KENYAN CIVIL SOCIETY STRENGTHENING PROGRAM

1. KENYAN CIVIL SOCIETY STRENGTHENING PROGRAM OVERVIEW OF NRM BUSINESS SECTOR STUDY AND NBE BUSINESS MODELS

2. Presentation Outline • Overview of the Natural Resource Sector in Kenya • Background on KCSSP • Objectives of the NRM Business Sector Study • Study Methodology • Key findings of the Study • NR Sub-Sector Mapping - Examples • NRM Business Sector Models

3. Natural Resource Sub-Sectors – An Overview • Forestry • Wildlife • Wetlands • Water • Fisheries • Mining & Quarrying • Refuse Management

4. Natural Resource Sub-Sectors – An Overview Socio - Economic Importance a) Forestry • 2% of GDP - ¾ accounted for by “commercial” forest-based activities. • 3 million people (10 %) - adjacent to indigenous forest boundaries derive cash income and meet their subsistence needs from this resource. • Important Habitat - 50% of Kenya’s plant species, 40% of mammal species, 35% of butterfly species and 30% of bird species • However, only constitutes 2% of the land mass. b) Wetlands • Approximately 3% of the country’s surface area. • Widely distributed within the country and are diverse in typology, including fresh water, coastal, temporary and seasonal as well as man-made wetland resources. • Key Contribution - environmental sustainability and socio-economic support.

5. Natural Resource Sub-Sectors – An Overview c) Wildlife • Accounted for 25% of the Gross Domestic Product (GDP) in 2006/07 financial year • Tourism accounted for 70% of the gross earnings, and more than 10% of total formal sector employment. • Estimated that 60 – 70% of wildlife in Kenya is found outside protected areas -conservation of wildlife in communal and private land, is hence vital to the sustainability of Kenya’s wildlife resource base. d) Fisheries • Main sources; inland fresh-water, coastal marine and aquaculture. • Kenyan coastline is 880 kilometres - including bays and inlets • However, marine fisheries account for just about 4% of total national fish catch. • Marine fisheries represents unique and very diverse fisheries resources with potential for growth NB: Policy, legal and Institutional reforms in the NRM sector – focus devolution and community integration in management and decision making structures

6. Background on KCSSP • KCSSP is a 3-year program implemented by Pact Inc. and Pact Kenya to strengthen Kenyan civil society organizations (CSOs) through grant-making and capacity building. • KCSSP is funded by USAID at US $ 9.4 million over 3 years. • KCSSP focuses on building capacity of NGOs and other civil society organizations with the greatest potential to build large constituencies for critical reforms needed in the democratic governance and natural resources management sectors.

7. Background on KCSSP Through KCSSP, Pact implements a range of grant making and institutional and technical capacity building activitiesfocused on achieving the following intermediate results: • Improved leadership and governance of Kenyan CSOs - Better staying power. • Enhanced ability of CSOs to build and work within coalitions and speak with a shared voice. • Improved quality and quantity of services delivered to CSO constituents. • Improved long-term viability of CSOs.

8. Current Portfolio • 23 Democracy and Governance • 2 Conflict mediation • 5 Natural Resources Management (Advocacy) • 1 Natural Resources Management (Community Management) • 5 Natural Resources Management (Nature-based Enterprises)

9. NRM Program Component Overall, the KCSSP NRM Program has two distinct approaches: • NRM Advocacy This aims to facilitate advocacy initiatives targeted at creating a more enabling environment for sustainable NRM • co-management; • equitable benefit sharing and • environmental justice • Market-led approaches to biodiversity conservation and NRM This aims to promote the creation of nature-based enterprises (NBEs) as a means of: • increasing economic and social benefits to communities (from natural resources) and • building incentives for the communities to participate in biodiversity conservation and NRM

10. Working Definition of Nature-based Enterprise Nature-based enterprises (NBEs) are defined as service- based or product-based businesses which rely on natural Resource (s) as an integral ‘factor of production’ and involves/benefits significant numbers of communities within the sphere of influence of the natural resource. Qualification • Without the natural resources ‘input’, the NBE cannot exist. • Sustainable biodiversity conservation is an explicit objective of NBEs. • Benefits from NBEs should at minimum compensate the opportunity cost.

