The Mystery of Tradition: why Tradition and Capital May Work Well in Africa and Not in the West

Two similar, and parallel, private agricultural initiatives in Ghana illustrate the potential for working with existing traditional hierarchies and community structures in Africa that big multinational companies often ignore / do not understand.

A local entrepreneur of rural origin and with limited previous business experience (second hand cloth imports), has used collaboration with the traditional leaders and bigger farmers as a solution to common problems, such as: technological innovation being undermined by superstitions, lack of cash and access to agricultural inputs among rural dwellers, insecurity of loan repayments and cash transfers, speculative competition. The company has rapidly increased its turnover, profit and is now borrowing commercially to expand its production into new regions.

At the same time, a similarly structured agricultural scheme led by highly trained financial experts and a multinational food company failed to ensure small holders’ productivity increases and loyalty. The company moved to commercial block farming where, while still struggling to make good commercial returns, the impact on the community and poverty is much lower and more limited.

I highlight these and other examples from Malawi and elsewhere in a recent essay. My argument, informed also by my work at Emerging Markets Group, is that big multinational companies and many donors / foundations, have been too focused on working through formal systems that may not work well in Africa. There has been a consistent attempt to try to make African ‘capitalism’ more like in the West rather than adapt to the potential of the indigenous traditional systems. This has led to lowered ability to solve inherent problems and has led to a resistance to invest in commercially fertile grounds.

An Ethical Valentine’s Day

Passions are rising again this Valentine’s Day. But this time the UK’s Department for International Development (DFID) is also getting emotional – with the launch of its shopping for development campaign. In a press statement today, the International Development Secretary Douglas Alexander encouraged “romantics in the UK to buy Kenyan flowers this Valentine’s Day”.

While it is unusual for Her Majesty’s Government to issue Valentine’s Day messages, this one is particularly heart warming as it debunks a whole set of myths that environmental campaign organisations have been peddling to the British public.

As I’ve argued before, there is a lot of nonsense spoken about “food miles”, with campaign groups arguing against buying Kenyan flowers because of the impact that flying them into the UK has on the environment. As the DFID statement says, “It’s important to remember that flowers flown in from Kenya aren’t grown in heated greenhouses so they use less energy than most of those produced in Europe."

Aside from exposing the environmental claims, DFID’s research also highlights the huge importance of the flower trade to Kenya and its workers:

“Kenya is the lead exporter into the European Union of cut flowers, and the world's largest producer of roses. International demand for Kenyan flowers accounts for almost 10% of the total income it receives from exports. By meeting demand for roses used on 14 February, exporters earn more than from the rest of the year's sales combined. Between 40,000 and 70,000, about 75% of them women, are employed on Kenyan flower farms, and indirectly 1.5 million are employed.”

Buying products from Africa is a way in which everyone can make a direct and sustainable contribution to poverty reduction in Africa. In a statement last year, Business Action for Africa, welcomed the boom in fair trade, but called for the world trading arrangements to be made fair too. African’s don’t want charity, they want a fair opportunity to grow their business and trade their way out of poverty. By highlighting that, the DFID Valentine’s message is a welcome one.

The Africa Enterprise Challenge Fund: a better way to make poverty history

Behind the headlines and campaigns, the key to making poverty history in Africa actually lies with its indigenous entrepreneurs. Not only an engine for economic growth, small businesses are also the source of most jobs and opportunities for poor people.

That’s why the Africa Enterprise Challenge Fund (AECF), launched last year, and with the search for its Fund Managers about to get under way, is so important.

The Fund will offer grants, matched by private sector contributions, to innovative business ideas which encourage greater participation of poor people in markets – as consumers, workers or entrepreneurs.

The Fund is backed by an array of donor agencies, including the African Development Bank, the Consultative Group for Assist the Poor, the International Fund for Agricultural Development, the Dutch Ministry of Foreign Affairs and the UK's Department for International Development.

Interestingly, the Fund will be hosted by the Alliance for a Green Revolution in Africa (AGRA) (which former UN Secretary General, Kofi Annan, chairs), hinting at one of the Funds likely and welcome areas of focus: agriculture - the sector on which most poor people depend for their livelihoods. Finance is the other initial focus, reflecting the difficulty small entrepreneurs often report having in accessing credit and other financial services.

As Business Action for Africa – the network of businesses, business organisation and development partners – this is just the sort of innovative partnership we have been calling for, and we stand ready to engage with the successful Fund Manager to make the AECF the success it needs to be.

The problem with food aid: one charity tells it as it is

Our latest news round up profiles one on the most inconsistent development policies currently out there - the long-running practice by the US government of providing aid relief in the form of subsidized grain bought from its own farmers. As reported in the New York Times, CARE, one of the world's largest charities, has just announced its decision to phase out its involvement, arguing that:

American food aid is not only plagued with inefficiencies, but also may hurt some of the very poor people it aims to help...[by competing] with the crops of struggling local farmers.

In taking this stand, CARE is breaking not only from its own past, but also from the general practice among similar agencies.

