Colorado Springs feels like a long way from the poor neighborhoods of Kampala, in Uganda, and Kigali, in Rwanda. But that’s nothing compared to the gap between a small father-and-son business, and the overwhelming clean water problems in East Africa.
But Randy Welsch, 59, and his son Galen, 28, are not ones to balk at a challenge. Jibu, the Colorado-based business that they cofounded in 2012, set itself the target of helping 4 million people gain access to clean drinking water in five years. (“Jibu” means “solution” in Swahili.)
The problem of unsafe water is not new. About 1 in 9 people worldwide are forced to drink potentially bacteria-ridden water every day, leading to an estimated 3.4 million related deaths every year.
Efforts to solve the problem aren’t new either. In 2014, USAID alone spent $361m on water supply, sanitation and hygiene programs, 86.5% of which was directed to Africa and Asia.
Yet the problem persists. Up to half of all water supply projects fail within two to five years, representing a waste of $1.2bn to $1.5bn in aid funding over the last 20 years, according to research cited by the United Nations. The Welsch father-and-son team feels a new, more business-based approach is needed.
Randy Welsch’s diagnosis of the issue is blunt: donor-based programs don’t work.
“Donors are just happy when they see the water flowing and kids jumping in puddles of water,” he says. “But once the pumps break there’s really no good follow-up sustainability model.”
What’s needed, he says, is a bottom-up approach led by local people who have “skin in the game”. The result is what Jibu’s cofounders call a “business-in-a-box” franchise model.
The model is relatively simple. Working through its African headquarters in Kampala, Uganda, Jibu provides in-country entrepreneurs with equipment to filtrate and bottle water, a retail space from which to sell and market it, and backup support as required. After that, it’s down to the franchisee to make of it what they will.
An “opportunity company”
Jibu remains small scale – it has only issued 15 franchises to date – but the initial results are positive. To break even, franchisees need to sell around 264.2 gallons (1,000 liters) of water per day. Most are selling anywhere between double and five times that figure.
From a societal perspective, the benefits are all too clear. In the three markets where Jibu currently operates – Uganda, Rwanda and the Democratic Republic of Congo (it is expanding into Kenya later this month) – safe piped water is almost non-existent in the major cities. Commercial bottled water, on the other hand, is financially inaccessible for most of the population.
Unlike most conventional companies, Jibu intentionally gears its business towards underprivileged consumers. Using water treatment solutions provided by the charity Healing Waters, Jibu is able to produce a 20-gallon bottle (75.7 liters) of potable water for around $0.90. Equivalent commercial brands in its key markets cost around four times as much.
Additional benefits exist too. Jibu’s goal is for half its franchisees to be women, which not only promises to increase household incomes but also to help break down gender prejudices. As for wider employment creation, each franchise generates five to 10 direct jobs, an impressive multiplier that leads Randy Welsch to call Jibu an “opportunity company” rather than a water firm.
There’s an environmental upside too. At present, Jibu’s core market depends on boiled water for its drinking needs. For fuel, people typically use wood, charcoal or kerosene, all of which are carbon-intensive.
Laudable though its approach is, Jibu has at least two major question marks hanging over it. The first relates to basic economics. All in, Jibu invests around $30,000 to cover initial setup costs and ongoing support for each franchise. In return, it charges the franchisee an upfront fee of between $1,000-$2,000, followed by between 30-40% of future revenues.
Compared to a standard franchise arrangement in the US, where a licensor would expect a royalty fee of around 5-7%, Jibu’s model could potentially be seen as exploitative. Randy Welsch is adamant that’s not the case. Not only is the company taking on a much higher than usual risk, he says, but its initial franchise fee is a small fraction of normal market rates.
“There are no apple-to-apple comparisons with the normal franchise world,” he says. “We are basically financing everything for them upfront, which is the difference.”
Scale is the other major issue. Generating enough demand is not the problem – compared to boiled water, Jibu’s product is comparable in cost and superior in quality. Where the really big questions lie is on the supply side.
Firstly, scaling any business in East Africa inevitably comes with operational headaches. In Jibu’s case, finding suitable retail space has proved more complex than the company anticipated. Navigating local fiscal and bureaucratic requirements – Jibu commits to getting its water officially certified in every market, for instance – represents an ongoing challenge too.
Critical to Jibu’s growth plans will be its ability to expand its network of franchisees. Again, there is no apparent problem with demand. For every new entrepreneur that the company signs up, it has 10 to 20 qualified applicants waiting in the wings. At current capacity levels, however, Jibu is stretched to take on any more than two franchisees a month.
Randy Welsch doesn’t seem overly bothered by this. He knows what it is to grow a business, having built up and recently exited his own software and systems engineering firm, Master Solutions, in the space industry.
Jibu is a different proposition, however. While Welsch and his son insist the firm’s sustainability depends on it becoming profitable – something they project will occur in early 2018 – they are equally interested in maximizing its social returns. For that reason, once their model has proved robust, they are happy for others to take it up and run with it themselves.
“We’re open source”, says Randy Welsch. “Once we feel confident that we’ve got a truly replicable business model, we want to share everything we can and enable others to copy us.”
The Colorado Springs’ origins are inextricably linked to fresh, flowing water. Jibu’s father-and-son team hope their innovative small business will one day evoke similar associations across Africa.