Ghana Climate Innovation Center Business Plan

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Ghana Climate Innovation CenterBusiness PlanBuilding competitive clean technologyindustries in GhanaPage 1

Copyright 2013 Information for Development Program (infoDev)/ The World Bank1818 H Street NWWashington DC 20433Internet: www.infoDev.orgEmail: info@infoDev.orgAll rights reservedDisclaimersinfoDev/The World Bank: The findings, interpretations and conclusions expressed herein areentirely those of the author(s) and do not necessarily reflect the view of infoDev, the Donors ofinfoDev, the International Bank for Reconstruction and Development/The World Bank and itsaffiliated organizations, the Board of Executive Directors of the World Bank or the governmentsthey represent. The World Bank cannot guarantee the accuracy of the data included in thiswork. The boundaries, colors, denominations, and other information shown on any map in thiswork do not imply on the part of the World Bank any judgment of the legal status of any territoryor the endorsement or acceptance of such boundaries.Rights and PermissionsThe material in this publication is copyrighted. Copying and/or transmitting portions or all of thiswork without permission may be a violation of applicable law. The International Bank forReconstruction and Development/The World Bank encourages dissemination of its work and willnormally grant permission to reproduce portions of the work promptly.Contributing AuthorsThis report was written by infoDev staff in collaboration with Sync Consult Ltd, Ghana. Primaryauthors are Michael Ehst, Bennet Kpentey, Samiksha Nair, and Georgina Campbell.To cite this publication:Ghana Climate Innovation Center Business Plan. An infoDev publication, December 2013.Available at: photo:Solar home system installation by Wilkins Engineering Ltd, Ghana ( 2

About infoDevinfoDev ( is a global partnership program within the World Bank Group whichworks at the intersection of innovation, technology, and entrepreneurship to createopportunities for inclusive growth, job creation and poverty reduction. infoDev is a thoughtleader in technology-enabled small business incubation, assisting governments and technologyfocused entrepreneurs and new ventures to grow jobs, improve capacity and skills, increaseaccess to finance and markets, ensure the appropriate enabling policy and regulatoryenvironment for business to flourish, and test out innovative solutions in developing countrymarkets. infoDev works in partnership with other development programs, with World Bank/IFCcolleagues, and with stakeholders from the public, private and civil society sectors in thedeveloping world.The Climate Technology Program (CTP) is creating a global network of Climate InnovationCenters (CICs) that provide a country-driven approach to climate change and allow countriesto achieve their green growth objectives. It targets the early stages of innovation, including thekey role of entrepreneurs and growth-oriented startups. Eight CICs are currently beingdeveloped in Kenya, Ethiopia, India, South Africa, Vietnam, Morocco, the Caribbean andGhana.Page 3

CONTENTS1.0 Executive Summary . 62.0 Climate Innovation Centers . 82.1 infoDev Goals .82.2 The Climate Innovation Challenge .82.3 Gaps in Existing Initiatives and Institutions .82.4 Incubators, Accelerators and Innovation Centers .92.5 Climate Innovation Centers .103.0 Climate Technology Market Analysis . 153.1 Climate Change in the Ghanaian Context .153.2 Defining Climate Innovation Technologies in Ghana .193.3 Sector priorities for Ghana CIC .213.4 Evaluation of priority sectors .243.5 Deal flow analysis: Sample companies .343.6 Stakeholder Analysis .364.0 Climate Innovation Gaps and Needs Analysis . 424.1 Gaps and Needs Assessment Process.424.2 Entrepreneurship and Venture Acceleration Gaps and Needs .434.3 Access to Finance Gaps and Needs .454.4 Market Growth and Access Gaps and Needs .464.5 Technology and Product Development Gaps and Needs .484.6 Policy and Regulatory Gaps and Needs .505.0 Climate Innovation Center Model . 525.1 Overview of CIC services .525.2 Regional Engagement .535.3 Women’s Entrepreneurship .545.4 CIC Service Lines .556.0 Operational Plan . 646.1 GCIC Implementation .646.2 CIC Host Selection .656.3 Establishment Phase – Year 1 .666.4 Scale-up Phase: Years 2-5 .66Page 4

