the IRC during the pilot phase and expressed

interest to work with the Fairbourne Consulting Group to develop the microfranchising system.

Manocap, the local venture capital firm owning Ice Ice Baby has also expressed interest in

financing capital expenditures for popsicle and water sachet production equipment. Ultimately,

this is an enormous opportunity that will benefit both the youth microfranchisees and Ice Ice

Baby.

25 | P a g e

WATER SACHETS

Water sachets are single serving plastic bags of drinking water sold by street vendors and

established stores alike. There is both an informal and formal market for the product.

Customers will pay a premium for branded sachets that are known to contain purified water.

Customers also highly value an ice-cold water sachet and will seek out vendors that can provide

this.

Informal water sachets (Le 100) are filled with unpurified water from

homes or community water taps and sold on the street. Many youth

will sell unpurified water sachets on the street as the product turns

over quickly and anyone can produce it.

Purified water sachets (Le 300 – Le 500) are produced by local

companies using a reverse osmosis process and are distributed in packs

of 30 for retail by street vendors and formal establishments. One

challenge with the purified water sachet business is the water quality.

As “purified” sachets sell for more than double the price of unpurified

sachets, the true water quality of some brands is called into question, especially since some

have businesses have been shut down by the government for falsifying their water quality.

MARKET ANALYSIS

DEMOGRAPHICS

Everybody buys water if they are thirsty and not near their home

water source. Individuals that spend a lot of time outside working

away from the home like taxi drivers, other street vendors, and

laborers may represent a higher portion of the customer base,

but either way water is a necessity for all and everyone buys it as

needed. However, the size of a customer’s disposable income will

dictate whether or not a customer purchases purified or

unpurified water as there is a premium for the purified product.


There is no more basic need than water. Consumers need to satisfy their thirst and highly prefer

cold water when given a choice. Customers require an accessible price for this most basic

product. Low-cost convenient packaging and lack of purification in the informal sector make

this easily attainable at Le 100. Customers in the formal purified water market highly value the

brand and are willing to pay a premium for safe drinking water. A well known trusted brand is

highly valued by consumers of purified water sachets.

26 | P a g e


Growth will be driven by increased distribution through expansion by existing companies and

new entrants and by general population trends. Using just the historical population growth of

2.2% and the estimated market sizes above, the water sachet market could hit $606M by 2014.

INDUSTRY ANALYSIS

INDUSTRY TYPE

The water sachet industry is primarily a treatment, packaging, and distribution sector. Water is

either purified or not and then packaged into small bags for easy distribution and sales. This

industry is based on the idea that finding clean, cold water for consumption is difficult and

inconvenient. By making access to drinking water convenient, vendors of water sachets create

value through both distribution and purification.


Most anyone can produce and sell unpurified water sachets. All that is needed is access to tap

water and a supply of plastic bags. The ability to sell cold-water sachets does come at a higher

expense to the producer, but this producer will sell sachets much more quickly.

There are numerous established companies producing purified water sachets including:

Nour

Family Care

Magram Water

Mama Pure Water

Global H2O

Ubez’s Pure Water

More Companies

Water Care

Educated consumers prefer to drink purified to unpurified water, but the decision of which

sachet to purchase is purely economic. Customers purchase what they can afford. For the most

part, the purified and unpurified water sachet markets are two distinct markets with little to no

competition between them. However, fierce competition exists within both the purified and

unpurified sachet markets.

Customers are fairly loyal to their water preferences and if they can afford to pay for premium

purified water sachets, they will avoid buying informal water sachets. Likewise, customers who

regularly purchase informal water sachets typically do not decide to buy a branded product

without a significant rise in disposable income. That does not mean that relatively affluent

customers do not purchase unpurified water sachets, but rather customers tend to stay true to

their preferences as dictated by disposable income. Informal surveys indicate that an average

person purchases 6-7 water sachets or bags a day.

Estimated Water Sachet/Bag Market Size

Location Avg Price Population Water/Day Penetration Market Size (L) Market Size ($)

Urban 200 2,394,000 3.5 70% 428,166,900,000 107,041,725

Rural 250 3,906,000 3 40% 427,707,000,000 106,926,750

Total 855,873,900,000 213,968,475

27 | P a g e

Competition within the informal water sachet market appears to be saturated. The streets are

lined with many vendors selling unpurified water sachets. Customers typically buy from a

trusted person and when no such person is available they will purchase from whoever has the

coldest water nearby. The product turns over quickly with one street vendor selling 20

unpurified sachets in approximately one hour. In another case, a single mother had her 3

children sell water sachets at the local market before and after school. Providing cold water is

very important as 80% of informal survey respondents indicated that they would travel to

another location if the water was not sufficiently cold.

Competition between formal players is equally fierce with more than 10 companies fighting for

market share. Purified water sachets are sold both by street vendors as well as more formal

store fronts.

There are issues of unpurified water sachets misleading consumers and lying about water

quality on packaging, and this presents some problems for formal players. Recently, the

Ministry of Health audited the industry and shut down 8 falsified operations. Thus, strong brand

presence in this space is very important.

SUPPLY CHAIN

Water sachets both purified and unpurified are made at the water source – for the informal

producer this is the home or public water faucet, and for a formal player this would be the

manufacturing facility. Informal street vendors head directly to the street to sell the products.

Formal players tend to have more developed supply chains. Purified water sachets are plastic

wrapped into cubes of 30 and loaded onto trucks for distribution to markets, small street

vendors, and individuals.


PARTNERSHIP

Formal companies producing purified water sachets have established distribution routes and

methods. For one of these companies to adopt a microfranchising mode, it will require

modifying relatively longstanding business practices. However, opportunity exists to build out a

completely new microfranchising system for Ice Ice Baby, who has expressed interest into

moving into the water sachet business. Ice Ice Baby is a very well-known and trusted brand in

Water Well City

River

Purification

Process

Sachet Package

Distributio

n Trucks

Business Customer

s

Tied Bag Package En

d C

ust

om

er

28 | P a g e

Sierra Leone and this will be a strong asset for when it moves into the sachet business. They also

already have trucks and distribution competencies in the adjoining space of ice.

SCALABILITY

Although there are already many competitors in the purified water sachet business, a strong

brand in the purified sachet business will be able to scale. Microfranchises will allow for even

deeper distribution in Freetown. Brand presence outside of Freetown is limited and a strong

brand outside of Freetown, where there is even less competition, should be able to scale

quickly.


