Sierra Leone Market Analysis

2010

Youth Microfranchise Initiative:
Market Analysis of Sierra Leone
This report analyzes the general youth labor market and includes
an industry and market analysis of 8 distinct sectors and evaluates
the potential of launching a microfranchise business in each.

Prepared for :

Prepared by:

oakley1008
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Hewlett-Packard
1/1/2010

TABLE OF CONTENTS
Executive Summary ......................................................................................................................... 4
Methodology ................................................................................................................................... 6
IRC Research Objectives .............................................................................................................. 6
Research Model And Criteria ...................................................................................................... 7
Management Team ................................................................................................................. 8
Scalability ................................................................................................................................. 8
Profitability .............................................................................................................................. 8
Sierra Leone Youth Labor Market Analysis.................................................................................... 10
Youth Demographics ................................................................................................................. 10
Location ................................................................................................................................. 10
Gender Ratios ........................................................................................................................ 11
Poverty .................................................................................................................................. 11
Employment Characteristics...................................................................................................... 12
Employment .......................................................................................................................... 12
Work Opportunities............................................................................................................... 12
Microfranchise Business Model ................................................................................................ 13
Impact on the Youth .............................................................................................................. 14
Business Sector Analysis ................................................................................................................ 15
Mobile Banking Services ............................................................................................................ 15
Market Analysis ..................................................................................................................... 15
Demographics...................................................................................................................... 15
Industry Analysis.................................................................................................................... 17
Evaluation of Microfranchising Potential .............................................................................. 18
Conclusion ............................................................................................................................. 19
Ice .............................................................................................................................................. 20
Market Analysis ..................................................................................................................... 20
Conclusion ............................................................................................................................. 24
Water Sachets ........................................................................................................................... 25

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Market Analysis ..................................................................................................................... 25
Conclusion ............................................................................................................................. 28
Popsicles and Frozen Treats ...................................................................................................... 29
Market Analysis ..................................................................................................................... 29
Conclusion ............................................................................................................................. 31
Salon Services ............................................................................................................................ 32
Market Analysis ..................................................................................................................... 32
Conclusion ............................................................................................................................. 36
Baked Goods .............................................................................................................................. 37
Market Analysis ..................................................................................................................... 37
Conclusion ............................................................................................................................. 41
Poultry ....................................................................................................................................... 42
Market Analysis ..................................................................................................................... 43
Conclusion ............................................................................................................................. 46
Mobile Phone Credit Sales ........................................................................................................ 47
Market Analysis ..................................................................................................................... 47
Conclusion ............................................................................................................................. 49
Conclusion ..................................................................................................................................... 50
Appendix........................................................................................................................................ 52

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EXECUTIVE SUMMARY
Introduction

Sierra Leone has been plagued with high unemployment rates since the conflict, with 70%
currently unemployed. The country is listed as the poorest country in the world, and 34% of its
population is youth between the ages of 15-35. To address youth unemployment, the
International Rescue Committee (IRC) launched an innovative microfranchise project in February
2009 to provide business opportunities to unemployed youth. After evaluating this pilot, IRC
sought additional impact on youth by exploring new industries and strengthening the
microfranchising component of the project. This report provides further analysis and
recommendations necessary to expand IRC’s youth microfranchising initiative and three-year
microfranchising strategy. Based on the Fairbourne Consulting Group’s (FCG) five week in-
country analysis, this report outlines FCG’s research methodology, assesses the current youth
labor market, and makes IRC partnership recommendations based on a broad business sector
analysis.

The Youth Labor Market and Microfranchising Potential

As a result of Sierra Leone’s long conflict, many youth lack key labor skills due to the limited
educational opportunities available during that time. Combining the high percentage of youth
with low education levels and the few employment opportunities today, many youth roam idly
in the streets of Sierra Leone. Although many skilled laborers provide opportunities for
apprentices to gain skills, 50% of urban youth work as unpaid apprentices. Often times these
youth apprentices work for years under their bosses with minimal chance for advancement. In
the rural areas this ratio moves even higher to 70% as youth work on family farms without
pay.

Although most youth see self-employment as their best income opportunity, only 33% of
working youth are self-employed as compared to 50% of adults. Youth focus groups cite a lack of
capital, network, and training. While traditional businesses in the formal market often require
high levels of education, opportunities for both educated and uneducated youth remain limited.
Addressing these youth labor market issues, a microfranchising business model will increase
youth’s employment opportunity and help them to become more independent, develop self-
respect, and learn the skills necessary to operate a successful business. Microfranchsing
opportunities are well-suited for youth because they provide capital, branding, and
training. Because microfranchises are proven businesses, youth should have a greater chance at
running a successful business. As a quality microfranchise prospect, Sierra Leone's youth also
represent a strong labor class because they have more energy, are more malleable, and are
more open to new ideas than adults.

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Industry and Core Market Sectors Analysis

Initially exploring 20 different industries in Sierra Leone, FCG discovered many market
inefficiencies, thus business opportunities. Through multiple interviews with business leaders,
government officials, business associations, and investors, FCG learned that Sierra Leone was
improving its barriers to market entry for private sector investments; however, challenges still
remained for a number of industries to grow. Weak infrastructure, management capacity, and
government regulations discouraged many industries, such as tourism, agriculture, and
manufacturing. In addition, there were many political and market saturation issues with mining
and selling gold and diamonds. Although private sector development was improving, no strong
incentives appeared to encourage local private sector development, but more support was
given to imported goods.

Based on FCG’s research and meetings organizations such as the Minister of Trade, Sierra Leone
Investment Public Access, the First Lady of Sierra Leone, and a variety of other business
association, 8 sectors were chosen out of over 20 to determine which would make a good
microfrachise business opportunity. These 8 industries included: mobile banking services, ice,
water sachets, popsicles and frozen treats, salon services, baked goods, poultry, mobile phone
credit sales. FCG explored these industries and businesses that operate in the formal and
informal markets, have innovative products or services, or are in high demand.

Recommendations

After analyzing 8 business sectors for their microfranchise potential, FCG recommends IRC
further develop relationships with the businesses Splash and Ice Ice Baby. By developing
partnerships with these two businesses, IRC will be able to tap into the following 4 businesses
sectors: mobile banking, ice, water sachets, and popsicles. Based on this robust market analysis
and exploration of the major businesses in Sierra Leone, Splash and Ice Ice Baby show the
greatest potential for working with IRC to create 3000 youth microfranchisees over the next
three years. As mutually beneficial partnerships, these businesses will create youth
employment opportunities, and IRC’s youth microfranchisees will help these businesses deepen
their distribution channels and improve the brand their products and services.

FCG also recommends Splash and Ice Ice Baby as optimal IRC partners because of their strong
management teams, potential scalability and profitability for both the microfranchisors and
microfranchisees. Both management teams of these potential partners run efficient businesses
and are very innovative, welcoming partnerships with IRC and FCG. They are excited about
creating new employment opportunities for youth in Sierra Leone and addressing the youth
unemployment disparity. Since both of these partners receive financial and management
support and oversight from Manocap, a Sierra Leone based venture capital firm, FCG is
confident that these businesses will maintain a strong, long-term market presence in Sierra
Leone through adequate capitalization.

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METHODOLOGY

IRC RESEARCH OBJECTIVES
IRC evaluations of the 2009 microfranshing pilot project showed that 96% of the youth plugged
into the microfranchise systems were either profitable or at least broke even. Further
evaluations found the benefit to the youth was much greater than the money they were
earning. Their self-confidence and outlook on life was also significantly higher compared to non
IRC microfranchise youth in Sierra Leone. While the IRC found much success in their pilot
project, they also wanted to overcome the unintended challenges they encountered.

