Business and Revenue Model





Business and revenue model
The most important requirements for the Multipurpose Centre were its self-sustainability. In the past few years PPHPZ experienced a reduction in their grants. This is why PPHPZ focusses more on self-sustainable projects. For this reason we also did a cost estimation and made a plan to payback these costs.

The purpose of the Multipurpose Centre is the facilitation of the amenities that were missing in Chazanga. Nowadays, the residents of Chazanga have to travel significant distances for these different facilities. The Multipurpose Centre will concentrate all these different facilities in one centre and shortens the travel time. Due to the lack of facilities in Chazanga there is a little competition for the products and services offered through the Multipurpose Centre. The competitors that are likely to exist are the hardware store for building materials and the surrounding settlements that have already established markets for some of these services. The good services and products offered for an affordable price and a closer distance distinguish the Multipurpose Centre from the other competitors. Also the products offered by these competitors are overpriced which makes the Multipurpose Centre a good cheaper option.

The Multipurpose Centre will be a community owned social enterprise in collaboration with PPHPZ. The Multipurpose Centre will be owned for 75% by the federation and for 25% by PPHPZ. The federation will plough the proceeds back into the business. They will also invest the money in other income generating activities as well as in helping improving community infrastructure and services. PPHPZ will use the benefits for continued support through providing technical support, expertise and training the residents to manage an enterprise.

The major challenge the Multipurpose Centre will face is the bad condition of the roads. Most of the roads are gravel roads with holes. They are also small which makes it hard for big vehicles to pass. Fortunately, the Lusaka City Council has already started working on the roads, so they will be in proper conditions when the Multipurpose Centre is finished.

Chazanga is not completely part of the Lusaka City Council, they cannot benefit from the Lusaka Water and Sewerage Company. Nowadays water is supplied through water kiosks. There are 43 water kiosks in Chazanga of which 5 are not working. Every water kiosk provides water for 410 families. The water kiosks only supply water for six hours a day and is also subjected to massive interruptions. This causes very long queues and a high degree of uncertainty whether there would be water available. For this reason water selling point is required within the Multipurpose Centre. The water point will sell a 240L water barrel for 2.50 ZMK. This price is compiled by the purchase price and a small amount of profit. Just enough to keep the water selling point self-sustainable.

During our spot check it became clear to us that most people missed some recreation in the area. For this reason we also included a sports field within the Multipurpose Centre. This soccer field will be free accessible for the youth. The cost for the construction of this soccer field will be covered by other rentals.

Another important component of the Multipurpose Centre is the Multipurpose Building. This building will be located in the middle of the Multipurpose Centre. This building will be used for community meetings where they can discuss the development of Chazanga and it is possible to attend workshops there. On the ground floor there is a room with an area of 50 m2 that will be used for workshops and education. There are no public secondary schools in Chazanga that results in long traveling distances to surrounding areas, a higher dropout rate and worse performance and attendance. For this reason education is required in the Multipurpose Building. This room will be leased for a price of 1500 ZMK/month and is 50 m2. The most important thing is that the room will be used as much as possible, so it would be ideal to have classes during daytime and additional cursus in the evening. The other room at the ground floor will be used as an office and is 45.5 m2. This room can be rented by a company and will be leased for 1365 ZMK/month.
At the first floor there are two rooms, which can be used for the community meetings, basically everyone can rent these rooms. For this rooms it is also important that they are used as much as possible. The size of these rooms is 80 and 42 m2 and will be leased for 300 and 150 ZMK/ 6 hours respectively. We made an estimation that these rooms will be rent for 8 times a month.

Across from this Multipurpose Building there will be a building for small shops. During our spot check we saw some scattered small shops around Chazanga. These buildings were often dilapidated so we decided to design this building for small shops. In this way these people can establish their shop in a decent building and the Multipurpose Centre becomes profitable in the long term. These small shops will provide also pay points for DStv, GOtv and electricity meters. There are four shops with an area of 25 m2 and one shop with an area of 35 m2. These will be leased respectively for 500 and 700 ZMK/month.

The last building will consist of a decent supermarket and a building material shop. One of the conclusions from our spot check and the extended market research was the lack of the decent supermarket. There is no supermarket with refrigeration and an assortment of basic products. This supermarket has an area of 230 m2 and will be leased for 6900 ZMK/month. The building material shop was also required according to the market research. Due to the major growth of Chazanga a lot of building material are required. Up to now it is only possible to buy the building materials in the adjacent settlements. This building material shop is supposed to sell raw materials. The area is 70 m2 and will be leased for 2100 ZMK/month

The rental prices are determined in consultation with Sydney. He is specialised in renting out rooms and told us that the normal price is 20 till 50 ZMK/m2. For the small shops we chose a lower rent, so it is easy for start-ups to start their business. This was 20 ZMK/m2 for one month. For all the other spaces we chose a rent of 30 ZMK/m2. Sydney told us that this was the most common price for a settlement like Chazanga. For a summary of these profits see table 1.

Spaces
Price (ZMK/month)
Small shops 25 m2 (4x)
2000
Small shops 35 m2
700
Supermarket
6900
Hardware shop
2100
Education space
1500
Office
1365
Meeting space 80 m2 (8x)
2400
Meeting space 42 m2 (8x)
1200
Total per month
18165
Table 1. Overview of the different rentals for the Multipurpose Centre

After this we also made and estimation for the building costs in cooperation with Kunda Chansa and calculated the payback time. Kunda Chansa is specialised in costs estimations and helped PPHPZ several times with different cost estimations. Due to the fluctuation of the kwacha prices are instable. For this reason PPHPZ wields the next procedure. Before you order something you have to get three different quotations to compare which one is the best option to go to. This is also to prevent corruption. In table 2 a summary of the costs is given. A more extended estimations is attached as a separate file.

Description
Amount (ZMK)
Preliminaries
160,216.73
Multipurpose Centre ground floor
1,269,138.60
Multipurpose Centre first floor
662,223.80
Small shops
580,626.62
Supermarket and Hardware store
692,345.60
SUB-TOTAL
3,364,551.35
Add CONTIGENCY
168,227.57
SUB-TOTAL
3,532,778.91


Add vat 16%
565,244.63
Total
4,098,023.54
Table 2. Summary of the building costs for the Multipurpose Centre

In one year the Multipurpose Centre will realise a profit of 217.980 ZMK. This means that the payback time will be 19 years. The 19 years is a reasonable timeframe for such buildings. As mentioned earlier the kwacha is very instable at the moment, but this won’t affect the payback time because the building costs and the rentals will change with the same ratio. Although it is likely the payback time would be longer than 19 years. This is because the federation and PPHPZ also use a part of the profit for the development in Chazanga, as mentioned earlier. The payback time is depending on how much of the revenues they are going to use for the development.
The strength of the Multipurpose Centre is the combination of entrepreneurship and its social aspect. In this way people can learn from each other and it will also contribute to the development of Chazanga.