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Article IX: Conclusion: What’s at Stake with Social Ventures in Africa? The Lives of 400 Million People Living on Less than $1.25 per Day by Brian Ray Dinning, JD, LLM and social venture lawyer

Article IX:  Conclusion:  What’s at Stake with Social Ventures in Africa:

The Lives of 400 Million People Living on Less than $1.25 per Day

 

By:  Brian Ray Dinning, JD, LLM and Social Venture Lawyer

July 27, 2012

 How many people in this world live on less than $2.50 per day?  A staggering 3,000,000,000 (3 billion people) or roughly half of the world’s population lives in desperate poverty according to the World Bank.[1]  In Africa alone, there are 400 million people living on less than $1.25 per day according to the United Nations.  And, even more shocking, over 21,000 children under the age of five die everyday from malnutrition and starvation according to UNICEF.[2]  In a given year, that’s 7.6 million children dying from preventable things such as lack of food, water or basic medicine.  Finally, the BBC reports that 200,000 children are sold into slavery and the sex trade each year in Africa.[3]

Many people ask me “why do you still work on social ventures after all that has happened?”  At the same time, I continue to ask myself and others “why aren’t more people working on social ventures to help the poor?”  The world’s population cannot sit by and let the preventable deaths of 7.6 million children occur each and every year without doing more.  I, for one, know that I cannot sit by without doing everything I can to help the poor and dying children of Africa.

Life is too short.  Material possessions and the comforts of life are fleeting.  The years of hard work at a job to simply receive a paycheck does not ultimately provide satisfaction for me and many other people – especially when our recent economic downturn shows us that it can all be taken away in a flash.  My family and my children give me a great sense of happiness and satisfaction in life as does my relationship with God.  It is because of my family and my belief in God that I am committed to helping others in need.  The Bible (along with most religions) teaches us that:

“Pure and genuine religion in the sight of God the Father means caring for orphans and widows in their distress and refusing to let the world corrupt you.”[4]

 What does it take to care for and help children and the poor?  One of two things:  your time or your money.  There are many people who have dedicated their lives to serving in charities, churches, missions organizations and even doctors without borders who give of their time to help those in need.  Yes, most of these people are paid – but they still give of their time and of themselves to help others.  Most of the world can help by giving money to help those in need.  Now, how much money is needed to help those children dying of starvation and the other three billion people living around the world in poverty.  A LOT!  But, each of us can help by donating to UNICEF, World Vision and organizations that feed and help needy children around the world.  Companies, individuals and organizations can also become financial partners by investing into social venture projects – which seek to help the poor and do even more – provide for jobs and a future for these children while also hopefully providing a financial return to the partners.

It is not an easy task!  In trying to help children and those in need in Africa, there are and will be many ups and downs:  children will still die, businesses and social venture projects will fail, people will do crazy things and pirates, dictators and rebel armies will still terrorize Africa and the rest of the world.  However, the real success is this:  some children will live by being helped by me or the many others who are working in Africa and around the world; some social venture projects will succeed; and more and more people will be given jobs and hope for a better future for themselves and their children.  In fact, if I can only help one child from starving then I believe that all my work in this life has been a success.[5]

I am truly proud to say that our social venture projects employed up to 60 full-time workers – which, in turn, fed 60 families or typically 300 people![6]  Now, how many more people could we help and jobs could we create when the social venture projects succeed?  A LOT!  Liz Hamburg in an article for The Huffington Post reported a 30:1 ratio for job creation from micro enterprise and social venture job creation at Women’s Initiative for Self Employment in San Francisco.  Meaning, for each of 30 jobs created, those employed women paid taxes and helped others with employment or other assistance thereby helping up to 900 total people.[7]  Ms. Hamburg reported,

“There’s a 30:1 return on investment as women create businesses, pay taxes, employ others and come off of public assistance. That means for every one invested in the program, 30 go back into the community through clients paying taxes, hiring others and leaving the welfare system.[8]

Thus, one successful social venture project in a rural community in Africa will change that community forever – and the lives of hundreds of people.  It was estimated by the Development Bank of South Africa that the Hole in the Wall project would have employed 23 people. If the project succeeds, it will create up to 57 full-time jobs in the local community feeding up to 285 people.  If you use the Women’s Initiative job multiplier as reported by The Huffington Post, then you could ultimately create up to 1500 jobs through a successful social venture project in one community in Africa.

