Proposal for the SGI

Institute of Natural Resources

An Applied Research Project

Proposal

Leadership Lessons for Best Practice in Estuary Based

Enterprise Development

PHASE II

All correspondence should be directed to:

Nhlanhla Sihlophe

Project Manager

Institute of Natural Resources

Private Bag X01, Scottsville, 3209

Tel: 033-3460796

Fax: 033-3460895

Cell: 0837174153

E-mail: sihlophen@nu.ac.za

Submitted by: Institute of Natural Resources (INR)

Submitted to: University of California Berkeley

Project period: January to December 2004

Total budget: US$ 51,164

Budget requested from SGI: US$ 9,600

Budget from INR and other sources: US$ 41,564

1) Problem statement / justification

In South Africa, like in its neighbouring states, considerable development funding is being invested in initiatives aimed at balancing protection of natural resources with sustainable utilization. The intention is to support rural livelihoods and the flow of benefits to rural communities in a manner that does not cause severe harm to the natural environment of rural communal lands. As a result, the initiatives broadly referred to as Community Based Natural Resource Management (CBNRM), often include the establishment of community owned nature-based enterprises. The primary aim of these enterprises is to provide alternative economic opportunities for the rural poor. The rationale is that as economic benefits flow to local communities from these predominantly eco-tourism ventures so will appreciation of the need to protect the natural assets that serve as a tourist drawcard to these areas. However, recent experiences and observations indicate an increase in failure of these enterprises soon after cessation of donor support.

The problem is that South Africa cannot afford the current levels of failure in establishment of enterprises; this does not only undermine the development and conservation imperatives of the region, but it also result in unnecessary wastage of resources. Investment must yield better results, quickly and at lower cost. Those who support the establishment of estuary and other nature-based enterprises must learn quickly from the experiences of success and failure.

In this regard, Phase I of a project conceptualized in three phases has been carried out and completed. It involved gathering entrepreneurs, community leaders, development practitioners and researchers to:

· Review business models,

· Gather lessons to form guidelines for the application of best practice, and

· Identify opportunities for research aimed at enhancing application of best practice.

Following from the completion of Phase I; Phase II of this applied research project is being proposed. It involves elements of action research aimed at practical application of the findings of Phase I. The intention is to test application of best business practice in three different types of business models that have been carefully identified. These three types of models, which exist along the Wild Coast of the Eastern Cape Region of South Africa, are:

· Micro scale operations (e.g. Bait collection and sale operations) conducted by individual community members,

· A community owned eco-tourism venture that receives a variety of subsidies from various sources including the NGO sector, and

· A Community Private Sector Partnership venture with minimal NGO involvement.

Phase II is a two year project involving the introduction of the best practice findings from Phase I during the first year, and applied research during the following year. Phase III would be a one year project involving a comprehensive review of best practice and preparation of a handbook on best business practice for environmentally based businesses in the disadvantaged sector. Phase II, this project, seeks to test application of best practice in existing and newly established estuary based businesses. It is based on the view that gathering lessons through action and applied research would aid the preparation of the mentioned handbook. It involves the following:

· An assessment of adherence to business principles and introduction of business principles where appropriate to do so. Introduction of these principles would include criteria, indices and standards for each principle. These, in turn, would help with monitoring and evaluation of adherence to the principles specified.

· An analysis of the subsidies underlying each business model, and to highlight to enterprise operators of the implications of the withdrawal of subsidies on the sustainability of the business.

· A review of existing business plans and assessment of alignment between the business plan and business operations, where relevant, strategic support would be provided in order to align operations with the plan. This would include introduction of simple but proper financial management systems.

· Development of a business plan and provision of support for implementation of a business plan for micro-scale operations.

· An analysis of the strengths and weaknesses of each business model and suggestions on remedial action to overcome the weaknesses.

· An investigation of the effect of: group size of direct beneficiaries on the sustainability of the business; and clearly defined land ownership or resource tenure rights on the sustainability of the enterprise.

·

These activities would be conducted for:

· Micro-scale operations such as bait collection and sale operations; ferrying and canoe businesses owned and operated by individual community members along the Wild Coast in Mngazi, or Manteku, or Mngazana estuaries. The exact site and type of micro-scale enterprises to be supported by this project would be selected based upon a criteria to be developed during project implementation.