Hoping to develop more quality business partnerships, ensure the success of every
microfranchisee, and scale the youth microfranchising initiative, IRC engaged the Fairbourne
Consulting Group (FCG) due to its firm’s expertise with developing microfranchises in emerging
markets. IRC employed FCG to undertake a five-week analysis in Sierra Leone to conduct market
research and identify viable business partners in the three regions of Western Urban
(Freetown), Kenema, and Bo Districts. Due to similarities in the markets, and resource
constraints, FCG’s analysis is based primarily on data gathered in Freetown and Kenema. FCG’s
team of four experts was led by, Jason Fairbourne, the author of multiple microfranchising texts
and articles. At the request of IRC, FCG was tasked to complete the following key objectives:

1. Identification of businesses for three-year micro-franchise strategy;
2. Business conversion and definition of path to scale for micro-franchises;
3. Definition of cost-efficiency and sustainability plans for micro-franchises

In this market analysis report, we address objective #1, sub-questions a. through f., while two
separate microfranchising business plans will address objective #1, sub-question g., and
objectives #2 and #3 in more detail. More specifically, this analysis addresses objective #1 along
with the following sub-questions from IRC in mind:

1. Identification of businesses for three-year micro-franchise strategy;
a. What sectors should microfranchise development in Sierra Leone focus on, and
why?
b. What products and services currently demonstrate unmet demand, at scale?
c. What are the supply chain, regulatory, or financial constraints to production,
processing or sale of these products?
d. Who are the market actors engaged in each of the specific product/ service sectors?
e. Is there value added to products or services as they move through the chain? If so
how and what are the monetary values of these additions?
f. Which businesses demonstrate potential for microfranchise operations in the
products or services identified, at scale? What are the specific criteria that are used
to make this decision?

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g. What are the specific strengths and weaknesses of these models in comparison to
other international youth-inclusive microfranchising models? Please identify three
comparable models that are youth-inclusive or set in conflict-affected countries and
describe the strengths and weaknesses of the strategy proposed.

RESEARCH MODEL AND CRITERIA
We used a flexible methodology for conducting market assessments and understanding the
business landscape in Sierra Leone.

First, we used a fluid process that allowed us
to adapt our daily agendas to be most efficient
with our limited time in country. The fluidity
allowed us to tailor our daily objectives as we
learned new information to meet the most
pressing needs. We set an initial agenda for
the first few days and modified daily activities
as we progressed. The reason for the fluidity
of our methods is we did not want to limit
ourselves to a set plan designed in the US. As
we learned, we better understood the right questions to ask, and who to ask, so we wanted to
be fluid enough to adapt with the process. As shown above, the data gathering and processing
is cyclical in nature allowing us to immediately apply new information to guide our analysis.

Second, we conducted research with a large range of participants including: government
officials, businesses, consumers, IRC youth groups, non IRC youth groups, households, and
informal entrepreneurs. The purpose of the initial scoping was to (a) identify potential products
and services from a range of sectors, which demonstrated unmet demand; and (b) identify
successful businesses which were providing these goods and services.

Third, we created a shortlist of twenty potential
micro-franchise partners and/or sectors. At the end
of each day, we would report our new findings and re-
evaluate these industries based on any new Manage-
ment
information. By the end of the first two weeks of Scalability
analysis, the most promising eight industries were:
mobile banking (Splash, Zap), popsicles, water, ice (Ice Profitability
Ice Baby), salon services (Jemna), poultry (Yewe
Poultry Farms), bakeries (School Bakery, Lebanese, J1,
Red Lions, Lumley), and top-up (Balani and Son’s,
Africell, Zain, Comium). Microfranchise
Opportunities
Fourth, we assessed these eight industries further and
evaluated potential partnerships in each one. Only

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two potential partnerships passed our microfranchising model criteria. This process involved
cataloguing and ranking potential business partners in each industry on the basis of their ability
to meet three core requirements. Through the assessment we found that there were many
business opportunities in Sierra Leone, but not all were poised for microfranchising and thus did
not make it through all three filters. Our three microfranchising filters or criteria were;
Management Team, Scalability, and Profitability.

MANAGEMENT TEAM
For the Management team we analyzed the skill sets of key management positions. We asked
ourselves questions like:
 Does the manager have ability to run a large scale business?
o Can he/she manage managers?
o Do they see value in using a microfranchise model?
o Are they willing to make management changes to meet needs of a
microfranchise business?
o Are they willing to allocate resources to make it work?
o What is there level of commitment?
o Are they trainable?
 If they do not have the ability are they willing to relinquish power and hire a manager
above them?
 Do they have the bandwidth to grow their business?
o Are there key staff and managers that need to be hired before adding the
microfranchise systems?
o How many hours do they put into their business?
o Are they innovative problem solvers?
 Do they have a vision that a microfranchise model can help them scale their business?

SCALABILITY
While the management team questions filter the ability of management to scale, our scalability
questions filter consumer needs and the overall market demand. We interviewed consumers on
the streets, in their homes, in focus groups, in taxis, anywhere and everywhere to get a pulse on
the needs and wants for the final eight industries. This is the primary question this filter
answers: Is there enough need for this product or service to scale large enough and provide
microfranchise opportunities to thousands of youth. If we felt it only had the ability to scale to
hundreds we crossed it off the list. Good businesses like hair salons fell short on this filter.

PROFITABILITY
To ensure these businesses would be profitable to both the microfranchisees and the
microfranchisor, we asked questions about wages and cost structures. As a result of our
analysis, we determined that the average daily wage for youth was LE 20,000. Most youth

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considered LE 20,000 a day, which is USD $5, a good salary. We also interviewed youth that
were making roughly LE 5,000 a day profit in Kenema and were very happy to have that. While
we hope youth will maximize their profit earning potential, we have only set a daily income of LE
20,000 as a minimum goal. We also asked ourselves questions like:

 How much value add does this business bring to the youth, compared to other options?
o How much more would the youth earn by entering into this business as opposed
to selling top-up (a business that anyone can enter if they have some capital)?
o Do the youth learn any skill sets? What are they? Are they transferable? (selling
top-up for example does not require a lot of training or add much experience)
o Is there room for growth?
 Can they afford to add employees?
 Is there a limit to the growth potential?
 Do they earn enough money?
 What equipment costs would they have?
 Would it engage the youth or is it a boring mind-numbing business?
 How innovative is the business – is it unique and differentiated from other businesses?
 Will it push the youth to new boundaries and build confidence?

Using these three filters, our experience in other emerging markets, and our analysis of each
potential industry, we were able to determine the best microfranchising opportunities in Sierra
Leone’s current market.

Though our time to research the complete business sector was limited to just five weeks in
Sierra Leone, having four consultants in-country, and the ability to hit the ground running, we
were able to increase the volume of meetings and maximize our research from day one. This
entire analysis was also made possible due to IRC’s in-country staff as they provided a solid
foundation and support to our consultancy. Their initial youth microfranchise pilot and business
sector network was key to our preliminary understanding of the business sector and youth
employment. The IRC staff also arranged numerous meetings and focus groups with the most
knowledgeable business leaders and market players, including youth. In addition, IRC provided
necessary feedback as we conducted our analysis.

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SIERRA LEONE YOUTH LABOR MARKET ANALYSIS
In order to better understand the major factors we
would need to consider in developing our youth
microfranchising models, in addition to showing the
impact microfranchising has on youth, we analyzed
Sierra Leone’s youth labor market.

Today, youth ages 15-35 represent 34% of the
country’s 6,300,000 people (all statistics in this
section come from Statistics Sierra Leone Census
2004). These youth face numerous changes in this
post-conflict state. Due to the closure of many
schools and the general inoperability of the
government to maintain social programs during the war, most of these youth lack the education
to create meaningful value in their communities. This lack of education and skill development
results in high underemployment rates where youth are unable to make money beyond a basic
sustenance level. This precludes the ability to improve their situation or to be able to afford
caring for a family, thus making them perpetual “youth.”

This is a particularly important issue to address as history has shown that unemployed and
underemployed youth, frustrated with their situation and lack of control, turn to violence to
achieve a sense of power. This phenomenon is highly relevant in Sierra Leone, where the
Revolutionary United Front (RUF) was composed primarily of disenchanted youth. Although the
war has ended, this key catalyst of the war has still not been entirely addressed.

The IRC is attempting to address this issue in part by helping youth become employed through
microfranchise businesses. The microfranchise business model addresses many of the key
constraints often faced in these markets. The model offers microfranchisee business owners a
proven turn-key business, differentiated products, and a comprehensive training program. Thus,
those that lack education or entrepreneurial talent can successfully provide value to the market
while developing human capital at the same time.