As we argued in a recently-issued statement, the real solution is far more complex: better access for farmers to markets and capital, appropriate technologies, farm inputs, diversified crop and animal portfolios, secure land tenure, adequate irrigation, the infrastructure and capacity building they need to connect to local, regional and international markets and supply chains, and better information on the current and future levels of demand for their crops.

We have also argued for a fairer world trading system. This includes ending market-distorting subsidies by the US (and EU) on the products that matter most to African farmers. Supporting farmers in a way that fundamentally damages their long term prospects, and is rooted in a problematic trade arrangement, is flawed. By standing up to its peers, CARE has brought this practice out into the open. And for that it should be congratulated.

Collaboration: The secret to building effective business linkages?

Shona (from the World Business Council for Sustainable Development) recently blogged about the Statement of Intent for Doing Business with the World, recently signed by twelve chairmen, CEOs, and other senior executives of major global corporations. The signatories declare their commitment to playing their part in “empowering people so they have the opportunity to move out of poverty.” Their proposed modus operandi? “Inclusive business solutions” that turn the world’s poor into new markets, new suppliers, new employees, and new customers.

One “inclusive business solution,” the focus of Shona’s Issue Brief on Promoting SMEs for Sustainable Development, is for large firms operating in developing countries to include local SMEs in their value chains. Sounds like a no-brainer: local communities enjoy new opportunities for employment and income generation; large firms reduce costs, increase flexibility, tap new markets and sources of innovation. The Issue Brief acknowledges that, in practice, it’s not so easy. A wide range of challenges face even the most advanced value chain linkage initiatives.

These challenges, along with innovative new solutions currently being explored, are mapped out in a recent report by the CSR Initiative here at Harvard, IFC, and IBLF, drawing on the experience of IFC clients and Business Action for Africa Enterprise Development Group members.

One of the findings I thought was most striking about this report (and, in the name of full disclosure, I’m one of the authors) was the role of collaborative action and intermediary organizations – what Michael Porter might call “institutions for collaboration” – in the landscape of emerging solutions. As I tried to make sense of the range of challenges and solutions these companies faced, I sliced and diced them a number of ways, trying to find some patterns (I should also disclose that I was once a consultant). For example, lots of the challenges were really external to the companies involved – things like regulatory constraints and lack of access to commercial finance by SMEs. It seemed natural that collaboration would help reduce the cost to any given company of addressing these external challenges, and at the same time increase their chances of having any luck at it.

But collaboration is also being used to address things I would’ve considered internal challenges – including identifying and assessing potential SME partners, establishing targets and commitments for local content, and in some cases, even ensuring corporate accountability that those targets and commitments being met.

As companies move toward more of “core business case” for forging value chain linkages with SMEs, it will be interesting to see whether competitive concerns crowd out the tendency toward collaboration, or whether a company’s capacity for collaboration in this space – the quality and extent of a company’s networks, and its ability to initiate, manage, and dynamically evolve relationships within them – actually becomes part of its strategic and competitive edge.

What can business and governments do to promote SMEs?

Poverty remains a major challenge to sustainable development, environmental security, global stability and a truly global market. The key to poverty alleviation is economic growth that is inclusive and reaches the majority of people. Improving the performance and sustainability of local entrepreneurs and small and medium enterprises (SMEs), which represent the backbone of global economic activity, can help achieve this type of growth.

The World Business Council for Sustainable Development (WBCSD) has published an Issue Brief on SMEs in collaboration with SNV Netherlands Development Organisation. The brief explains how governments can help alleviate poverty by focusing on SMEs and how larger corporations can help themselves by including SMEs in their value chains. It describes some of the comparative advantages of SMEs and the challenges they face in developing countries. The Brief also includes a set of key messages to both business and governments on promoting the growth of SMEs.

The publication follows the recent "Statement of Intent for Doing Business with the World", in which the leaders of twelve WBCSD member companies commit to looking beyond corporate philanthropy to search for responsible, sustainable and inclusive business models that are good for business and good for development.

Meanwhile, the WBCSD is working with its members members, Regional Network partners and other stakeholders to broker new business ventures that are both good business and good for development.

A breath of fresh air: a business solution to Indoor Air Pollution

This weekend the United Nations’ main environmental body hit the headlines when Zimbabwe was controversially elected to its chairmanship.

Zimbabwe’s leadership of the Commission on Sustainable Development (UNCSD) has outraged most western countries but was backed by many developing world countries.

Wrangling and bizarre (to say the least) outcomes of UN votes are nothing new. In fact, they are almost to be expected. That these organisations exist to help the world’s poor and the environment is sadly forgotten amongst the infighting and point scoring of international diplomacy.

One positive outcome, however, from the 15th session of the UNCSD was the publication of the first-ever country-by-country estimates of the impact of Indoor Air Pollution (IAP).

More than three billion people depend on solid fuels including biomass (wood, dung and residues) and coal for cooking and heating. The smoke from these stoves causes the premature deaths of more than 1.5 million people a year, according to the World Health Organisation (WHO).