You may be asking – what are these social venture projects?  What is it like at a community project in Africa?  What is the value of this property to the local community?  How about $98,818,000 of the most sought-after beautiful, untouched oceanfront land on the Indian Ocean in South Africa?  This is the value of the raw, undeveloped land held by the social venture between the community and Pure Africa as determined by a South African property expert and a real estate developer.[9]  For these rural communities in Africa, this land is their future and a means to lift their entire communities out of poverty. The local impoverished community should and must benefit substantially from the sustainable development of their land – it is their right and heritage.  Even if our social venture partners and I cannot finish the task, someone must help these communities benefit from the heritage, culture and land that they have had for generations.  It is a moral imperative and a social responsibility!

In order for you to fully understand the above statements, I will share a bit of our project vision for the local people in Africa with you and why the community land is so special. The local Xhosa people are very poor – most live on less than $1.00 per day, on average.  They are impoverished in a worldly sense but they are blessed with tremendous natural resources – their oceanfront land.  The average tribal leader has less than a sixth grade education, so while they have amazing land – they do not have the tools, skills or education to know how to maximize the value of the land.  This is where our social venture partners bring in the education, know-how, a professional team of lawyers and real estate companies and the finances to help the local community sustainably develop a real estate project to create jobs, job skills training and hopefully profits.  Don’t get me wrong – social venture projects are for-profit – so our goal was to maximize the value of the community land so that the community, our social venture partners and financial partners can all benefit.

Hole in the Wall is a cultural[10] and National icon in South Africa.  It is a large rock mountain in the Indian Ocean that boasts beautiful scenery and ocean views.  In 2004, the Development Bank of South Africa “DBSA” and the South African Government funded a study on creating a tourism project at Hole in the Wall.  In 2004, DBSA, the government and Incopho created a project summary for several projects including Hole in the Wall.[11]  In 2005, our social venture partners received a Lease from the South African National Government to develop the community project at Hole in the Wall[12] and a Record of Decision (building permit and authorization) was issued in late 2005.[13]

Now, it is well-known that nothing happens in Africa without a meeting:  we literally had hundreds of hours of meetings with the local chiefs, the tribal counsel, the community trust and the local people to show them the business plan and the proposed benefits to the local community.  In Africa, everyone has a right to speak so the meetings were attended by hundreds of people – both young and old.  Once everyone had a chance to voice their opinions and concerns, then we would finalize our social venture project plan.  Finally, after our projects were approved by the local community, we then sought approvals from the National, Provincial and local government.  Once everyone was happy with and had approved the business plan at a social venture like Hole in the Wall, then we would begin.  This initial process takes from 18 months to several years for each project!

At Hole in the Wall, after three years of meetings, the approved plan was to build a tourism site with 50 oceanfront rental homes and a boutique hotel[14] which would create a minimum of 57 jobs for the local community and the potential for hundreds of micro business jobs such as beadwork, tours, sea shell jewelry and other tourism souvenirs and hopefully profits from the development (the community owned 45% of the Hole in the Wall development as our partner).

Our professional team provided great endorsements of the projects.  We agreed to approach Sotheby’s International Realty to market the Hole in the Wall project.[15]  On May 6, 2008, Lofty Nel, a Principal with the firm of Sotheby’s International Realty provided a letter to the project, which reads:

“Lew Geffen Sotheby’s International Realty are extremely proud and honoured to be granted the exclusive mandate to market Pure Africa Development LLC Hole in the Wall project on the Wild Coast in South Africa.  Marketing of the project has commenced by word of mouth with the official launch of the project scheduled for the end of May, 2008.

 The development comprises 51 Ocean front homes in a gated estate at the Hole in the Wall, a national landmark in South Africa.  Earth Conservancy have also been appointed to manage approximately 5000 acres of pristine land adjacent to the project as part of a conservancy.  This will ensure that the amazing views and natural beauty of Hole in the Wall will remain intact for guests and owners at the Hole in the Wall development.”[16]

The 50 lots plus a hotel site were priced for long term lease at an average price of $120,000 per lot for total projected revenue to the social venture project of $6 million.[17]   The engineering firm prepared a lot layout for the Hole in the Wall and architects, engineers, and home builders were appointed to get the project ready to market.[18]

In addition to community and government approval, we also sought the approval of specialized real estate legal counsel.  On September 1, 2008, the law firm of Smith Tabata provided Pure Africa with a legal opinion letter:

“We act on behalf of the aforesaid Pure Africa, LLC as majority shareholder of Incopho Wild Coast Development Projects (Pty) Ltd.  Incopho, in turn, is the majority shareholder of the project company, The Reserve at Hole in the Wall (Pty) Ltd.  Our firm has represented The Reserve at Hole in the Wall project on behalf of Pure Africa since 2007 as legal counsel.  We also assisted in the referral of the project auditor, Charteris &  Barnes, auditors.

