Holcim‘s low-cost housing projects – targeting customers at the Bottom of the Pyramid
Stefanie Koch, CSR/SD Coordination
Business and Poverty Leadership ProgrammeCambridge, November 14, 2006
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Content
About Holcim
Low-cost housing
Challenges, open questions...
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About us
Holcim is one of the world's leading suppliers of cement and aggregates as well as downstream activities such as ready-mix concrete, asphalt and construction-related services.
From its origins in Switzerland it has grown into a global player with majority and minority interests in over 70 countries on all continents.
Today Holcim employs some 70‘000 people.
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Holcim – global by tradition
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1912 1920 1930 1940 1950 1960 1970 1980 1990 2005
SerbiaCroatiaChinaNew CaledoniaTanzaniaSri LankaBulgariaRomaniaHondurasPolandKosovoMadagascarMauritiusGuineaIranMalaysiaMacedoniaThailandEl SalvadorDom. RepublicIndonesiaNicaraguaGuatemalaFrench GuyanaAzerbaijanAustriaIvory CoastNigeriaNamibiaLa RéunionFijiHaitiCaribbean IslandsPanamaBangladeshYemenUnited KingdomNorwayUAESwitzerland
FranceBelgium
NetherlandsEgyptLebanon
GermanySouth Africa
CanadaBrazilUSA
MexicoCosta RicaItalyColombia
New ZealandPhilippinesEcuadorChileAustraliaCyprus
VenezuelaSpainIndiaHungaryCzech RepublicGreeceSlovak RepublicMoroccoPeruArgentinaSingaporeRussiaVietnam
Eu
rop
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Afr
ica
Mid
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acif
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Numberof countries
Countries with operations of consolidated companies and those with minority interest
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Quarrying and raw material preparation
Clinkerproduction
Cement grinding and distribution
135 cement plants
398 aggregate plants
989 ready-mix concrete plants
101 Asphalt plants
CementClinker
56%
Other construction materials and services33%
Aggregates Concrete 11%
Sales 2005
Focus on core competencies
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Balance between growth and mature markets
Emerging markets
Mature markets
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Balance between growth and mature markets
Emerging markets
Mature markets
Employees
29'557
59'901
1990 2005
Net Sales in million CHF
5'247
18'468
1990 2005
252% 103%
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Sustainable development is a key element of our vision and mission
Sustainable development is a core element of the vision and mission of Holcim
Our mission is to be the world’s most respected and attractive company in our industry – creating value for all our stakeholders.
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Creation of Value
Mindsets
Strategy
Goal
Base
Product FocusGeographicDiversification
Local ManagementGlobal Standards
People
BetterCostManagement
Permanent MarketingInnovation
Human ResourcesExcellence
CorporateSocialResponsibility
SustainableEnvironmental Performance
Triple bottom line integrated in our strategy
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Content
About Holcim
Low-cost housing
Challenges, open questions...
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... a few examples of “classic” CSR projects
School center Felix Gloor
Holcim Vietnam – clean water, bright future
Ortopolis, Holcim Brazil
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Money spent for OH&S, donations and charity, CSR projects and coordination
Group companies have allocated USD 43 millions to CSR* of whichUSD 21 millions** go to OH&S.
* Data from Aggregates Industries not included** Data missing from four Group companies, including Aggregates Industries*** Most Group companies reported estimates
Total CSR spending 2005: USD 43 million
30%
4%
5%
6%6%
49%
OH&S***Donations and charityCSR coordinationCSR projects in the focus area educationCSR projects in the focus area community developmentCSR projects in the focus area infrastructure
Total CSR spending 2004: USD 29 million
39%
25%
7%
15%
6%
8%
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New business models
$$$
Maximizing social and economical value
Economic benefits For-profit commercial venues
Not-for-profit corporate philanthropy
Low
HighCan help in the short run, but is not self sustaining
Does not sufficiently serve the community
Sustainable livelihoods business
Social benefits
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Low cost housing – a new business opportunity Shelter and housing are a basic need.
