Ethiopia: Can free be too expensive? - African Business Magazine
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Ethiopia: Can free be too expensive?

Ethiopia: Can free be too expensive?

A US non-profit organisation aims to become a self-sustainable business selling condoms in Ethiopia, but it’s encountering competition from some unlikely and even well-intentioned sources. James Jeffrey’s report from Addis Ababa reignites the old debate over whether free donations are stifling sustainable local businesses.

Members Only is the latest condom brand released by DKT Ethiopia that, despite being part of US non-profit DKT International, has every intention of building a successful business model enabling it to shed its NGO status and become a profitable business in its own right.

Since 1989, DKT Ethiopia has sold the country’s most popular brands, usually well below market cost and heavily subsidised – UK’s Department for International Development has pledged £18m ($11m) from 2011 to 2015 – as part of the effort to tackle problems such as HIV and improve family planning for the country with Africa’s second-largest population.

At the same time, Ethiopia’s burgeoning economy – averaging 10% GDP growth since 2007 and set to continue by a somewhat reduced but still-high 8% in the coming years – is enabling DKT to shift strategy.

For Members Only is not subsidised and is instead being sold at full market cost in an attempt to get a clear picture of what consumers might be willing to pay for as the company strives to move toward establishing a fully self-sustainable business model.

This is something DKT has achieved with condom programmes in Indonesia, Philippines and Brazil, and if successful in Ethiopia, would provide the country with a more sustainable condom supply. Currently Ethiopia receives millions of free condoms from donor organisations each year.

“Our model [for Members Only] is based on the economic development of the country, and there’s reason for enthusiasm,” says Andrew Piller, in charge of DKT’s condom distribution network in Ethiopia – sending out more than 60m of them a year. There are about 40m stacked in the main Addis Ababa warehouse right now.

DKT is certainly making concerted and bold efforts to achieve its goal. Across the Ethiopian capital, Addis Ababa, huge billboards dominate horizons advertising Members Only and stressing how “membership has its pleasures”.

On first viewing one could be forgiven for connecting such a billboard with the types of adverts seen in the likes of New York for so-called gentleman’s clubs. But it is meant to be eye-catching and thought provoking in a bid to stir potential consumers’ interests, and is notably upmarket for the same reason, with three condoms packaged in a sleek-looking black metal container.

A pack costs 20 birr (about $1), which is up to 10 times more than DKT’s other condom brands, such as Hiwot Trust and Sensation, sell for. And as you read this article, there’s every likelihood that somewhere in Ethiopia one of DKT’s distribution trucks is toiling along a road or even a dusty track, with no corner of a country the size of France and Spain combined, too remote for delivery.

“Distribution in Ethiopia is complicated,” says Messele Abebe, DKT’s logistics’ manager. “But we even get to the Afar desert, where we go door to door visiting pharmacies, and to the Somali border region.”

DKT’s greatest competition isn’t coming from other businesses, however, as one might expect, but from aid organisations such as US Agency for International Development (USAID) and the US President’s Emergency Plan for AIDS Relief (PEPFAR) providing a relentless supply of free condoms to Ethiopia.

Unlikely competition In 2015, USAID plans to procure up to 35m condoms for Ethiopia at an estimated cost of $0.03 per condom, according to USAID.

“Ethiopia is still very popular with donors and there is still a lot of aid money flowing in,” Piller says. “Sometimes donors struggle with how to spend their funds – and condoms are easy to provide and seem like a self-evidently good idea.”

The private sector used to be the major source of condoms in Ethiopia up until 2011, Piller says. But DKT has seen its market share slide from about 70% in 2009 to 30% currently, making the goal of achieving a sustainable and profitable business, and a sustainable condom supply for Ethiopia, that much harder.

“We support market segmentation, but there is a limit to what we can expect people to pay for given the financial situation,” says Keith Hummel, commodities and logistics adviser for USAID in Ethiopia. He notes that 29% of Ethiopians subsist on less than $2 a day and that targeted distribution of free condoms combined with health promotions can actually create demand to purchase condoms.

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Written by James Jeffrey

After completing a master’s degree in journalism at the University of Texas at Austin in May 2012, James Jeffrey spent a year freelancing in US focusing primarily on business, including writing for the Austin, Houston, San Antonio and Dallas Business Journals. In October 2013 he moved to Addis Ababa, Ethiopia, to write about business-related features primarily, while endeavouring to cover other topics of interest in a remarkable country.

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