EquiTrade™ (ET) – Fostering Co-ownership and Sharing ... - Unido

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EquiTrade™ (ET) – Fostering Co-ownership and Sharing ... - Unido

EquiTrade (ET) – Fostering Co-ownership and Sharing Intangible Value with PoorProducersBy gedPublished: 09/12/2008 - 08:54Focus Themes:Supply/value chains, market access and linkagesCompliance with standards and conformity assessmentInnovative forms of financeTo which sector/s of agribusiness does the solution apply? :HorticultureProcessinglogistics:Cold ChainPlease name:Ged BuffeePlease describe the solution /project. :ABSTRACT: EquiTrade (ET) – Fostering Co-ownership and Sharing Intangible Value with Poor ProducersMarket mechanisms can indeed be used to effect social and economic change. However new, more equitablemarket mechanism configurations are needed in order to build real wealth for poor producers rather than just thepossibility to earn extra pennies. Using consumer-buying power to improve the living conditions of the poor issomething ethical consumers increasingly support and market mechanisms seeking to do this need to be improvedand optimized. This paper introduces and makes the case for EquityTrade(ET) – a new superior equity sharingmodel that far exceeds the popular, yet limited, “Fair Trade” branding. ET is innovative, entrepreneurial, moretransparent and a considerably more equitable branding process than Fair Trade. ET offers a new pathway for poorAfrican producer, and those that seek to increase incomes of farmers, to follow. That pathway leads, step by step,to assigning them equity in an ET brand that markets products made from their crops and to gain an IntellectualProperty (IP) asset. With equity farmers can build wealth through asset value growth and dividends, both of whichincrease over time as the SE brand business grows. Importantly this asset is a share of a brand, which is an assetwhose value is recognized by the financial institutions and capital markets of modern economies. ET introduces anew mantra: “Trade with Equity”. This “Trade with Equity” approach is the logical and necessary next step beyondthe A4T development approach and the fundamental hypothesis is that equity, defined as ownership by smallfarmers of a share of a company in a modern economy, is not only possible but essential if the growingNorth-South poverty gap is to be overcome.What problem or market opportunity did it address? :Lack of supply chain governance.Inequitable sharing of value chain profits.Lack of meaningful market penetration.Fair Trade flaws.How was the solution developed? :Solution was innovated by Paul Weatherly and further developed working with Ged Buffee. It is a response to thedismal market performance of Fair Trade in spite of extraordinary high levels of publicity (Fair Trade sales on only1 / 4

at $2.3 billion globally - very small). In addition poor producers were clearly not being lifted out of poverty byexisting market mechanismsWhat were the implementing stages of the solution?:Some Equitrade branded businesses have been planned and are ready to launch. It is proposed these businessesare placed in a Proof of Concept incubatorWhat challenges had to be overcome?:The major challenge is that perception that Fair Trade is doing the job and lifting thousands of poor producers outof poverty. A great deal of education is required around (i) the flaws of Fair Trade and (ii) the benefits of EquitradeWhat are the main outputs / outcomes of the solution?:Sustainable livelihoods for poor producersEntrenched market positions for Equitrade brands and a continuous flow of significant wealth building benefits forpoor producers that are co-owners of these Equitrade brandsWhat are the lessons learned in implementing the solution? What factors were critical for its success? :See attached noteIf there are other solutions to a similar problem what makes this one different?:See attached noteHow long was the duration of the project / how long was required for the solution?:3 - 5 yearsWhich institutions / organizations are supporting the implementation of the solution? :Private sector associationsInternational organizationsDonorsWhat are the key areas of impact?:SocialTradeEmploymentFood security/availabilityPlease Specify:Market penetrationHow is the impact evaluated?:Market share and sales plus longterm growth in the value of the Equitrade brandsWhat was/is the budget allocated to design/implement your solution?:200.000,00 USDHow was the solution financed?:Private sectorWere alternative sources of finance considered?:2 / 4

YesPlease Specify:DonorsHow can the sustainability of the solution be ensured?:By building strong market positionsIs there a cost recovery scheme in place?:Equitrade is a business so ROI is plannedAre beneficiaries able / willing to pay for services?:NoWhat are the future plans for the implementing institution?:PROOF OF ET CONCEPTThis involves the establishment and funding of a Proof Of ET Concept Research Organization to demonstrate theefficacy of the “EquityTrade (ET) model as a viable way to lift poor African farmers in large numbers out of poverty.It will also seek to show that ET offers donors and governments a way to invest to embed preeminent supply chaingovernance that in fact guarantees a fair share of proceeds for poor producers while also fostering a secondincome stream for farmers that has the potential to increase over time as the Intellectual Property and reputation ofan ET brand grows more valuable. (In contrast, present alternatives for public investment do not offer such apotential upside over the long-term). Ventures following the ET model have the potential to grow in both assetvalue and income for the medium to long-term. (In contrast investments in agricultural production are almostguaranteed to do neither). Once the first few ET ventures are incubated and shown to be an effective way to growprofitable brands, then market forces will make ET ventures attractive to private capital.The goal of the proof of concept work proposed here is to prove the ability to create ET branded business initiativeswith attractive risk/return profiles good enough to secure additional venture or mezzanine capital investment. Toprove the value of the ET model, it is proposed to establish three ET ventures. Overall the incubating andestablishment of these businesses, with ET at the heart of their brands, will demonstrate ET’s powerful wealthsharing potential for poor African farmer/producers. Once these ventures are launched, the ET development unitwill work to form a for-profit incubator with a pipeline of 5 more ET brands, plus create a non-profit ET certificationservice for other companies that wish to form their own ET ventures. The outcome of the work of this proposal willprove that the ET concept is viable. Such proof will open the door to a wide range of private sector ventures,tapping purely commercial sources of investment, that will bring a completely new source of wealth to Africa’s ruralpoor.How will the implementing institution continue to provide services to beneficiaries?:See aboveAre there expansion plans for new services – new potential beneficiaries?:Yes: (i) is to run 3 Equitrade businesses in the Proof of Concept unit and (ii) thereafter facilitate a privately fundedincubator to bring additional Equitrade businesses to marketCan the solution be replicated/scaled up to cover other areas/regions/countries/groups/products? :3 / 4

YesIn which way can this be achieved and what resources would be needed in order to replicate/scale up thesolution? :See noteWhat should be considered in the implementation?:See noteIs a business plan or project document available?:Business PlanProject DocumentPlease Upload Documents:EquiTrade Outline & Proof of Concept.docDoes the solution model offer opportunities for South-South cooperation? :YesIs there cooperation already ongoing with initiatives or projects in other places? :YesWhat are the tools and elements needed for South-South cooperation?:Proof of Concept unitYoutube Videos:4 / 4

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