YOUTH DEMOGRAPHICS
LOCATION
Young people tend to be more urbanized than the rest
of the Sierra Leone population as shown to the left.
Youth originally relocated to the urban areas during
the war for protection. After the war, research
indicates that youth continue to migrate in search of
better income opportunities. This in part is driven by
the social controls of rural elders – land is controlled by

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a few elite families that use their positions to extract unpaid labor from rural youth. These
reasons may indicate why urbanized youth have expressed strong resolutions not to leave urban
areas.

GENDER RATIOS
As with most populations, young women
outnumber young men in Sierra Leone.
Youth Gender by Location
350,000
However, the differences in ratios are
300,000
particularly high in rural areas. This is possibly 250,000
explained by three effects. During the war, 200,000
young men had a higher incidence of death as 150,000
100,000
compared to women, men are often selected
50,000
over women to receive educational
-
opportunities available only in urban centers, Rural Rural Urban Urban
and it appears that proportionally more men 25-35 15-24 25-35 15-24
Male Female
migrated during the war.

It is important to note differences between when men and women become parents within a
family unit. Even compared to other sub-Sahara African countries, youth pregnancy in Sierra
Leone is high among women with 17% of 16 year olds and 47% of 18 year olds having at least
one child. Many of these women marry at earlier ages (50% by age 19 and 71% by age 24),
particularly in rural areas where arranged marriages and traditions dominate.

Men on the other hand do not marry until much later in life (50% by age 27 and 85% by 35). This
is in part due to the cultural responsibility placed on men to provide for the high cost of
supporting a family. Achieving this level of income can take a long time for men, as they work to
gain education, experience, and stronger
social networks. In rural areas, many men
are dependent on the local elders to be able
to marry, often requiring that they provide
free labor to future in-laws in order to “pay”
for their wives. Marriage delays often result
in social exclusion and ultimately, violence.

POVERTY
Given Sierra Leone’s low Human
Development ranking of 180 out of 182, it is
no surprise that poverty is prevalent.
Among youth, poverty incidence is
particularly high due to lack of education,
weak social networks, and few employment
opportunities.

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Focus groups and interviews have shown that most youth contribute very little to their families.
This results in additional burden to the income producing members of the family and promotes
a lack of respect for those youth. The emotional impact of poverty therefore may play a more
important emotional and social stability role for youth. It appears that by simply reducing the
financial burden on their family, youth gain more respect from others and from themselves.

EMPLOYMENT CHARACTERISTICS
EMPLOYMENT
25% of young men are neither Unemployment Profiles of Labor Force
80%
working or in school. Unemployment 70%
60%
is the highest for men between the 50%
ages of 20-24 at 30%. That age span 40%
30%
is considered a time of transition for 20%
10%
youth as they finish up school and/or 0%
15-19 20-24 25-35 36-65 15-19 20-24 25-35 36-65
feel additional social pressure to
Men Women
become more financially Completely Inactive Unemployed Home Duties
independent.

As shown above, many young men are completely inactive, while those that are actively
searching for a job (unemployed) or performing house work (home duties) still make up a large
percentage of the youth labor force. As would be expected with earlier marriages and child
barring, women tend to have higher unemployment rates, though they are primarily busy doing
house work.

Differences occur in employment rates between rural and urban areas. 70% of rural 20-24 year
olds have work compared to only 40% of their urban counterparts. This difference declines with
age such that by 35, labor participation rates are the same. These differences are driven by rural
youth leaving school sooner and working on the family farm, while urban youth face fewer job
opportunities.

WORK OPPORTUNITIES
Work opportunities for youth fall into the following categories:

 Unpaid Labor: More than 50% of urban youth are employed in unpaid labor
(apprenticeships) with 70% of rural youth engaged in unpaid agricultural activities
(primarily family farms). Although unpaid labor rates decline with age, 33% of men work
for free, while 40% of women work for free in their husbands’ shops and stalls. While
workers within a family do share household expenses, many are unable to become
independent income earners.
 Self-employment: Most youth see self-employment as their best employment option.
Although this leads to increasing self-employment with age, only 33% of working youth
are self-employed, compared to 50% of adults. Urban youth and men are more likely to

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operate their own business, though this gap also declines over time with more than 50%
of the labor force operating their own businesses. A key finding is that many youth feel
that they lack sufficient capital and access to cheaper inputs to help their business
operate efficiently, be productive, and ultimately competitive. 25% of all unemployed
would like to start their own business. 30% of unemployed youth would like to start
their own business, though this declines to only 16% by age 25-35.
 Wage Employment: Wage employment is very rare and predominately an urban male
phenomenon. Given that wage employment increases with age, even when controlling
for education across ages, it appears that wage labor markets value experience over
education. Youth also indicate that labor market connections often trump merit in hiring
decisions. 70% of all unemployed would prefer wage labor, which may be an indication
of entrepreneurial drive in the economy.
 Formal Sector Employment: Only 10% of labor in Sierra Leone is a formal sector wage
job with benefits. Workers in this sector are more educated and are predominately
urban and male, even compared to comparably educated women. As education level
increases, unfortunately so does unemployment. However, the likelihood of being
employed in the formal sector also increases with education such that once a highly
educated individual finds a job, it will most likely be in the formal sector.

Most people move from one work sector to another, improving their situation over time, with a
wage position as the end goal. Many youth start their own business and over time are able to go
back to school and get more education and/or make more connections with other wage earners,
thereby increasing their chances of acquiring a wage paying job. Strong educational
backgrounds are required for formal sector employment, while experience and connections
appear to be the biggest influences to achieving a wage paying job.

MICROFRANCHISE BUSINESS MODEL
The youth labor market is an important part of the overall economy and social structure of the
country. Long term growth and development will depend on having a strong, experienced labor
force well into the future. In order to make up for the lost years of the civil war, when few
educational and work opportunities existed, youth today need even more opportunities so that
they gain the necessary skills to develop into the next generation of leaders in Sierra Leone.

As a microfranchise prospect, youth represent a strong labor class. Youth typically have more
energy, fewer family responsibilities, and potentially more ambition than adults. They can
endure longer work hours and travel distances. This is important because a core part of
microfranchising is the model’s ability to drive wider distribution through microfranchisees that
are able to sell to the last mile.

Youth are also more malleable and open to new ideas than adults. This makes them more
optimistic about their potential success and they are more teachable, making it easier to
transfer successful business practices within the microfranchise. Given that strong systems are a

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key component to a successful microfranchise system, having youth that adhere to a
microfranchise system’s guidelines is crucial.

IMPACT ON THE YOUTH
A microfranchising business model helps youth to become more independent, develop self-
respect, and learn the skills necessary to operate a successful business.

Microfranchise businesses around the world have demonstrated the ability to provide
individuals with better, more reliable jobs. Research of several microfranchises in Bangladesh,
Ghana, and Guatemala have indicated that although microfranchisees don’t always earn the
most as compared to stand alone enterprises, they do have a much tighter profitability band,
indicating much less risk for the microfranchisee. This is important in developing countries as a
bad week for the business can have dire consequences on a family. We have seen countless
individuals go from earning $1-2 per day before joining a microfranchise business to earning
$20-30 per day. This dramatic increase in income has a large impact on the overall welfare of
the family and the independence of the microfranchisee.

In focus groups with youth, we found a stark contrast between those that were part of the IRC
Youth Microfranchise Initiative and those that were not. Youth employed in the program cited
multiple benefits. Youth felt like they were contributing to their families, or at the very least
independent from their families for their care. Others referenced an increased amount of
respect from their family and community and how their status within the community had
changed from idler to contributing member. Many youth also enjoyed the freedom associated
with having extra money. All demonstrated an increased level of self-respect and self-worth.
Youth not part of the program, however, were more pessimistic and frustrated with their
situation. They also appeared to be more prone to expect others to help them as opposed to
being independent.

Although most youth see self-employment as their best income opportunity, only 33% of
working youth are self-employed as compared to 50% of adults. The youth we met with often
cited lack of capital, network, and training. A microfranchise business model solves these issues.
Most microfranchises are set up with financing as part of the package through either
microcredit or consignment sales. Microfranchisees are immediately plugged into the broader
market and have the opportunity to leverage a strong brand/product to develop their own
business relationships. Finally, training is a core component to any microfranchise. In order to
operate smoothly and increase sales, microfranchisees are trained on their products, best sales
practices, and general business operations. This addition to their human capital improves their
potential for success within the microfranchise and greater society.

