This is a summary of the highlights of the year. Interestingly there were no major low points other than the usual budget constraints and the inevitable sponsorship rejections.

Other than a very small income from the Vodacom Community Phones and some services there was no income generated by Connect Africa (CA) during 2006. The year consisted primarily of field trials funded privately and by a grant from the Southern Africa Trust that was received later in the year. Both the private funding and the SA Trust grant are detailed in this report.

The Real Beginning:

2006 Was the real start for Connect Africa. Following 18 months of research, preparations, more research, a move from the UK to South Africa, extensive local travel, networking, developing contacts and making friends, this was the year Connect Africa actually started working in the field.

January started on a high with one of South Africa ‘s leading franchise consultants, Eric Parker (a founder of Nando’s) validating the Connect Africa franchise concept and agreeing to assist in establishing the organisation as a franchisor.

The first vehicle, in addition to Dion’s Land Rover, a 15 cubic meter Iveco “Daily” delivery van had generously been sponsored by Iveco and was fitted out in January by Vodacom (Cell Roy), HP and 4×4 Megaworld/African Outback.

Even with multiple service capability – phones, faxing, email, web access, printing, copying and scanning – the vehicle was very simply fitted out. The robust fittings provided by 4×4 Megaworld and African Outback proved themselves in the harsh rural conditions as did the HP and Vodacom equipment.

The vehicle, as predicted by Iveco themselves, sadly did not fare so well and was returned to them at the end of the year. The “Daily” was the only vehicle available at the time and a more suitable vehicle, Iveco has a range of rugged vehicles for this type of work, will be sourced in 2007.

Field Deployment:

February saw the vehicle go into the field with Elias Mashilo , CA’s first field operative. CA also welcomed Rachel Maja who joined as Elias’s field assistant. Much of February and March was spent liaising with Mogalakwena Municipality on which villages to visit, the route to follow, service level expectations and government involvement. A Memorandum of Understanding (MOU) was drawn up and passed by the Municipal Council’s Executive Committee.

March also saw CA move into an office generously provided by TC3 (Part of the Galaxy Media Group) in their plush headquarters in Rivonia, Johannesburg . Shawn Bishop from Penguin Solutions, who was introduced to CA at a Shuttleworth Foundation tuXlab installation, kindly set up and installed CA’s computer system with equipment sponsored by HP and software sponsored by Microsoft.

April proved the value of branding when a Kenyan lawyer, Alphonse Ouya, saw the branded Land Rover in central Johannesburg , looked up the Website, and offered his services to CA for free. Discussions were also opened with Hollard Insurance with a view to CA being used as a conduit to deliver insurance services to the “unbanked” – funeral, accident and cell phone insurance specifically. It is proposed that these services will be incorporated in the CAS service portfolio early in 2007. April also saw the beginning of a great relationship with the Southern Africa Trust who ultimately provided Connect Africa with a grant of R140 000 in August – this is detailed in the SA Trust – Proof of Concept Project Report.

The Formal Launch:

May was the month Connect Africa went “public”. A formal press launch was sponsored by Vodacom and held at their Midrand headquarters, VodaWorld. It was a great opportunity for all the sponsors to meet and to introduce the CAS initiative to the press. A 5 minute DVD on Connect Africa (sponsored by Vodacom and made by the energetic young team from Bi-Nuaral) was shown for the first time and received great reviews. May also saw the opening of key discussions with the Development Bank of Southern Africa (DBSA). Interestingly commercial banks also started showing an interest in the CA franchising concept, initially by Standard Bank and then Absa later in the year. CA appointed Northplan Accountants as their auditors in May.

June started with a flurry of PR that came out of the press launch. Multiple radio interviews (SAFM, Metro, 702), an article in iWeek and TV interest from Reuters all provided for some good publicity. Partnerships were explored with the Universal Services Agency (USA), Wizzit, an innovative cellular banking service, and Khuseti another leading South African franchise operator. They too validated the CA franchise concept and offered to manage the franchise operations for CA. It is proposed that the USA , Wizzit and Khuseti will form key parts of CA’s service offering and National roll-out strategy in 2007. Field operations continued as did negotiations with the DBSA and the SA Trust.

First Funding:

July saw the approval of CA’s grant application by the Southern Africa Trust and CA was registered as (Connect Africa Technologies PTY Ltd – CAT) to facilitate this. The longer process of registering Connect Africa Services as a Section 21 non profit entity was initiated in June and completed in September. A decision will be made by the board on what to do with CAT. CA was also introduced to Prof Rok Ajulu from Wits University International Relations Department who expressed an interest in becoming a non-executive director. This was not completed but his contacts and input have been most useful. CA also welcomed Melanie Malema in July who joined to manage CA’s day to day operations. A trip to UK by Dion Jerling provided an opportunity to re-open discussions with the UK Government’s Department for International Development (DFID) and to meet the UK team from Digital Links – a pan-African NGO providing refurbished computers to schools and communities. Both DFID and Digital Links are proposed to be included in CA’s future expansion.