Water is a basic necessity for survival and people need to drink it. The decision to purchase a

purified water sachet depends on two things, disposable income and education levels. As water

is free for residents in their homes, convincing consumers to spend their meager disposable

income on purified drinking water can be a challenge, especially since they are already

accustomed to drinking unpurified tap water.

The water business is a low margin operation with many vendors for the readily available

product. The market may not need deep distribution for purified water sachets as it might for

other products and services as deeper distribution would penetrate markets that may not prefer

purified sachets to unpurified tap water in the home. However, if customers are drawn to water

sachet street sellers due to their offering other attractive products like popsicles, then this could

increase a well-branded sachet seller’s profitability.

CONCLUSION There is significant opportunity in the water sachet market. Customers will welcome a company

with a trusted brand for high quality. As a result, we recommend that IRC consider partners in

this industry. In particular, a company like Ice Ice Baby, with a well recognized brand

would capture significant market share. Ice Ice Baby's management envisions developing a cold

chain distribution system for all products cold or frozen - not just ice, but also water and

popsicles. There is significant value for both the franchisor and the franchisee in selling multiple

products including energy savings from selling various cold products that keep each other colder

longer in route to the end customer.

Other water sachets companies have established operations and methods for selling.

Partnering with an existing water sachet company would hinder the opportunity to innovate

around new products, distribution routes and branding as these companies already have well

established procedures. With Ice Ice Baby there is freedom to build a new business that

benefits both the franchisor and franchisee instead of simply plugging into an existing business

model. There is a complimentary relationship between ice and water sachets that will help Ice

Ice Baby to quickly scale. In addition to the strong brand recognition, the company already has

established distribution routes. In order to pursue the opportunity, Ice Ice Baby will need to be

willing to acquire some production equipment and adopt new production practices. Manocap

29 | P a g e

and Ice Ice Baby have expressed willingness to do so once the hub distribution system is

designed.

POPSICLES AND FROZEN TREATS

Frozen treats and more specifically popsicles in Sierra Leone are a popular frozen snack food. In

this market a popsicle refers to a frozen sugary mixture (approximately 3 ounces) funneled into

a plastic bag. The product can be either dairy-based using powdered milk or traditional syrup

based fruit flavoring. These popsicles, like those pictured below are sold for Le 500 (USD

$0.127) from street vendors.

MARKET ANALYSIS

DEMOGRAPHICS

With limited selection of products in the frozen treats category, a large portion of the

population purchases these products. Target customers include school-age children and

mothers. Popsicles retail at an extremely accessible price point for Le 500 (~$0.12). As a point of

reference a bottle of Coca-Cola retails for Le 1200.


There is a high demand in Sierra Leone for anything frozen or cold. When purchasing a popsicle

consumers are not only satisfying their hunger for a sugary treat, but also some relief from the

heat. The product size also makes it readily available to be bought and sold on the street at an

accessible price point. Popsicle vendors also value the low price point and portability because it

makes for a quick product turnover. Quick turnover is important as the product melts during

the course of the day.


Fanmilk, a similar company in Ghana sells ice cream using the microfranchise model. Last year

the company reported $66 million revenue from selling ice cream in Ghana (population 24

million). Using Fanmilk’s experience in Ghana as a comparable business, the market size for

popsicles in Sierra Leone is estimated at least at $18 million.

INDUSTRY ANALYSIS

30 | P a g e

INDUSTRY TYPE

The frozen treat market is entirely informal, from the manufacturers to the street vendors.

Neither group is large enough to fall into the formal sector. It appears that only one

manufacturer is large enough to have achieved any level of scale. Product is sold to consumers

through street vendors, making this a manufacturing and distribution sector.


There are no formally established businesses operating in the popsicle or frozen treat space.

The industry is characterized by a fragmented informal group of producers and distributors.

There is a loosely organized Ice Cream Seller’s Association comprised of approximately 15 ice

cream street vendors. The association shares 2 extremely old ice cream producing machines

which are in constant need of repair. Ice cream vendors complain of unreliable supply for sale,

an d there are no other close substitutes for popsicles or frozen treats.

SUPPLY CHAIN

Inputs for Popsicle production include sugar, water, powder milk and flavoring. All inputs can be

obtained easily for local markets in large quantities. Current production methods require access

to either block ice or a freezer for cooling.

Upon freezing, product is distributed to street vendors. Vendors typically sell on credit and

return cash and unused product at the end of each day. Street vendors pay Le 400 to producers

and retail the product at Le 500, making a 20% margin.


PARTNERSHIP

There currently is no formal player in this industry. Partnering on this

venture would entail working with a reputable business in an adjacent

industry like water sachets, ice production or juice production. Ice Ice

Baby, the leading producer of ice in Sierra Leone, has expressed

interest into moving into this adjacent space and would make for a

potential partnering candidate.

SCALABILITY

In the informal sector, popsicles are produced in Freetown and then transported up to Makeni

(approximately 3 hours away). There is high demand for this product that extends beyond

Mixing and Packaging

Process

Freezing

Process

Street

Vendors

Customers

31 | P a g e

Freetown. Regions outside of Freetown, like Kenema and Bo, struggle with unreliable access to

electricity, which could impede the freezing process. This challenge could be overcome by using

generators and/or ice blocks. Also, simple packaging improvements to more of a sachet form of

popsicle would minimize product loss due to thawing. Once challenges related to freezing are

addressed, the business opportunity is highly scalable across the country.


Currently, both vendors and producers make adequate profit to sustain operations in the

informal popsicle sector. Vendors make Le 100 per unit sale and according to multiple

distributors they can sell up to 200 per day during the dry season, equating to a total take home

profit of Le 20,000 (approx USD 5). Producer’s profit is determined by the scale of the operation

and cooling costs.

CONCLUSION The product is in high demand and the current supply is unreliable, unhygienic, and unbranded. Since there are no formal players producing popsicles, there is an enormous opportunity for a new entrant to capture market share, and we recommend IRC explore this industry. As with water sachets, Ice Ice Baby has also expressed interest in producing and selling popsicles. This is a natural move for the company. Ice Ice Baby’s strong brand for product quality as well as established distribution routes would allow for quick scale. Simple product improvements coupled with Ice Ice Baby’s Baby’s brand would excite the market. It is possible that the new popsicle could even be sold at a premium just above the current Le 500 price point. Right now, informal popsicle vendors spend time producing popsicles. Integrating popsicle production machinery would make the entire process much more efficient and sanitary. Thus, franchisees could devote more of their time to selling and earning money. Again, since Ice Ice Baby envisions setting up a cold chain distribution system for all products frozen or cold, IRC’s youth microfranchise initiative is very well matched for this opportunity.