As one of the world's leading supplier of cement, aggregates, concrete and construction-related services there is an opportunity to think about the poor as prospective customers.
Current projects
Holcim Apasco's MiCasa and Provivah projects and the prefabricated housing system Prefa PC of Holcim Costa Rica are good practice examples exploring new business opportunities while serving the needs of the poor.
Tsunami response: Reconstruction projects in Thailand, Sri Lanka and Indonesia
A partnership project between Holcim Lanka and Ceylinco Grameen aims at offering a solution to the housing needs of Sri Lanka‘s poor by combining micro credit with a low-cost housing concept
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Commercial component
Evaluation of the market potential, actors, partners, available resources and subsidies
Technical component
Development of a model house with high quality at the best possible price
Identification of the appropriate building material (cement, binders, others,…)
Capacity building & livelihood creation
Training and technical support
Support to local government and community planning
Access to building
materials
Distribution channels
Access to financial services
Provision of housing micro credits in partnership with a suitable organization (e.g. MFI foundations, donors)
Possible components of a project
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Low-cost housing models according to target group
Provivah, Mexico
House-for-Life, Sri Lanka
Mi Casa, Mexico
Holcim-GTZ, Aceh, Indonesia
LCH, Java, Indonesia
Prefa, Costa Rica
Mahagedera, Sri Lanka
Holcim-Gov., Ecuador
Aff
orda
ble
ho
usin
g
galing Mason, Philippines
Focus of the model on:
Commercial solution
Technical solution
Financial solution
Access to material
Skill/Capacity Development
Social tier 1Annual income p.c.:> $20,000Population in billions:0.75 – 1.00Purchasing power in billions: $ 15,000 – 20,000
Social tier 2 & 3Annual income p.c.:> $1,500 - 20,000Population in billions:1.50 – 1.75Purchasing power in billions: $ 15,000 – 18,000
<$2
>$2
Bas
is lo
w-
cost
hou
sin
g
Social tier 1Annual income p.c.:< $1,500 Population in billions:4.00Purchasing power in billions: $ 6,000
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Mi Casa - Holcim Apasco, Mexico
Overview Projecthistory and main outcomes, geographical focus and target group
Project History Project started in 1995, bringing together wholesalers, local
government and credit institutions Launch of Mi Casa “reloaded” in 2005
Main outcomes Construction or improvement of about 400,000 houses in
Mexico supported over the last six years.
Geographical focus and target group All over Mexico People with a daily income of more that USD 3 per day
1. To help people self-build to an acceptable standard
2. To improve the availability of affordable construction material
3. To become the leader in the bag market
4. To maintain a close relationship with distributors and clients
Budget: $ 4,029,000.00 / 364,286 USD (Exchange rate 11.06) Revenue: $83, 598,644.00 / 7,558,648 USD (Exchange rate 11.06)
ProjectObjectives
Budget and expected revenue 2005
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CASAKIT - Holcim Ecuador
OverviewProjecthistory and main outcomes, geographical focus
Project History Pilot project implemented to explore materials, workforce
from January 2002 to June 2002. Final development of project on company land in July 2002. Creation of “Fundacion Procasa”. Two models of housing were developed and built as part of
this project. CasaKit 01 (40 m2) y CasaKit 02 (46 m2). Today only one model is produced (CasaKit 02).
Main outcomes 686 units of CasaKit 01 were built between April 2003 to
August 2003. 266 units of CasaKit 02 were produced until January 2005. 206 units of CasaKit 02 are currently being produced,
handover planned for February 2006.
Geographical focus and target group Urbanization “Mucho Lote” in Guayaquil, property of the
municipality of Guayaquil. People below USD 3 per day.