6.5 Governance .676.6 Organizational structure .676.7 Safeguards .696.8 Other Issues to be addressed during Implementation .706.9 Exit Strategy .707.0 Financial Plan. 727.1 Budget for establishment through year five .727.2 Sustainability .747.3 Co-investment and Leverage .757.4 Fundraising Plan .757.5 Global Network Participation .758.0 Indicative Impact and Results. 778.1 Highlights .778.2 Monitoring and Evaluation .778.3 Logic Model (LM) .798.4 Indicative Performance Measurement Framework (PMF) .809.0 Risks . 8310.0 Conclusion . 86Page 5

1.0 Executive SummaryName ofProgramGhana Climate Innovation CenterProgramObjectiveThe objective of the Ghana Climate Innovation Center (GCIC) is to establishlocal institutional capacity to support Ghanaian entrepreneurs and newventures involved in developing profitable and locally-appropriate solutions toclimate change mitigation and adaptation. Through its programs, activitiesand financing, the GCIC and its network of partners and stakeholders willprovide a country-driven approach to solving climate, energy and resourcechallenges and support economic development through job creation. The USD17.2m program will provide targeted support, mentoring, training and fundingfacilitation to up to 100 companies in Ghana over 5 years.Design ProcessThe Center’s business model and associated services are dependent on, andtailored to, the local market. To identify market needs, opportunities andchallenges from a local perspective, infoDev developed the GCIC businessplan through a detailed analysis and an extensive in-country, multi-stakeholderengagement process. Over 250 stakeholders from the region were convenedfor a series of workshops, focus groups, surveys and interviews to explore thekey barriers to climate technology innovation and entrepreneurship in Ghanaand the design of appropriate solutions to these barriers in the form of theGCIC’s programs, services and support.GCIC ModelBased on the design process the GCIC model the CIC will offer the followingService Lines:Entrepreneurship and Venture Acceleration Business advisory, mentoring, access to professional services Technical training and skills development Seminars, events and networking opportunities Office space and services for entrepreneurs and start-ups Women’s entrepreneurship programAccess to Finance Proof-of-concept grants up to USD 50k Direct Seed Capital Investments (debt/equity) from USD 50k-1m Facilitation of commercial investmentMarket Growth and Access Research and analytics on markets, competitors and sectortrends Export promotion program Technology quality and performance information and databaseTechnology and Product Development Access to technical facilities and services to design, prototype,test and demonstrate products Commercialization program for universities and researchinstitutes involved in climate tech R&DPolicy and Regulatory Support Advocacy with government on climate tech policy issuesPage 6

Sector(s)/focusResearch on sector policy trends and best practicePolicy dialogues, roundtables and eventsEnergy Efficiency (Industrial and Household)Domestic Waste ManagementSolar EnergyWater Supply Management and PurificationClimate Smart AgricultureCurrent donorsDanish GovernmentInvestmentrequiredUSD 17,206,500 (of which USD 10m expected contribution from Danida)Impacts andResultsThe GCIC and infoDev will actively track results of the Center’s operationsunder a Performance Measurement Framework. Through modeling the GCIC’sdeal flow using benchmarks from company data in the region, it is projectedthat after 5 years, revenues of up to 100 GCIC-assisted companies willgenerate the equivalent of approximately USD 28.6 million in economicimpact. This will assist up to 304,000 people to increase their resiliency toclimate change through providing increased access to cleaner sources ofenergy and better and more efficient sources of water and agriculturalresources. In the long term (over 10 years), assuming continued financialsupport, it is projected that GCIC-supported ventures will generate close to10,720 cumulative jobs and mitigate over 661,598 tons of CO2e.TargetImplementationPeriod2014-2019Page 7