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BUSINESS SECTOR ANALYSIS
After exploring over 20 business sectors in Sierra Leone, eight sectors met our first pass criteria
for viable youth microfranchise options and thus warranted further analysis. The Business Sector
Analysis section outlines each sector’s products and/or services, analyzes the market and
industry dynamics, and evaluates its microfranchise potential. Finally, each sector summary
concludes with our recommendations regarding its viability as a youth microfranchise business.

MOBILE BANKING SERVICES
Mobile banking is currently one of the hottest economic growth and development opportunities
in emerging markets. With the recent success of M-PESA in Kenya, more organizations,
governments and companies are looking at the potential of mobile banking. This is a big
opportunity in Africa as over 40% of Africans own at least one cell phone. M-PESA, a mobile
banking solution provided by Safricom in Kenya, is currently the largest player in Africa with over
8 million active customers, representing an 18.4% country penetration rate, and a 38.3%
penetration rate of total cell Kenyan cell phone users
(The Economist, September 2009). One recent study
by Olga Morawczynski, an ethnographer at the
University of Edinburgh who has studied M-PESA in
detail, found that mobile banking has saved E-PESA
users enough in time, travel, and fees so as to
increase their incomes by 5-30%.

The basic mobile banking services simply allow people to transfer funds via their cell phones.
Applications may include but are not limited to remittance transfer, payroll, shopping, non-
interest paying saving accounts, utility and school fee payments, etc. In part, mobile phones act
like debit cards. The service reduces the need to carry cash, which can be unsafe and
cumbersome. This is important for countries like Sierra Leone where inflation has led to paper
currency with little value, resulting in the need to carry large quantities of cash.

MARKET ANALYSIS
D EMOGRAPHICS
Currently, users include mostly more educated and technology savvy
consumers and businesses. Customers will need to make enough
money to own a cell phone and to justify the transfer fees. Most
users are urban based, though as the services rolls out, it is expected
that usage among rural users will grow significantly.

Today there are only 200,000 bank accounts among Sierra Leone’s
6.3 million, compared with the 1.5 million mobile phone users. Akin
to other countries in Africa, mobile telecommunications are
leapfrogging archaic technologies; youth as well as adults use cell phones. Although youth are

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more technologically savvy and likely to adopt new mobile phone applications quickly, adults
who account for the majority of small business and farm owners could stand to profit the most
from mobile banking solutions.

C ONSUMER N EEDS /W ANTS AND P REFERENCES
Awareness is one of the largest problems facing mobile banking in Sierra Leone. People are
unfamiliar with banking in general given the low banking penetration in the country and they
typically lack the education to understand how the system operates. Although many people in
Freetown had heard of Splash and Zap, the two solutions provided, few know where or how to
use the service.

People do not trust or like banks in Sierra Leone. Countless individuals store money under their
beds and in other unsecure areas rather than depositing it in the bank. This bleeds over into the
mobile banking sector as people get comfortable with the system and trust that it will operate
correctly – ensuring that they always have access to their money.

Currently, there is limited benefit to the customer due to the few other registered customers. As
more and more people use mobile banking solutions, it is expected that there will fast growth
due to network effects and ease of use. However, the service must be available to thousands of
customers with hundreds of physical access point before it reaches exponential usage growth
rates.

M ARKET S IZE AND G ROWTH
Currently the market size is small, with very few users. Splash currently has 25,000 users and the
competing offering Zap by Zain is also now just raising awareness of its product. Using M-PESA
as a guide, number of mobile banking users in Sierra Leone could reach 600,000 (40% of 1.5
million cell phone users). This estimate might even be low, given that M-PESA is tied into
Safaricom and only works on that network. M-PESA transfers around $200 million every month
with an average transaction size of $18 in Kenya among its 8 million users.

Using similar statistics to M-PESA would result in a potential $5.4 million market size per year in
the next year or two, assuming 3% transaction fees on $15 million in transfers per month. If
Sierra Leone mobile phone penetration hit the same 40% as the rest of Africa (2.52 million Sierra
Leoneans), that alone would grow the market to $22.7 million per year. Although this may seem
like a much lower market size, this does not account for other additional services, nor is it
expected that more than 2-3 players will operate in this market. In addition, there is still
significant growth in this market given that M-PESA is currently signing up 10,000 new users per
day.

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INDUSTRY ANALYSIS
E CONOMY T YPE
Mobile banking sits within the finance industry; however, it decentralizes traditional banking
into the informal markets and is considered one type of “banking for the unbanked.” While
many poor have access to mobile phones, there are still many without bank accounts or
education regarding how to save money. Hence, mobile banking has the potential to change the
financial industry as it becomes more prevalent and possibly redefine the demand for banking
services in the emerging markets.

M ARKET P LAYERS AND C OMPETITION
Currently in Sierra Leone, only two companies offer mobile banking services. These include Zap
by Zain, a mobile payments service that only operates on the Zain network and a few large
businesses, like one of the local gas station networks. The other is the new start-up Splash,
which is funded by ManoCap and works with all three of the major telecommunications
companies in Sierra Leone: Zain, Africell, and Comium. Customers can substitute either by
simply transferring air time units to one another. Although it appears from talking to people that
this is uncommon, we did meet a couple individuals that transferred money to the provinces in
this manner.

Perhaps the greater threat comes from outside of the country. M-PESA is currently working with
a number of banks to expand its presence in other African countries. MTN recently launched a
mobile payments service in Uganda with Stanbic Bank. So far the trial has been successful and
resulted in expansion to Ghana with 20 other countries on the expansion list (“Beyond Voice”,
The Economist, 2009). Other potential entrants include Gcash and Smart Money in the
Philippines, Wizzit in South Africa, and Celpay and Mobile Transactions Zambia Limited in
Zambia.

S UPPLY C HAIN

Mobile Banking System
Provides banking system, training, certification

Large Bank Super Agent Agent Customer
“Agent of Capital and Transaction
Last Resort” Management Point for
w/reserves Support Customers

Mobile banking agents provide a very simple service to their customers. First, customers
deposit money with a mobile phone agent. The mobile phone agent then transfers the amount
minus a small fee to the customer’s mobile phone and both will receive an electronic SMS as a

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receipt of the transaction. From there, the customer uses their electronic credit by dialing
certain numbers and using their security id or password. They can pay bills that are set up with
the service, transfer money to family or friends, or pay for additional phone minutes out of their
mobile phone’s balance.

Mobile banking systems are simply a software and mobile texting platform that sits on top of
the transaction network. The networks are designed to keep the virtual cash as liquid as
possible for the customer, this being the key to generating revenue for the mobile banking unit
as it derives its incomes from fees. Each layer of the network, from the Bank to the Super Agent,
to the Agent, carry increasing amounts of cash, so that if the Agent runs out of cash to handle
transactions, the customer or the Agent can always resort back to the Super Agent or Bank.

EVALUATION OF MICROFRANCHISING POTENTIAL
P ARTNERSHIP
We have strong partnership opportunities with Splash. They have
an experienced management team that is capable of managing a
large scale business. In addition, they have access to capital from
a venture capital fund, ManoCap, which has invested USD $2
million to date, while currently raising another $1 million for a
third round of funding projected to close at the end of this year.
Splash’s management also sees the value of designing a
microfranchise model to scale their services; thus, strengthening
the commitment to see the IRC youth succeed.

S CALABILITY
There is a lot of potential for mobile banking to be successful in Sierra Leone. Building out the
strong transaction network outlined in the Supply Chain section will be crucial to achieving that
success. This network of Agents will require that at least thousand people are ready throughout
the country to provide liquidity for customers. Splash recognizes this and is focused on building
and supporting this network. This provides a real opportunity to employ hundreds, if not
thousands of youth through a microfranchise model. In many aspects, this business should scale
to a similarly to the mobile air time reseller market, such that a Splash agent can be found
within a certain distance from any customer.

Splash is also exploring a number of other verticals such as payroll services and becoming Sharia
compliant, which would give them better access to the large Muslim population that accounts
for 60% of Sierra Leone.

