Nando’s, the restaurant chain popular for its peri-peri chicken, recently announced a partnership creating the Mozambique Malaria Performance Bond, a development impact bond to fund malaria reduction efforts in Mozambique.
Why would a restaurant chain get involved in malaria work? How did they choose to launch a creative financial instrument?
Devex Impact asked Sherwin Charles, a director at Nando’s who now is working full time on the company’s malaria campaign, including the bond, and David Stern, a global strategist for Nando’s who is also playing a key role in the company’s malaria work.
They said the bond should be up and running by the second quarter of 2014, though a team is already on the ground and Nando’s is financing the work done so far. They have received some tentative commitments from potential investors, who they define as foundations and wealthy individuals. Here are a few excerpts from our conversation:
How did Nando’s get involved in malaria eradication efforts?
We wanted to visit all our stores in Africa so Robbie [Brozin, the founder] decided the fun way to do that would be with a guy called Kingsley Holgate and Kingsely is probably Africa’s leading explorer. Nando’s got into malaria by handing out bed nets with Kingsley Holgate on expedition in the most rural of villages where generally the country bed net programs had not yet reached. We realized that there was a lot more work that needed to be done. There was focus on malaria, but we needed to make a bigger impact. We tried to understand what do we, as Nando’s, have to offer to the malaria work. One thing that we saw was lacking was creativity. We’re known for being a little bit cheeky, somewhat irreverent, but we realized that if we brought our creativity to bear we could make a way bigger difference than just donating cash.
Why did you choose to do this through a development impact bond?
We believe that through an innovative financing model we could introduce private sector capital and private sector efficiency and private sector capacity building into the healthcare system. It is also important to understand that the infrastructure and structure we put in place is very easily scalable.
I think what is great about the model is that it shows there is a compelling business case for corporates doing business in an endemic malaria country to invest in eliminating malaria in those communities. Because, at the end of the day, for anyone who is doing business there, there is an incredible upside and return on getting rid of malaria. It raises the GDP of the community, it frees up health resources to deal with other illnesses it makes a huge impact on education because malaria has a big effect on kids who suffer from malaria at a young age there is learning difficulties that sometimes develop.
Who is going to manage the fund and implement the programs?
Part of the private sector structure that’s put in place is effectively an asset manager that really manages the complete process from raising the money with investors, to ensuring that the guarantees are put in place, to ensuring the proper process in governance, to distributing the funds.
On the implementation side of the structure, there are a few things that are important. Most important is country ownership of this program so whatever we do is done under the auspices of the ministry of health, as part of the country program and that everything we do helps build capacity and sustainability within the government’s healthcare system.
Where the big change comes in is that the whole premise of the bond is that it brings into play a pay for performance mechanism, meaning you get paid for the results that you produce. Because we are financially responsible to the investors, that runs all the way through the chain.
How will you define success with the bond?
We’re still in the process of defining what the exact metrics would be. Obviously from an outcomes point of view there would be a couple different metrics that we would use, which could include the number of cases, the number of homes sprayed, the number of nets distributed, percentage of usage of those nets. The big thing though is to introduce technology into the system and by introducing such technology it would make the data more reliable and more easily audited.
What will the impact be on Nando’s bottom line?
There will be an impact on the bottom line for Nando’s, but I don’t think it will be monetary. For us it’s really about ensuring our staff see Nando’s as a great place to work and the passion that runs through the veins of the [our] system will just grow stronger and as a result of that there is a better love for the product, there is a better love for the company, there’s more productivity. There is a direct correlation between poverty and growing the wealth of communities. If you get rid of malaria you are going to sell more Coca-Cola, people are going to build factories and homes and maybe Nando’s restaurants, which are not affordable in certain areas will pop up. The whole thing is about raising the level of the lifestyle for everyone.
What are the key challenges you’ve faced so far in putting together this partnership?
For the partnership we’ve put together, what we were doing was being done almost either as CSI or part time by all the organizations, so I think the challenge we needed to overcome was actually to dedicate resources to getting it done and keeping everybody at the same pace. We come out of a franchise system within nandos so we understand how the system needs to work in terms of working with various different owners, working with various different interested parties, working with various different joint ventures.
What lessons from the franchise system do you think apply to managing partnerships?
One of the most important factors there is attention to detail. You cannot run a franchise system unless there is extreme attention to detail, there’s extreme ordered processes and governance because you have to have the right measurement tools to understand why the businesses are operating the way they are. You have to understand the environment in which you operate and what the drivers of success are in your business.
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As a Devex Impact reporter, Adva covers the intersection of business and international development. Previously, she has worked as a reporter at newspapers in both the US and South Africa. Most recently, she has been ghostwriting a memoir for James Kofi Annan, a former child slave and NGO founder in Ghana.