· Amadiba Adventures. This is a community owned eco-tourism enterprise operated along the Wild Coast section of the Eastern Cape Region in South Africa. It is supported by an NGO called PondoCrop. Amadiba Adventures runs a horse and hiking trail that attracts both local and international tourists, throughout the year. The horse and hiking trail starts and Mzamba and ends at Mtentu estuary. The distance between these two estuaries is approximately 40 km.

· Amadiba Adventures and Ufudu fly-fishing partnership. This is a catch and release fly-fishing operation that resembles a Community Private Sector Partnership model. This model is increasingly being applied to a wide range of environmentally based enterprises, and it is also applied to the fly-fishing operation that takes place at Mtentu estuary.

Proposal to SGI

The specific proposal to SGI involves the engagement of a team of consultants from the International Business Development (IBD) Program of the Haas School of Business, University of California, Berkeley.

The objective of the IBD team’s work is to obtain a clear, precise actionable set of recommendations that will lead to implementation of the business plans developed in Phase I of the project.

The Haas International Business Development team will review the work completed in the previous year under Phase I of the project. Based on the results of this review, the team will evaluate the feasibility (commercial, financial, strategic and infrastructural) of implementing these best practices in specific examples of the three model types (micro scale operations, eco-tourism operation and community private sector partnership) proposed by Phase I. This will involve assessing the specific operations, individuals and organizations proposed by the applicants (namely the micro-scale operators on the Wild Coast of Mngazi, Manteku or Mngazana estuaries, Amidiba Adventures and Amidiba Adventures/Ufudu fly fishing partnership) as "model" businesses in the Eastern Cape Region. Each of these enterprises will undergo a "due diligence" assessment that will lead to an overall evaluation of their operations, management, and market potential. The assessment will include the development of a forward looking plan complete with pro forma financial statements.

The team will assist in the further development of the existing business plans for these operations and, specifically, will assist in the development of a clear and precise implementation strategy for each in line with the previously mentioned pro forma financials.

2) Project activities and timelines

The following activities are planned:

Activity	Start date	End date	Responsible Organisation	Place
Preparation of the project implementation plan	01 March 04	30 March 04	INR/HSB/MN/CEAD	SA/USA
Analysis of the subsidies underlying each business model	01 March 04	30 May 04	INR	SA
Development of a criteria for the selection of micro-scale enterprises, and introduction of the project to enterprise operators	01 March 04	31 March 04	INR/CEAD/MN	SA
Assessment of adherence to business principles	01 April 04	30 May 04	INR/CEAD/ HSB	SA/USA
Review and assessment of alignment between the business plan and operations	01 April 04	22 May 04	CEAD/HSB	SA/USA
Business plan development and / or modification of existing plans	22 May. 04	12 June. 04	HSB	SA
Implementation of business plans and introduction of business principles	12 June. 04	30 July. 04	HSB/INR /CEAD	SA/USA
Ongoing support to align business activities to the business plan	01 Aug. 04	30 Dec 04	INR/CEAD/ HSB	SA/USA
Analysis of the strengths and weaknesses of each model	01 Aug. 05	30 Dec. 05	CEAD	SA
An analysis of the effects of group size and clearly defined land ownership/resource tenure rights on the sustainability of community owned enterprises	01 January 05	30 May 05	MN	SA
Ongoing monitoring and evaluation of the relationship between adherence to business principles and business sustainability	01 Sept. 04	30 Sept 05	CEAD/MN/ HSB/INR	SA/USA
Completion of the final report for the SGI	01 Nov. 04	30 Dec. 04	CEAD/MN/ HSB/INR	SA/USA
Completion of the final report for the SGI and other funder(s)	01 Sept 05	30 Dec. 05	CEAD/MN/ INR	SA

Note: In the context of this project subsidies refer to any form of service or support that is received by the enterprise without incurring any direct or indirect costs (e.g. An NGO may subsidize a community owned eco-tourism business by marketing its services on behalf of the operators, through continuously soliciting donor funds to perform this service).

In order to sufficiently monitor and evaluate the effectives of application of best practice on business sustainability, a minimum of two years would be required for this project. However, a report based on activities scheduled for the first year would be compiled and supplied to the Beahrs SGI.

3) Collaboration statement

The collaborating partners to lead Phase II of this project are:

· Mr Nhlanhla Sihlophe, Ms Ngotho Muthoni, and Mr Mpumelelo Ncwadi. These individuals are all ELP alumni of 2002, 2003 and 2001 respectively. Sebastian Teunissen is a collaborating partner from UC-Berkeley.