32 | P a g e

SALON SERVICES

Hair styling related businesses can be divided into three separate areas: barbers for men, stylists

for women, and weavers for women. Barbers offer shaves and hair trims for men, stylists can

relax hair and style it, and weavers weave in extensions. Each area ranges in quality and price:

large/nice barber shops and salons that offer multiple products and services, small shops offer

only a few products and services, and capable friends of the end consumer simply barter for

services. This analysis focuses primarily on the middle tier shops, although we mention the other

two to give a holistic view of the overall market.

MARKET ANALYSIS

DEMOGRAPHICS

The demographics of customers differ significantly from the high end salons and barber shops,

the small shops on the side of the road, to the person that trims hair for free.

HIGH END SALONS AND BARBER SHOPS

These establishments are frequented primarily by higher income earners. This includes the large

expatriate and Lebanese populations as well as local formal and informal wage earning Sierra

Leoneans. For men to keep their hair care to 10% of total income, they need to make at least L

400,000 per month. Women, who place a much higher value on their hair, would need to earn

at least L 350,000 per month to keep their hair costs to 20% of their total income. It is expected

that the majority of those that frequent these shops earn far more than those amounts.

Lebanese, expatriate, and local Sierra Leonean woman each patronize different shops

dependant on relationships and trust level. Lebanese men are the same, patronizing only

Lebanese run barber shops and local Sierra Leonean men tend to patronize the local barber they

know and trust, placing less importance on the quality of the overall establishment. Ages for

these customer groups range from 18 to 65 years.

SMALL BARBER SHOPS AND SALONS

The majority of adults in Sierra Leone frequent small, one-chair shops to have their hair styled,

trimmed, or weaved. Income levels of these individual are estimated to range from Le 75,000 to

Le 400,000. This means that these individuals are typically well established and have families

33 | P a g e

that they provide for. Ages appear to range from 18 to 65 for men and 16 to 50 for women, with

the majority falling closer to the younger middle of that range.

UNPAID TRIMMING AND STYLING

The majority of youth and children fall into this bartered service category. Also, those living at

sustenance levels also fall into this group. Income is so low for these individuals that they place

very low value on their hair. Styling, weaving, and trimming are often preformed for free in swap

style agreements when one will trim or style the other’s hair in return for the same service.

Thus, friends will style each other’s hair and parents will style their children’s hair.


Like many markets in developing countries,

individuals buy from people they know well and

trust. In the hair styling business, many get their

start by simply styling or cutting their friends’ hair.

Over time they gain enough clients that they open

up a shop to style hair. It appears that little formal

advertising is done and that all shops rely

primarily on word of mouth advertising and/or

business from their established clientele. Trust

appears to be the biggest factor, regardless of

customer segment. Customers need to feel comfortable that their hair will be styled or trimmed

well and that the service is safe.

Demand for actual shops and trained stylists/barbers increases with income levels and the

complexity of the desired trim. For women in this group, styling their hair is very important and

they are willing pay for the better atmosphere and skill of a high end salon. Lebanese men tend

to prefer the nicer Lebanese-run barber shops, while relatively wealthy Sierra Leonean men

appear to use their local, trusted small barber shop.

As in most countries, women are the driving force of the salon industry. Women place a high

amount of value on their hair, even slightly above clothes. Thus, those that can afford it will

have their hair relaxed and styled at least once every two months, and often they will style it

even more frequently. This is particularly true of girls who are no longer in school, as many

schools also do not permit girls to have styled hair, resulting in girls keeping their hair trimmed

and short.

It is important that hair relaxing is done correctly, as improper application of the chemicals can

result in permanent hair loss. This unfortunately occurs quite often as hair stylists lack the

required training and products to properly relax hair. Better education about these risks is

needed to help build customer preference to safe treatments over cheap ones.

34 | P a g e


The chart below shows an estimated yearly market size of $131M for the salon industry (a

breakdown of these calculations can be found in the appendix). We expect this market to

increase over time as both population and incomes rise within the country. Using historical GDP

growth over the last 8 years of 6% as a proxy, the market would be expected to reach $165.5M

by 2014.

INDUSTRY ANALYSIS

INDUSTRY TYPE

The salon industry is primarily a service sector. The majority of services rendered occur in the

informal areas of the market, with bartering for hair trimming/weaving a significant portion of

the overall market. Few large salons exist, and only in the major urban areas. These

salon/barber shops cater primarily to wealthly clientele and typically offer more services. Closely

tied to the salon sector is the hair care products sector. Most hair related services use these

products as part of the hair trimming/styling process.


Using the assumptions from the market analysis, we estimate that there are 2,875 small, one

chair salons and barbershops in the country. This is assuming that 95% of those that style their

hair do so at one of these shops and that each shop does 6 stylings per day, consistent with our

informal surveys. We estimate that the rest (5%), whom are higher income individuals, have

their hair styled at one of an estimated 150 high end salons in the country.

Most of the high end salons are owned and operated by the Lebanese, who also control the

majority of hair product imports into Sierra Leone. We found that the majority of small, one

chair salons are run by Sierra Leoneans, many of which are formally trained through one of the

numerous local vocational schools/programs.

Market Size in Leones

Trim/Styling Hair Relax Weaving Total Market Size

Men 83,796,300,000 - - 83,796,300,000

Women 54,617,476,546 180,582,842,784 205,301,087,629 440,501,406,959

524,297,706,959

Market Size in US Dollars (using L 4,000:$1 exchange rate)

Trim/Styling Hair Relax Weaving Total Market Size

Men 20,949,075 - - 20,949,075

Women 13,654,369 45,145,711 51,325,272 110,125,352

131,074,427

35 | P a g e

SUPPLY CHAIN

Because this is a service industry, the supply chain for salon services will vary depending on the

level of training obtained by a stylist/barber. Whether trained in a vocational school, learned

through non-formal apprenticeship, or entirely untrained, stylists/barbers offer various services

and products at a range of prices to their end customers. However, trained labor will most

likely have access to wholesale prices and high end imported products due to their stronger

networks. Ultimately, prodcuts are avaialble for end customers from salons as well as shops in

the market, albiet products at market shops may not be of the highest quality.