11. Market-led Approach: Who we work with and how? Our vision is that critical ecosystems and natural resource bases in Kenya shall extensively come under sustainable biodiversity conservation and NRM, through co-management regimes chiefly involving communities within the jurisdiction of these resource bases and the government. We believe that sustainable conservation and/or NRM can only occur when there exists: • Significant incentives for communities to co-exist with natural resources • A mechanism for moderating NBEs utilization of natural resources and • A mechanism for enabling NBEs to finance NRM and conservation initiatives

12. Pact/KCSSP NRM Business Sector Study Objectives • Assess and prioritize Natural Resource sub-sectors; • Establish the status and profile of the NRM business sector in Kenya; • Develop a clearer understanding of the needs and potential of NBEs in key natural resource sub-sectors.

13. NRM Business Sector Study Methodology • Key Steps • Induction of Pact team in VCA/SSA • Identification of key criteria for sub-sector selection • Literature review; • Selection of sub-sectors • Forestry, Water, Fisheries, Wildlife, Wetlands, Mining &Quarrying, Refuse management • Field data collection – Nairobi, Coast, Amboseli/Kajiado, Mt. Kenya • Data analysis and report preparation • External review workshop (May 2nd 2007) • Key Selection Criteria for sectors • Socio-economic importance - livelihood/employment, income, number of MSMEs • Degree/Potential Threat to Biodiversity – rate of depletion, threat • Potential to impact on other sub-sectors – backward & forward linkages

14. Selection of Nature-Based Sectors

15. Study Findings - Summary • Natural Resource Sub-sector maps (see samples) • Policy, Regulatory and Institutional Issues • Challenges and viability of community-based NBEs • BDS issues • Private Sector role • Other issues • Balance between Enterprise and conservation • Market opportunities • Sector specific issues • Time frame for intervention • Business Models

16. Study Findings - Summary • Natural Resource Sub-sector maps (see samples) • Policy, Regulatory and Institutional Issues • Challenges and viability of community-based NBEs • BDS issues • Private Sector role • Other issues • Balance between Enterprise and conservation • Market opportunities • Sector specific issues • Time frame for intervention • Business Models

17. Business Models – Definition Business model design is defining the business logic of a company at the strategic level.

18. Business Models – Definition A business model is a conceptual tool that: • contains a big set of elements • relationships between big set of elements and • allows expressing the business logic of a specific firm. It is a description of • the value a company offers to one or several segments of customers and • the architecture of the firm and • its network of partners All the above being for the purpose of: • creating, marketing, and delivering this value and relationship capital and • generating profitable and sustainable revenue streams. Osterwalder, Pigneur and Tucci (2005)

19. Business Models – defining A Business Model mainly has nine building elements (BE), categorized along four core blocks (CB), namely: • Infrastructure • Offering • Customers • Finances

20. Study Findings – Business Model I Direct conservation financing - involves : • direct levy of fees from enterprises to meet costs of conservation, through mutual agreement. (KENVO, ASF) • enterprises operate as clusters • enterprises have specific interest in conservation of given natural resource. • cluster management structure coordinates levy collection & utilization. • Mostly, enterprises’ obligation stem from commitment or investment made by the cluster into the enterprises. • enterprises may or may not be nature based enterprises. • Advantage • Successful in availing resources for financing conservation • Shortcoming • Participants not legally bound to finance conservation – i.e. absence of structures and mechanisms to guarantee sustained contribution from members for the conservation financing.

21. Study Findings – Business Model II Individual NBEs using market brokerage services with indirect conservation financing - involves • indirect levy of fees from NBEs to support conservation. • core unit of model is agency with direct interests in natural resource conservation (Kipepeo CBO) • Partnership with core unit mostly represents key strategic value for the NBEs esp. market access • core unit leverages partnership for two key reasons; (i) to levy conservation fees; (ii) to build constituencies for NRM • conservation fees may not necessarily be explicitly stated – ordinarily they are embedded.

