The Rich Returns of Investing

The following is an email exchange between three people: a supporter of
Cheetah named Mark, a friend of his named Larry (name changed since I am
printing without permission) and myself, Ray. I thought the questions that
Larry raised were important and valid and so I wanted to make sure that
everyone had a chance to think about them.

Ray - Larry is good friend - very bright fellow. You'd enjoy meeting him
when you're back in MN.
All the best to you for a wonderful Thanksgiving holiday [a day late but
hope the glow flows over].
Mark
(Larry writes:)
Hi Mark,
Thanks for the introduction to Cheetah! These ideas look creative and valid.
Of course, when we consider investing, rewards must be commensurate with
risks. Being completely clueless as to the risks of doing business in
Tanzania, I did some quick research.
Source: "Doing Business 2009, Comparing Regulation in 181 Economies" The
World Bank
Tanzania
Ease of doing business rank: 127/181 countries (2008 rank was 124/181)
Category rankings:
Starting a business - 109/181
Dealing with construction permits - 172
Employing workers - 140
Registering property - 142
Getting credit - 84
Protecting investors - 88
Paying taxes - 109
Trading across borders - 103
Enforcing contracts - 33
Closing a business - 111
No reforms (positive or negative) in 2007/2008.
Property issues and employment look to be the worst problems. I hope Ray is
prepared to deal with frequent setbacks.
I signed up for the Cheetah newsletter. I'll bet it would be fun to meet Ray
at some point.
Enjoy the weekend!
Larry

(Ray writes:)
Mark and Larry,
Thanks for thinking of us! I will look forward to meeting you in January
when I am in the states.
Today I drove deep into the southern highlands of Tanzania working on our
project with poor tea farmers. I 'suffered the setbacks' of a flat tire and
then broke the leaf springs on the pickup. We found someone to start repair,
trusting them with adequate cash for spare parts and the keys to the truck.
We then hitched a ride another half hour deeper into the countryside with no
return ride arranged.
This is one of the most beautiful places on earth and I literally felt
almost a spiritual ecstasy at times. The emerald green mountains covered
with tea and eucalyptus forests can take your breath away. The people are
likewise beautiful. The area is so fertile that the trees reach 75 or more
feet in 5 only years. They grow so fast that they often lack bark and the
trunks look like giant bamboo.
I met with the tea processor and found a way to securitize our loan for
trucks to the tea cooperative farmers. Mkonge Tea Block Farmers is a coop of
523 families making about $1 per day, among the poorest people on earth.
Net, net, we expect to quadruple their income.
I'm familiar with the indexes you sent and they don't show how hard these
people work - it would take a small book to describe it. The way to change
these indexes will come more from engaging with people than from condemning
their failures.
You're right of course. Reward must be commensurate with risk. And we
provide the opportunity to dramatically change the lives of thousands with a
small investment. That's a high reward to risk ratio, indeed. Even better,
we have a reasonable and justified expectation that we will be repaid.
We give our investors the ability to diversify their portfolio so that part
of it is working to change the lives of the poorest of the poor. The type of
returns we offer are materially modest only to the investor. The net impact
is, well, how do you measure the value of changed lives?
By the way, I returned safely to my room, quite late but in good spirits
with a healthy appetite. If you appreciate tea, I will bring you some when
we meet in January. It's some of the very finest in the world.
Peace,
Ray
Postscript: (Please see the other blog on tea farmers - you can find it by
keyword 'tea' on the left.) Since we last met these farmers, there need has
actually grown more acute. They have worked hard to grow more tea, creating
their own nursery, expanding their fields, weeding carefully, etc. These
people work so hard! But the trucks are so far behind. Now they have been
restricted to having their tea collected only three days a week - so their
production is cut in half. We were there on a day when they were allowed to
pick. Yet we saw that at every collection center, they were waiting for
trucks to arrive. This degrades the quality of the tea and reduces their
income further. We must act to help these people who are working so hard!
And the investment we make is securitized by the tea factory. How could we
not do this?