| THE WILMA PROGRAM | |
Functions of the WILMA Network in Africa
The WILMA Network has two main functions: organizational development and business incubation. Organizational development: WILMA catalyzes the formation of grassroots organizations that are intended to be the beneficiaries and ultimate owners of the business assets created by WILMA's program. These beneficiary groups are called Community Development Associations (CDAs). WILMA guides the maturation of CDAs over a learning period of five to ten years. CDAs are membership organizations composed of heads of household in a well-identified community. Business incubation: WILMA incubates "social enterprises"; that is, business ventures having strong commercial prospects and that serve the interests of the CDAs (such businesses are sometimes called "double-bottom-line" companies). In the WILMA process, these enterprises start as subsidiaries of WilmaFund, WILMA's Holding Company in Africa. Over a learning and maturation period of 5-10 years, they become companies managed and owned by the communities in which they are located, called host CDAs. During this maturation period, the CDAs normally become registered Community-Based Organizations, able both legally and managerially to take over from WILMA the responsibilities of ownership.
Connecting with grassroots organizations
WILMA connects with, works through, and adds value to established self-help networks at the community ("grassroots") level of organization. A good example is the Ngua Mlambo Development Trust (NMDT), which is a leader in community-driven development in Taita-Taveta district, Kenya. WILMA empowers such organizations by adding small-business capacities to their ongoing micro-enterprise activities. Reciprocally, WILMA benefits from building its CDAs on the social foundations of these established, grassroots networks.
Fields of commercial enterprises
The enterprises incubated and facilitated by WILMA may be engaged in income-generating activities in any of these commercial fields: (1) agribusiness and cooperative farming/fishing, (2) drinking water, irrigation, and sewerage, (3) solar power and other renewable energy, (4) information, computing, telecom and internet services, (5) housing and furnishings, (6) transport and storage, (7) marketing and packaging, (8) visitor services and tourism, (9) mining and other extractive activities.
Public Goods
The WILMA network in Africa nurtures ventures producing what economists call local public goods, which (because they cannot be sold privately at market prices) require sustained support from grants and/or cross-support from commercial businesses. Such activities may include mobile clinics, technical training schools at secondary level, general secondary schools for girls and AIDS orphans, arts alliances, legal aid for disadvantaged groups, community libraries, and centers for cultural and historical research and preservation. WILMA favors public-service ventures that strongly complement WilmaFund's for-profit subsidiaries in terms of the overall welfare impact on the host communities.
Marketing
WILMA exploits the positive potential of globalization for African producers. It counsels innovative selling strategies that build effective demand for distinctive local goods and services in all industries (abandoning the dysfunctional and unrealistic commodity model of trade in primary products). WILMA builds brand identity creatively, establishing marketing companies that co-brand with established international labels. WILMA fosters consistent incentives by building producer equity in its marketing companies. It exploits Africa's present comparative advantage in organic products, resources of traditional significance (such as cows, dairy and meat products), and environmental resources.
Revenue and Budget
WILMA and its National Managing Partners cover part of their administrative costs by earning management fees that are computed and paid by WilmaFund. The base of the computation of fees is capital disbursed and outstanding in favor of WilmaFund ventures currently being serviced. For National Managing Partners (NMPs), the percentage of this base payable after the start-up period is provisionally set at 2 per cent (this assumption being made in the calculation of management costs in the WilmaFund Business Plan). Additional funds are provided during the start-up period, as seed money for the capacity building needed to establish the initial start-ups. NMPs may outsource some of their local service functions to district-level organizations, in which case the fees paid by WilmaFund are shared with the local managing organization..
Capitalization and Debt Service
Capitalization of the ventures themselves is provided by WilmaFund. WilmaFund makes five-year term loans to its ventures. WilmaFund also facilitates capacity building for start-ups through short-term recoverable grants. The debt service on any given loan to any given venture takes the form of annual payments that are similar to royalties. They are calculated as a certain percentage of gross revenue of the venture during the period of the loan. This percentage is based on the five-year revenue projections in the business plan of the venture-projections that must be made current at the time of the loan. This calculated percentage equates the expected average annual rate of return on the loan to 17 per cent. This planned return has been estimated by WilmaFund to be sufficient to cover its own debt service and other costs (this figure being used for the revenue projections in the Business Plan of WilmaFund).
Profit and Equity
Profits of WilmaFund ventures after payment of this debt service are reinvested or distributed to owners in proportion to their equity shares. For the first five years of any venture, all its equity is held by WilmaFund as security against WilmaFund's borrowing from investors. After five years or when its term loans have been repaid, 20 per cent the equity in the venture is given outright to the Community Development Association (CDA) that is hosting the venture (subject to passing certain tests of readiness, including the CDA's qualification for ownership of assets under local law). Thereafter, WilmaFund encourages sale of the remaining equity to the CDA (whose interest as beneficiary is accorded priority) or to other local investors at fair market value (typically a standard multiple of expected earnings). Shares may be sold to WILMA's NMPs and/or to their district-level partners.
Control
For purposes of financial control, WilmaFund enters into formal contracts with its registered Subsidiary Companies, in whose favor the financing is provided. At community level these Subsidiary Companies are led by the venture managers (called Technical Managers) who, while residing and interacting with the hosting CDAs, have first-line responsibility to WilmaFund for the successful management of their respective ventures, including the payment of agreed debt service . Subsidiaries may also be constituted at District level to handle a variety of support functions. Enterprises having multiple locations, or establishments, are also envisaged.
Organizations of "Friends"
WILMA encourages the growth of local ownership by individuals who, while not members of the CDAs, have an interest in their success and can contribute something tangible to it. Friends of WCEC, or of RSDS, or of BMI, are organizations formed for this purpose. They represent national groups of social investors or "venture philanthropists." Friends are individuals who are interested in being informed of opportunities to collaborate with the WILMA Network or acquire shares in ventures at a realistic price-earnings ratio. The Friends organizations benefit WILMA directly by providing working capital and advice based on the individual expertise of the members. These organizations benefit WILMA indirectly by building the confidence of international investors in WILMA and by building WILMA's own confidence in its financial autonomy and sustainability. Members of Friends organizations are asked to contribute a certain minimum amount annually to the programs of their local NMP organization.