22. Study Findings – Business Models II • Advantages • Increased income generation at individual level – model supportive of creating entrepreneurial spirit • Commission paid in return for services provided • Opportunity for provision of embedded business services • Provides reliable market outlets for products • Product development in response to market requirement • Provides good mechanism for financing conservation • Shortcomings • Over dependence on single market outlet • Producers disadvantaged due to limited information regarding entire product market chains

23. Study Findings – Business Models III Individual NBEs using market brokerage services with no conservation financing: • enterprises are loosely organized and operate largely in isolation • enterprises may have minimal appreciation of the need for natural resource conservation and even where they do, they lack the structures through which to support conservation • enterprises are nature-based and therefore will utilize natural resource products and services but not necessarily support conservation. • Advantages • Provides reliable market outlets • Shortcomings • Absence of mechanism for enterprises to contribute to conservation

24. Study Findings – Business Models IV Community-Private Sector Partnership • partnership between community-based organization and a private sector firm. • community may enter the partnership through structures that govern the capital resource owned by the community e.g. group ranch committees, community owned companies, trusts and cooperatives or simply community elected committees. • Advantage • Enhances possibility for business success through the private sector partner contributing capital, requisite management skills and playing role of market promotion and linkages. • Shortcomings • Selection of private investor often not competitively done – hence the possibility of exploitation • General governance and decision-making processes cumbersome due to large memberships • Revenue sharing at individual level challenging due to high number of members

25. Study Findings – Business Models V Community owned and managed business - community fully owns business and manages it independently Advantages • Potentially good community reach (numbers) Shortcomings • Extremely weak governance and business management capacity • Governance tends to be overwhelmed by group politics • Under capitalized in event of no external support

26. Proposed Business Model I Community-private sector partnership in tourism ventures • Source of Investment Capital:Community – land contribution; Private sector - venture capital • Ownership of Assets:Land owned by the community; Facility owned by community OR joint ownership • Type of Community Organization - An Incorporated Trust & A Limited Company or other • Core business ownership, management and marketing - private sector partner • Type of Private Sector Entrepreneur - A legitimate firm specializing in tourism-related ventures and with proven commitment to natural resource conservation and community development. • Revenue streams for community partner: • Lease fees for land and physical assets – • Revenue appropriation/Benefit allocation at community level • Conservation levy from business patrons and percentage of bed night fees • Multi-sector development within community jurisdiction • Revolving loan fund for enterprise creation and support • Paying for use of natural resources • Direct conservation financing

27. Proposed Business Model II Community-private sector partnerships in commodity-based ventures • Source of Investment Capital: • Community members - shares • Private sector – shares • Ownership of Assets:- options • Natural resource - community owns/access rights • Group owns physical assets or co-owns with private sector partner • Type of Community Organization - company limited by shares or cooperative • Core business ownership, management and marketing - company or cooperative. • Type of Private Sector Partner - established intermediary or product end user organization- to play the role of a buyer or a marketing agent; • Revenue sources and expenditure: • Sales revenue from product sales; • Costs of running core business; Dividends to share holders; • revolving loan fund for enterprise creation and support • User pays fees

28. Proposed Business Model III Individually owned enterprises within the community • Source of Business Capital:- Individual NBEs /entrepreneurs • Core Business Owners and Managers: - Individual members of a community • Individual NBE Business form - Any legitimate, member of a legally constituted natural resource user group • Community level Business form - Marketing cooperative • Private Sector Partner Business form - Any legitimate but provide reliable outlet for the NBE products • Resource ownership/user rights - bonafide natural resource users (either individually or within a group) • Commodity marketing and distribution • Private sector partners/agents or Individual NBEs or community marketing structures • Business services - Private sector partner/firm ; stand alone or embedded • Revenue sources - Commodity sales or commissions fees

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