1. To provide a housing solution for the project „Mucho Lote“ in the municipality of Guayaquil.
2. To achieve a cost-benefit balance with impacts on social problems.
3. To develop an industrial housing solution involving low-cost concrete and other components.
4. To strengthen Holcim Ecuador’s social image.
ProjectObjectives
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CASAKIT - Holcim Ecuador
Overview
Main learnings
Learning It is possible to develop high quality products for people who otherwise don’t have access to
decent housing. The houses can be produced at the real costs of a council house (low cost housing). A simple way to respond to Government requirements is the creation of a foundation. An
example: PROCASA. It is essential to control the costs in this kind of housing. The product (house) needs to be adaptable to environmental requirements.
Today 1.2 million USD are budgeted annually for PROCASA Holcim is perceived to be delivering a service to the community
Budget and expected benefits
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House-for-Life project - Holcim Lanka
Overview Projecthistory and main outcomes, geographical focus and target group
Project History November 2004, Evaluation of partnership opportunity and
preliminary project definition Mid-December 2004, Signing of Memorandum of Understanding Dec./Jan., Tsunami delays initiation of the project Spring/Summer2005, Construction of first 7 houses in the context
of the project Nov./Dec. 2005, First evaluation of the project
Main outcomes First houses built Partnership with Ceylinco Grameen established, evaluated Next steps defined
Geographical focus and target group Communities in the South of Colombo Peope with in income of USD 3 per day and more
1. To offer a housing solution to Sri Lanka‘s poor
2. To establish a partnership with Ceylinco Grameen
3. To provide products and services to a so far unserved target group
Fund with Ceylinco Grameen established of $50,000 Reinvested interest of $2,000 100% collection rate
ProjectObjectives
Budget and expected benefits
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House-for-Life project - Holcim Lanka
Overview
Main learnings
Learning Construction is delayed due to insufficient management of the construction by the house
owner. This is increasing housing costs. Initial training to manage the construction plan will help.
Shop Houses not only assist in poverty alleviation but create an opportunity to educate the lower strata of society on being independent.
Frequent project reporting would have helped to monitor the project more efficiently. It is difficult for Holcim Lanka to gain funds through development agencies, however alternates
like ‘securitised housing’ partnership are promising.
Adding incremental funds to ‘House for Life’ project will not create a significant impact to housing situation in Sri Lanka. We need breakthrough solutions.
Partnership with a networked, efficient and connected Micro Finance Institution will remain critical to manage the retailing of the business.
Catering to diverse land sizes & design needs through engineering & construction expertise is essential.
Sufficient resources to introduce technical advisory and project management to prevent the escalation of costs due to delays & inefficient use of raw materials must be considered by Holcim.
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Prefa - Holcim Costa Rica / Productos de Concreto
OverviewProjecthistory and main outcomes, geographical focus and target group
Project History 1965: Launch of new housing system, consisting of columns and
panels 1985: Introduction of pre-stressed columns and new joints
between the panels Casapac: Development of a solution that can be packed and sent
on a truck, including all material and components. 2000: New, and lighter Prefa system 2005: Elevated houses and two story prefab houses
Main outcomes Offering of an industrial product of high quality plus additional
services. Industrialization of the construction process. Achievement of an important relation with government. Coverage of the whole country. Program targets persons with more than USD 5 per day.
1. Provide a high-value, engineered solution through innovation, based on cement.
2. Develop the company brand equity and the prefabricated product image in general.
3. Increase the competitiveness in the construction sector providing environmentally friendly products, reducing waste and speeding up construction.
4. Facilitate the access of low-income families to low-cost housing.
5. Foster employment generation.
Estimated sales for 2005: 36,000 concrete tons (4,500 houses) Expected sales for 2006: 40,000 concrete tons (5,000 houses), $5 MM revenue
ProjectObjectives
Budget and expected revenue
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Prefa - Holcim Costa Rica / Productos de Concreto
Overview
Main learnings
Learning The housing deficit created a new market where the shortest construction time, the lowest
costs, the lowest level of skills required and, the lowest level of waste, were the key success factors.
Proactive communication helped to handle initial negative perceptions regarding the appearance of the material, that was so far primarily used in farms.
