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TANZANIA REDCROSS EXPERIENCE IN INCOME GENERATING PROJECTS. LOW SALARY. I t has been proved beyond reasonable doubt that national societies in Africa in particular and in developing countries in general are increasingly having challenges/ problems to meet their operational costs.
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LOW SALARY It has been proved beyond reasonable doubt that national societies in Africa in particular and in developing countries in general are increasingly having challenges/ problems to meet their operational costs. e.g. They cannot pay descent salaries to the staff and therefore fall into a paradox as follows POVERTY TRAP TO THE N.S CHEAP STAFF NO ROOM FOR CHANGE/ NO IMPROVEMENT NO INNOVATION
2. WAY OUT • This situation should be stopped; the umbilical cord should be cut! • It can’t be cut by wishful thinking but SOMEONE, SOMEWHERE, SOMETIMES has to do SOMETHING! • AND WHO IS THAT SOMEONE?- Leadership of the national society • SOMEWHERE ( where?)– inside African National Societies • SOMETIME (when?) – Now !; because we are already too late • DO SOMETHING (what) – income generating
3.It is also very true that the traditional ways and means of local fund raising e.g. selling badges, selling red cross pins and pens, holding tins in the streets e.t.c …. does not work nowadays and we are not alone in the “begging industry”. We are facing vigorous head on collision competition from NGOs and Faith Organizations who come with more sophisticated strategic means and ways of raising funds. • 4. It is therefore a necessary evil to do what we call related diversification and unrelated diversification. • Related Diversification e.g. ambulance services or commercial first aid • Unrelated diversification – real estate, drinking water factories etc
5. This will depend on the circumstances of : • a) a particular national society – leadership • b) a particular country – opportunities • 6. For Tanzania Red Cross, We made some kind of SWOT analysis • STRENGTHS – leadership commitment & innovation • a) INTERNAL - land or plots • WEAKNESSES – very weak financial base • - unmotivated staff • b) EXTERNAL OPPORTUNITIES – country & cities in need of investments both in Commercial & Residential building • THREATS - Red Cross is not supposed to do business because we are a Humanitarian Organization • - Fear of The Unknown especially in borowing
7. Tanzania Red Cross decided to ignore all that and turned its Weaknesses and Threats into Opportunities using the Strengths it had and ventured in Real Estates as detailed below • 8. We considered three approaches in Real Estate • a) Loans • b)joint Ventures • c) Loan & Equity
ADVANTAGES & DISADVANTAGES OF DIFFERENT APPROACHES • In the short run - if not well managed ;it can be very risky and eventual bankruptcy thus a lot of pressure to the national society to meet its financial commitment • a) LOANS In the long run - if well managed; very lucrative to the national society because the national society will own 100% of the assets there is, and the income there after
b) Joint ventures • Risk free • Pressure free • Hustle free • No bankruptcy to the national society • Returns are moderate compared to the loans both in the long term and short term
c) Loan & Equity • Risky but manageable depending on the Loan equity Ratio “own source or Donor source” ; here is where we want donors to chip in and kick start the process • In this situation Risk Takers will have High Returns and Risk Averse play safe but low returns . • Tanzania Red Cross therefore decided to take the • JV Approach • and did the following:
RED CROSS BUILDING FIRDOUS APARTMENTS
