Nobuntu Food Pension

Extending pensions to the informal sector in West Africa.

Challenge 1: Pensions (or savings) are abstract concepts and unnecessarily complex for informal actors to understand and engage with.

Challenge 2: Difficult to systematically access the informal sector.

Challenge 1 solved: The Nobuntu Food Stamp promise is simple: buy 36 stamps and you will receive at least $5 in groceries monthly for the rest of your life. Each stamp bought could win you a prize! You can cash in your stamps. Through being tangible (groceries!) the benefit is simple to understand. Leveraging the extremely powerful gambling driver makes it behaviourally attractive. 

Challenge 2 solved: The product is distributed through approved retailers (who now have a lifetime customer). 

Result: Customers have a base level of food security until the day they die. Protected against emerging currency fluctuations and food inflation - the gold standard for pensions in Africa.

We need to get people in the informal sector (up to 80% of the population!) protected against the financial risks of outliving their meagre savings and not being able to afford groceries in their old age. This is best done through a combination of social security (i.e. government funded) and self-saving from individuals.

To get individuals self-saving is the challenge - they would rather put money under the mattress or rely on inter-generational support than interact with Financial Services firms or existing social security arrangements. 

That is due to a lack of trust driven by a lack of financial literacy as well as the complicated nature of investments which are abstract constructs and require much faith to commit to for long term savings. 

The majority of a pensioners salary is spent on groceries, so why explain and pay benefits in anything other than groceries? Emerging market currencies are notoriously volatile and can leave a lifetime of savings worthless - no wonder people don't save for the long term because, truth be told, that would be irrational in a country where the currency can devalue so drastically. 

Nobuntu Food pension serves low to middle income informal workers. The solution enables long term saving to fulfil the burden of not having enough money to buy food in their old age.

The target population are looking for a trust worthy savings vehicle that will put them in good stead for when they're older, so that they can live independent lives and not have to worry about the affordability of our most essential and basic human right, being food.

To feed a single person a nutritionally complete basket of food for the month costs between $30 (for small children) to $39 (for very active men). This is just for food, and not all the other necessities in life like rent, transport, electricity, education, clothing, and most importantly, a sustainable well-fed future.

The Nobuntu Food pension will provide access to food and nourishment during retirement.

This solution provides a powerful pension product system which is able to be accessed by the informal sector and is made attractive through a customer centric, behaviourally driven design ethos. 

It is  well suited to being aligned with social security contributions by way of subsidizing the stamp cost or the benefit payment (i.e. a portion of the cost of the groceries). It travels well across borders since the point of benefit access is at the retailer where a smartphone application easily manages reconciliation between different social security subsidy systems. It relies on the WURI identification being functional. 

Savings products are abstract concepts which do not appeal to financially illiterate people. They are therefore not bought and people rely on informal savings clubs to save. 

These informal clubs typically are group savings clubs which are meant to provide once yearly revolving savings and are not invested in any interest earning asset - clearly a short-term commitment mechanism rather than a real pension. State social security is near impossible to align with these highly informal arrangements.

These savings clubs work because they are much simpler to understand, people know where their money is going and therefore are more trusted. The loss is that they result in sub-optimal savings outcomes - they are not benefiting from compound interest, they are subject to mismanagement and they cannot benefit from social security support.

The Nobuntu Food Pension is radically simple and the benefit is tangible (groceries for life!) which makes it unique compared to all financial services products. 

Behind the scenes (i.e. the way the money for the stamps is pooled) it is invested into assets which earn compound interest and the return is boosted by mortality credits - clearly a superior financial outcome than informal savings clubs.

It is sold through retailers which means it benefits from a universal reach. It is also easily allows for social security support (subsidize contributions or benefits). 

Finally the product offers monthly prizes for each stamp bought - this powerful behavioural trigger has been repeatedly proven in various low income contexts to be extremely attractive.

This is a new product specifically designed for the challenges faced. It has been inspired by a combination of:

1. The Nobuntu People's Fund. This is our other product, presented at the World Bank informal pensions workshop in 2019 in Benin (http://pubdocs.worldbank.org/en/437361559589712544/Session-11-Nobuntu-World-Bank) and used as an example for this very competition. It is a micro-pension driven by the concept of a tontine where those that die earlier directly subsidise those that live for longer - this creates a "mortality boost" to significantly enhance pension returns and elegantly create a return profile for a persons entire lifetime. 

2. The Shoprite savings stamp. This is a simple stamp sold in Shoprite, the retailer, in South Africa. It allows a person to convert their cash into a stamp which can only be spent at Shoprite and the stamp is the same value as the cash. Despite the stamp actually being less fungible than cash, and NOT earning any interest at all, it is wildly profitable with billions of Rands being spent annually by informal sector workers. The reason it is popular is due to its tangible nature and it speaks to the need for a commitment mechanism (i.e. a way for people to stop themselves from spending that money on other things - this is driven by the mental accounting behavioural bias). This design is critical to appeal to lower income, informal sector actors.

Impact

Pioneer an end to old age poverty

Long term outcomes

1.     Financial inclusion

2.     Strong public private partnerships

Short term outcomes

1.     Data on the effectiveness of Foodsurance

2.     Greater trust in the financial sector from beneficiaries

3.     Prove an innovative financial services distribution model

4.     Prove that state subsidies to saving can encourage saving in individuals

Output

1.     Obtaining peer reviewed data on financial inclusion. Contributing to the body of work regarding successful financial inclusion programs.