PARTNERSHIP

After visiting various salons, we only found one salon that offered a

unique and innovative package that potentially matched a

microfranchising model. Naasu Fofanah , owner of Jemna Salons,

has established her salon in Freetown and attracts more high end

clientele in the city. Unlike most high end salons, she caters to all of

the major high income groups including the expatriates, Lebanese,

and high income Sierra Leoneans. Her salon has been in operation

for the past 6 months. She has plans to expand to several shops in

the Freetown city.

One of the core parts of her business is her agreement with Avlon,

a high end hair products company in the US that targets salons that

cater to African American clientele. Naasu has negotiated an

exclusive distributorship for West Africa. Avlon is very supportive

and has come out to do product training to other salon owners and

stylists that purchase Avlon product from Naasu.

She is college educated with undergraduate and master’s degrees

from universities in the UK, where she has lived for the past 15+

years. She also has spent the last five years running her own salon in the UK, where she also

Skilled

Individual

Vocational

School Apprenticeship

Salon/Barber Shop

Imported Styling Products

US/EU/China/ECOWAS

Wholesale

Market End

Cu

sto

mer

36 | P a g e

underwent numerous trainings on how to do more complex hair styling.

Overall, we found Naasu to be very well connected, competent and eager to work with us. From

a management perspective, we feel that she would be an ideal manager to partner with.

However, she would need to add additional staff to manage a larger microfranchise operations

business.

SCALABILITY

Although Naasu would be a great manager, we are concerned about scalability of the business.

Although it would be possible to quickly scale the business through conversion franchising,

wherein existing salons were converted to a microfranchise model, there are only an estimated

2,875 in Sierra Leone, requiring 30% market conversion to reach this project’s target. Even

under the assumption that each salon could employ and average of two stylists/barbers, it is

uncertain if even 15% market share could be captured.


We also are concerned with the amount of value added to the salon by converting to a Jemna

microfranchise salon. Although her products are of higher quality, they are also much more

expensive than other products on the market, particularly if they are used correctly. In addition,

it is still unclear if there are other ways that a salon microfranchise could help the

microfranchisee make money through either more clients or better margins. This is due in part

to the fact that most salons in Sierra Leone are frequented by the same clients who have a

personal connection with the stylist and thus trust him or her.

CONCLUSION Even though Naasu is potentially an ideal manager to partner with, her current business is

difficult to franchise to the scale required for this project. However, if she was able to get her

product costs down and if we were able to line up partnerships with a few of the local

vocational schools, the salon market may represent a unique microfranchise opportunity. We

recommend IRC continue to monitor Naasu’s business in the event that either she is able to get

cheaper inputs to make the microfranchises salons more accessible to the broader market or

market dynamics shift favorably.

37 | P a g e

BAKED GOODS

The baked goods industry includes bakeries and individuals involved in selling baked goods in

the formal and informal markets of Freetown. This industry’s main service is to provide ready-

to-eat baked products to individual consumers and businesses. Although formal shops offer

various baked products, such as breads, cakes, and desserts, the most widely consumed

products purchased by the majority of the population are the basic bread options of begets,

rolls, etc. These basic bread products are sold to consumers both from the bakeries directly as

well as by the individual bread sellers in the streets.

The bakeries produce bread in a few basic shapes; some bread is long or round, while other

styles are square or the traditional loaf-styled bread. Individual bread sellers sell these products

as plain bread or sweet bread to their customers.

MARKET ANALYSIS

DEMOGRAPHICS

As a regularly consumed product by many Sierra Leoneans, citizens buy their bread daily from

the bakery shops or from individual bread sellers in the street. The majority of customers

purchased their bread daily from the individual bread sellers, primarily out of

convenience. These individual bread sellers are mostly youth and adult women.

Youth sellers walk from place to place, through dense urban areas as well as residential

communities, carrying their bread on their heads in plastic bins or crate-like boxes. Having the

bread sellers walk around the towns and communities, customers more easily purchase bread

rather than incurring any additional travel expense or loss of time to go to a bakery to buy it.

Some individual bread sellers have regular customers throughout the major city of Freetown

and its hills; these bread sellers have built up trust with their customers and they distribute

freshly baked bread to their customers daily. Also, since many Sierra Leoneans do not have a

way to store the bread or prevent it from spoiling, most consumers would buy what they would

eat right away rather than paying for any excess bread they would have to store. Bread is a

daily commodity for many as it is regularly available staple of grain.


After observing the bread sellers in the street, visiting various markets, and shadowing two

youth bread sellers for an entire day, it was easy to determine there is a high demand for bread

in Freetown and its surrounding cities. The average person is willing to pay for either sweet

38 | P a g e

bread at the price of Le 700 per piece or regular bread for Le 500 per piece. While these prices

may fluctuate based on the cost for ingredients, bakeries are constantly running out of supply

for these individual bread sellers to sell. At one bakery we visited, the daily supply of bread was

sold out before 6:30 AM to various individual bread sellers, and many more still remained with

their empty containers awaiting the production of more bread.

We also observed that consumers demanded quality in their bread products as they would buy

from individual bread sellers with a certain quality of bread associated with a particular brand

(i.e. J1 Bread or Red Lion Bread). Branding also helped the individual bread sellers to garner a

regular customer base as customers knew what quality they would receive from their daily

bread distributors. While individual bread sellers would sell to whomever they could find, many

went directly to their most-frequented areas to sell since they maintained relationships with

consistent customers and became those customers’ exclusive daily suppliers. Hence, when

these individual bread sellers could not deliver a product, they had some very unhappy

customers that missed the opportunity to buy from another seller since they were loyally

counting on only one distributor. In the village communities, consumers also preferred to buy

bread from family or close friends as they were more familiar with the seller.


Due to the high demand for baked goods, the market size is large and appears to be growing;

however, with so many market actors selling the same products the likelihood of long-term

expansion is slim. There is definite room for growth should this industry diversify its products

available to every citizen. Unfortunately, without any innovative bakeries producing new

products and distributing them for sell in the informal markets, this potential for growth

remains untapped.

The lack of any wide-reaching strong brand also remains a challenge for the growth of this

industry. The market is saturated with individual bread sellers on every city street or even in

remote areas selling similar bread products without many being brand exclusive.

