Laterite Aims to Build a Rock-Solid Business Layer in Rwanda
Geologically, laterite is the layer of soil rich in iron and aluminum often found in humid tropical regions and created from the erosion of rocks beneath it. Over the centuries, it was (and still is) used to make bricks to form walls, monuments and ancient structures that still stand today. Economically, laterite could be a euphemism for the business infrastructure (lawyers, accountants, consultants and advisors of all stripes) that helps developed economies thrive and emerging economies take root.
While Rwanda’s GDP has grown (on average) of 6.6 percent over the last four years, the business infrastructure to support new investment and government economic policy, is still trailing behind the impressive economic surge.
Launched in February 2011 by Sachin Gathani and Dimitri Stoelinga, who graduated with business and economic policy degrees from Harvard and Columbia, respectively, Laterite aims to address that gap and spin off new businesses in the process. After serving stints in private sector development, NGOs and government consulting, the co-founders saw a need to establish a new kind of social venture consultancy.
The following are excerpts from my recent interview with Gathani about Laterite and the Kigali firm’s objectives.
NextBillion.net: What is the value proposition behind Laterite?
Gathani: Laterite is a social venture that starts up and builds local companies in the advisory services sector with the help of international partners. We acheive this by hiring and training local Rwandans to provide these services, while Laterite works on the product development quality control and performance management. Our goal is to gradually transfer ownership of these firms to the local professionals who are managing these firms or to investors, after a 2 to 4 year period. The objective is to increase acccess to key advisory services such as economic policy and market research in Rwanda but also prove to the market that local consulting firms can compete with the big international consulting firms while providing high-quality and affordable services.
NB: Based on your past experience in consulting within government and within the private sector, you and your co-founder obviously saw an unmet need to form Laterite. What need wasn’t being addressed in Rwanda?
Gathani: Through our previous work in the region, we found that Rwanda was lacking in key advisory services that affected public and private sector service delivery; we found there aren’t any (or very few) firms that can provide economic policy, market research or management coaching services in Rwanda. Government and the private sector rely on a few big, international consulting firms and plenty of independent short-term fly-in, fly-out consultants who sometimes have limited in-country experience. So we wanted to transform the way consulting was done in Rwanda. We wanted to provide a high-quality and affordable advisory service that is not offered locally and has the potential to improve decision making in the public and private sector – while building the capacity of local consultants to actually provide these services.
NB: How does this model actually work with the three companies you’ve established?
Gathani: We identified three major gaps in the Rwandan advisory services market and created three new companies to address this gap. We created an economic policy firm called Econafrique, a market research firm called Isoko Research and the third one is Rwanda Executive Development Ltd, a management coaching firm. For each of these firms, we are recruiting young Rwandan professionals that we can train to manage these firms and jointly work on developing new innovative products that are tailored to the local context. To ensure the quality and credibility of these local consulting firms, they will each have an international partner (either a firm or an organization) that can assist with capacity building of our local staff, help with product development and effectively act as a guarantor or provide a ’stamp of approval’ for any of the services rendered.
NB: You mention in your marketing materials that this is a different way of going about consulting and capacity building, how so?
Gathani: We see ourselves as a unique type of a social venture focused on improving access to advisory or consulting services that are lacking in the market while ensuring that we train local professionals to provide this service. The model is unique as we go about business creation in a different way: we identify gaps, create companies to address these gaps and eventually we want to transfer ownership to local professionals and local investors. It’s also a different way of going about entrepreneurship in the sense that we feel that there are critical organizational functions that prevent entrepreneurs from from growing their own advisory service firm in Rwanda. So what we try to do is internalize a lot of the organizational functions such as HR, product development, quality control and then eventually transfer these (functions) once companies can stand on their own.
A big component of that is the training of professionals, so we’re looking at young Rwandans, recent graduates from universities, who are entrepreneurial and possess good critical thinking skills but maybe would not have had the experience of working at a consulting firm. So we provide that training with our network of international partners, so they can eventually run these consulting firms that we have started, on their own.
NB: Returning to the question of these three firms, tell me more about the niche within the Rwandan infrastructure they are addressing?
Gathani: For Econafrique, we are the only economic policy firm that exists in the country. We found for a country that’s growing 7 percent on average year after year, it’s really surprising you don’t have any economic policy firms to advise government or the private sector. So there’s a glaring need to set up an economic policy firm; we feel we could provide a lot of the technical tools that we’ve come to use from our previous work and help transfer it to local consultants who can provide economic policy work.
The second one is Isoko Research. We found that getting good market information in Rwanda is very difficult. Again, for a country growing that fast it is really important to better understand the market dynamics, consumer behavior and domestic demand. There are currently no firms offering professional surveying services, market trends and segmentation analysis, as well as consumer and product research. So for private sector companies that don’t have the capacity to do their own market research or to do product testing, there is a huge gap; similarly for investors who are coming to invest in Rwanda, (They) do not have any investor support services which is another huge gap. We also want to pilot new and innovative techniques through this market research firm … we want to pilot the first business confidence index in Rwanda, and this hasn’t been done in the region, starting off with Rwanda and later expanding it. Another pilot is an SMS-based platform for polling. So in addition to paper surveys or interviews, we want to develop a SMS-based technology to survey a pool of people which is more tailored to the local context.
Finally, Rwanda Executive Development – our management coaching arm is a niche in Rwanda and it’s a niche in the region. And this one will be more interesting and challenging because we’re trying to create demand for management coaching in Rwanda. We hope to have the public sector commit about thirty to fifty senior government leaders to benefit from management coaching. We also want to partner up with international coaching firms – we’re in talks with two firms that would send coaches to Rwanda, one to provide coaching to government leaders, but at the same time train two to three high-potential Rwandans who could be management coaches in the future to ensure the sustainability of it. And finally, we want to partner up with sponsors…and it would be a very simple pitch: are you willing to sponsor five government leaders for management coaching for a year? So it’s essentially a different model, where for the first year we really want to test this product and see if we can create demand for management coaching in a setting where this hasn’t really been tested before and also prove that it is more effective than other capacity building interventions. We hope that after a year, government and private sector companies will see the need for management coaching and we can then commercialize the service.
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