2.     Improved food outcomes for beneficiaries. Providing beneficiaries with food security in their old age.

3.     Local staff gain competence to the point that they are independent and can handle all local operations.

Activities

1.     Training of local staff.

2.     Creation of marketing materials that explain the product and its benefits.

3.     After sales service of customers.

4.     Building relationships with local retailers.

5.     Building relationships with local regulators and government agents.

6.     Managing all stakeholder relationships.

7.     Product administration.

8.     Customer interviews to gauge understanding of product and financial inclusion success.

Inputs

1.     Financial resources required for product launch.

2.     Local staff to assist in training and product distribution partnerships.

3.     Nobuntu Technology platform required to administrate the product.

Social security systems in each country/region can easily subsidize the cost of each stamp purchased (the contributions) or subsidise the benefit (i.e. the cost of the groceries allowing more groceries to be paid monthly). This allows the state to extend pensions coverage to the informal sector.

The product is extremely user friendly as it connects an individual's identity (from the WURI system) to the benefit via a smartphone held either by the retailer or the end consumer. This means that reconciliations between different regional social security programs or transferral of the social security benefit is handled in the cloud. 

At its simplest, all that is needed is a customer who can identify themselves as a citizen and a retailer who has an internet connection. The customer can benefit from this without needing to have a cellphone/internet nor being literate. 

Our technology is built specifically with open APIs in mind wherever possible and, as an impact organisation, we are not in the game of "vendor lock-in". Data security is critically important and our technology partners, having built systems for South Africa's premier insurers, have a strong and proven handle on. 

This is a strength of the model. The physical stamps which are purchased can simply be kept in the booklet sold with the stamps. Once the customer has 36 stamps they can go redeem their stamp book at an approved who will then register the stamps using the Nobuntu system (can be done using the retailer cellphone) to the customers ID. The customer therefore does not need to be digitally savvy nor literate. 

The retailer, however, needs to have some basic internet connection. It is possible to create a solution for non-internet areas by having a monthly database downloaded for a retailer to confirm eligibility but this is not a preferred outcome. The key though is that the customer does not need to have internet nor a phone nor be literate to benefit from this product.

Currently: 0

1 year: 100,000,000

5 years: 10,000,000

Funding; governmental support

We are currently finalising a pilot with Africa's largest retailer, Shoprite (MoU can be provided upon request). once we have secured this pilot with Shoprite and sign customers in the pilot market (Zambia/Ghana) then we can raise funding for wider expansion through Shoprite's African markets

3 - full time staff 

3 - part time staff

7 - contractors (developers; marketing content)

Our CEO, Tyron Fouche is a fully qualified actuary and therefore understand the numbers behind what is essentially a defined benefit pension fund. He has been recognised as an Exeptional Talent in the digital innovator space by the UK government, has presented on micro-savings products at various conferences (including World Bank workshop) and has a deep understanding of this space.

Our CFO, Reka Borole, is a fully qualified chartered accountant and chartered financial analyst - he comes from a banking background and has a firm grip on the balance sheet and what unit economics are required to have a sustainable business.

Our COO, Chris Vella, was previously COO at GetSmarter, which is one of the most succesful Edtech start-ups globally and he saw them transition from a small company into one servings thousands of customer globally. He understand what it takes to scale internationally and retain operational excellence.

Our CTO, Anthony Robinson, founded one of South Africa's premier development houses which specialise in financial services systems. He understand what is required to operate a financial product digitally at scale and within world class runtime and data security requirements.

Our CMO, Sascja Bowes, ran the marketing for the Shoprite stamp program and therefore has actual, succesful, experience in how to sell and market this product to the low income informal sector.

Shoprite, Africa's largest retailer, have signed an MOU with us to deliver our Nobuntu Food Pension product throughout their African operations. The target date for our launch is H1 2021 (pandemic dependent).

CrossFin - One of Southern Africa's largest VCs and large player int he low income POS space. CrossFin sees our product set as optimal for reaching customers through retailers and enhancing financial inclusion outcomes for their POS customers.

DFS Lab invested grant funding from the Gates foundation into our technology based on our theory of change in Africa. They provide ongoing support in Africa.

We provide peace of mind to our customers that they will have access to monthly groceries for the rest of their lives.

We make money by charging a small portion of each stamp purchases and by charging an annual Assets Under Management Fee.

We have successfully raised grant funding previously off of our theory of change and will continue to do so particularly if we successfully receive this funding and initial impetus from the Wold Bank. 

We have already raised VC funding off the back of our business model and would have access to further rounds of capital from this avenue, particularly if we have paying customers in West Africa.

We have been invited into the UK Global Entrepreneur program and will be moving our HQ to London whereupon we have access to much deeper capital markets and UK government grant funding.

Over the past two years we have developed strong relationships with impact funders across the world from Washington to London to Japan and will leverage these connections should we gain entry into this competition.

DFS Lab (via Gates foundation) grant - $75k

CrossFin ventures - confidential

Angel funding - $50k

We seek to raise $1m but only once we have proven a test pilot. The expected date for this is dependent on our own activities within the South African sandbox, retailer partnership launches and this World Bank event. The target date for this raise is Q1 2021.

$100k. Details confidential.