INDUSTRY ANALYSIS

ECONOMY TYPE

The baked goods industry is a food processing and distribution sector. Because there are limited

packaging options for these products and Sierra Leone is very hot and humid, most baked goods

have a short shelf life and are consumed daily or within a few days. While grains are a main

staple for consumers, this sector creates value through increasing grain consuming options and

decreasing the cooking costs for baked goods. In addition, this industry provides timely access

to baked goods otherwise not regularly produced every day by average consumers.


Due the high volume of baked goods consumption, there are many market players and steep

competition for individual bread sellers in Sierra Leone. In order to understand this baked goods

39 | P a g e

market better, we met with a number of baked goods producers in Freetown and Kenema. We

found everything from high end bakeries that supplied various products to low end bakeries that

were simple bread businesses. We explored various Lebanese bakery shops, J1 Bakery, Red

Lions Bakery, Lumley Bakery, and also spent time talking with the IRC’s Microfranchise youth

that were individual bread sellers. In addition, we shadowed two IRC Microfranchise youth as

they collected their bread from a local bakery and another from a bread delivery

van. Subsequently, we followed them around for the majority of a working day as they sold

their bread throughout their hillside village communities.

With a volume of individual bread sellers found in any given community, competition can be a

challenge for each seller. The most successful bread sellers are those that have built

relationships with regular customers and gained recognition for his/her high quality bread. For

example, when following around Muhammad--a 23 year old individual bread seller and J1 Bread

representative—he sold most of his bread because he yelled, “J1 Bread. Fresh, hot, J1 Bread.”

Although he did not actually have J1 Bread that day, nor did his customers know that, they still

purchased his bread.

There are other advantages for individual bread sellers to partner with a particular branded

bakery to remain competitive. Since bakeries only produce so much bread each day, we found

that when they sell their supply wholesale to individual bread sellers, they give precedence to

their regular wholesale customers before they sell to new customers. Regular wholesale

customers can also maintain payment systems unavailable to new customers. They can pre-pay

for bread the day or week before and also maintain a credit with the bakery. Also, there are

multiple individual bread sellers that are trying to become new customers, hence, new

customers may have to pay more in order to buy the extra bread over another new customer.

Also, since bakeries do not regulate who can sell their bread, most individual bread sellers

appear to sell from multiple producers.

SUPPLY CHAIN

With the limited diversity in baked goods products in Sierra Leone, the supply chain of this industry is very simple. First, products are purchased by the bakeries such as milk, butter, sugar, and grain. Bakeries then make the various types of bread mentioned earlier and prepare it to sell to businesses, stores, restaurants, individual bread sellers, and in the markets. Individual bread sellers then resell the bread to other customers, which include different businesses, individual customers, and regular citizens. If all the supply is not sold, depending upon the seller, the individual bread seller or businesses may store the bread to sell at a bread stand in

Bread Inputs Flour, yeast,

water, power

Bakeries Lebanese, Red Lion, Lumley,

J1

Individual Bread Sellers

End

Customer

40 | P a g e

the next day or two or some may sell it back to the bakery. Ultimately, the supplies end up with the consumer, individual bread seller, or bakery, albeit these products will not last long.


PARTNERSHIP

Although the baked goods market has potential for increased market efficiency and growth, we

cannot recommend any of the producers we explored as strong partners for IRC’s youth

microfranchising project. Currently, we did not find any baked goods business that was

producing innovative products or had a systematic method for branding itself in the informal

market to maintain a large market share of bread consumption. As IRC’s previous partner J1

Bread struggled to manage its financials as well, we could not recommend J1 as a strong partner

either.

SCALABILITY

Due to the high demand for bread, the baked goods industry has the potential to scale;

however, this would only be possible if there was a well-established partner that could manage

the growth of a baked goods microfranchise. Without a strong partner that could manage the

volume of work involved with training the youth, growing the microfranchise, and systematizing

a baked goods model, this baked goods industry is not the most viable sector for IRC. Desiring

to create 1000 jobs in the next three years for youth and with the influx of individual bread

sellers already, IRC would also need to attempt to convert existing individual sellers to our

microfranchise model and brand, in addition to adding new individual bread sellers to thier pool

of microfranchisees. Without an effective partner, IRC cannot scale this microfranchising

business conversion model.

DEMAND CHARACTERISTICS

As mentioned above under the consumer preference section, baked goods are in high demand

in Sierra Leone. Regardless of socio-economic status, Sierra Leoneans are willing to pay for

bread products both plain and sweet, and they desire quality and reliability from the individual

bread sellers. A microfranchise model would easily meet this demand as the franchisor would

have a strong brand and trained staff on how to sell that brand. Quality would also be

recognized and tied to the brand as the baked goods microfranchise would enforce a

policy/practice that only microfranchisees could sell bread from IRC’s partnered bakery to claim

affiliation with the bakery. Thus, having a strong brand that includes a unique product design,

quality product, and systematized marketing and distribution method, IRC’s youth

microfranchisees would more likely garner business and find success.


A baked goods microfranchise model could prove sustainable and profitable under the right

conditions. If IRC’s youth microfranchisor partner managed its financials well and maintained

quality equipment and access to inexpensive products with a high mark up value after bread

41 | P a g e

production, then the profit margins could be substantial. As the youth microfranchisees have a

quality brand, consistent access to enough supply, and are well trained in managing their

finances and marketing the products, then they could also ensure sustainability and

profitability. Regardless, the profitability of a baked goods microfranchise highly depends on

the effectiveness of implementing the microfranchise model itself, which would require a

quality partner.

CONCLUSION While the baked goods industry appears initially attractive to the IRC youth microfranchising

initiative due to its potential scalability and sustainability, there are no quality partnership

options at this time. Hence, we do not recommend IRC pursue partners in this industry.

However, since there is a demand for baked goods, a few small distribution networks, and an

inexpensive cost to produce, sell, and purchase these products, FCG recommends that this

market be watched over the coming years in the event that a strong partner emerges with

whom a differentiated baked goods business can be launched via a microfranchise model.

42 | P a g e

POULTRY

The poultry market can be divided into two distinct product categories: poultry for consumption

and poultry for production. Although this report focuses primarily on poultry for consumption, it

is important to understand the market dynamics influencing poultry for production products, as

both are connected.

POULTRY FOR PRODUCTION

Poultry for production includes chickens for laying eggs (lay birds), fertilized eggs to hatch

chicks, and chicken feed. It is very expensive and difficult to build the capacity to produce

fertilized eggs. This has resulted in fertilized eggs being imported from Holland at ~$1.70 plus

tax and tariff per dozen. In order to turn those eggs into chicks, large incubators are required

and the process takes 21 days. Once hatched, new born chicks can sell for around $1.50 each.