S USTAINABILITY /P ROFITABILITY
Mobile banking has the possibility to be profitable to both the microfranchisees and the
microfranchisor. We see good potential for IRC microfranchisees to get involved in an emerging
industry and build a large clientele before the industry explodes and the market is saturated
with youth mobile banking agents. While the cost for Splash agents to offer mobile banking

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services may be fairly low, we expect each youth agent to have a high earning potential, with a
percentage of transactions being paid as a commission. According to Splash, Agents should
make L 20,000 (~$5) per day if they service at least 7 transactions. In addition, microfranchisees
will be able to sell mobile phone air time at a much better rate through Splash then they could
get from airtime wholesalers, thus increasing their earnings.

CONCLUSION
Due to the mobile banking industry’s current management team, scalability, and profit earning
potential, we recommend using mobile banking as one of the project’s sectors. In particular, we
recommend IRC partner with Splash as the best microfranchising partner. Since Splash envisions
developing a deep distribution system with mobile banking and its services, it will make a great
partner. This service distribution network represents an enormous opportunity for youth
microfranchisees to become mobile banking agents throughout Sierra Leone.

In addition, Splash has already expressed interest to work with IRC and Fairbourne Consulting
Group to develop the microfranchising system. Manocap, the local venture capital firm funding
Splash has also offered its backing and support. This is an enormous opportunity that will
benefit both the youth microfranchisees and Splash.

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ICE
In Sierra Leone the temperature remains fairly constant throughout the year, hitting 95 degrees
Fahrenheit during the dry season and not dropping much below 70 degrees during the wet
season. There is an obvious need to keep items cool. Ice is used in this market much more as an
input for other businesses rather than direct consumption by the end user. Consumers demand
ice-cold water and soda from vendors. Fishermen need large quantities of ice to transport their
catch. Frozen treat vendors require ice to sell their products as well. To that end there are
different kinds of ice – cubed ice, block ice, and packing ice. The highest cost of producing and
distributing ice is fuel and energy. Thus, ice is very much a commodity product that can
fluctuate in price based on energy costs.

MARKET ANALYSIS

D EMOGRAPHICS
Ice is primarily sold to two customer groups – fishermen and street vendors, with only a minimal
amount going to restaurants and hotels. Ice Ice Baby, the largest producer of ice in Sierra Leone
estimates that half of their sales can be attributed to fishermen (packing ice) and the other half
to street vendors (crushed ice).

Fishermen in Tombo (1 hour outside of Freetown) order ice in large quantities as needed to
keep their catches cool for resale. Fishermen prefer either shaved or crushed ice, as it is the
best form of ice for packing fish. Street vendors are less discriminate about what type of ice
they have to keep their beverages cool. When questioned almost all street vendors purchased
ice to keep soda, ginger beer, and water cool for resale. Hotel and restaurants are occasionally
in need of cubed ice for drinks and tend to make higher purchases on the weekends. Many
hotels have their own ice producing equipment and will only request ice when their machines
are broken.

When there is a power outage, there is a high demand for ice because almost everyone loses
the ability to keep things cold and small informal producers lack the power needed to

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manufacture ice. However, Ice Ice Baby, the largest ice producer in the country with capacity of
28 tons of ice daily has a high output generator to meet all of its energy needs.

Fishermen need ice to cool fish, street vendors to cool their inventory of beverages, and hotel
owners to prepare drinks for tourists. The important common denominator with these three
distinct customer groups is that these are business-to-business transactions. Little to no ice is
sold direct to consumers for their cooling needs.

Customers prefer specific types of ice (blocked, cubed, crushed, shaved) based upon their
business needs. All customers demand “strong” cold ice. Upon distributing ice, many
customers at the end of the distribution route tend to complain about ice quality as some of the
ice was melted after a few hours of transport. However, left with no real alternative options to
purchase ice, customers quickly purchase what ice remains.

Current estimated revenue just for ice is
$880,000 annually per conversation with
Amadeus, Ice Ice Baby’s General Manager.
He provided sales amounts for the dry
season at 11.2 million Leones daily, and we
estimated the wet season at half that. There
is also opportunity for deeper distribution
within Freetown, possibly 3 times the current
5-kilo bags distribution which is half of the
current revenue, so an additional $1,320,000. Total estimated market size on current routes
with deeper distribution is $2,200,000. Building out new production facilities in 4 other sites to
establish a larger network of 5 total facilities to blanket the country could bring the total
estimated nationwide market size to $11 million.

There is opportunity for exponential growth in the ice market, as producers cannot meet
demand both in and outside Freetown. Within Freetown deeper distribution networks would
greatly expand the customer base to many street vendors in need of ice. Riding alongside Ice
Ice Baby’s salesmen on a daily distribution route to Waterloo in Freetown, literally hundreds of
customers were calling for ice from the side of the road and yet did not receive ice as the truck
only stopped at specific locations. Outside of Freetown there are many customers whose needs
for ice are not being met. In addition, should Ice Ice Baby be able to reduce the cost of its ice, it
may be able to further grow the overall market size. In the long run however, it is expected that
ice sales will decline as power becomes cheaper and more reliable within the country.

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INDUSTRY ANALYSIS

I NDUSTRY T YPE
Ice production is primarily a manufacturing and distribution sector. Core competencies and
resources related to both are important for success in this sector. Strong players have access to
large ice production facilities and the ability to keep them consistently operating. Refrigerated
or insulated trucks for distribution are also necessary. Finally, quality of the product produced
through those processes is important to building trust in the market.

Competition in the ice market is not intense as the market absorbs all ice that can be produced.
There is room for much more capacity. Whether that capacity comes from current market
players or new entrants, it will be a function of capital costs to set up facilities and distribution
routes with trucks. First movers that can set up deep distribution routes and build a strong
brand will capture significant market share. Currently, Ice Ice Baby is the only major player in
this industry. There are many small and informal local vendors as well. However, customers
clearly prefer Ice Ice Baby due to product quality and brand recognition. These producers sell
minimal amounts as they have limited capacity to pay the utility bills to freeze and store ice.

Ice Ice Baby is the only company that is certified by the Ministry of Health to sell ice for
consumption. Other ice producers were shut down due to poor water quality earlier in 2010.
Remarkably, the company is also certified by the European Union to service the fishermen in the
event the fishermen can export fish.

S UPPLY C HAIN
The production capacity outside of Freetown is rather
limited. Therefore, Ice Ice Baby will ship it as far as
Tombo and Makeni. No other established company is
servicing the ice needs of communities past Makeni. The
transport costs combined with Ice Ice Baby’s limited
number of trucks discourages transport of the product
farther than Makeni. The company is eager to expand
into these areas and could build another facility in the
region to do so when ready.

Distribution in and around Freetown follows more of an “ice cream man” distribution route.
The ice truck follows a daily route in the morning making stops in strategic locations to meet
street vendors to sell 5-kilo bags of crushed ice (Le 2700). As traffic is a big problem on the road
to Waterloo the ice truck is limited on where it can stop to avoid being ticketed by the police.
Many customers will call to the truck from the side of the road requesting ice, but the truck will
not stop.

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Water Purification Freezing
Process Distributio Business
Process
Cubed n Trucks Customers
Shaved Hotels
Crushed Fish
Businesses
Power Drink Vendors

Once the truck is stopped many vendors will run up to the truck to purchase the product. In the
case of Ice Ice Baby, the truck will make as many as 12 stops before making it out to Waterloo.
It is possible that all of the ice will be sold out before even making it out there. The salesman on
the ice truck typically reserves ice for customers that routinely purchase larger quantities.
Otherwise, it is likely that the ice truck will arrive in Waterloo with no ice.


P ARTNERSHIP
Ice Ice Baby is a willing and strong partner. As mentioned, the company is the only company
approved by the Ministry of Health to produce and sell purified ice. The company is well
capitalized with 6 trucks and the capacity to produce 28 tons of ice each day. Ice Ice Baby may
very well be the strongest brand for any local product in Sierra Leone. There is also a strong
management team in place with oversight by Manocap, a local venture capital firm. Most
importantly, Ice Ice Baby is willing to pursue a microfranchising model with the end goal of
setting up a cold chain distribution system. Once the cold chain distribution system is set up, Ice
Ice Baby can distribute more cold and frozen products like water and popsicles.

