Today’s featured member of the VC4Africa platform is entrepreneur Robert Smith of EarthWise Ferries. With Earthwise Ferries, entrepreneurs Robert Smith and William Sunderland are aiming to rebuild ferry systems on Lake Victoria. The venture attracted over $4 million in capital in previous rounds, and is now looking for second round investors to raise an additional $1.2 million in equity, and $2 million in structured debt. EarthWise sees itself as a social enterprise: in addition to solid financial returns, investors will also realize a significant social return on their investments.
“EarthWise Ferries offers passenger services on East Africa’s Lake Victoria, and as we scale up will offer various forms of intermodal freight services as well. Lake Victoria once had a robust ferry system that supported the movement of people, bulk goods and rail cars across the Lake. As many as 30 million people live in some form of dependence on the Lake, yet the ferry system had over the years slowly ground to a halt. There is currently no way containers can cross the 180 nautical miles of Lake Victoria. At present all goods coming into the landlocked countries of Uganda, Eastern Congo and Southern Sudan come through Kenya via truck. Ninety eight percent of goods come via container trucks. Because these areas produce very little, they import almost all of the goods needed for life.
EarthWise intends to rebuild the ferry system on Lake Victoria to open up the movement of container goods through Tanzania. By offering shippers the ability to cross the Lake in container ferries, a competitive route becomes a choice, and the cost of shipping begins to occur. On each side of the lake lies cities with millions of residents. There is a remarkable opportunity to revive and encourage economic activity between the major cities of Kampala in Uganda and Mwanza in Tanzania.”
What social and economic impact do you expect the venture will have?
“We believe that while EarthWise will make a healthy return for its investors, it will restore economic corridors that will bring great benefit to the residents of the cities around the Lake, and even in destinations as far away as Eastern Congo and Southern Sudan. Both of these countries, like Uganda, are landlocked countries heavily dependent upon imports to sustain everyday life. A working ferry system opens up competitive shipping channels into this region through Tanzania and Kenya and will, in time, lower the cost of shipping and therefore lower the cost of consumables to everyday people in the region.
The overall social impact will be the increase of productivity (therefore personal earnings) as the cost of moving product begins to become lower. There are other direct impacts, such as the number of direct jobs created per ferry (about 40) and the jobs that are indirectly created, but nothing compares with the social and economic impact that lowering the transportation costs of goods across the lake will do. Producers will have new markets to sell their products in, and new businesses that formerly could not compete will not have a chance to succeed.”
Can you highlight the main milestones you have achieved with the business to date?
“There are several milestones that we have reached to make this venture work. The first was to gain the credibility to both win the local regulatory bodies that regulate marine life on the lake, and to win the backing of the investment community to back our business. We have created the first by a long track record of philanthropic investment that had great success, and the latter by attracting over $4million in capital.
The second was to put together a strong African team with the skills to manage a ferry system. We have a team of Africans that are proving their competence in delivering reliable ferry service in a very tough environment.
A major milestone we have achieved has been the building, delivery, assembly and licensing of the first ferry, MV Amani. While we always anticipated that this would not be an easy task, it turned out to be formidable and we learned an enormous amount. We assembled a vessel on the banks of Lake Victoria where skilled labor and resources are scant. We were licensed by agencies that have licensed very few vessels in the last 10 years and never licensed a composite fast ferry before. It was a learning curve for all and its achievement was a major milestone.”
EarthWise’s first ferry MV Amani coming to the mainland bringing islanders to the market
What was the single greatest challenge/obstacle you faced to date? How did you overcome this?
“The single greatest challenge has been overcoming the reality that this is a frontier opportunity in a broken environment. We have had to move forward in the face of many obstacles that could doom the project. We have developed a fortitude that has faced failure many times, and simply worked through the obstacle and achieved our objective.
Moving forward with agencies that are responsible for overseeing the fleet of vessels we are bringing to Uganda has been our major challenge. Many mid-level government officials are afraid to make a decision, and often prefer to punt the ball than to make a decision that could get them in trouble. If we push, they get nervous and become difficult to deal with. If we go over their head, they feel betrayed and become non-cooperative. Even having a relationship with a superior is threatening. This has been something we have learned to negotiate”.
Can you talk about safety, quality control and energy supply?
“As in any marine environment, there is nothing more critical than safety. This is the most important part of operating a ferry system, and we take safety very seriously. We have frequent fire drills and state of the art detection and extinguishing equipment on the vessel. We also carefully monitor our schedules. A record of on-time departures and arrivals reflects excellence, so we have a performance based compensation package. Ship-Shape is our watchword.
We use diesel fuel or vegetable to power our vessels. We are looking forward to using locally produced oil, grown by poor farmers, as we are able to secure the produce reliably. In the meantime we have tested our engines by running both diesel and vegetable oil. So far the engines have performed flawlessly.”
In additional to capital, what do you need to fully realize your plans the coming two years?
“We need (and anticipate getting) continued good will and cooperation from the governing officials around the Lake. We also need to find qualified crew and staff – crew that we need to recruit from Tanzanian and Kenyan ports as the number of qualified marine crew on the Lake is very limited. In order to scale up we need to maintain a good public image of safety, innovation, and excellence.”
What kind of investor(s) are you looking for and for which amount?
“We are looking for second round investors that will help us to raise an additional $1.2million in equity, and $2million in structured debt. Our investors are typically investors that choose to invest because they believe that in addition to the solid return we project on their investment, also realize a significant social return on the investment. A typical investor invests between $50,000 to $200,000.
How do you see the VC4Africa community and what is your message to other members?
“The VC4Africa community is a vital part of building a economically sustainable Africa. Because local markets cannot compete with things given away for free in the form of aid, there is nothing more needed and valuable than investing in entrepreneurs that are creating businesses in these areas. Their voice against continued and senseless aid, as well as the willingness to risk investing their capital will be a remarkable part of helping create an Africa where poverty is tackled effectively and wealth created.”
Anything you feel we left out that you would like to add?
“Before we started EarthWise I and my colleagues formed a charity called Agathos, desired to help raise orphans. We started EarthWise after developing the realization that a vitally needed part of our involvement in these communities was the need to create economic opportunity. In 2005 we rescued and began to raise two orphan boys. One was a single orphan, and the other the oldest of 10 siblings and cousins. These two boys have now become young men and recently completed electrical training in South Africa. We were so proud to hire them both to work with EarthWise Ferries. They will be a part of the team that reassembled ferries that are shipped as we add ferries to the fleet on Lake Victoria.
This is why we have invested in Africa. We seek to be a real part of seeing lives go from hopelessness to hopeful, as we invest in businesses that create economic life and encourage productivity and the self-esteem that productivity creates in the both individuals and communities alike”.
For more information, see the venture profile of EarthWise on VC4Africa. Only registered investors can review the documents, see details for this deal, and express their interest to participate.