Farms will often keep the female chicks to turn into lay birds and sell the male chicks to others

interested in raising them for consumption.

Feed is another important portion of the equation as access to and pricing of feed directly

impacts egg production. Chicken feed is composed of 50% maize, 35% feed concentrate

(includes minerals and vitamins), 10% brown fiber, and 5% limestone. Feed concentrate is

imported and although special approval can be made to waive import tariffs, getting that

approval can be difficult and time consuming.

POULTRY FOR CONSUMPTION

Poultry for consumption consists of eggs that sell

for market prices of Le 4,500-6,000/dozen. There

are several types of eggs for sale on the market:

White eggs that are imported from India account

for more than 50% of egg sales, large brown eggs

that are produced domestically by farmers, and

small brown eggs that are produced by

individuals.

Whole chickens consumed for their meat sell for

43 | P a g e

Le 8,000-10,000 each. Whole chickens are imported predominately from Brazil with imports

also coming from other countries like the USA. Chickens are also grown domestically, many by

individuals that purchase the chicken as a chick and raise it.

MARKET ANALYSIS


Chicken meat is a high demand food and considered a type of

delicacy in the provincial areas of Sierra Leone. It is often

cooked for special visitors and it is considered an honor if you

are served chicken at someone’s house. This is typically

because in the provincial areas, one of the family chickens was

killed that day for your meal.

Almost all Sierra Leoneans interviewed expressed the interest

in eating more chicken and listed it as one of their favorite

foods. They noted lack of availability and the high price as

constraints to increasing their current consumption. It is also

interesting to note that live chickens are often given as gifts.

These chickens thus become prized possessions and are used

to produce eggs and eventually for meat.

Recently a number of NGOs, such as Christian Veterinary Missions of Canada, have been

providing chickens to rural farmers in an attempt to help increase farmer income and rural

nutrition. This is typically accomplished by paying local poultry producers with incubator

capacities to import fertilized eggs and incubate them. The resulting chicks are then distributed

to provincial farms. This market however is fairly random in demand and is not considered of

long term importance.

Although eggs come in brown and white varieties depending on origin, there appears to be little

difference in consumer preference between the imported white and domestically acquired

brown eggs. Large brown eggs are reported as being slightly sweeter than white eggs and can

carry a slightly higher price (Le 100+ per egg) over white eggs. Small brown eggs are not liked by

most and thus carry a much lower price tag.

Imported eggs spend 4-5 weeks on a ship before they arrive in Sierra Leone. This means that by

the time a consumer eats an imported egg, it may have already technically spoiled. Prices for

white imported eggs thus decline rapidly after their arrival, dropping up to Le 1,000 per dozen

every week. Nonetheless, the price appears to be the key factor over quality as more white eggs

are consumed than brown eggs, which are typically only a couple days old when consumed.

44 | P a g e


The market is expected to grow due to the high demand for chickens. As chicken prices continue

to decline and income continues to rise, we project that the chicken meat and egg market will

also rise at least as fast as GDP growth, which has grown at a 6% annual rate since 2002. This

would result in an estimated market size for eggs of $171.6M and $64.3M for chickens by 2014.

INDUSTRY ANALYSIS

ECONOMY TYPE

The poultry industry is characterized as having a few large and medium importers of both eggs

and chicken, with a few small domestic poultry farmers that mostly produce eggs for

consumption and only a couple with the capability to incubate fertilized eggs in-country. The

rest of the industry is composed of thousands of individuals and families that raise their own

chickens and produce their own eggs for personal consumption or small sales in the market.

Distribution is similar to most agricultural goods. Eggs and chickens are brought to large

wholesale markets where they are purchased and taken to smaller markets or carried and sold

by individuals in the streets. Eggs are transported to rural areas by individuals that travel to

Freetown and back, returning to sell in their home markets. This results in slightly higher prices

due to the additional transportation costs incurred.


According to our interview with the purportedly largest poultry producer by capabilities in Sierra

Leone, competition is fierce between importers and local producers. Domestic producers

complain that they are unable to compete against the low prices of eggs imported from India

and chickens imported from Brazil. Domestic producers suspect that other countries like India

and Brazil benefit from economies of scale and subsidies.

Having been crippled by the war, it has been difficult for domestic producers to rebuild their

production capabilities. The producer we met with has 21 poultry houses capable of holding

Estimated Chicken Egg Market Size

Ages 15-64

Ages <15

and >65 Ages 15-64

Ages <15

and >65

Cost Per

Egg (L)

Market Size Per

Year (L)

Market Size

Per Year ($)

Urban Population 1,197,000 1,197,000 6.6 3 400 239,016,960,000 59,754,240

Rural Population 1,953,000 1,953,000 5 1 500 304,668,000,000 76,167,000

Total 543,684,960,000 135,921,240

Populations Egg Consumption/Week

Estimated Chicken Egg Market Size

Location

Number of

Households

Chicken Consumption

per Month

Cost Per

Chicken (L)

Market Size Per

Year (L)

Market Size

Per Year ($)

Urban Households 362,727 3 8,000 118,394,181,818 29,598,545

Rural Households 591,818 2 8,000 85,221,818,182 21,305,455

Total 203,616,000,000 50,904,000

45 | P a g e

3,000 each that could produce some 5,250 dozen eggs per day. He also has the incubator

capacity to produce 6,000 chicks per month. Unfortunately, the restart costs are high and make

it difficult to scale his business. Today he has 18,000 lay chickens, at least half of which are

getting close to the age where they will be sold for meat due to low egg production.

The government appears to have strong influence in this market. Because almost 50% of state

revenues are acquired from import duties, the government has a vested interest in promoting

imports. This has led to suspicion among domestic poultry producers that larger poultry

importers are not paying the full 40% import duties. As noted earlier, feed concentrate, a core

component of chicken feed must be imported. Although it is possible to receive special approval

to avoid import duties on it if it is used for agricultural production, getting that approval can be

time consuming, costly, and often result in a net loss for the farmer as dock fees pile up.

SUPPLY CHAIN

The above diagram does not fully take into consideration the large number of chickens owned

by individuals. However, the general processes would be the same. Males are kept until the

family is ready to eat them, which may not occur for several years as chickens live for an average

of 7 years. Eggs are collected from the female until she is ready for consumption as well, which

typically occurs after year two or three as egg laying ability declines.


