5
Recommendations

INCENTIVES FOR PRIVATE COMPANIES TO PROVIDE PUBLIC GOODS AND SERVICES

The proverbial 100 million in Nigeria lacking home lighting, safe drinking water, and effective malaria therapy is a population larger than those of all but a handful of countries. Lacking the resources to more than double the number served by the electricity grid and piped water network, the Nigerian government can turn to the very active private sector to provide these basic products and services. A program of financial incentives and technical assistance to encourage responsible service will be in consonance with the National Economic Empowerment and Development Strategy (NEEDS) poverty reduction plan prepared with the International Monetary Fund (IMF). If a large proportion of those lacking the basic services of electric power and safe water in the home are to be served, a solution engaging the private sector may require the involvement of a large number of new companies, many of them start-ups. First-stage financing or venture capital will be required, perhaps for the majority of them.

With some trepidation, we mention a mechanism—the Alternative Agricultural Research and Commercialization Corporation (AARC)—that was set up by the U.S. Department of Agriculture (USDA) in 1992 to provide venture capital for the promotion of alternative systems of agriculture in the United States. The AARC, which had an independent board of directors, made investments in mostly small companies that promised



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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria 5 Recommendations INCENTIVES FOR PRIVATE COMPANIES TO PROVIDE PUBLIC GOODS AND SERVICES The proverbial 100 million in Nigeria lacking home lighting, safe drinking water, and effective malaria therapy is a population larger than those of all but a handful of countries. Lacking the resources to more than double the number served by the electricity grid and piped water network, the Nigerian government can turn to the very active private sector to provide these basic products and services. A program of financial incentives and technical assistance to encourage responsible service will be in consonance with the National Economic Empowerment and Development Strategy (NEEDS) poverty reduction plan prepared with the International Monetary Fund (IMF). If a large proportion of those lacking the basic services of electric power and safe water in the home are to be served, a solution engaging the private sector may require the involvement of a large number of new companies, many of them start-ups. First-stage financing or venture capital will be required, perhaps for the majority of them. With some trepidation, we mention a mechanism—the Alternative Agricultural Research and Commercialization Corporation (AARC)—that was set up by the U.S. Department of Agriculture (USDA) in 1992 to provide venture capital for the promotion of alternative systems of agriculture in the United States. The AARC, which had an independent board of directors, made investments in mostly small companies that promised