2.0 Climate Innovation CentersOver a six-month period, through an extensive stakeholder engagement process, infoDevassessed the feasibility of establishing a locally owned and operated Climate Innovation Center(CIC) in Ghana. The engagement process culminated in September 2013 with approximately220 stakeholders from varied backgrounds and experiences joining a workshop in Accra toprovide input into the proposed design and development of a CIC in Ghana.2.1 infoDev GoalsThe following are the goals of infoDev in designing, implementing and operating a CIC inGhana:Assess the feasibility of establishing a CIC in Ghana and develop a full business plan thataddresses market failures preventing domestic innovation in climate technologies.Based on the business plan, mobilize investment to implement the CIC to execute theCenter’s programs, services and financing via suitable in-country partnerinstitutions/consortia.Network the Ghana CIC (GCIC) regionally and internationally to promote technologycollaboration, business linkages and to support local and international trade opportunitiesfor Ghana’s climate technology sector.2.2 The Climate Innovation ChallengeNew technologies are essential to reduce the long-term cost of climate change and achievegreen growth. Developing countries want to build their own capacity to innovate to (i) ensureenergy security and increased energy access, (ii) promote climate change mitigation andadaptation and (iii) create competitive domestic industries in clean tech for job creation andeconomic benefits.However, barriers to innovation in climate sectors are especially high and even morepronounced in developing countries. These barriers often include gaps in appropriate financing,lagging technical and business capabilities, entrepreneurial and human capacity constraintsand uncertain regulatory environments. Moreover, many developing countries lack the publicand private sector bodies that support innovation, and as a result support for locally appropriateclimate innovation is often weak or absent. infoDev has designed the business model for theGhana CIC with these barriers in mind.2.3 Gaps in Existing Initiatives and InstitutionsIn addition to the country specific analysis and stakeholder engagement described in thefollowing sections of this chapter, infoDev also commissioned a report by Bloomberg New EnergyFinance that surveyed and analyzed hundreds of government, private and public-privateinitiatives that support climate and clean energy innovation to provide a broader context of theneeds faced by the climate and clean technology sector globally. These included centers ofexcellence, seed funds, technology accelerators, business incubators, advisory centers andPage 8

other programs. Of the 500 that were analyzed, 70 were mostly focused on climate technologiesand only 25 dedicated all of their operations to climate – a small number relative to the gravityof the challenges and immense market opportunities.The findings of this report provide context tothe barriers and gaps that CICs seek toaddress. The report found gaps in the existinginstitutions, which prevented them fromaddressing the broad range of barriers,associated with climate innovation. Somefocused only on financing or businessadvisory while others concentrated effortssolely on technical development – fewadvocated policy reform or standards. OnlyLocations of institutions supporting climate innovationa few institutions addressed most barriersincluding China’s Baoding New & High TechIndustrial Development Zone, China, The UK’s Carbon Trust and Brazil’s CIETEC at the University ofSao Paulo. Geographic coverage was also sporadic with a majority of centers located either indeveloped or highly industrialized developing countries.2.4 Incubators, Accelerators and Innovation CentersinfoDev supports innovation in developing countries through facilitating a global network ofalmost 250 business incubators. These incubators act as hubs to aggregate financing and sharedservices to accelerate innovative companies, helping them overcome market barriers that areparticularly high in developing countries. Experience has shown that these centers dramaticallyincrease the survival rate of new enterprises with over 75% being operational after 3 years ofexiting the incubator.As a policy tool, incubators are a highly effective form of public spending, resulting in lower long1term employment costs when compared with infrastructure projects. Incubation experiencealso has shown that for every USD 1 of government subsidy, a Return on Investment (ROI) of USD30 tax revenue can be generated in the long-term through corporate and income taxes from2the spun out companies. With infoDev’s business incubator network expanding to almost 250centers in more than 75 developing countries, supporting over 16,000 enterprises and creating200,000 jobs, such programs form an important component of developing country economicgrowth and employment strategies.12Grant Thorton Report on Incubation: Source: U.S. Economic Development AdministrationNBIA (National Business Incubation Association) dataPage 9