S CALABILITY
Scaling will require some capital expenditures, be it lighter trucks and/or strategically located
storage facilities. Deeper distribution from these strategic points will also require some
pushcarts or possibly bicycles and coolers for the microfranchisees. These costs should not be
an obstacle to Ice Ice Baby, given their backing by ManoCap, and ManoCap’s commitment to
developing those distribution channels.

Ice is in very high demand and there is not sufficient supply for the market. The first mover to
establish deep distribution will open up and capture market share. Managing capital
expenditure and growth of the distribution network will be a critical factor in the overall
profitability. Developing a cold chain distribution system to sell products complimentary to ice
like water and popsicles will make the business even more profitable.

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CONCLUSION
We highly recommend that IRC further develop
their relationship and partnership with Ice Ice
Baby in the ice selling industry. Due to Ice Ice
Baby’s high quality management team and
potential scalability and profitability, it provides a
great opportunity for IRC’s youth
microfranchisees. Microfranchising is also well
matched for the needs of Ice Ice Baby since the
company envisions developing a cold chain
distribution system. With this distribution network and support, Ice Ice Baby’s cold/frozen
products will more easily be sold throughout Sierra Leone.

In addition, Ice Ice Baby has already partnered with the IRC during the pilot phase and expressed
interest to work with the Fairbourne Consulting Group to develop the microfranchising system.
Manocap, the local venture capital firm owning Ice Ice Baby has also expressed interest in
financing capital expenditures for popsicle and water sachet production equipment. Ultimately,
this is an enormous opportunity that will benefit both the youth microfranchisees and Ice Ice
Baby.

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WATER SACHETS
Water sachets are single serving plastic bags of drinking water sold by street vendors and
established stores alike. There is both an informal and formal market for the product.
Customers will pay a premium for branded sachets that are known to contain purified water.
Customers also highly value an ice-cold water sachet and will seek out vendors that can provide
this.

Informal water sachets (Le 100) are filled with unpurified water from
homes or community water taps and sold on the street. Many youth
will sell unpurified water sachets on the street as the product turns
over quickly and anyone can produce it.

Purified water sachets (Le 300 – Le 500) are produced by local
companies using a reverse osmosis process and are distributed in packs
of 30 for retail by street vendors and formal establishments. One
challenge with the purified water sachet business is the water quality.
As “purified” sachets sell for more than double the price of unpurified
sachets, the true water quality of some brands is called into question, especially since some
have businesses have been shut down by the government for falsifying their water quality.

MARKET ANALYSIS

D EMOGRAPHICS
Everybody buys water if they are thirsty and not near their home
water source. Individuals that spend a lot of time outside working
away from the home like taxi drivers, other street vendors, and
laborers may represent a higher portion of the customer base,
but either way water is a necessity for all and everyone buys it as
needed. However, the size of a customer’s disposable income will
dictate whether or not a customer purchases purified or
unpurified water as there is a premium for the purified product.

There is no more basic need than water. Consumers need to satisfy their thirst and highly prefer
cold water when given a choice. Customers require an accessible price for this most basic
product. Low-cost convenient packaging and lack of purification in the informal sector make
this easily attainable at Le 100. Customers in the formal purified water market highly value the
brand and are willing to pay a premium for safe drinking water. A well known trusted brand is
highly valued by consumers of purified water sachets.

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Estimated Water Sachet/Bag Market Size
Location Avg Price Population Water/Day Penetration Market Size (L) Market Size ($)
Urban 200 2,394,000 3.5 70% 428,166,900,000 107,041,725
Rural 250 3,906,000 3 40% 427,707,000,000 106,926,750
Total 855,873,900,000 213,968,475

Growth will be driven by increased distribution through expansion by existing companies and
new entrants and by general population trends. Using just the historical population growth of
2.2% and the estimated market sizes above, the water sachet market could hit $606M by 2014.

INDUSTRY ANALYSIS

I NDUSTRY T YPE
The water sachet industry is primarily a treatment, packaging, and distribution sector. Water is
either purified or not and then packaged into small bags for easy distribution and sales. This
industry is based on the idea that finding clean, cold water for consumption is difficult and
inconvenient. By making access to drinking water convenient, vendors of water sachets create
value through both distribution and purification.

Most anyone can produce and sell unpurified water sachets. All that is needed is access to tap
water and a supply of plastic bags. The ability to sell cold-water sachets does come at a higher
expense to the producer, but this producer will sell sachets much more quickly.

There are numerous established companies producing purified water sachets including:

 Nour  Global H2O
 Family Care  Ubez’s Pure Water
 Magram Water  More Companies
 Mama Pure Water  Water Care
Educated consumers prefer to drink purified to unpurified water, but the decision of which
sachet to purchase is purely economic. Customers purchase what they can afford. For the most
part, the purified and unpurified water sachet markets are two distinct markets with little to no
competition between them. However, fierce competition exists within both the purified and
unpurified sachet markets.

Customers are fairly loyal to their water preferences and if they can afford to pay for premium
purified water sachets, they will avoid buying informal water sachets. Likewise, customers who
regularly purchase informal water sachets typically do not decide to buy a branded product
without a significant rise in disposable income. That does not mean that relatively affluent
customers do not purchase unpurified water sachets, but rather customers tend to stay true to
their preferences as dictated by disposable income. Informal surveys indicate that an average
person purchases 6-7 water sachets or bags a day.

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Competition within the informal water sachet market appears to be saturated. The streets are
lined with many vendors selling unpurified water sachets. Customers typically buy from a
trusted person and when no such person is available they will purchase from whoever has the
coldest water nearby. The product turns over quickly with one street vendor selling 20
unpurified sachets in approximately one hour. In another case, a single mother had her 3
children sell water sachets at the local market before and after school. Providing cold water is
very important as 80% of informal survey respondents indicated that they would travel to
another location if the water was not sufficiently cold.

Competition between formal players is equally fierce with more than 10 companies fighting for
market share. Purified water sachets are sold both by street vendors as well as more formal
store fronts.

There are issues of unpurified water sachets misleading consumers and lying about water
quality on packaging, and this presents some problems for formal players. Recently, the
Ministry of Health audited the industry and shut down 8 falsified operations. Thus, strong brand
presence in this space is very important.

Purification Sachet Distributio Business

End Customer
Water Process Package n Trucks Customer
Well s
City
River Tied Bag
Package

S UPPLY C HAIN
Water sachets both purified and unpurified are made at the water source – for the informal
producer this is the home or public water faucet, and for a formal player this would be the
manufacturing facility. Informal street vendors head directly to the street to sell the products.
Formal players tend to have more developed supply chains. Purified water sachets are plastic
wrapped into cubes of 30 and loaded onto trucks for distribution to markets, small street
vendors, and individuals.


P ARTNERSHIP
Formal companies producing purified water sachets have established distribution routes and
methods. For one of these companies to adopt a microfranchising mode, it will require
modifying relatively longstanding business practices. However, opportunity exists to build out a
completely new microfranchising system for Ice Ice Baby, who has expressed interest into
moving into the water sachet business. Ice Ice Baby is a very well-known and trusted brand in

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Sierra Leone and this will be a strong asset for when it moves into the sachet business. They also
already have trucks and distribution competencies in the adjoining space of ice.

S CALABILITY
Although there are already many competitors in the purified water sachet business, a strong
brand in the purified sachet business will be able to scale. Microfranchises will allow for even
deeper distribution in Freetown. Brand presence outside of Freetown is limited and a strong
brand outside of Freetown, where there is even less competition, should be able to scale
quickly.

Water is a basic necessity for survival and people need to drink it. The decision to purchase a
purified water sachet depends on two things, disposable income and education levels. As water
is free for residents in their homes, convincing consumers to spend their meager disposable
income on purified drinking water can be a challenge, especially since they are already
accustomed to drinking unpurified tap water.

The water business is a low margin operation with many vendors for the readily available
product. The market may not need deep distribution for purified water sachets as it might for
other products and services as deeper distribution would penetrate markets that may not prefer
purified sachets to unpurified tap water in the home. However, if customers are drawn to water
sachet street sellers due to their offering other attractive products like popsicles, then this could
increase a well-branded sachet seller’s profitability.

