Back to Magazine
Homepage

 

Humanity Inc.

 

Disasters, violence and displacement are stretching aid groups to their limits. Funds, meanwhile, are tight. What’s a humanitarian to do? One option is to open up for business.

It’s an overcast afternoon in traffic-clogged Nairobi as the ambulance navigates among the vehicles, sometimes taking to the wrong side of the road with its horn blaring to warn oncoming cars. Time is precious: the team is responding to an emergency call from a school where an 8-year-old has fractured her arm in the playground.

Arriving at the scene, paramedic Mable Nakweya cradles the young girl in her arms and gently puts her on the stretcher in the ambulance. It is one of many calls that Nakweya and her colleague Jamal Abdi receive every day in their work for Emergency Plus (E-Plus) Medical Services, an independent ambulance company owned by the Kenya Red Cross Society.

It’s a for-profit enterprise with a humanitarian purpose. In a country where access to health care is limited, it was conceived as a way to provide a local, sustainable source of income while building on the National Society’s competence and reputation as a leading provider of first aid and medical assistance. In this case, people subscribe to the service like buying into an insurance policy.

 “We work in teams of two,” explains Abdi. “At the scene, one of us tends to the patient and the other checks that the finances are in order.”

On today’s visit to the school where Nyakio has broken her arm, there’s no need to deal with finances. The school is a member of the insurance scheme. Sometimes, however, the paramedics have to assess on the spot if a patient can pay or contribute to the cost of medical treatment and transport.

That assessment does not affect the care, however. It often happens that they forgo payment altogether or the patient makes a contribution once he or she has recovered.

Nakweya and Abdi stress that the patient’s health always comes first and that the service’s financial arrangement does not mean they avoid poor areas or shy away from the most vulnerable during catastrophe.

Indeed, E-Plus crews are often side-by-side with volunteers as first responders on everything from car crashes in central Nairobi to inter-communal violence in rural provinces. They also work among the refugees in and around the Dadaab refugee camps, where two ambulances are permanently stationed. Those ambulances were critical in saving lives after an attack on a church in Garissa in July 2012 and during recent clashes in the Tana River region.

“We never turn anyone away,” stresses Nakweya. “At the end of the day, we [Red Cross] are all about saving lives.”

The road to sustainability
For many in the Red Cross Red Crescent Movement, the idea that first responders are checking bank accounts along with vital signs seems anathema to the humanitarian mission of unconditional assistance to the most vulnerable.

But it is important to note that in Kenya, the E-Plus ambulances are offering a service that would otherwise not exist. There are no state ambulance services and few private ones. Health insurance policies are not widely used. So whatever services are provided often come at a cost to the patient.
In the case of E-Plus, each member pays 2,500 Kenyan shillings (US$ 30) a year to be part of the service. According to a May 2011 report, some 7,800 people were members and that number is increasing. E-Plus aims to provide 80 per cent of its services to paying members and offer 20 per cent as a free service to people who cannot afford to pay.

Now, with 29 ambulances equipped with advanced life-saving equipment and highly qualified paramedics, E-Plus is Kenya’s foremost ambulance service provider. But, after two years of existence, it is not yet making a profit.

The company’s managing director, Yusuf Nyakinda, is confident, however, that the lack of state-run services and other private providers means that E-Plus has considerable business potential. The idea is that over time, the company will turn a profit and a portion of the proceeds will provide some financial stability to the core operating budget of the Kenya Red Cross.

The main sources of funding for the Kenya Red Cross come from local and international donors and participating Red Cross Red Crescent National Societies. Given the current economic situation and greater competition from non-governmental organizations (NGOs), contributions are on the decline.
At the same time, the National Society and its volunteers are dealing with a number of chronic issues and complex emergencies in which vulnerable people and aid projects are reliant on external funding from international donors.


The Kenya Red Cross’s E-Plus ambulance service was established as a way to generate revenue for National Society operations while also providing desperately needed emergency medical services. Here paramedics attend to victims of a road crash in Nairobi.
Photo: ©Kenya Red Cross Society

The time is ripe
Known as an innovator in trying to change that paradigm, the Kenya Red Cross is engaged in a variety of income-generating and food security activities that use donor funding as seed money for home-grown agrarian enterprise rather than simply delivering food aid or supporting a short-term emergency response (see Red Cross Red Crescent magazine, Issue 2-2012).