Based upon a review of the documentation, The Reserve at Hole in the Wall is an oceanfront and oceanview real estate development consisting of 50 stands and a small hotel.  The Reserve at Hole in the Wall is being marketed by Lofty Nel of Sotheby’s International Realty in East London, South Africa.

The original documentation for this project dates back to September, 2004.  For this letter, I have reviewed the following:

The Final Scoping Report dated September, 2004;

The Review of Documents relating to proposed Coffee Bay and Hole in the Wall developments by East Cape Development Corporation and the Development Bank of South  Africa;

The Ground Lease by and between the Kwa Tshezi Community and Earth Conservancy dated February 6, 2006;

The Lease Agreement between The Government of the Republic of South Africa through the Department of Land Affairs, the Kwa Tshezi Community and Incopho dated February 2, 2006;

The Record of Decision from the Department of Affairs, Environment and Tourism dated August 10, 2005 authorizing Incopho “to construct 50 single storey chalets, a central restaurant, a curio shop and amenities and association infrastructure at Hole in the Wall, KSD Municipal Area.

The Lease Agreement between The Government of the Republic of South Africa through the Department of Land Affairs, the Kwa Tshezi Community and Incopho dated June 21, 2008 which is a 30 year renewable lease at the option of Incopho for up to 90 years and continuing thereafter.

It is also my understanding that Title Deed to the land comprising the Hole in the Wall development is forthcoming to the Community in the next 6 months or longer from the Government of South Africa and the Department of Land Affairs.

Based upon a review of this documentation, Incopho has a valid lease with the Government of South Africa and the Kwa Tshezi Community for up to 90 years or more.  Under South African law, Incopho through The Reserve at Hole in the Wall (Pty) Ltd. can sublease the 50 stands to interested sublessees for rental payments over the term of the lease or the rent and lease may be prepaid.  It is my understanding that sublessees can “purchase” or sublease one or more of the 50 stands for an up-front payment of rent or with 10% downpayment of rent and the balance of the rent payments over 10 years at 12% interest.

It is my understanding that Sotheby’s International Realty will be acting as estate agent in the “sale” of the 50 subleased stands to the general public.  A separate company,  Villager Homes, will be constructing homes on the 50 subleased stands under separate written agreement between Villager Homes and the stand “purchasers” or sublessees. 

Finally, when Title Deed is ultimately vested with the Kwa Tshezi Community, it is planned that the 50 stand sublessees may have the opportunity to convert their lease to Title Deed ownership of their stand.”[19]

By May, 2008, all architectural designs, engineering, lot layout, utilities and infrastructure plans were completed and a contract to install all utilities, roads and services to The Reserve at Hole in the Wall were completed.  These crucial steps made it possible for marketing of long term leases for the 50 lots by Sotheby’s International Realty.

In May, 2008, Sotheby’s began to issue marketing materials for Hole in the Wall[20] and in September, 2008, Hole in the Wall was listed as a “hot property” in Conde Nast Home in South Africa and Media Press Releases were issued.[21]  Sotheby’s also went to great expense to create glossy brochures to begin marketing and they also launched a marketing website for the Hole in the Wall project.[22]  Pure Africa and the social venture partners put up a marketing Sign Board at the Hole in the Wall project.[23]  Everyone was excited because Sotheby’s and their marketing experts were certain that the property would lease quickly and that meant up to $6 million of projected revenue for the social venture project and the local community.

However, just as the marketing campaign was beginning, the aggressive bad press campaign team of Batte, Stiner and others jumped in to actively interfere with and destroy the marketing efforts at the Hole in the Wall project.  This was the most damaging tortious interference that resulted from the aggressive bad press campaign – anonymous phone calls from this coordinated group to our real estate professional team and social venture partners.[24] At the launch of the Hole in the Wall project and at other projects, Sotheby’s International Realty, government officials and others received several anonymous phone calls from Virginia and from South Africa stating that the projects were false, that we were trying to sell (versus lease) community land and that I was not someone to be trusted.  The callers also threatened to and did take the matter to the newspapers to discredit Sotheby’s and the social venture projects.  In discussions with Sotheby’s and other real estate firms, we were told that a new development, especially a social venture development, is a delicate matter and you only want positive information for the general public to view when seeking to spend money on a new oceanfront resort.  The decision was made to halt the marketing campaign at Hole in the Wall and try to regroup later.  This was devastating to us because it meant that years of time, effort, money and relationships were wasted.

Each time a project was halted by the malicious and negative actions of Batte and his coordinated bad press campaign, we had to stop everything and try to work on a new project that hadn’t yet been attacked by this group.  However, each time the task grew harder and everyone on the social venture team was tired of the negative attacks and the disappointment and damage that resulted from the negative attacks.