CONCLUSION
There is significant opportunity in the water sachet market. Customers will welcome a company
with a trusted brand for high quality. As a result, we recommend that IRC consider partners in
this industry. In particular, a company like Ice Ice Baby, with a well recognized brand
would capture significant market share. Ice Ice Baby's management envisions developing a cold
chain distribution system for all products cold or frozen - not just ice, but also water and
popsicles. There is significant value for both the franchisor and the franchisee in selling multiple
products including energy savings from selling various cold products that keep each other colder
longer in route to the end customer.

Other water sachets companies have established operations and methods for selling.
Partnering with an existing water sachet company would hinder the opportunity to innovate
around new products, distribution routes and branding as these companies already have well
established procedures. With Ice Ice Baby there is freedom to build a new business that
benefits both the franchisor and franchisee instead of simply plugging into an existing business
model. There is a complimentary relationship between ice and water sachets that will help Ice
Ice Baby to quickly scale. In addition to the strong brand recognition, the company already has
established distribution routes. In order to pursue the opportunity, Ice Ice Baby will need to be
willing to acquire some production equipment and adopt new production practices. Manocap

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and Ice Ice Baby have expressed willingness to do so once the hub distribution system is
designed.

POPSICLES AND FROZEN TREATS
Frozen treats and more specifically popsicles in Sierra Leone are a popular frozen snack food. In
this market a popsicle refers to a frozen sugary mixture (approximately 3 ounces) funneled into
a plastic bag. The product can be either dairy-based using powdered milk or traditional syrup
based fruit flavoring. These popsicles, like those pictured below are sold for Le 500 (USD
$0.127) from street vendors.

MARKET ANALYSIS

D EMOGRAPHICS
With limited selection of products in the frozen treats category, a large portion of the
population purchases these products. Target customers include school-age children and
mothers. Popsicles retail at an extremely accessible price point for Le 500 (~$0.12). As a point of
reference a bottle of Coca-Cola retails for Le 1200.

There is a high demand in Sierra Leone for anything frozen or cold. When purchasing a popsicle
consumers are not only satisfying their hunger for a sugary treat, but also some relief from the
heat. The product size also makes it readily available to be bought and sold on the street at an
accessible price point. Popsicle vendors also value the low price point and portability because it
makes for a quick product turnover. Quick turnover is important as the product melts during
the course of the day.

Fanmilk, a similar company in Ghana sells ice cream using the microfranchise model. Last year
the company reported $66 million revenue from selling ice cream in Ghana (population 24
million). Using Fanmilk’s experience in Ghana as a comparable business, the market size for
popsicles in Sierra Leone is estimated at least at $18 million.

INDUSTRY ANALYSIS

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I NDUSTRY T YPE
The frozen treat market is entirely informal, from the manufacturers to the street vendors.
Neither group is large enough to fall into the formal sector. It appears that only one
manufacturer is large enough to have achieved any level of scale. Product is sold to consumers
through street vendors, making this a manufacturing and distribution sector.

There are no formally established businesses operating in the popsicle or frozen treat space.
The industry is characterized by a fragmented informal group of producers and distributors.

There is a loosely organized Ice Cream Seller’s Association comprised of approximately 15 ice
cream street vendors. The association shares 2 extremely old ice cream producing machines
which are in constant need of repair. Ice cream vendors complain of unreliable supply for sale,
an d there are no other close substitutes for popsicles or frozen treats.

S UPPLY C HAIN
Inputs for Popsicle production include sugar, water, powder milk and flavoring. All inputs can be
obtained easily for local markets in large quantities. Current production methods require access
to either block ice or a freezer for cooling.

Upon freezing, product is distributed to street vendors. Vendors typically sell on credit and
return cash and unused product at the end of each day. Street vendors pay Le 400 to producers
and retail the product at Le 500, making a 20% margin.

Mixing and Freezing Street Customers
Packaging Process Vendors
Process


P ARTNERSHIP
There currently is no formal player in this industry. Partnering on this
venture would entail working with a reputable business in an adjacent
industry like water sachets, ice production or juice production. Ice Ice
Baby, the leading producer of ice in Sierra Leone, has expressed
interest into moving into this adjacent space and would make for a
potential partnering candidate.

S CALABILITY
In the informal sector, popsicles are produced in Freetown and then transported up to Makeni
(approximately 3 hours away). There is high demand for this product that extends beyond

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Freetown. Regions outside of Freetown, like Kenema and Bo, struggle with unreliable access to
electricity, which could impede the freezing process. This challenge could be overcome by using
generators and/or ice blocks. Also, simple packaging improvements to more of a sachet form of
popsicle would minimize product loss due to thawing. Once challenges related to freezing are
addressed, the business opportunity is highly scalable across the country.

Currently, both vendors and producers make adequate profit to sustain operations in the
informal popsicle sector. Vendors make Le 100 per unit sale and according to multiple
distributors they can sell up to 200 per day during the dry season, equating to a total take home
profit of Le 20,000 (approx USD 5). Producer’s profit is determined by the scale of the operation
and cooling costs.

CONCLUSION
The product is in high demand and the current supply is unreliable, unhygienic, and unbranded.
Since there are no formal players producing popsicles, there is an enormous opportunity for a
new entrant to capture market share, and we recommend IRC explore this industry. As with
water sachets, Ice Ice Baby has also expressed interest in producing and selling popsicles. This is
a natural move for the company. Ice Ice Baby’s strong brand for product quality as well as
established distribution routes would allow for quick scale.

Simple product improvements coupled with Ice Ice Baby’s Baby’s brand would excite the
market. It is possible that the new popsicle could even be sold at a premium just above the
current Le 500 price point. Right now, informal popsicle vendors spend time producing
popsicles. Integrating popsicle production machinery would make the entire process much more
efficient and sanitary. Thus, franchisees could devote more of their time to selling and earning
money. Again, since Ice Ice Baby envisions setting up a cold chain distribution system for all
products frozen or cold, IRC’s youth microfranchise initiative is very well matched for this
opportunity.

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SALON SERVICES
Hair styling related businesses can be divided into three separate areas: barbers for men, stylists
for women, and weavers for women. Barbers offer shaves and hair trims for men, stylists can
relax hair and style it, and weavers weave in extensions. Each area ranges in quality and price:
large/nice barber shops and salons that offer multiple products and services, small shops offer
only a few products and services, and capable friends of the end consumer simply barter for
services. This analysis focuses primarily on the middle tier shops, although we mention the other
two to give a holistic view of the overall market.

MARKET ANALYSIS

D EMOGRAPHICS
The demographics of customers differ significantly from the high end salons and barber shops,
the small shops on the side of the road, to the person that trims hair for free.

H IGH E ND S ALONS AND B ARBER S HOPS
These establishments are frequented primarily by higher income earners. This includes the large
expatriate and Lebanese populations as well as local formal and informal wage earning Sierra
Leoneans. For men to keep their hair care to 10% of total income, they need to make at least L
400,000 per month. Women, who place a much higher value on their hair, would need to earn
at least L 350,000 per month to keep their hair costs to 20% of their total income. It is expected
that the majority of those that frequent these shops earn far more than those amounts.

Lebanese, expatriate, and local Sierra Leonean woman each patronize different shops
dependant on relationships and trust level. Lebanese men are the same, patronizing only
Lebanese run barber shops and local Sierra Leonean men tend to patronize the local barber they
know and trust, placing less importance on the quality of the overall establishment. Ages for
these customer groups range from 18 to 65 years.

S MALL B ARBER S HOPS A ND S ALONS
The majority of adults in Sierra Leone frequent small, one-chair shops to have their hair styled,
trimmed, or weaved. Income levels of these individual are estimated to range from Le 75,000 to
Le 400,000. This means that these individuals are typically well established and have families

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that they provide for. Ages appear to range from 18 to 65 for men and 16 to 50 for women, with
the majority falling closer to the younger middle of that range.

U NPAID T RIMMING AND S TYLING
The majority of youth and children fall into this bartered service category. Also, those living at
sustenance levels also fall into this group. Income is so low for these individuals that they place
very low value on their hair. Styling, weaving, and trimming are often preformed for free in swap
style agreements when one will trim or style the other’s hair in return for the same service.
Thus, friends will style each other’s hair and parents will style their children’s hair.