PARTNERSHIP

There do not appear to be any strong domestic partners. The poultry farm that we met with that

has tremendous unused production capacity is currently for sale for $550,000 as the owner is

old and seeking to retire from the business. Although a number of poultry farms have opened

over the last couple of years, all remain too small to be an adequate partner.

Fertilized Eggs

(Imported)

Wholesale

Market

Incubator (21 days)

Chicks “Layer” Chickens

(eggs) 18-22 weeks

“Broiler” Chickens (meat)

4-10 weeks After 2 yrs for

Layers

Large

Retail

Marke

ts Last Mile Vendors

End Customer

46 | P a g e

SCALABILITY

Demand for both eggs and poultry meat is high in Sierra Leone, with hundreds of sellers of both

products in the markets, streets, and restaurants/tea shops. Very low start-up costs would be

required for this microfranchise, making it inexpensive to quickly enlist hundreds of

microfranchisees. Hundreds of existing egg and chicken sellers could quickly be converted into

microfranchisees, allowing the project to hit its goal of 1000 microfranchisees very rapidly.


As noted earlier, it appears that egg quality is not highly valued among consumers. The same

appears to also be true of chicken meat. Therefore a low cost strategy must be employed

instead of a differentiated one. In order to achieve a low cost strategy, the potential partner

would need to have significant economies of scale or some other protected source of low cost

inputs. To date, we have not found any domestic partners with that capability. In addition, it is

difficult to achieve meaningful profits with a low cost strategy in a microfranchise business

model as there are significant incentives for the microfranchisor to sell its product to as many

vendors as possible. The increased competition ultimately drives down prices, squeezing

margins and resulting in low profits for the microfranchisee.

CONCLUSION Although demand for poultry goods is very high in Sierra Leone and scalability of a poultry

microfranchise could be achieved quickly and easily, the poultry business lacks a domestic

partner with sufficient capacity and resources. FCG therefore recommends that this market be

watched over the coming years in the event that a strong partner emerges with whom a

differentiated poultry business can be launched via a microfranchise model.

47 | P a g e

MOBILE PHONE CREDIT SALES

Mobile phone shops are scattered throughout every street in the cities of Sierra Leone. While

painted walls, shops, homes, and even huts are notorious for advertising the mobile phone

companies and their services in many emerging markets, Sierra Leone’s landscape follows suit

with its mobile companys’ branding. Whether talking for free on the weekend or being able to

transfer money or minutes to a friend or family, it is ironic to see even the poorest citizens,

many without electricity, owning a mobile phone. As one of the most attractive services offered

by mobile phone companies, young entrepreneurs offer “top up” service from their small street

shops, where one can purchase minutes to recharge their phone wirelessly rather than typing in

a scratched off number from a recharge card. Customers purchasing the convenience of the

timely service and smaller increments of minute units available provide a meager profit margin

for these youth microbusinesses.

MARKET ANALYSIS

DEMOGRAPHICS

The numerous mobile phone shop owners use their affiliations with the three main mobile

phone companies in Sierra Leone as a status symbol. Being connected to something greater

increases a small shops reputation and the perception of an entrepreneur’s socio-economic

status. In addition, providing new services and the most updated phones improves the identity

of individuals and business owners. Many youth have been used by the three largest

telecommunication companies to sell “top up” services. However, most important to this

industry is the impact mobile phones have had on the population in increasing communications

and information sharing country-wide, even in the most remote regions.


Based on our research, consumers frequently pay for top up service at the mobile phone shops;

however, since it is already widely available, consumer growth does not appear to be extremely

high. Although there are many paying for the service, others may know about it, but still choose

not to pay for it. Regardless of access, since the service is not very innovative or absolutely

necessary for consumers to use to increase their talking minutes, the overall consumer

preference for top up is low.


The market for cell phones and unique mobile services like top up constantly changes as

companies compete for customers. Currently all telecommunication providers offer top up as

an optional service; however, its potential for growth is uncertain. While some remote areas

may not have as many mobile phone top up retailers available, the populations in these areas

will have less access to and knowledge about this service. Even though customers in these areas

may not know about top up services, it is unclear exactly what percentage of these consumers

would want to pay for the convenience if they did.

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INDUSTRY ANALYSIS

INDUSTRY TYPE

From a mobile unit top up view, this is purely a distribution sector. Similar to the Coca Cola

model, the goal for telecommunication companies is to make their mobile units and sim cards as

accessible as possible to as many people as possible. This requires large distribution networks

with thousands of distribution points.


Currently, there are three dominate mobile telecommunication companies in Sierra Leone:

Africell, Zain, and Comium. Each one offers various services that attempt to build the volume of

users and its network.

Africell has the most users and offers a number of value add features and services such as

downloadable ring tones. Africell is probably the cheapest on a cost to coverage ratio of the

three companies. Zain has the strongest network, but is also the most expensive. It is the only

company to offer service in most of the provincial areas. Comium is has the lowest coverage, but

it is also the cheapest option and offers the best margins to its wholesalers and resellers. All

three of these companies have markets outside of Sierra Leone and sell services that generate

business for those that travel between countries.

SUPPLY CHAIN

Mobile telecommunication companies sell their top up codes and minutes at wholesale prices to

a few designated selling agents. Then the selling agents offer those minutes to individual

retailers in shops throughout the country. The individual retailers purchase these minutes at a

discounted price and then resell the service at a marginally higher price to the customers.

Minutes can be transferred phone to phone (~95% of all mobile top up transactions) or by

entering and sending codes from the customer’s phone to the telecommunication company

which in turn sends minutes to the customer’s phone.


PARTNERSHIP

The CEO of Africell offered to make IRC or an affiliated party one of five wholesalers at a much

lower entry price. However, this still would require a trusted and capable partner. Balani & Sons

also represent another potential partner. However, they could offer little in the way of

Mobile Phone Company

Africell, Zain, Comium

Large Wholesaler Selling Agents

(e.g. Balani & Sons)

“Top Up” Resellers Transactions: Mobile

to Mobile Unit Code Cards

End

Cu

sto

mer

49 | P a g e

additional value add to the microfranchisee than what they would receive from another

wholesaler. Talks with Splash have been more productive and Splash has indicated that they are

negotiating a better ate for air time units and will pass almost all of the margin on the their

microfranchisees, thus allowing them to make a 5% profit margin instead of the 3-5% currently

available to wholesalers. By working with Splash, selling air time units could be a nice adjacent

business to the mobile banking practice for the microfranchisees and help them supplement

their income in the short term as the mobile banking practice takes time to build.