Brazil’s CIETECCIETEC, or Centro de Inovacao, Empreendedorismo e Tecnologia, is the largest incubator inLatin America and one of the most successful in Brazil. Although it covers a range of sectors,CIETEC’s focus has shifted recently, and now hosts some 20 climate technology companies,more than any other incubator in Latin America. With many renewable energy success storiesin its portfolio - including wind, hydro, solar hot water and fuel cells - CIETEC offers valuableinsights for the Climate Innovation Center in Ghana.Founded in 1998 with funding from government microfinance program SEBRAE, CIETEC is a‘full-service’ incubator that provides assistance to companies at all stages of innovation - fromR&D through demonstration and deployment to diffusion and transfer. The center providescompanies with office space, laboratory use, and consultancy services at heavily discountedprices. It also helps to arrange financing from public and private sources, and is thinkingabout creating its own investment fund.The CIETEC model is proving successful on a wide range of measures. In its first decade, thenumber of companies under incubation has grown from 15 to 140. CIETEC also helps itscompanies secure private sector equity investment – rising to USD5M in the past few years.CIETEC’s success rate is also impressive: while 75% of Brazilian start-ups fail within three years,for CIETEC companies, that rate is just 30%. The center’s work also represents value for money:according to its 2008 annual report, for every USD 1 the government furnished to CIETECcompanies, it received USD 3.40 in taxes. A total of 90 innovative companies have alreadygraduated from CIETEC, of which some 30 continue to be associated with the center,achieving revenues of USD12M per year and creating thousands of jobs.2.5 Climate Innovation CentersAs multilateral, national and local solutions are being structured to support the developmentand deployment of climate friendly technologies, infoDev’s Climate Technology Program isrolling out Climate Innovation Centers (CICs) in 8 regions including Kenya, Ethiopia, India, SouthAfrica, Ghana, Morocco, Vietnam and the Caribbean. While the Kenya CIC has beenoperational since mid-2012, other CICs are expected to launch or commence implementationin 2013 and 2014. The CICs support innovation by offering a full suite of financing and capacitybuilding services to technologists, entrepreneurs and new ventures that address challenges tostarting and scaling their climate or clean technology businesses. In addition to incubatingpromising start-ups, CICs provide dedicated proof-of-concept and seed capital funding toentrepreneurs to bridge local funding gaps.In parallel to investments, CICs also provide business advisory and training services, marketdevelopment services, access to product testing facilities and government engagement onpolicy. In this way, a CIC acts as a national focal point, coordinating efforts in promoting thegrowth of locally relevant climate sectors. CICs also provide a platform to create internationalbusiness-to-business linkages, enhance knowledge sharing and facilitate trade.Page 10

General services provided by Climate Innovation CentersPage 11

The Kenya Climate Innovation CenterThe Kenya Climate Innovation Center (KCIC) was launched in September 2012 with supportfrom the Governments of Denmark and the United Kingdom. The KCIC is hosted by aconsortium comprising four main partners: Pricewaterhousecoopers (PWC) Kenya, StrathmoreUniversity, Global Village Energy Partnership (GVEP) International and Kenya IndustrialResearch and Development Institute (KIRDI). The Center provides an integrated set ofservices, activities and programs that leverage and expand existing innovation capacity andsupport the accelerated scale and deployment of climate technology solutions.In the first five years, the KCIC is expected to create more than 70 sustainable climatetechnology businesses, generating some 4,600 direct and indirect jobs. Over the nextdecade, it is estimated that over 24,000 jobs will be created in Kenya and 1.74m tCO 2 will bemitigated from CIC supported technologies.The KCIC has already secured 62 clean technology entrepreneurs from over 230 applicationsin the following sectors; renewable energy, agribusiness and water and sanitation. Themajority are renewable energy ventures including clean and energy efficient cookstoves,biogas, biofuels, briquettes and solar technologies. Others include water purification systemsand mushroom farming to produce fertilizer.For more information please visit http://kenyacic.orgPage 12