The time may be ripe for such an approach. Kenya’s economy is booming in some sectors and a burgeoning high-tech sector is opening new ways for people to do business, share ideas and respond to emergencies. In Kenya, some 70 per cent of the adult population uses cell phones for banking, paying bills and borrowing cash — a phenomenon that many economists say is increasing local investment and savings, as well as offering a safe and fast way to make humanitarian contributions.

A case in point is the National Society’s ‘Kenya for Kenyans’ appeal, which raised US$ 10 million over five weeks at the height of the Horn of Africa drought in 2011. The donations came from individuals and the corporate sector — mainly from individual bank accounts via cell phones.
Kenya Red Cross Secretary General Abbas Gullet cautions this was a one-off due to the extreme nature of the emergency. But the response was an indication of Kenya’s growing interest and capability in finding local contributors and solutions.

“We are aiming for sustainability but our immediate goal is to cover our core costs, which donors are reluctant to pay,” says Gullet. “That is why we are investing heavily in business ventures so that we generate enough profit to pay our operational costs at the end of every year.”

Free enterprise
It is also a question of freedom — of raising funds that do not come with restrictions. Donors often earmark funds to specific projects and they often put a cap on the percentage of their grants that can be used cover basic administrative overhead. The challenge for humanitarian organizations, therefore, is to avoid being overstretched or becoming mere implementers of the donors’ agendas.

Could enterprises such as E-Plus be part of the solution? If so, what does this mean for the humanitarian mission? Does the need to turn a profit compromise the humanitarian imperative to help the most vulnerable? If so, is this any worse than over-reliance on donors or governments who may also have agendas other than humanitarian? These are just some of the questions facing National Societies as they look to diversify revenue streams in a tough economic climate.

These questions are not new to Red Cross and Red Crescent National Societies: revenue-generating operations — from small retail shops to major nationwide contracts with government or even manufacturing plans — have been part of the humanitarian landscape for decades.

The Turkish Red Crescent Society, for example, has been producing and selling bottled water since 1926, when the founder of modern Turkey, Mustafa Kemal Atatürk, offered the National Society a bottled water factory provided that revenues are spent on humanitarian aid activities. Today, the plant’s assembly line produces up to 160,000 bottles per hour and the product line includes not only plain natural mineral water but also water with aromas or natural fruit juice mixed in.

Indeed, the types of businesses found among National Societies are as diverse as they are colourful. A factory run by the Thai Red Cross Society raises snakes to produce and market anti-venom treatment; a snack bar run by the Belize Red Cross Society offers breakfast and lunch next door to the capital’s central hospital; a chic vintage clothing store run by the Swedish Red Cross is attracting a hip crowd interested in older fashions.

Sometimes one National Society will be engaged in diverse markets. Redmo Holdings, the commercial arm of the Sri Lanka Red Cross Society, is a major construction contractor that also leases heavy machinery, offers water filtration systems, as well as travel and tourism services and insurance plans. It even operates fuel stations.

Many Red Cross and Red Crescent enterprises have little or no direct connection with their humanitarian mission other than offering affordable goods or services to the public — and raising money for the National Society. Others are more directly linked to the humanitarian mission: swimming lessons, first-aid courses, blood collection or contractual arrangements with governments to run hospitals, ambulances or home health care are a few examples.

Combined, these fee-based services or enterprises are the largest source of non-emergency National Society income globally, accounting for 51 per cent of revenue (see chart right), according to the IFRC’s 2011 Federation-Wide Resource Mobilization Strategy.

”Some of these businesses raise significant funds for the National Society,” says Andrew Rizk, IFRC’s chief financial officer and head of its Finance Department.  “Others are essentially subsidized by the National Society but because it is mission-related — for example, fee-based blood services — it is viewed as worth the investment.”

Sometimes, the income provided does not make up a great percentage of overall revenue, but it does provide a financial buffer. “The more streams of income you have, the less of a shock it will be if one of these streams dries up,” Rizk notes.

The IFRC has supported these operations in various ways over the years. The ambulances used by the Kenya Red Cross and some other National Societies, for example, are leased from the IFRC as part of a deal with the auto manufacturer Toyota. After being outfitted with medical equipment in Dubai, the ambulances are leased to National Societies for periods of five years.