SCALABILITY

The mobile phone industry’s top up service is not very scalable as a youth microfranchising

employment model. Due to the high availability of this service and saturated market of sellers

without a strong brand-user connection, it would be difficult to create additional jobs in this

sector. Perhaps the best way to increase employment is to overcome the lack of capital

problem. However, this will require significant capital infusion, making it difficult to scale to

target numbers of microfranchisees. As was mentioned, providing multiple or more innovative

mobile services has greater potential to scale.


In the short term, the mobile phone industries’ top up service does not show potential for

extreme profitability. Only coupling this service with other services would the microfranchisees

and the microfranchisor turn a reasonable profit in the long-term. Through conversion

franchises, there could be potential to strengthen the profitability of this model; however, since

each youth entrepreneur can sell any type of brand, the profitability remains capped for those

at the individual seller.

CONCLUSION We do not recommend IRC partner with a mobile phone company to have their youth sell top

up services because the market is already saturated with sellers of this service and the mobile

phone companies have not shown to be quality partners. Since the youth entrepreneurs and

top up service are such a small part of the mobile phone companies programs, their

partnerships would be very weak in supporting the desired job growth, training component, and

business innovation. The top up service alone is also not very scalable as a youth

microfranchising employment model. However, air time sales may be an excellent adjacent

business to launch for mobile banking microfranchisees, like those involved with Splash to help

supplement their income. We recommend taking this approach to the air time sales sector.

50 | P a g e

CONCLUSION After analyzing each of Sierra Leone’s most viable business sectors with the intent to identify

optimal microfranchising opportunities, FCG highly recommends IRC continue to explore

innovative partnerships in the following four industries:

Mobile Banking

Ice

Water Sachets

Popsicle and Frozen Treats

Having researched Sierra Leone’s youth labor market, current market demands and consumer

trends, in addition to exploring the major business industries in our analysis, these four sectors

provide the best opportunities for IRC’s youth microfranchise initiative. Under the right

conditions, each of these industries had strong potential partnerships when measured against

our three main criteria: management team, scalability, and profitability. In particular, we

recommend IRC solidify partnerships with two established businesses, Splash and Ice Ice Baby,

which would allow IRC to take advantage of all 4 industry’s market opportunities.

SPLASH: MOBILE BANKING

Partnering with Splash in the mobile banking

industry, IRC youth microfranchisees will gain an

immediate market edge on this burgeoning financial

services market. Splash has a quality management

team, a highly scalable service, and profit-earning

potential. Splash’s management team welcomes

innovation and has already expressed interest to

work with IRC and FCG to develop the

microfranchising system. Splash also has venture

capital support from Manocap to ensure oversight for

its management team and provide access to capital

for growth. In addition, Splash has agreements with the three major telecommunication

companies giving it a market penetration advantage and access to all potential user networks.

We will explore this industry and partnership further in our subsequent microfranchising

business model report for Splash.

ICE ICE BABY: ICE, WATER SACHETS, AND

POPSICLE AND FROZEN TREATS

We also recommend that IRC further develop its

established youth microfranchise partnership with

Ice Ice Baby due to its quality management team,

potential scalability, and profitability. Like Splash,

Ice Ice Baby has an innovative management team

supported by Manocap. Ice Ice Baby is highly

interested in expanding its operations and

51 | P a g e

deepening its distribution by expanding its youth microfranchising networks. Already meeting

the high demands for ice with its quality recognized brand, Ice Ice Baby is an ideal partner

poised for growth and product diversification. Should Ice Ice Baby begin producing water

sachets and popsicles, its strong reputation coupled with the high demand for these products

will lend legitimacy to the youth microfranchisees and help facilitate sales. This partnership will

also lead to high profitability for both the microfranchisor and the microfranchisees. In a

subsequent microfranchising business model report for Ice Ice Baby, we will discuss our

recommendations further for how this partnership should unfold.

Returning to IRC’s objectives, this report addresses objective #1, sub-questions a. through f.,

which is to identify potential businesses that could successfully partner with IRC in their three-

year microfranchise strategy. FCG will continue to expound on our findings in the subsequent

two microfranchising business model reports for Splash and Ice Ice Baby. In those additional

reports, we will address sub-question g. from objective #1, which is to outline the proposed

microfranchising model, accounting for its strengths and weaknesses, and compare it to other

similar international microfranchising models where relevant. Those two additional reports will

also culminate our initial five week analysis by addressing IRC’s last two main objectives with the

following sub-questions:

2. Business conversion and definition of path to scale for micro-franchises;

a. What specific activities will be required to support each selected businesses’ conversion into micro-franchise operations?

b. Who will be engaged in providing support to each of the selected businesses (IRC, local partners, other market actors)?

c. What is the expected timeline for scaling micro-franchise operations (provide specific numbers along timeline)?

3. Definition of cost-efficiency and sustainability plans for micro-franchises; a. What is the expected cost of implementing micro-franchise operations for

businesses (per youth)? b. What is the expected cost for buying into micro-franchises for youth?

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APPENDIX

Salon Market Size Total Market

Market for Men 83,796,300,000L Market for Women 440,501,406,959L 524,297,706,959L

20,949,075$ 110,125,352$ 131,074,427$

Number of Men Number of Women

1,037,876 1,104,124

518,938 552,062

488,412 519,588

518,938 552,062

488,412 519,588

% that pay to style Hair % that pay to style Hair

10% 15%

15% 25%

25% 45%

60% 65%

75% 85%

No of Trims/yr No of Styling/yr

8 1

10 1

12 3

14 5

16 6

Average Cost Per Trim 83,796,300,000 Average Cost Per Styling 54,617,476,546

500 1,000

1,000 1,500

1,500 3,000

5,000 6,000

10,000 20,000

Average Frequency of Relax Average Frequency of Relax

- 1

- 1

- 2

- 3

- 6

Average Cost Per Relax - Average Cost Per Relax 180,582,842,784

- 20,000

- 25,000

- 30,000

- 40,000

- 60,000

Average Frequency of Weave Average Frequency of Weave

- 1

- 1

- 2

- 3

- 4

Average Cost Per Weave - Average Cost Per Weave 205,301,087,629

- 40,000

- 50,000

- 60,000

- 70,000

- 80,000