2.5.1 Complementarity with Ongoing and Future ProgramsEach CIC is being designed and developed leveraging the experiences and expertise ofhundreds of local stakeholders representing R&D, academia, entrepreneurs, NGOs, privatecompanies and host government ministries such as energy, environment, science andtechnology, industry and finance. This is to ensure that existing local initiatives arecomplemented and coordinated without duplication. It is also to secure local participation andownership that will increase the success of the CIC’s implementation and operations.The GCIC would collaborate in delivery of services with local and international actors, includingclear commercialization and technology partners. Relevant experience from partners for eachstage of an SME’s development, be it prototyping, early market traction or scale, will be essentialto GCIC supported startups. Another important aspect is the GCIC’s role and ability to reach outto international investors, private sector companies, research institutions and climate innovationnetworks to encourage collaboration with GCIC supported companies.infoDev is coordinating efforts at the global level as well, including existing and future programsdesigned to support climate technology development and deployment. This includes ongoingefforts at the UNFCCC with the Climate Technology Center and Network (CTC&N), internationalorganizations such as the Global Green Growth Institute (GGGI), multilaterals such as the InterAmerican Development Bank (IDB), The World Bank and IFC and bi-lateral organizationsincluding development partners and donors. Participation in the global network of CICs isexplained in section 7.5 of this business plan.2.5.2 Stakeholder Engagement Process in GhanaThe Center’s business model and associated services are dependent on, and tailored to, thelocal market. To identify market needs, opportunities and challenges from a local perspective,infoDev developed a business plan via detailed analysis and an extensive in-country, multistakeholder engagement process. Over 250 stakeholders from Ghana were convened for aseries of workshops, focus groups, surveys and interviews to explore the key barriers to climatetechnology commercialization and assist in the development and design of appropriatesolutions to overcome barriers. This gaps-needs analysis formed the basis for the GCIC businessmodel.Mar - June '13:Local stakeholderidentification &concept workshopJune '13:Regional Focus Groups(Takoradi, Kumasi,Tamale)Apr - June '13:May-July '13:Sector mapping andresearchQuantitative analysisand surveysIn-depth interviewsJuly - Sept '13:Sept '13:Nov '13:Development of CICbusiness modelValidation workshop& working groupsDelivery of finalbusiness planJune - July '13:The flow chart shows the process of the GCIC business plan developmentPage 13

Two workshops were held for climate technology stakeholders from across the region in theprivate sector, academia and the public sector. These workshops were held in Accra andincluded over 230 participants. During these workshops, expert panels and working groupsidentified and examined gaps, barriers and proposed solutions to scaling climate-relatedbusinesses in Ghana. Gaps, barriers and solutions were considered in relation to five thematicareas, namely:Entrepreneurship and venture accelerationAccess to financeMarket growth and accessTechnology and product developmentPolicy and regulatory supportPhotos from Stakeholders Workshops and Focus GroupsPage 14

3.0 Climate Technology Market Analysis3.1 Climate Change in the Ghanaian ContextWhile Ghana’s contribution to climate change through greenhouse gas emissions is currentlynegligible,3 the impacts of climate change on Ghana’s economy, people, and developmentprospects are projected to be substantial.4Ghana has experienced impressive reductions in poverty and steady economic growth inrecent years5 advancing it from low-income to lower-middle income status in 2010, almost adecade earlier than expected.6 However, with anticipated increases in temperature, extremeweather events and unpredictable rainfall in Ghana over the next century, 7 climate changeposes a growing threat to this economic and developmental progress.With continuing rises in temperature and extreme conditions, agriculture productivity andGDP is projected to decline in Ghana: Although annual temperatures and precipitationare predicted to fluctuate, temperature data shows a warming climate across mostecological zones in Ghana over the period of 2010-50.8 For example, dry season meantemperatures are projected to rise by about 2 degrees C by 2050 to about 3 degrees Cby 2080.9 These temperature increases are expected to adversely impact agriculturalproductivity over time due to the industry’s heavy reliance on rain-fed crops (particularlysmall-scale-farmers10 and women11). Relative to the baseline, crop yields are predictedto decline by 7% by 2050.12 Furthermore, agricultural GDP is predicted to decline by 3-8%by the middle of the century, with expected losses of as much as 122 million per annum.Given that agriculture contributes approximately 40% of real GDP to the Ghanaianeconomy13 and over 50% of the population derives their livelihood from agriculture, theseThe World Development Indicators of the World Bank show CO2 emissions have increased from 3927.80kt in 1990 toabout 9801.20kt in 2007, averaging about 0.3 metric tons, per capita4 "Economics of Adaption to Climate Change”. World Bank. 20105 "USAID/Ghana Country Development Cooperation Strategy 2013-2017”. USAID. December, 20126 "No Longer Poor: Ghana’s New Income Status and Implications of Graduation from IDA ". T. Moss, S. Majerowicz Centerfor Global Development. July, 20127 "Ghana Climate Change Vulnerability and Adaption Assessment ". USAID. June 20118 Ibid9 "Ghana Climate Change Vulnerability and Adaption Assessment ". USAID. June 201110 "Ghana Goes for Green Growth (Ghana's National Climate Change Policy Framewor

2.4 Incubators, Accelerators and Innovation Centers infoDev supports innovation in developing countries through facilitating a global network of almost 250 business incubators. These incubators act as hubs to aggregate financing and shared services to accelerate innovative

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