Extensive research and development was needed to improve the quality of the product in order to meet the customers’ expectations.
The new Seismic Code recommendations in design and construction phases needed to be implemented.
Durability and flexibility of the solution are the most important advantages of the system in comparison with other options available on the market.
Engagement in a process to get a clear understanding of customers’ needs and wants have changed the product dramatically and ensured the success of the project.
A permanent R&D program was crucial for product development. Long-term goals must be set and the organization must provide an internal structure able to
support the strategy.
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Galing Mason, country-wide training program for masons, Holcim Philippines
Partners TEDSA (government agency) Design/approval of curriculum, program implementation Assessment and certification of skills
Construction industry Assist in curriculum development and establishment of
criteria for awards Program implementation
Project recipients Selection of project sites/provision of resources
1. To enhance knowledge and skills, and to promote the image of masons
2. To promote concrete technology and appropriate use of concrete products
3. To engage in partnerships with the government, the construction industry and NGOs to promote and transfer masonry skills and to contribute to improving infrastructure
Project Objectives
Holcim ‘galing Mason Training: Basic and advanced masonry skills training.The 7-day training program is open to uncertified masons, offering skills training, competition, assessment, and skills certification. Masons received tools and subsidy while they participate in the construction of houses, schools, and other community facilities.
Holcim ‘galing Mason Olympics: local regional to world masonry competitions. A showcase of local masons’ skills through various levels of competition.
Holcim ‘galing Mason Award: Annual search for outstanding mason. Participants are nominated and awarded based on their skills and level of dignity they have acquired and shared with family, community, and society in their everyday life as a mason.
Capacity building and livelihood creation
Type of training activities
Accompanying CSR activities
Contributions to community development through construction of houses, schools or other community facilities as integral part of the training program.
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Housing Program “Ciudad Bolívar”, Holcim Colombia
Overview
History and main results
Project histroy En desarollo de su política de responsibilidad social y
teniendo como marco para el meejoramiento de la calidad de vida de la población que habita en las zonas de influencia de las actividades de la empresa, Holcim subscribío un convenio de cooperación interinstitutional con la Caja de la Vivienda Popular en el mes de julio del año 2005, con una duración inicial de 12 meses.
Main results Desarollo de un conjunto de acciones de carácter técnico,
social, administrativo y financiero para lograr que und conjuncto de 100 familias puedan llevar a cabo procesos de mejoramiento de sus viviendas o de construcción de unidades habitationales en sitio proprio.
Geographic focus and target group El proyecto enfoque sobre tres Unidades de Planeación
Zonal – UPZ – de Localidad de Ciudad Bolívar en la cual se encuentra la planta de producción de agregados “Manos”.
1. Housing improvements for 78 houses
2. Construction of 22 new houses (in collaboration with Idipron – public entity aiming at working with vulneable population)
3. Training of masons, inhabitants and beneficiary families with regard to issues such as housing, urban norms, and architecture
Project Objectives
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Opportunities Exploring new markets with the opportunity
to tap a yet unserved market segment and the possibility of increasing the share in the low-cost housing segment
Building of reputation Pioneer role in low-cost housing in
combination with microfinance Increasing customer base
Summary low-cost housing models Holcim Group
The housing deficit that is existing in all LATAM countries offers an opportunity to become leader in the low-cost housing market sector while living up to social responsibilities and tapping a yet unaddressed market segment with a high potential
Project Rationale
Perceived challenges / opportunities
Although there is a big market potential in relation to the population with less than USD 2 per day, most programs focus on people with USD 5 per day because it is more practicable and financing is less of a problem. This approach, however, requires accompanying measures to improve the situation of the population at the bottom of the pyramid
Market Component
Holcim Costa Rica and Holcim Apasco run their Prefa and Mi Casa program without any partners, while Holcim Indonesia partners with GTZ, Holcim Lanka with the National Building Research Organization and Ceylinco Grameen. For ProVivah Holcim Aspaco partners with the ProVivah Fund.