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria to commercialize agriculture-based industrial products. It took an equity position in the company or a royalty on sales, and it had an agreed exit strategy after eight years. Unfortunately, the AARC was disbanded after seven years when the USDA Inspector General’s Office uncovered serious deficiencies in its management and oversight.1 Despite this outcome, a similar mechanism with a narrower mandate, perhaps run by a nongovernmental organization (NGO) that could be held to account, might prove effective in funneling venture capital funds to small companies that would directly further the aims of the program. An essential ingredient of any such program is effective evaluation and approval of the product and associated service for quality and compliance with published standards as well as the oversight that was ineffective in the case of AARC. Like many venture capital firms, the proposed one could also offer technical assistance with logistics and help in negotiating the legal requirements. Alternatively, a large major company in the solar energy or pure water business could be enticed to develop a system for sales in Nigeria and offer franchises to entrepreneurs to sell and service units in different parts of the country, providing credit and training as required. In the previous chapters and in the following recommendations, reference is frequently made to the “Nigerian government.” However, in Nigeria, as in most countries, government exists at several levels—generically, federal, state, and local. The present distribution of power frequently allows the state and local levels of government to undertake actions such as those proposed here. Moreover, they may have easy accessibility to the poor rural populace and community-based projects that are involved. Here we do not try to determine which level of the Nigerian government system is most appropriate for the indicated action. The term government should therefore be understood to apply to all three, with the hope that the recommendation will be considered by the one that is most interested and effective. Recommendation: The Nigerian government should develop a system of incentives to encourage private companies to sell and service solar electric systems for the home to rural residents who are not connected to the national grid. The Nigerian government also should develop a system of incentives to encourage private companies to sell and service water purification systems to communities that are not served by municipal or national water supplies, or to produce household filtering systems for safe drinking water. 1 U.S. Department of Agriculture, “Assessment of the Alternative Agricultural Research and Commercialization Corporation—Management Lacking over High Risk Investments,” 1999, http://www.usda.gov/oig/webdocs/37099-1-FM.pdf.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria Consumers of home solar electric systems will need consumer credit to purchase their units. Local financial institutions, community associations, cooperatives, and trade associations should be encouraged and trained to make small loans for such systems, including service contracts, secured only by the system itself, as has been done in other countries. The experience of SELCO in India demonstrates how the company itself can intervene effectively, but if a large number of new companies will have similar needs, the government could take the lead in working to establish a partnership with the credit organizations. Recommendation: The Nigerian government should work with banks, community associations, cooperatives, trade associations, and other financial institutions to establish microloan funds that would be dedicated to providing consumer credit for home solar electric and water filtration systems in rural areas. Many householders are not aware of the advantages to their families and the improvements in their lifestyles and educational and business opportunities that are made possible with electricity. Many also do not realize the harmful effects that contaminated water can have on their children and the cost to themselves and the nation. Mass media campaigns could be highly effective in promoting these lifestyle benefits. Suitable slogans might be along the lines of “Wash your hands, filter your water,” or “Light up their lives” (with children shown studying beside an electric light). Recommendation: The Nigerian government should sponsor an educational campaign to encourage people to invest in electric power and safe water. Existing law might actually make it legally hazardous for private companies to bring electric power into people’s homes, because this service is now the exclusive mandate of a federal ministry. A new law in the realm of public health and conservation of natural resources could encourage people to conserve water and energy and to avoid disease from infected water and food, in part by making it legal to install electric power and water filtration systems and sell and deliver electric power and safe water to the home. Recommendation: A legal remedy should be found to the prohibition on private companies or individuals providing power to homes

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria in Nigeria. In the context of legislation on renewable energy sources, it might give additional impetus to the proposed program. THE CHALLENGE OF ARTEMISININ COMBINATION THERAPIES The production of artemisinin combination therapies (ACTs) by Nigerian companies, even just for the Nigerian market, will probably not be successful without active and purposeful government intervention. Currently, economics is holding back the demand for ACTs. The strategy that has received the most attention by those trying to solve the problem is a global subsidy, which would be applied at the supranational level and would be financed in large part by international donors (see Chapter 3). Only high-quality and appropriate products (probably prequalified by the World Health Organization) would qualify for the subsidy. Should the notion of a subsidy not succeed, it is unclear whether the majority of those seeking malaria treatment will ever have access to these drugs. Today, however, nothing about the proposed subsidy is certain. Nigerian pharmaceutical companies and public health officials may not be sufficiently aware of developments in the international arena that will affect their plans. The government should play an active role as an information broker—with well-informed international contracting assistance as necessary—to ensure that all interested officials and companies are fully briefed. At the same time, those preparing to cultivate artemisia or to take other steps toward producing ACTs for the Nigerian and world market should be encouraged and assisted. Whether or not Artemisia annua is grown commercially in Nigeria and Nigerian pharmaceutical companies are able to participate fully in a subsidized distribution system, actions must be taken to ensure that the population is as fully protected as possible. These actions include public campaigns calling for the use of treated bed nets, avoiding counterfeit and ineffective drugs, and draining potential breeding places for mosquitoes. Recommendations: The Nigerian government should support private sector participation in the global ACTs market. It should do this by tracking international developments related to the economic and technical requirements of all aspects of ACTs production and establishing formal and informal links to academic, public, and for-profit entities that could play a role in ACT production. The Nigerian Academy of Science could play an important role by convening potential