This arrangement helped the Kenya Red Cross keep the up-front start-up costs low. Indeed, many National Societies that have launched major businesses were able to do so because land, buildings or services were donated, reducing the amount of capital that had to be raised or borrowed.
To better understand the potential and risks involved in these businesses, the IFRC has engaged the global accounting firm KPMG to conduct a study of National Society commercial and contracted ventures  in 20 to 25 countries. The idea of the study, to be done by KPMG on a probono basis, is to share insight that could help National Societies make sound decisions, avoid pitfalls, share innovations, and minimise the risks associated with operating a business. The study is intended to highlight this important yet often misunderstood aspect of National Society financing.

Managing risk is critical for any business. In the case of contracted services for government, some of the financial and legal liability is sometimes taken on by the state. But that does not leave National Societies invulnerable. In strictly private ventures, National Societies in some cases establish limited liability partnerships or holding companies that shield them from financial and legal risks. It could be argued, therefore, that these ventures are no more risky than placing National Society funds in a high-yield investment portfolio.

A manageable risk?
Perhaps the greatest risk has to do with reputation. Because many of these businesses carry the Red Cross or Red Crescent brand, any problems with the business might not only affect the reputation of one National Society, but of a global, humanitarian emblem.

When the IFRC announced it was considering a hotel and conference centre on part of the ground it had bought in the Haitian capital Port-au-Prince following the January 2010 earthquake, there was considerable debate about whether a humanitarian organization associated with first aid, shelter and food distribution should be going into the hotel business.

The idea was that the hotel would provide revenue for Haiti Red Cross Society operations as well as new operating facilities for the National Society, which had its headquarters and many of its facilities destroyed by the quake.

But according to Daniel Borochoff, president of Charity Watch, an organization that evaluates non-profit organizations, the plan is controversial as it raises the question of whether land, purchased with disaster-relief funds, should be used for a commercial venture that caters to NGOs and tourists in a city where thousands are still living in makeshift tents.

This is why communication about these ventures is vital, says Danya Brown from CDA Collaborative Learning Projects, a US-based non profit that conducts research and offers advice for improving humanitarian response. Brown cites a survey CDA conducted of 600 aid beneficiaries in 20 countries that showed most people were extremely suspicious of aid agencies and how they used the money. It is crucial, she says, that organizations listen to users and donors and explain how the money being spent is to their benefit.

Similarly, an independent study by Global Humanitarian Assistance on the Kenya Red Cross Society’s resource flows advised that high-profile, income-generating schemes such as hotels could create the perception that the National Society is wealthy and therefore doesn’t need support. That could result in reluctance among some to make contributions, be they financial, material or volunteer labour.

That said, there is ample precedent for National Societies running hotels without compromising the brand or their reputation. The Palestine Red Crescent Society has run a hotel near Ramallah in the West Bank for many years and the Red Cross Society of China owns a three-star business hotel in Beijing.

However, others have opted out of hotels and conference centres. The Swedish Red Cross closed its conference centre in 2010 as it had failed to turn a profit and survive in a very competitive market. “We could see no end to the continual deficits we were running up,” says Tord Pettersson, senior adviser on business development at the Swedish Red Cross. “Many also felt that we should not be running a business we didn’t know enough about.”

Open for business
Given the risks of the events and hospitality sector, no wonder then that retail shops, mostly second-hand clothing stores, are viewed by National Societies as a profitable and low-risk option. While not strictly in line with the Red Cross Red Crescent mission, they do offer low-price goods to people with low incomes and the proceeds serve a good cause.

“We don’t see ourselves running hotels and conference centres in the UK market,” says Rebecca Mauger, head of high-value giving and events at the British Red Cross. “But retail shops work well for us.”

Income from the British Red Cross’s 60 second-hand shops across the United Kingdom topped £26 million in 2011 with a £5.6 million profit. “This is a respectable margin compared to commercial retailers,” she adds.

While retail shops account for just 12 per cent of the British Red Cross fund-raising income, it is more than double in Sweden where selling second-hand clothes in its 274 shops is big business.
In June, the Swedish Red Cross opened a vintage and designer store in the centre of Stockholm as part of its strategy to market clothing to different segments of the population. According to Martina Bozic, the Swedish Red Cross business development manager, clothes, shoes and handbags from the store literally flew off the shelves in the first two weeks of opening, making more than US$ 28,000.

The Colombian Red Cross Society, meanwhile, augments its donations with revenue from renting ambulances, blood bank services, training centres and gift shops. It has also ventured into the construction business — winning government funding to build homes last year.

Such contracts, says Walter Cotte, national executive director of the Colombian Red Cross Society, are tricky because they can put the National Society in competition with private companies that may neither be able nor want to offer the service for the same price.

