Who pays?

Finance Tweet
This tweet is a great starting point for a blog post. Thanks to @gentlemandad for posting it. I think it was in response to yesterday’s ColaLife principle: promoting micro-enterprise post where I made the case for Coca-Cola distributors to be paid for the safe delivery of AidPods.

The short answer is ‘I don’t know, it depends’. But the considered response is:

Although this is obviously a significant consideration which will have to be addressed, this is not the place to start. The starting point is the fact that 1 in 5 children in developing countries die before their 5th birthday and the majority die from preventable causes. The next question is ‘What should be done about this, if anything?’. If we agree that this is just not acceptable in the 21st Century, then the question turns to, ‘What can we do with the resources available to have the biggest impact?’.

Having got this far you need the most cost-effective means of doing everything: procuring the drugs; training the health workers; running awareness raising/training campaigns, distribution and so on. When it comes to distribution, especially to more remote areas, it will NOT be cost ineffective to set up a dedicated distribution system and maintain it. Piggybacking on existing distribution networks, like Coca-Cola’s, is going to be far more cost-effective, by an order of magnitude, even if you make micro-payments to those who undertake successful delivery.

Comments

  1. It strikes me there are two different costs. First the costs of the medicines in the packs – which as you say might be paid for out of some kind of relief/NGO/development budget.

    Second is the costs of persuading those who distribute coke to distribute the packs.

    Therein lies the problem. Coke is a commodity so is traded like a commodity. I’m not sure of the exact details, but presumably there is a bottling plant which gives the coke to smaller wholesalers who then spread them about through a network of distributors who sell the coke to customers.

    They each get paid by the step before. Or in another sense the money cascades down the supply chain with each step taking their cut.

    But with the aidpod, there is no obvious financial model. If the customer had the cash, he could pay for the pod instead of the bottle of coke. But (I guess) we’re assuming the ‘customer’ doesn’t have the cash. So someone else has to pay everyone in the chain to make the arrangements. And actually the final distributor has some considerable power – even if you managed to find a way to pay him, he could fairly easily demand further payment before releasing the pod. Remember – these guys are not hospital or aid workers, they are well practised entrepreneurs on the knife-edge of the real market.

    I hope I’m not sounding unduly negative. I just think this is a critical issue to think about.

  2. Thanks for these thoughts. In the model I saw in Tanzania (but there are other models which we need to understand better) it worked like this:

    – Different sized lorries were loaded at the bottler according to the distributor they were going to. Big distributor = big lorry
    – The lorry then went to one distributor and unloaded its entire load
    – The AidPods would be put into boxes and placed on the lorry (in the cab probably) as it left the bottling plant and these would be unloaded with the crates at the distributor
    – This part of the distrubtion would not be paid for. It would done pro-bono in return for the huge positive PR that would accrue from doing this
    – At the distributor the boxes of AidPods would be unloaded with the crates
    – When the crates are loaded onto bikes, hand carts etc, for the ‘last mile’ of distribution, the aidpods would be inserted into the crates by hand
    – When the AidPod arrives at its desination this would be recorded and this would trigger a payment to the ‘receiving agent’ and last mile distributor.

    This is explained in more detail here:
    http://www.colalife.org/2009/10/25/verifying-delivery-and-paying-for-it/

  3. Ah-ha. I like the idea of SMS payments.

    But isn’t it still putting a lot of power in the hands of the cola retailer? Couldn’t they just refuse to hand over the aid pouch without additional payment?

  4. “Think Zinc

    Will zinc be the silver bullet in the fight against diarrhoea and can it help to save the lives of millions of children globally? Rockhopper travels to Bangladesh to find out!

    On site 30 September 2009
    Produced for BBC World”

    http://www.rockhopper.tv/programmes/281/