As I have said before, I am still working on social ventures in Africa and will continue to do so.  Each day that I work in trying to help create jobs for the needy in Africa will hopefully help save one or more of those 21,000 children dying everyday.  Does it take money to help save the needy in Africa and elsewhere?  Yes, a lot of money.  Does it take time and hard work?  Yes, a lot of time, effort and thankless hours.  Will this work get done by itself?  No – people have to get involved and do it.

Can you be paid to do this work?  Yes, you can be paid – just like I was paid and millions of others in the public and nonprofit sectors are paid.  And, that pay comes from donations, taxes and investment dollars – just like my consulting compensation.[25]  How does President Obama get paid?  He gets paid from our voluntarily contributed tax dollars.  The fact is public service and charity work is paid for by people contributing money to get a job or a project or a public service done.  If getting paid for social venture work or public service was wrong, then millions of people are guilty of the same thing on a daily basis in the United States.  Did you know that your tax dollars went to pay an abortion doctor to perform abortions or for a soldier to fight in Afghanistan or for a social worker to help inner city children learn to read – probably not but perhaps indirectly you were aware of it.

In our social venture projects, donors and financial partners were given hundreds of pages of legal documents, business plans and other project-related information to review, study and provide to their lawyers and accountants.  Each of these financial partners or donors then chose to donate or invest pursuant to those legal documents and business plans.  In donating funds, there is no return other than the charitable donation deduction you receive for donating.  In becoming a financial partner, it was abundantly disclosed that like most businesses in the world, the social venture projects can fail.  The financial partners were informed that they could lose all of their investment and they were advised of the risks.[26]  While I hope that the social venture projects can be completed, even despite all of the obstacles and interference and crazy actions of others, it will still take a lot of time, money and hard work to get it done.  However, the rewards of completing the social venture projects and helping to create jobs, feed families and save as many lives as possible in Africa make it all worthwhile.

God Bless you all.


 [3] BBC 5 October, 2001 & Anti-Slavery Society.  See http://www.oprah.com/oprahshow/Sold-into-Slavery/

 [4] James 1:27 New Living Translation (2007).

 [5] Like many other people, I sponsor a little girl in Zambia through World Vision by providing enough money – roughly $1 per day – so that she has food, clothing and school supplies.  While this is clearly not enough – it is something invaluable to her and frankly, it means the world to me.  To help a child in need, see www.worldvision.org.

 [6] http://www.huffingtonpost.com/liz-hamburg/microenterprise-an-exciti_b_813738.html.  Liz Hamburg reports that each job created fed a family of five from the income from that job.

 [7] For a report on the multiplication effect from job creation in social ventures, see http://www.fieldus.org/Microtest/SROI.pdf

 [9] See Wild Coast Property Valuation.  This valuation was prepared by real estate expert Alan Bell and real estate developer David Stefano based upon comparable property values on existing real estate for sale on the Wild Coast of South Africa.

[10] Known in Xhosa tradition as the place of The Great Cattle Killing, Hole in the Wall is steeped in cultural fokelore and significance for the Xhosa people.  For a short version of the legend, see http://www.southafrica-travel.net/eastcape/wildcoast.htm

[11] See DBSA – Incopho Project Overview as Article 6 FN 4.

[12] See National Government Lease to Incopho.  There are dozens of leases between the local community partners and the social venture partners, which document the projects and the hopeful social benefit to the local community partners.  For years, the social venture projects paid lease payments to the various communities, paid local workers and paid development costs.

[13] See Record of Decision to Incopho.

[14] See Site Plan at Article 6 FN 7.

[15] See Pure Africa letter to Sotheby’s at Article 6 FN 10.

[16] See Letter from Lofty Nel of Sotheby’s International Realty at Article 6 FN 11.

[17] See Plot and Plan Pricing at Article 6 FN 12.

[18] See Model Home specifications by Villager Homes at Article 6 FN 13.

[19] See Opinion Letter of Smith Tabata Law Firm at Article 6 FN 14.

[20] Sotheby’s Booklet showing Hole in the Wall Development at Article 6 FN 15.

[21] See Conde Nast Home article naming Hole in the Wall a “Hot Property” at Article 6 FN 16.

[22] See Sotheby’s website layout at Article 6 FN 17.

[23] See Pure Africa Hole in the Wall signboard at Article 6 FN 18.

[24] See Pam Golding Properties Letter.

[25] My consulting compensation was paid pursuant to signed agreements on an hourly rate basis and payment of costs and expenses and it was acknowledged by the managers and boards of the various companies that agreed to hire me as a consultant.  See William Brown Letter.

[26] See Private Placement Memorandum of the Fund and the signed Subscription Agreement of Dr. Allan Stiner.

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