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria participants for the exchange of information with the government and the international community. The Nigerian government should ban all counterfeit drugs, illegal clones, low-quality products, and artemisinin monotherapies from the Nigerian market by means of proactive enforcement against illegal activity. It also should prohibit all advertising for such products. Duties and other impediments to the importation of the equipment, raw materials, solvents, and other materials needed for ACTs research and production should be removed. The Nigerian government should support training and research on the agronomy and selection of the best cultivars of Artemisia annua in collaboration with the global malaria community. Public health laboratories should participate in surveillance to determine the levels of resistance to possible partner drugs for different ACTs formulations. CONSUMER EDUCATION AND TRAINING In every modern society, consumers are confronted by a bewildering array of choices of products and services that affect their health, well-being, and economic security. However, most countries offer little formal training, and so consumers are expected to educate themselves by means of the media, their friends and community, and commercial advertising. Sometimes, consumers receive some reassurance from the public regulatory agencies or the private NGOs that monitor product safety, drug efficacy, and truth in packaging. But when these watchdog agencies are ineffective or absent, or when populations are illiterate or isolated, public agencies must step in and provide more explicit consumer education through the schools or in public campaigns or pronouncements. A prominent example is the series of pronouncements by the U.S. surgeon general on the dangers of smoking, which must be reproduced on all cigarette advertisements in the United States. An idea that has been put into practice successfully in Africa is a university-to-village extension program. Engineering, nursing, medical, and other professional students “adopt” villages to assist. In doing so, they make frequent visits and provide free service and advice to the villagers on simple solutions to common problems. At the same time, they become sensitive to the villagers’ problems and issues, which serves to make them better professionals and better future citizens. The hands-on work can be integrated into the curriculum to formalize the training and recognize the educational benefits to the students. Such an approach

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria was taken in the introduction of the simple filtration of water in Bangladesh.2 The Kigali Institute of Technology (KIST) in Kigali, Rwanda, has been using such an “adopt a village” model in its engineering program.3 Students are exposed to villagers’ problems at an early stage in their curriculum. Recommendation: The high mortality rates in Nigeria from diarrheal disease and malaria argue that the Nigerian government should offer health education and training in the schools that would include the importance of safe drinking water, how to maintain a sanitary water supply, and how to choose effective medicines. Other relevant topics could include nutrition, hygiene, safe sex, and the prevention and treatment of common diseases such as respiratory infections, diarrhea, and HIV/AIDS. This program should be supplemented by public pronouncements on topics such as filtering water and a public information campaign on the importance of using the most effective antimalarial therapy—currently ACTs—and the necessity of completing the course of treatment. THE ROLE OF PHILANTHROPIC FOUNDATIONS AND DONOR AGENCIES The proposals offered here for government suggest a new approach for philanthropic foundations and donor agencies. Ideally, any donor should have two objectives. First, enable the target community to find and implement solutions to its own problems rather than giving it a particular solution—that is, as the popular saying goes, teach people to fish instead of giving them fish. Second, create sustainable solutions that do not require an ongoing supply of donor funds. Too often, however, aid agencies and foundations are criticized for making recipient countries and communities dependent on aid by giving them unearned benefits that are not sustainable or by creating wealth that is not shared by the majority of people. Furthermore, the benefits disappear when the aid program ends because the local government is unable to continue the support. Instead, we suggest that this kind of philanthropy should be considered a sort of investment in public goods and services. The goal should 2 Young-Gun Zo, Irma N. G. Rivera, Estelle Russek-Cohen, M. Sirajul Islam, A. K. Siddique, M. Yunus, R. Bradley Sack, Anwar Huq, and Rita R. Colwell, “Genomic Profiles of Clinical and Environmental Isolates of Vibrio cholerae O1 in Cholera-Endemic Areas of Bangladesh,” Proceedings of the National Academy of Sciences 99(2002):12409–12414. 3 See http://www.kist.ac.rw.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria be to create enterprises that will work to continue to provide the goods and services that represent the solutions to socioeconomic problems. If necessary, such enterprises could be asked to return a portion of their profits to the donor or to a fund that will expand the activity. They will be sustainable, because the owners and employees themselves depend on the success of the enterprise—rather than renewal of grants—for their survival. However, for donors this path is the more difficult one, because the creation of successful enterprises is less well understood in the philanthropic world than grant giving, and a natural failure rate characterizes even the most fertile investment plans. Donors would do better to emulate the most successful venture capital firms in Silicon Valley by employing the kind of expertise needed to select the best candidates and offer the kind of technical advice needed by recipients. Even so, the effort should be spread among many enterprises to improve the probability of success, and thus it will resemble a balanced investment portfolio more than a normal grant program. It might be initiated with the kind of knowledge assessment that was employed for this project to create a model business plan, with the implied hope that some of the selected participants themselves will be among the first applicants for start-up loans, or technical assistance, or whatever the program offers as an incentive. Some NGOs, which often serve as agents of the donor agencies, also should modify their method of operations. They are adept at organizing demonstration projects, some of which might illustrate the feasibility of installing solar PV systems in villages by donating such systems and teaching the recipients to use them. Experience has shown, however, that, relieved of the responsibility of selecting and paying for the unit, the recipient has little motivation to maintain or use it effectively, and the project often ends up demonstrating to villagers that such utilities need not be paid for and have a limited lifetime. Such an approach is detrimental to entrepreneurs who seek to sell and service such units, and should not be part of the proposed effort. Demonstration projects would still be useful, but the demonstration should be of small enterprises that make a profit by supplying the basic needs of poor people. Experienced businesspeople, local or international, could be enticed to assist these companies, even to invest in them, and, even further, to make a second career as a consultant helping other companies to enter these markets. As Professor C. K. Prahalad has pointed out, real profits are to be made by serving the people at the bottom of the pyramid, but the business plan is different (see Chapter 1). There is much to be learned. Another area in which NGOs excel is public education and media promotion. With the support of their donors, they could take the lead in

