Net Profit

By: Jennifer Vilaga
Published: Fast Company
Date: March 2005

What does it take to make a better bed net? It's no small matter: Bed nets are a critical defense against malaria, which each year kills 1 million people and makes another 300 million ill in developing regions. The solution, it turns out, is no small matter either.

Olyset bed nets, featuring a dramatically better pesticide mechanism and an expected lifetime five times that of existing nets, are now coming off the knitting machines at A to Z, a textile company in Arusha, Tanzania. Behind that breakthrough, though, is something even more striking: a sweeping partnership of for-profit and not-for-profit heavies including the World Health Organization, UNICEF, Exxon Mobil Corp., Japan's Sumitomo Chemical, and Acumen Fund, a nonprofit venture capitalist.

Such partnerships represent a sort of holy grail in the philanthropic world, where activists have long dreamed of harnessing the power of markets to the ideas and ideals of social entrepreneurs. The bed-net consortium pulled it off, lending hope and credibility to the notion -- but also proved the difficulty of doing so.

The project was conceived by WHO scientist Pierre Guillet, who saw promise in a 1978 innovation by Sumitomo. Its Olyset material, impregnated with a pesticide, killed mosquitoes on contact and made "re-treatment," or redipping a net into insecticide, obsolete. That's crucial, because fewer than an estimated 10% of users actually re-treat the nets as needed.

In 2001, Guillet initiated a year-and-a-half-long conversation with Steven Phillips, medical director for global issues and projects at ExxonMobil. "His notion was great but somewhat simplistic," Phillips recalls. "Exxon would donate plastic, Sumitomo would provide the technology, a manufacturer would adapt it in Africa, and this was such a good idea that everybody would do it more or less for free."

The idea gained more power after the WHO gave the Olyset its official approval for long-lasting effectiveness. That's when Anuj Shah, CEO of A to Z, one of the biggest manufacturers of bed nets in Africa, took notice. "It became very clear: The natural net is going to have a natural death," he says. Acumen, a four-year-old fund that typically invests in low-cost technologies to help the poor, was attracted as well. "The Olysets represent a quantum leap in net technology," says CEO Jacqueline Novogratz. Acumen joined the partnership and pulled in A to Z as the manufacturer, lending the company $325,000 to buy new equipment.

Even then, the partnership had to agree on its goal: Was this about charity or sustainability? The latter seemed more compelling to all, but it required letting the for-profit companies actually make money. That drove consensus: A to Z would purchase polymer from Exxon's Saudi Arabia operation, and the resulting insecticide solution from Sumitomo, then manufacture the treated nets in Tanzania. And ExxonMobil would donate $250,000 -- the value of the resin needed to produce 400,000 nets -- to UNICEF, which would then purchase the nets from A to Z and distribute them in Africa.

ExxonMobil could have just donated the plastic. But "we didn't want to distort the economics of the project," explains Phillips. "This way, we're donating in a manner that will help the whole project succeed." ExxonMobil's contribution helps to seed the market without killing off the fundamental market incentives.

In a year, about 220,000 nets have been distributed, mostly through UNICEF and Population Services International, another partner that joined in late 2003. A to Z has been steadily building capacity, and Shah was confident his company would produce 125,000 nets a month by this past February. A to Z is producing nets in new colors such as shocking pink and turquoise, and it's experimenting with Olyset door covers and curtains as lower-cost alternatives to traditional bed nets.

The question: How to turn Olyset from an aid-driven freebie into an ongoing commercial product? "Even if you could wave a magic wand and create the most incredible product, you'll still have to deal with pricing and distribution," says Rustom Masalawala, who manages the bed-nets project for Acumen. ExxonMobil will distribute the nets at its MobilMart service stations in five African nations, in partnership with NetMark, another nonprofit. And Acumen is exploring the idea of selling through Tupperware-style parties hosted by village women's groups.

Back in November, at the ceremony celebrating the launch and full technology transfer at A to Z, Masalawala raised a question: "Is this the end of a great partnership . . . or is this the first step in a long road?" If the partners figure it out, they could help stop malaria, Africa's biggest killer of children. They would also set a landmark precedent for cooperation between for-profit and not-for-profit groups in confronting the world's toughest social challenges.

Copyright © 2005 Gruner + Jahr USA Publishing

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