Nhlanhla Sihlophe is currently a project manager at the Institute of Natural Resources. He has been involved in estuary management work for the past three years and has a particular interest in the sustainability of nature-based enterprises. He was also involved in Phase I of this project. The Institute of Natural Resources (INR), an organization in which he is currently based, has 20 years of experience in supporting natural resource based enterprise development. Therefore, he has a sound support base to aid with successful completion of this project.

Ngotho Muthoni is a PhD student at the Centre for Environment and Development (CEAD) at the University of Natal. Prior to pursuing development studies in South Africa, she was involved with urban communities on environmental improvement initiatives among others those emerging from the piloting of Local Agenda 21 in Nakuru, Kenya. Ms Muthoni is currently supervised by Professor Rob Fincham, a Director of CEAD, who has expressed his willingness to lend support to Muthoni’s participation in this project.

Mr Mpumelelo Ncwadi (MN) is an independent environmental consultant and waste management specialist. He has nine years of experience as an environmental practitioner in a wide range of industries in the Southern African region. He brings to this project his invaluable experience on sustainable environmental management.

Sebastian Teunissen is an Executive Director at the Clausen Center for International Business and Policy and Adjunct Professor at the Haas School of Business (HSB) at UC –Berkeley. The involvement of his school in this project would assist with developing the business/commercial aspects of the project. These would include developing business plans, implementing business management systems and supporting the application of sound business principles among enterprise operators.

4) Connection with learning / skills developed during the summer course at Berkeley

This project is founded on an integration of lessons learnt and skills developed during the summer course at Berkeley in 2001, 2002 and 2003 by alumni collaborators, particularly in the following broad topics:

· Entrepreneurship and the environment, including core concepts gained at the course in leadership and management;

· Collaborative processes;

· Community based adaptive management; and

· Natural resources and ecosystem management.

For Nhlanhla, experiences gained at Berkeley fortuitously coincided with practical experiences of working with ecotourism among marginalised coastal communities. This gave direction for research.

5) Expected outputs

Expected outputs of this project are:

· At the end of the first year a report will cover:

- Activities performed as according to the work schedule,

- The effects of subsidies on the sustainability of the community-owned, nature-based businesses,

- Initial results or lessons learnt from testing practical application of the findings of Phase I in the three types of business models identified; and

- Areas that require further research to improve performance of enterprises based on ecosystem goods and services.

· At the end of the second year the report will cover, in addition to the above:.

· An analysis of the strengths and weaknesses of each business model,

· A report of the effects of: the group size of direct beneficiaries on the sustainability of a community owned enterprise; and of land ownership/resource tenure rights on the sustainability of a community owned enterprise, and

· The results of monitoring and evaluation of best business practice in the mentioned three types of business models.

6) Expected outcomes

The expected outcomes of this project will be the following:

· Development practitioners have improved access to relevant information for support of coastal enterprises,

· Researchers are better informed about research needs in support of natural resource based enterprise development, and

· New partnerships support knowledge generation and application resulting in improved efficiency and cost effectiveness.

7) Timeline and duration

SGI: Start – 01 Feb 2004 End – 31 Nov 2004

INR: Start – 05 Jan 2005 End – 30 Nov 2005

*Note: It is anticipated that the INR would secure additional funds to take forward the implementation of the activities scheduled for 2005.

8) Budget

Preamble:

In order to test application of best practice through implementing the findings of Phase I, a period of a minimum of two years is required for the implementation of this project. This project is unlikely to provide good results if implemented over one year. However, we do recognise that the Beahrs SGI projects have to be completed in one year. This being so, funding from the SGI would be expended during the first year of implementation (2004) specifically to fund the work of the Haas IBD team. A full report would be prepared and supplied to the SGI at the end of the first year. It is expected that the INR would be successful in securing additional funds to perform the rest of the activities in 2005. A final report on the project compiled at the end of 2005 would be supplied to all the funders including the Beahrs SGI. (Details of budget confidential.)

9) Innovation

The project provides an innovative approach to and a second step towards developing an essential tool for use by environmental practitioners, enterprise operators, funding organizations and the corporate business sector in supporting sustainable enterprise development in South Africa. Although the focus is estuaries, the potential application of best practice transcends this and in adapted form will be applicable to a range of ecosystems that provide goods and services to society in South Africa and further a field.

10) Risks

At the moment there are no foreseeable risks that could prevent successful implementation of this project. A situation of instability or unrest is unlikely to erupt in the Wild Coast, it is a very stable place, and something really drastic would have to happen to prevent the success of this project.