August saw the receipt of the SA Trust Grant and Iveco extended their sponsorship of the vehicle to the end of the year (with a little assistance from Fiat, their parent in Italy ). Absa bank expressed an interest in the CA franchising concept and discussions were opened with a US based technology company to deliver a mobile multi-purpose cellular based service to rural communities in East Central Africa for a leading African cellular network.

September was a month focused on field operations with a view to securing municipal approval of the service and to formally engage with multiple government departments. Fiat’s involvement in the Iveco sponsorship extension also provided an opportunity to explore a more ambitious long term pan-African partnership. Discussions with Fiat South Africa will continue in 2007.

October provided another milestone in CA’s progress when CA was selected as a finalist in the Mail & Guardian – Investing in the Future (Drivers for Change) Awards. We didn’t win, largely due to the fact that CA was still too “young”, but the judges agreed that CA had something significant to offer and they would watch with interest.

A US$1m proposal was submitted to Systems Fusion, the US based technology company, for a multi-purpose service in East Central Africa (response expected early 2007). A valuable contact at the UNDP in South Africa was made by Melanie. Our accountants Northplan also completed the registration of Connect Africa Services (CAS) as a Section 21 non-profit entity.

Year End:

November saw the end of the SA Trust funds and a tight month financially with Dion Jerling covering the month end payroll. A highlight of the month was Mogalakwena Municipality ‘s formal adoption of the CA rural service. The DBSA negotiations continued and a commitment was secured from Vodacom to provide a R100 000 marketing contribution that would be triggered once the DBSA funding was approved. Another highlight in November was an agreement with African Parks (a pan-African conservation organisation) to investigate CA providing a service to communities surrounding their game reserves in Malawi and Zambia . It is proposed to visit these parks early in 2007 with a view to running a trial in Malawi as soon as possible. This is outlined in Section B – Prospects for 2007. Melanie also made a valuable contact with SA Tourism to expand on a CA proposal to offer “Social Tourism” in the regions where CA operates.

December saw the sad return of the “Daily”, CA’s first operational vehicle, to Iveco. CA however looks forward to using some of Iveco’s more rugged vehicles as the fleet expands. Two significant highlights in December were the approval of the DBSA grant (R430 000) and a partnership proposal with Iridium Satellite to provide a Satellite phone with data capability, airtime and tracking device free of charge for CA’s international expansion. (This sponsorship has subsequently been confirmed!)

Lessons and Learning:

2006 Was a learning curve. Some of the key observations made were as follows:

• ICT services in rural communities did not generate the level of revenue anticipated. Most users of the community phones are elderly and make one call only.
• 90% of individual calls made on the Community Phones were for under R2.
• Although personal cell-phones are ubiquitous, even among the elderly, most have no air time and most require charging. Thus there is a demand for a phone charging facility in the vehicles.
• The ability to deliver government and government related services is essential to the future of CA both in terms of revenue generation and in satisfying rural demand. The delivery of ICT services alone is not currently sustainable.
• Weekday morning visits attract mainly the elderly – everyone else is either at work or school. Weekend schedules, particularly on Saturdays, should therefore be implemented.
• Young (teenage) rural kids today do not associate themselves with the elderly and will often avoid any gathering or traditional “Imbizo”. This is a modern day problem and CA, with its technology element (Web access), is well positioned to offer an attractive “hook” to involve these rural teenagers.
• The Vodacom trailers being deployed in January 2007 trial are designed to attract youngsters and results will be monitored.
• Informative/educational films, football and music broadcasts will attract all levels of rural society and a broadcast medium (TV or projector) should be incorporated in CA’s service offering. This will be particularly important for the 2010 World Cup and rural specific advertising will provide another revenue source.
• There is a clear demand for Eskom services in the rural areas and CA is well positioned to carry a recharge meter so that communities can buy electricity locally.
• Rural people know what they need and rural adolescents know what they want – we need to listen and act accordingly.
• Local knowledge is indispensable in determining service routes, particularly during the rainy season when alternative routes around flooded areas need to be found, often daily.
• Municipal field officials usually have a wealth of information on all the communities within their region – they are a valuable and an often under-utilised resource.
• Municipal Councilors, Ward Committee members and Community Development Workers (CDW’s) should all be involved in the CA initiative. CDW’s would make ideal local CA Community Coordinators.
• “Promise fatigue” is a barrier to service provision – so many promises have been made to rural communities that an initial skepticism of any proposed service is universal and it is not easy to counter. We have to deliver exactly what we promise – nothing less!
• Traditional and cultural ways have to be genuinely respected and followed – lip service is not enough.
• Equally, formal government processes have also to be respected and adhered to.
• Traditional and government processes don’t always work together. CA operators need to know how to work with both – both separately and together.
• Rural people are patient – we don’t have to immediately offer all things. It is usually better to build service delivery gradually and in direct consultation with the local people.
• A common complaint is the lack of awareness that officials are due to visit a region or village. The CA concept of routine weekly visits and the appointment of CA employed local community coordinators in the villages will address this issue directly – routine awareness.
• There is often confusion as to which government service is visiting a village and CA’s presence was often mistaken for Home Affairs. This is a serious problem as people walk long distances to get to these collection points only to be disappointed. It is critical that communication and cooperation between CA and the various government departments is established. Again, the CA routine, once established, will address this problem.
• School children taking a leaflet or notice home is one of the more efficient ways to inform a community of an event or service schedule. Government currently uses a loud hailer to broadcast such information along with notices placed at community centers and government offices. CA’s routine visit will negate the need for loud hailers that not everyone hears.
• The original proposal to use schools as the stop point has proven not to be ideal. The schools are often outside the village itself meaning people must walk to the vehicle. CA’s presence at a school can be disruptive for classes.
• Photocopying was the most popular business service requirement – government departments require copies of all formal documents and expect the applicant to provide them.
• Home Affairs was both the most demanded and most vilified government service.
• Not one incidence of corruption was experienced throughout the whole of 2006.
• Vehicle maintenance, servicing, and daily running costs for vehicles in rural areas will be higher and often less efficient that in urban areas – allowances must be made for regular authorised dealer maintenance.
• A Vehicle’s effective lifespan on corrugated rural roads will be no more than 3 years – assuming it is an appropriately rugged vehicle. Urban vehicles will not last much longer than 18 months.
• 4×4 Capability is not always a requirement but a high floor clearance is a necessity.

