Fresh thinking at DFID

A wind of change is blowing through the UK's Department for International Development (DFID). A string of speeches over the last month have signalled a new and welcome direction: speeches by Douglas Alexander (the Secretary of State), Baroness Shriti Vadera (a DFID Minister) and Suma Chakrabarti (the top DFID civil servant) have all highlighted the importance of economic growth as the source of long-term wealth creation for poor people, and the value of engaging with the private sector.

In his speech to the United Nations on 31 July 2007, Prime Minister Gordon Brown stated that “trade, wealth creation and job creation are the only routes to long term prosperity”, and that business has a key role to play, in partnership with others, in meeting the MDGs. He argued that “for too long we have talked the language of development without defining its starting point in wealth creation – the dignity of individuals empowered to trade and be economically self sufficient.”

According to DFID, they are looking to engage more intensively with business to discuss what more can be done to advance the growth agenda. They would like to see business scaling up its activities in pursuit of a more transformative agenda, recognising that the most important contribution the private sector can make is through their core business – moving beyond traditional philanthropic Corporate Social Responsibility (CSR) or meeting minimum standards towards innovative and effective, long-term development partnerships.

Suma, in his speech, identifies two approaches that DFID would like to see taken more often in the private sector: voluntary collaborative partnerships, and pursuing profitable opportunities that transform the lives of the poor. On the former, DFID have experience and expertise in collaborative initiatives, such as the Extractive Industries Transparency Initiative (EITI), the Construction Sector Transparency Initiative (CoST), and the Medicines Transparency Alliance (MeTA), and see this as an area where they can offer support to business.

On the latter, DFID say that they recognise that core business, market opportunity and competition can drive activities which meet the needs of poor people. DFID is seeking to work with companies to develop new business models, based on their core business, that can be scaled up to have a transformative economic impact on the communities affected – in terms of jobs, investment, goods and services. There most innovative work in this area has perhaps been in their work around "challenge funds" - pools of funding over which the private sector competes to deliver specific development objectives – including, for example, the Business Linkage Challenge Fund (BLCF), the Financial Challenge Deepening Fund (FDCF) and the recently-announced Africa Enterprise Challenge Fund (AECF). DFID also recognises that creating the right climate for business is also critical to enabling the private sector to thrive, drive growth and reduce poverty, with DFID's interested reflected in their support for programmes such as the Investment Climate Facility (ICF), itself a collaboration with the private sector.

As a long-standing DFID-observer, I believe this shift of emphasis - if it is followed through in practice - is one of the most significant of recent times. Other donors should take note. And business must stand up to the challenge of engaging effectively.

Growth in Africa: good news again

The positive sentiment about Africa expressed by Stephen Lussier in his recent blog was reflected this weekend by the IMF and World Bank. At their Annual Meeting, they announced that they expect Africa's growth rate - so critical to lifting people out of poverty - to reach 6 per cent this year and 7 per cent by next.

This is big news for two reasons. First, 7 per cent is the rate at which many have estimated Africa must grow to meet the Millennium Development Goals (though this was an estimate made 7 years ago, and considerably more is probably now needed to catch up). If it can maintain growth at this rate, Africa's economy will double in size in 10 years.

Second, it comes on the back of the little-noticed fact that Africa's growth has outperformed the world economy for the last 7 years. Africa's problem has not been one of achieving growth, but of sustaining it for long enough. The fact that the good news has kept coming is hugely significant.

The sort of policies being pursued by many African governments - to improve governance and enhance the climate for business - is starting to pay off - in terms of rising business sentiment and economic growth. Donors are also putting greater emphasis on boosting growth. The Annual Meetings also saw the launch of a new partnership to support stronger financial systems in Africa by Germany, the World Bank and the African Development Bank. While growth is not sufficient for poverty reduction, it is nevertheless absolutely critical.