 

 

 

 

 

 

“We never turn anyone away. At the end of the day, we are all about saving lives.”
Mable Nakweya,
Emergency Plus Medical Services
paramedic

 

 

 

 

 

 

 

 

 

 

 

 

 

 


National Society enterprises around the world take many shapes and sizes. The Thai Red Cross Society, for example, raises snakes to produce anti-venom for people bitten by poisonous snakes. The snake farm is also a colourful attraction for tourists.
To read more about the Thai Red Cross snake farm and other National Society ventures, please see our additional coverage at www.redcross.int.
Photo: ©The Thai Red Cross Society

 

 

 

 

 

 

 

 

 

 

 

“We are aiming for sustainability but our immediate goal is to cover our core costs, which donors are reluctant to pay. That is why we are investing heavily in business ventures.”
Abbas Gullet,
secretary general of the Kenya Red Cross Society

 

 

 

 

 

 

 

 

 


E-Plus ambulance paramedics respond to all types of emergencies, from natural disasters to urban fires, inter-communal violence and everyday minor injuries. Here a young girl with a broken arm is transported from a school that is part of E-Plus ambulance’s membership plan.
Photo: ©Claire Doole/IFRC

 

 

 

 

 

“We are judged by
business criteria
and that can be a
challenge as tradition-
ally we are used to
receiving donations and not making money.”

Walter Cotte,
national executive
director of the
Colombian Red
Cross Society

 

 

 

 

 

 

 

 


Retail clothing stores are a time-honoured way for National Societies to raise money. This trendy and profitable boutique run by the Swedish Red Cross carries vintage clothing and targets Stockholm’s youth market.
Photo: ©Peters Bilder/Swedish Red Cross

The bottom line, says Cotte, is that whatever product or service is offered, people will have high expectations of anything associated with the Red Cross Red Crescent brand.

“Whenever we sell a product, we need to ensure that it is a quality product and that it is competitively priced,” says Cotte. “We are judged by business criteria, which can be a challenge as traditionally we are used to receiving donations and not making money.”

By Claire Doole
Claire Doole is a freelance writer based in Geneva, Switzerland.

Your turn

What do you think about the risks and benefits of commercial enterprises owned or managed by Red Cross and Red Crescent National Societies? Email your comments to:rcrc@ifrc.org


The new five-star Boma Hotel in Nairobi as it nears completion in June 2012. Photo: Claire Doole/IFRC

Hospitality with a conscience

When the five-star Boma Nairobi hotel opened its doors in June 2012, the modern, glass-faced upscale hotel offered businesspeople and tourists a menu of amenities: a rooftop swimming pool, a spa and gym, as well as international cuisine, individually designed rooms and a massive ballroom.

One in a growing chain of Boma hotels and conference centres being built around the country, the 150-room hotel is part of the Kenya Red Cross’s most ambitious business venture yet.

“Our principal business is the humanitarian business,” says Abbas Gullet, secretary general of the Kenya Red Cross,“but the hotel business is purely commercial with its own board and management who have hired some of the best hospitality professionals in East Africa.”

Unlike the E-Plus Medical Services, the hotel venture is purely business. Their sole function is to run a profit and provide a stable funding source to the Kenya Red Cross.

Also unlike E-Plus ambulance service, which is still relatively new and has not yet posted a profit, the National Society’s hotel operations show a track record of earnings. The Kenya Red Cross’s conference centre and three-star Red Court hotel, built in Nairobi on land given to the National Society by the government, began to generate profits 18 months after opening in 2007. Revenues from the hotel currently cover roughly 6 per cent of the National Society’s core costs.

 The new Boma hotel, also built on land donated to the Kenya Red Cross, required significant borrowing. The Kenya Red Cross is confident, however, that income will rise substantially not only from the Red Court, which has been upgraded to a four-star hotel and re-branded as the Boma Inn, but also as a result of its growing property portfolio.

Later this year, the four-star Boma Inn in Eldoret in western Kenya will be completed and there are plans to add rooms to a conference facility in Nyeri and to build hotels in other towns such as Kisumu, Malindi and Nakuru.

The newly appointed managing director of the Boma chain, Mugo Maringa, who has 30 years’ experience in the industry, says that “hospitality with a conscience” is a winning combination. “Guests at the Boma can eat, drink and, at the end of the day, sleep well knowing that they are supporting a good cause,” he says.

Top

Contact Us

Credits

Webmaster

©2012

Copyright