Awash in Green and Gold: The Emerging Restoration Economy in Kenya
Kuki Njeru’s eyes sparkle as she discusses her bamboo business. “There’s immense potential in restoring the gullies with bamboo,” she says. “Not only does it grow well on degraded land, it helps stabilize soils and prevent erosion as well.”
A co-founder of GreenPot Enterprises, Kenya’s first integrated bamboo company, Njeru is the face of a rapidly emerging new restoration economy in Kenya. Founded in 2014, GreenPot has shown there is profit in rehabilitating degraded land with bamboo, a fast-growing plant with versatile applications in the energy, construction and textile industries. In the past 18 months, the company has become profitable, managing about 400 hectares (1,000 acres) of bamboo and bringing in more than $2 million in sales.
How did they do it? In their core business model, the company starts by signing 30-year leases on suitable land. Then, the GreenPot team plants, manages and subleases bamboo plots of five to 10 acres to retail investors (individuals that make investments for their personal accounts, in contrast to institutional investors like banks or pension funds). Because bamboo grows rapidly, biannual harvests are possible after the plant matures in four years, bringing cash to GreenPot, the retail investors and the landowners. To create cash flow while the bamboo plantations are still in development, GreenPot has also developed other profitable revenue streams, including management services for large, existing plantations and nurseries that produce hundreds of thousands of seedlings for sale. Plans include constructing factories nearby to turn bamboo into flooring material and activated carbon to deliver even higher value.
GreenPot is not alone. Across the country, Kenyan entrepreneurs are seeking to demonstrate that with the right business model, restoration companies can have environmental and social impact while delivering financial returns. From community conservancies that engage in ecotourism and sustainable livestock to financial software companies that help incentivize smallholder restoration, these enterprises are challenging the popular notion that capitalism is at odds with the environment. Their approach is also distinct from companies that have acknowledged the benefits of healthy forests and committed to minimizing environmental impact, but whose business operations do not integrate restoration. Here, restoring landscapes isn’t just good for business; restoring landscapes is the business.
East Africa’s Economic Powerhouse
Indeed, there are signs of tailwinds for restoration businesses in Kenya. The country is an economic powerhouse in East Africa, growing its GDP by 5.6 percent in 2015 while other Sub-Saharan African countries struggled with economic shocks. Much of this growth stems from a dynamic private sector that benefits from relatively market-friendly policies, an encouraging sign for budding restoration businesses. These enterprises also stand to gain from government support; this September, Kenya announced its commitment to restore 5.1 million hectares (3.7 million acres) by 2030 – an area bigger than Denmark. The commitment, part of the African Forest Landscape Restoration Initiative (AFR100), signals to restoration businesses that the Kenyan government is receptive to their work, and is likely to enact policies that help the restoration industry thrive.
Encouraging as the market environment may be, obstacles remain. In interviews with entrepreneurs across Kenya, WRI’s New Restoration Economy (NRE) identified several barriers to scale, including the lack of access to growth capital. While multiple philanthropies and impact investors are willing to provide seed capital – grants or investments of $100,000 or so – fewer organizations are willing to invest larger amounts in the $3-10 million range that are necessary for businesses to take off.
Madison Ayer, chairman of Honey Care Africa, is all too familiar with the issue. Founded in 2000, Honey Care is a for-profit apiary enterprise that seeks to bring financial, environmental, and social sustainability to rural communities in Kenya. The company’s vision won recognition from many international organizations, including awards from the World Bank Development Marketplace and UN Equator Initiative. By 2010, however, it was struggling financially. “Honey Care had a great history and story,” Ayer said, “but there was a need to evolve the enterprise beyond a small subsidized project and develop a strategy for scaling and economic sustainability.”
The company needed a more economically sound business model. Under the leadership of a strong board and CEO Ryan Marincowitz, the company has shifted from beekeeping for community development and environmental sustainability to developing nutritious honey-based snack products for the mass market in East Africa.
The pivot worked. Honey Care’s revamped business model attracted the attention of Root Capital, Lundin Foundation, Grameen Foundation, and Alphamundi, impact investors that have invested in multiple funding rounds since 2012. Honey Care Africa’s sales in fiscal 2016 were five times the average annual sales of the previous decade. This dramatic growth has translated to accelerated impact; the company now purchases honey, peanuts, cashews and sesame seeds from almost 5,000 farmers, which adds up to $200 per year to each farmer’s income – a significant amount in Kenya, where per capita GDP was just under $1,250 in 2013. The hives Honey Care has distributed are also a boon for the environment, rejuvenating landscapes through pollination and boosting crop yields by 15 to 30 percent.
The success of Honey Care and GreenPot offer a common lesson: successful business models in restoration are essential to deliver environmental, social and financial returns. As the restoration economy in Kenya continues to grow, NRE is committed to understanding how these models can be replicated and scaled up. Although the challenges are great, the opportunities are even greater. With companies like GreenPot and Honey Care, the vision of Kenya’s restoration economy is awash with green and gold.