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria the campaigns for safe water, home solar electric systems, and the exclusive use of ACTs for malaria treatment, and they could serve as effective partners of the enterprises that provide the products and services. Meanwhile, the many donors and NGOs that already employ similar techniques with success should be supported and encouraged. The philosophy of philanthropy proposed here raises some associated problems that should be solved. In the United States, philanthropic foundations must register with the Internal Revenue Service for tax exemption under Section 501(c)(3) of the Internal Revenue Code. One of the conditions is that they not make grants to profit-making enterprises, even with charitable intent. Many such grants are made legally, however (for example, reportedly the Rockefeller Foundation made a start-up grant to SELCO in India), whereas other companies continue to confront obstacles in trying to secure such support. Each foundation must evaluate its situation in each case and find an appropriate way to support these enterprises. The same problem may arise when the subsidy for ACTs is finally established and private companies are paid above-market prices for their medicines. This committee does not find itself competent to assist with these problems. Recommendation: Philanthropic foundations and donor agencies should orient some of their activities in developing countries toward creating and supporting profit-making enterprises that would provide public-benefit goods and services to poor people. Grants should be replaced in spirit with first-stage financing or investments, and the portfolio should be broad enough in diversity of enterprises with different business plans and different technologies to raise the probability of financial success in this area, where there is relatively little experience. THE ROLE OF THE NIGERIAN ACADEMY OF SCIENCE The Nigerian Academy of Science, like the U.S. National Academies, selects its own members on the basis of scientific merit and contributions to knowledge. Within Nigerian society, it represents the national scientific community, and its officers often participate in national events in that role. It sponsors scientific conferences, awards prizes, and publishes a national scientific journal. The U.S. National Academies are distinguished among the world’s science academies in their formal role as advisers to the nation on science, engineering, and medicine. Their original mandate as self-selecting scientific societies, issued by the U.S. Congress in 1863, included a mandate to advise the government in matters of science and art upon request, but added that the Academies “shall receive no compensation whatever for any services to the Government of the United States.” They therefore