Like many markets in developing countries,
individuals buy from people they know well and
trust. In the hair styling business, many get their
start by simply styling or cutting their friends’ hair.
Over time they gain enough clients that they open
up a shop to style hair. It appears that little formal
advertising is done and that all shops rely
primarily on word of mouth advertising and/or
business from their established clientele. Trust
appears to be the biggest factor, regardless of
customer segment. Customers need to feel comfortable that their hair will be styled or trimmed
well and that the service is safe.

Demand for actual shops and trained stylists/barbers increases with income levels and the
complexity of the desired trim. For women in this group, styling their hair is very important and
they are willing pay for the better atmosphere and skill of a high end salon. Lebanese men tend
to prefer the nicer Lebanese-run barber shops, while relatively wealthy Sierra Leonean men
appear to use their local, trusted small barber shop.

As in most countries, women are the driving force of the salon industry. Women place a high
amount of value on their hair, even slightly above clothes. Thus, those that can afford it will
have their hair relaxed and styled at least once every two months, and often they will style it
even more frequently. This is particularly true of girls who are no longer in school, as many
schools also do not permit girls to have styled hair, resulting in girls keeping their hair trimmed
and short.

It is important that hair relaxing is done correctly, as improper application of the chemicals can
result in permanent hair loss. This unfortunately occurs quite often as hair stylists lack the
required training and products to properly relax hair. Better education about these risks is
needed to help build customer preference to safe treatments over cheap ones.

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The chart below shows an estimated yearly market size of $131M for the salon industry (a
breakdown of these calculations can be found in the appendix). We expect this market to
increase over time as both population and incomes rise within the country. Using historical GDP
growth over the last 8 years of 6% as a proxy, the market would be expected to reach $165.5M
by 2014.

Market Size in Leones
Trim/Styling Hair Relax Weaving
Total Market Size
Men 83,796,300,000 - - 83,796,300,000
Women 54,617,476,546 180,582,842,784
205,301,087,629 440,501,406,959
524,297,706,959
Market Size in US Dollars (using L 4,000:$1 exchange rate)
Trim/Styling Hair Relax Weaving Total Market Size
Men 20,949,075 - - 20,949,075
Women 13,654,369 45,145,711 51,325,272 110,125,352
131,074,427

INDUSTRY ANALYSIS

I NDUSTRY T YPE
The salon industry is primarily a service sector. The majority of services rendered occur in the
informal areas of the market, with bartering for hair trimming/weaving a significant portion of
the overall market. Few large salons exist, and only in the major urban areas. These
salon/barber shops cater primarily to wealthly clientele and typically offer more services. Closely
tied to the salon sector is the hair care products sector. Most hair related services use these
products as part of the hair trimming/styling process.

Using the assumptions from the market analysis, we estimate that there are 2,875 small, one
chair salons and barbershops in the country. This is assuming that 95% of those that style their
hair do so at one of these shops and that each shop does 6 stylings per day, consistent with our
informal surveys. We estimate that the rest (5%), whom are higher income individuals, have
their hair styled at one of an estimated 150 high end salons in the country.

Most of the high end salons are owned and operated by the Lebanese, who also control the
majority of hair product imports into Sierra Leone. We found that the majority of small, one
chair salons are run by Sierra Leoneans, many of which are formally trained through one of the
numerous local vocational schools/programs.

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S UPPLY C HAIN

Skilled Vocational
Apprenticeship

End Customer
Individual School
Salon/Barbe
r Shop
Imported Styling Wholesale
Products Market
US/EU/China/ECOWA
S

Because this is a service industry, the supply chain for salon services will vary depending on the
level of training obtained by a stylist/barber. Whether trained in a vocational school, learned
through non-formal apprenticeship, or entirely untrained, stylists/barbers offer various services
and products at a range of prices to their end customers. However, trained labor will most
likely have access to wholesale prices and high end imported products due to their stronger
networks. Ultimately, prodcuts are avaialble for end customers from salons as well as shops in
the market, albiet products at market shops may not be of the highest quality.


P ARTNERSHIP
After visiting various salons, we only found one salon that offered a
unique and innovative package that potentially matched a
microfranchising model. Naasu Fofanah , owner of Jemna Salons,
has established her salon in Freetown and attracts more high end
clientele in the city. Unlike most high end salons, she caters to all of
the major high income groups including the expatriates, Lebanese,
and high income Sierra Leoneans. Her salon has been in operation
for the past 6 months. She has plans to expand to several shops in
the Freetown city.

One of the core parts of her business is her agreement with Avlon,
a high end hair products company in the US that targets salons that
cater to African American clientele. Naasu has negotiated an
exclusive distributorship for West Africa. Avlon is very supportive
and has come out to do product training to other salon owners and
stylists that purchase Avlon product from Naasu.

She is college educated with undergraduate and master’s degrees
from universities in the UK, where she has lived for the past 15+
years. She also has spent the last five years running her own salon in the UK, where she also

35 | P a g e

underwent numerous trainings on how to do more complex hair styling.

Overall, we found Naasu to be very well connected, competent and eager to work with us. From
a management perspective, we feel that she would be an ideal manager to partner with.
However, she would need to add additional staff to manage a larger microfranchise operations
business.

S CALABILITY
Although Naasu would be a great manager, we are concerned about scalability of the business.
Although it would be possible to quickly scale the business through conversion franchising,
wherein existing salons were converted to a microfranchise model, there are only an estimated
2,875 in Sierra Leone, requiring 30% market conversion to reach this project’s target. Even
under the assumption that each salon could employ and average of two stylists/barbers, it is
uncertain if even 15% market share could be captured.

We also are concerned with the amount of value added to the salon by converting to a Jemna
microfranchise salon. Although her products are of higher quality, they are also much more
expensive than other products on the market, particularly if they are used correctly. In addition,
it is still unclear if there are other ways that a salon microfranchise could help the
microfranchisee make money through either more clients or better margins. This is due in part
to the fact that most salons in Sierra Leone are frequented by the same clients who have a
personal connection with the stylist and thus trust him or her.

CONCLUSION
Even though Naasu is potentially an ideal manager to partner with, her current business is
difficult to franchise to the scale required for this project. However, if she was able to get her
product costs down and if we were able to line up partnerships with a few of the local
vocational schools, the salon market may represent a unique microfranchise opportunity. We
recommend IRC continue to monitor Naasu’s business in the event that either she is able to get
cheaper inputs to make the microfranchises salons more accessible to the broader market or
market dynamics shift favorably.

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BAKED GOODS
The baked goods industry includes bakeries and individuals involved in selling baked goods in
the formal and informal markets of Freetown. This industry’s main service is to provide ready-
to-eat baked products to individual consumers and businesses. Although formal shops offer
various baked products, such as breads, cakes, and desserts, the most widely consumed
products purchased by the majority of the population are the basic bread options of begets,
rolls, etc. These basic bread products are sold to consumers both from the bakeries directly as
well as by the individual bread sellers in the streets.

The bakeries produce bread in a few basic shapes; some bread is long or round, while other
styles are square or the traditional loaf-styled bread. Individual bread sellers sell these products
as plain bread or sweet bread to their customers.

MARKET ANALYSIS

D EMOGRAPHICS
As a regularly consumed product by many Sierra Leoneans, citizens buy their bread daily from
the bakery shops or from individual bread sellers in the street. The majority of customers
purchased their bread daily from the individual bread sellers, primarily out of
convenience. These individual bread sellers are mostly youth and adult women.

Youth sellers walk from place to place, through dense urban areas as well as residential
communities, carrying their bread on their heads in plastic bins or crate-like boxes. Having the
bread sellers walk around the towns and communities, customers more easily purchase bread
rather than incurring any additional travel expense or loss of time to go to a bakery to buy it.

Some individual bread sellers have regular customers throughout the major city of Freetown
and its hills; these bread sellers have built up trust with their customers and they distribute
freshly baked bread to their customers daily. Also, since many Sierra Leoneans do not have a
way to store the bread or prevent it from spoiling, most consumers would buy what they would
eat right away rather than paying for any excess bread they would have to store. Bread is a
daily commodity for many as it is regularly available staple of grain.

After observing the bread sellers in the street, visiting various markets, and shadowing two
youth bread sellers for an entire day, it was easy to determine there is a high demand for bread
in Freetown and its surrounding cities. The average person is willing to pay for either sweet

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Sierra Leone Market Analysis

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