Subsidies are available to low-income families in Costa Rica and Mexico. In Mexico, however, government programs are not sufficient to tackle the existing housing deficit.
No subsidies are available in Indonesia and Sri Lanka-
Market potential
Partners
Available subsidies
Challenges Expansion of basic housing solutions Land issues in rural areas Financing services offered to clients Collaboration with providers of subsidies Local technical skills Program monitoring Up scaling of programs
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Summary low-cost housing models Holcim Group
The distribution of the final product has a wide range from direct sales by the program unit in the company for the urban areas and distributors in rural areas in Costa Rica and distribution by specialized Mi Casa distributors in Mexico to distribution via the program partners like in Sri Lanka.
The more successful program have a special unit that is also involved in distribution of the final products.
Access to building material
The different initiatives offer either: a pre-fabricated housing solution or incremental Do-It-Yourself (DIY)-building in the traditional way with technical advice
provided via the program.
TechnicalComponent
Type of solution offered
Building material used
Distribution of solution
The different programs use a wide variety of building material including: cement, aggregates, wood, steel, fiber-cement panels, aluminium, copper-PVC, tiles, pre-cast sewage, compressed earth blocks, concrete frames and others
Most materials are sourced locally, in the case of Indonesia from local SMEs
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Summary low-cost housing models Holcim Group
Promotional and technical brochures and booklets (Costa Rica) Extensive technical advise on self-building (Mexico) Conduction of mostly extensive training programs for different audiences, including end-
users (Costa Rica) Running of an extensive training program for masons (Philippines)
Capacity building and livelihood creation
The programs of Holcim Lanka and Holcim Indonesia offer financial services (micro credits) as a key element of their solution.
Holcim Costa Rica offers credit services only to contractors, information about financial services offered by other organizations is provided to the end-customer.
Mi Casa offers credit options via distributors and is evaluating other options in collaboration with an MFI.
Financial services
Availability of credit services
Credit partners
Mode of collaboration
Holcim Lanka partners with Ceylinco Grameen, a well-known and successful MFI.
In the case of Sri Lanka, close partnership with Ceylinco Grameen, regulated by a MoU. Credit options in other countries offered through collaboration with distributors.
Type of training activities
Accompanying CSR activities
Self-construction training to end-users, training programs on site Provision of blue-prints of community facilities to be constructed Support for income-generating activities
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Main learning/findings
Overview
Technical solution The low-cost housing market requires a solution that offers the shortest construction time, the lowest price, lowest
cost, lowest level of construction skills required and the lowest level of waste and at the same time a high quality. It is essential to offer solutions that allow incremental building. Prefabricated building parts seem to be efficient for many low-cost housing programs. Durability, flexibility and adaptability to local circumstances are other crucial success factors.
Internal organisation and stakeholder involvement The company internal structure must be able to the support the strategy and implementation of a low-cost housing
program. A special unit needs to be established to ensure the implementation of the low-cost housing program. Financing, which is the main entry barrier for clients in this market segment, needs to be an integral element of any
low-cost housing program. Low-cost housing programs will vary from country to country and must be based on a thorough understanding of
the clients cultural and social values. Stakeholders’ (in particular house builders’) involvement in the design of the low-cost housing solution ensures the
meeting of needs. Partnerships with NGOs and community organizations, in order to build trust, and with professional organizations,
in order to facilitate program implementation, are crucial.
Capacity building and livelihood creation
Training self-builder and clients in construction skills is essential in order to keep the prices for the final product down and the quality high.
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Content
About Holcim
Low-cost housing
Challenges, open questions...
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Discussion
Questions?
What do you think how companies can scale-up projects in order to reach a considerable impact?
How to combine the market-driven with the community-driven approach?
People at the very bottom of the pyramid can‘t benefit from low-cost housing solutions. What can be done to move them up higher in the pyramid?
How do you suggest to measure the success of BOP-projects?