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria receive no appropriation from Congress, but they publish about 250 study reports a year, 90 percent of them commissioned and paid for by the U.S. government. The absence of compensation refers to the diverse volunteer scientists and engineers who, as independent members of the study committees, research and write the reports, or as anonymous reviewers provide independence and quality control. In few other countries does the national science academy play as important a role in public life. The Nigerian Academy is well positioned to strengthen its public role, and several actions related to this report might help it to move in that direction while furthering the goals of sustainable development. A good framework for a proactive role by the Nigerian Academy of Science could be modeled on a program that has been a fixture at the U.S. National Academies since 1984. The formal mission of the Government-University-Industry Research Roundtable (GUIRR) is “to convene senior-level representatives from government, universities, and industry to define and explore critical issues related to the national and global science and technology research agenda that are of shared interest; to frame the next critical questions stemming from current debate and analysis; and to incubate activities of on-going value to the stakeholders. This forum is designed to facilitate candid dialogue among participants, to foster self-implementing activities, and, where appropriate, to carry awareness of consequences to the wider public.”4 The chair of GUIRR is usually a retired high government or industry official, and heads of major government departments are ex officio and entitled to appoint representatives. Other members must agree to participate in person. Reports of GUIRR workshops are often published for public information. Recent examples include: National Laboratories and Universities: Building New Ways to Work Together (2005); Envisioning a 21st Century Science and Engineering Workforce for the United States: Tasks for University, Industry, and Government (2003); and Overcoming Barriers to Collaborative Research: Report of a Workshop (1999). In the Nigerian context, the debate need not be limited to research, but could embrace other areas in which the governmental, university, and industrial sectors have a common interest. The first topics for discussion and perhaps publication could be how to mobilize the private sector to sustainably provide basic services to remote parts of Nigeria; setting and enforcing government standards for drinking water sold to the public; and a national strategy for ensuring that Nigeria has a secure supply of effective malaria therapy at affordable prices. Another valuable topic for discussion could be preventing the illegal sale of counterfeit products and medicines. 4 U.S. National Academies, http://www7.nationalacademies.org/guirr/index.html.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria Recommendations: The Nigerian Academy of Science should establish a program similar to the Government-University-Industry Research Roundtable (GUIRR), focusing on scientific and technological issues of common concern. It should sponsor and convene workshops of experts drawn from the government, academia, and industry, and reports of the workshops should be published by the Academy. One early topic for a meeting of the Nigerian roundtable and a workshop of experts should be the production of ACTs in Nigeria. Invitees would include agriculturalists, pharmaceutical companies, and government health officials. The workshop would seek to help interested companies to become informed about international efforts to subsidize the price of ACTs and the requirements for cGMPs (current Good Manufacturing Practices) certification and World Health Organization (WHO) prequalification to manufacture ACTs. Another, equally important early topic for the Nigerian roundtable should be the importance of safe potable water to public health in Nigeria. A follow-on workshop that includes experts from academia, government, NGOs, and the private sector would bring the issue to the public. Especially useful participants would be representatives of the Ministry of Health, the Federal Institute of Industrial Research, the International Center for Business Research, the Nigerian Agency for Science and Engineering Infrastructure, and the Nigerian Association of Small and Medium Enterprises. Importantly, such a workshop could urge the government both to clarify the law on the right to provide potable water to households and to mount a campaign in favor of filtered purified water to combat diarrheal disease. The U.S. National Academies should be prepared to assist the Nigerian Academy of Science to organize the Nigerian roundtable, if requested, in view of the National Academies’ long experience with GUIRR. The National Academies also might assist by arranging for international experts to participate in Nigerian Academy–sponsored workshops dealing with solar energy, safe water, and ACTs.

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Mobilizing Science-Based Enterprises for Energy, Water, and Medicines in Nigeria U.S. scientific agencies with international programs, such as the Office of International Science and Engineering of the National Science Foundation and the Fogarty Center of the National Institutes of Health, should guide the exchange programs between the United States and countries such as Nigeria toward cooperation in helping small and medium enterprises to provide public goods and services. Many U.S. scientists have valuable expertise in linking research to enterprise creation.

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