Prospects for 2007

After over 2 years of research, establishment, and field trials, 2007 will be the year of roll-outs.

South Africa :

CA formally rolls out into Mogalakwena Municipality in partnership with the Development Bank of Southern Africa (DBSA) and up to 8 South African Government Departments in February 2007. Negotiations will then start with Limpopo Province on a Provincial Integrated Sustainable Rural Development Program (ISRDP) Nodal roll-out once the DBSA project is completed in May 2007.

A roll-out strategy for all 12 of South Africa ‘s ISRDP Nodes is proposed to be completed between 2007 and 2010 (in time for SA’s hosting of the World Cup).

The projected cash flow for this ISRDP roll-out in South Africa is summarised below.

Rands Millions	Y1Q1	Y1Q2	Y1Q3	Y1Q4	Y2Q1	Y2Q2	Y2Q3	Y2Q4	Y3Q1	Y3Q2	Y3Q3	Y3Q4	Total
Revenue	0.327	1.543	3.226	4.815	6.452	8.555	10.659	12.623	14.446	16.550	18.653	20.617	118.465
Unit Exp	0.275	1.295	2.707	4.041	5.415	7.180	8.946	10.594	12.124	13.890	15.655	17.303	99.424
HQ Exp	0.808	1.239	1.631	2.066	2.139	2.244	2.349	2.448	2.800	2.905	3.011	3.109	26.749
NPBT	-0.756	-0.991	-1.112	-1.292	-1.102	-0.869	-0.636	-0.419	-0.478	-0.245	-0.012	0.205	-7.709
Cumul’tv	– 0.756	– 1.746	– 2.858	– 4.151	– 5.253	– 6.122	– 6.758	– 7.177	– 7.656	– 7.901	– 7.914	– 7.709

Other Countries:

Note: Countries outside of South Africa are mentioned in this report because they currently impact on the overhead costs for Connect Africa Services and will no doubt also utilise (on an agreed basis) the expertise and infrastructure established in South Africa in the future.

It is proposed that as soon as a suitable Managing Director has been appointed for CAS in South Africa the International Operations for Connect Africa will fall under the remit of the UK registered entity.

Dion Jerling, as Special Projects Director, will be responsible for this and it is proposed that, certainly initially, these operations will be run from the same offices as CAS with all costs and overheads appropriately distributed.

Malawi:

Discussions are already underway with African Parks, a Pan-African conservation organisation, with game reserves in South Africa, Zambia, Malawi, Ethiopia, DRC and Sudan, to provide a mobile multi-purpose community service to communities surrounding their parks.

A trial is proposed in Malawi and Dion Jerling will be traveling to Majete Wildlife Reserve, 70km outside Blantyre, in March to assess logistics and coordinate the project with local and National officials.

A detailed project plan will be submitted to African Parks after this visit with a view to commencing a 3 month trial as soon as possible.

Zambia:

In a proposal similar to that in Malawi CA proposes to provide a service to communities around the Liuwa Plain National Park in the remote Western region of Zambia.

This region is inaccessible during the rainy season (Dec to April) so the project will be scheduled to begin towards the middle of the year, after the results of the Malawi project have been analysed.

Dion Jerling proposes to visit Liuwa in April 2007 to assess the region during his trip to Malawi .

Mozambique:

A significant amount of research was carried out on a CA roll-out into Mozambique prior to CA’s deployment in South Africa.

The current CA/Vodacom relationship is well placed to offer opportunities in Mozambique and these will be explored as appropriate and without impacting on the well advanced progress in South Africa and proposed projects in Malawi and Zambia.

“Poverty itself limits people’s ability to access services. It is enormously expensive for rural poor people to travel to the nearest urban centre to register for child grants, for instance. Access to services therefore has become central both to the definition of poverty as well as its alleviation.” Dr David Hemson, (Research Director in the Integrated Rural and Regional Development (IRRD) research programme – March 2003).