This makes IAP one of the 10 most important global threats to public health – yet its profile compared to TB, AIDS, Malaria and other killers is extremely low. This is partly because of a lack of data. These new figures are the first time individual country estimates have been published. They are therefore to be warmly welcomed.

They reveal 80% of worldwide deaths from indoor air pollution occur in just 11 countries -- Afghanistan, Angola, Bangladesh, Burkina Faso, China, Congo, Ethiopia, India, Nigeria, Pakistan and Tanzania.

China and India lead the incidence of IAP with an estimated 400,000 people dying prematurely each year in each country. That's equivalent to two superjumbo jets a day crashing in each country and killing every passenger.

The problem is just as bad across African countries taken together with 79,000 dying in Nigeria, 56,000 in Ethiopia and 47,000 in the Democratic Republic of Congo alone. And for every death, dozens more will suffer from illnesses caused or exacerbated by IAP such as TB. That raises the number of women and children silently enduring serious health problems every day from IAP to the tens of millions and takes this into the realms of biblical plagues.

The world should pay more attention. Women should not be dying as a result of preparing meals for their families.

Most similar health scare stories from the South are accompanied by calls for massive cash donations from the North. In the case of IAP, the Shell Foundation believes instead that the best way to tackle this deadly problem is through the application of business thinking. Through our “Breathing Space” programme, we’re promoting the use of commercial product development techniques to help design stoves that get dangerous smoke and emissions out of the homes of poor people. And we’re setting up sustainable supply chains to cost effectively manufacture affordable, attractive stoves and distribute them to people’s homes in the remotest rural areas. We have a vision to sell 20 million clean stoves in five countries over the next five years and take a hundred million people out of harm’s way as far as Indoor Air Pollution is concerned. Now that will be something to make a fuss about on the global stage.

Fresh thinking on Africa: "A homecoming for jobs in Africa"

There are two things that I have come to believe very strongly. First, it is time to change the language used to talk about Africa - away from "charity", "aid" and "poverty", and towards "enterprise", "trade" and "job creation". In short, towards the language that African's themselves use to talk about Africa.

And second, it is time to recognise the enormous contribution that the Diaspora is making, and can make, through their remittances and skills. Governments and business should focus on how this can be facilitated.

It is for these reasons that I have been particularly impressed by the recent video produced by Afford - the UK Diaspora organisation. It documents the visit by a group of Diaspora to Sierra Leone to work as business advisers and mentors to Sierra Leonean entrepreneurs. We need more programmes like this.

International Business Forum (IBF) Turns to Africa

It is widely recognized that Africa needs more business investment for its development. Yet many companies regard investment in Africa as too risky an affair. In order to scale up investments that are not only profitable but that also contribute to Africa’s development, InWEnt together with the World Bank Institute recently held a conference on “The Business Challenge Africa”, looking at this issue. The conference report is out now and stresses the good opportunities that forward looking companies can seize by being part of a thriving African economy. The report is to be commended for the concrete examples it provides as case studies on how business has actually found ways to reach to the vast market at the bottom of the pyramid, as most recently discussed in World Bank’s The Next 4 Billion. The report also recognizes the significant role of the financial and knowledge bridges that can be built by the Diaspora and south-south economic relations (see the Silk Road).

What’s next? The 12th International Business Forum "Business Engagement for Governance" will take place 8-10 October in Washington D.C., and look at how business, together with its stakeholders, can shape a sound and stable business framework to scale up more investments and more business contributions to development. Participants will look at innovative ways for business engagement in reducing fraud and fighting corruption. Not an easy issue to tackle, but certainly one that needs the attention it will get from big players. Look for updates on the upcoming conference at BusinessAndMDGs.net.

Doing good by doing good business

SABMiller – the world’s second largest brewer, and one of the first African-originated companies to emerge as a global business – announced today plans to invest $7.5m (£3.8m) to scale up its Eagle Lager project in Uganda. Eagle has emerged as the second largest pan-African brand, while benefiting over 10,000 small scale farmers in Uganda and Zambia that supply the sorghum from which it is brewed.

When I visited the farmers last June, their enthusiasm was infectious. Yet what struck me most was that they, unknowingly, have found themselves at the heart of a distracting, yet heated, international debate about the role of business in international development: about whether the private sector is part of the solution to poverty reduction, or part of the problem.

The debate is distracting for two reasons. First, for the large part, the private sector is actually made up of small-scale entrepreneurs and family farms – much like those that supply Eagle. While the public emphasis is often on big business, it is in fact the poor who are the private sector: nine out of ten jobs in developing countries are in the private sector. So eliminating poverty is inextricably linked to boosting local private sector development and entrepreneurship.

Second, in the midst of the noise of NGO campaigning and defensive corporate communications, the most important linkages between larger businesses and poverty reduction are seldom studied and often missed. The focus – within the framework of “corporate social responsibility” – is often either on large companies doing good (in the form of philanthropy) or avoiding doing bad (in the form of signing up to one or another of the myriad of international codes).

The Eagle story is a powerful demonstration of one way in which – by engaging small enterprises in their value chains – businesses can do good by doing good business.