Customs procedures still a challenge – BAFICAA one solution?

A recent survey by the East African Business Council (EABC) has highlighted the continuing problems of cumbersome customs procedures in the region. Based on over 450 questionnaire responses the EAC Business Climate Index (BCI) 2006/07 Survey focused on six trade-related clusters namely, customs procedures, immigration and work permits, business registration and licensing, police roadblocks, weighbridge stations and quality standards and export certification. Customs procedures continue to top the list of obstacles as perceived by businesses and a serious impediment to intra-Africa trade.

This view is broadly supported by a report for Business Action for Improving Customs Administrations in Africa (BAFICAA). The report (sponsored by Unilever, BAT, SITPRO and Diageo), Customs and Business in Africa: A Better Way Forward Together was revealing. It emerged that businesses were tired of being considered “the enemy”. Customs authorities across Africa just did not appreciate the private sector and that despite reforms and improvements, generally most front-line Customs officers lacked any basic appreciation of business issues such as the impact of delays on their businesses. Respondents said that even when higher-level officials were business friendly, this rarely translated to lower management levels. The general feeling was that of frustration – those law-abiding, tax-compliant value-generating businesses were being treated with constant suspicion.

It is unfortunate though that these perceptions still linger. Customs administrations in the East African region have been putting themselves through a sometimes painful though much needed process of reform and modernisation. Much has improved as reflected in improved clearance times for most of the East African countries (see the recent Doing Business Report). Though this public sector driven reform and modernisation agenda has been driven by primarily revenue imperatives it has the potential to significantly improve the business climate.

BAFICAA is making sure that the role of the private sector as a driver of change is not overlooked. BAFICAA is working with customs administrations in the East African region to implement what the report calls “Fast Track” - or simplified procedures for compliant businesses aimed at reducing clearance times for businesses with a history of full compliance. The initiative has met with considerable success in its first phase which included the creation of private sector taskforces, meetings with national customs administrations and a regional workshop in Arusha, Tanzania with the EAC secretariat and the EABC amongst others. These meetings facilitated by Pricewaterhouse Coopers (Kenya) have set the groundwork for a dialogue with customs administrations. A meeting to agree an action plan with the Commissioners of customs is being organised by SITPRO in conjunction with the World Customs Organization (WCO) for later this year.

BAFICAA is still in its infancy but has broken free of its start in the UK and is now the purely African initiative it was always envisaged to be.

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.

Talking business in Ghana

I co-chaired the EU-Africa Business Forum in Ghana recently (21-22 June), an honour I was less than sure about after the largely declaratory inaugural meeting in Brussels last November. But we tasked the four working-groups (trade, entrepreneurship, infrastructure and ICT) to come up with deadlined deliverables and the results (fed into the AU Summit) were not bad.

Given the political profile - lots of AU and EU people there, led by their respective Commissioners Maxwell Mkwezalamba and Louis Michel - the Forum has the potential to be quite a good way of getting across business concerns (I was for example able to make various interventions in support of more efficient intra-regional trade flows)... though, having now done three big meetings across Africa in three weeks, I am also mindful of the danger of over-stretch/overlap/dilution.

Trading insults: Doha disappoints again

There was a depressing sense of déjà vu to Thursday’s collapse in the Doha trade talks. The meeting of the so-called G4 – the US, EU, India and Brazil – was widely seen as a last chance to achieve the target of getting a deal by the end of the year.

Insults and recriminations quickly followed. The US and EU pointed the finger at Brazil and India for not moving far enough on opening up access to their manufacturing markets. Meanwhile Brazil and India argued that the US and EU were demanding too high a price for what were unacceptably unambitious reforms to their trade-distorting farm policies.

It is easy nowadays to become numb to bad news on trade talks. Last July's suspension of the trade talks was a particular low. The early optimism after the trade round was subsequently resumed seems to have been replaced with a tangible negativity about the prospect of the Doha talks living up to their much-hyped objective of being the first-ever “development round”.

But perhaps the greatest danger right now is fatalism. The fact is that a deal is tantalisingly close, and still possible. For the World Trade Organisation’s Director General Pascal Lamy, while a convergence of views among the G4 would have been “helpful”, it was not “indispensable”, and ultimately some, including Oxfam, are happy the process will now revert to a broader discussion among the WTO’s 150 members.

Staying focused and optimistic is vital, if only because failure would be disastrous. Trade is a far more powerful lever for poverty reduction than aid could ever be.

Above all, as negotiators try and find a way forward in the corridors of Geneva, they should remember that business (despite what a vocal minority may say) is overwhelmingly supportive of a deal for Africa. The US and EU should also bear in mind that the vast majority of businesses in their countries recognise the importance of a sound deal for more developed economies as well.

Straight talking at the WEF

The 17th African World Economic Forum kicked off on Wednesday with an opening plenary styled a “conversation” between two Presidents, an aspiring President, a Vice President and a lonely CEO.

Our hopes were raised by Tokyo Sexwale, the moderator, who assured us that this would not be another talk shop, but quickly dashed by President Mbeki who told us that there was nothing new to say about the challenge of Africa.

But this didn’t deter the energetic octogenarian President of Senegal, Abdoulaye Wade, who described the success that had been achieved by his country without the benefits of oil, minerals and other resources. The secret of success being “good friends with lots of money”!

This contrasted with the underlying message from President Mbeki who described the capacity challenges of the continent and posed the question – who will pay? Certainly not the World Bank if Obiageli K. Ezekwesili’s speech was anything to go by. Instead of providing solutions Ms Ezekwesili posed a long series of questions. One of these was how to get the private sector to come to the party and how to get business to recognise Africa was not one country. Cynthia Carroll, the new CEO at Anglo American, was left to answer on behalf of business and showed how hard it is for a business person to compete on a stage with politicians. She stressed the need for partnerships, best practices, good governance and flexibility of approach.

Tokyo Sexwale moderated the event with great charm, energy and humour. However it was clear his thoughts were on other things when instead of referring to the African continent he referred to the African National Congress.

Outside the plenary the tone of the meeting was very much one of quiet determination. Growth of 5-6% showed that Africa was doing the right things and that the right policy choices were being made. Governance was improving and individuals such as Mo Ibrahim vigorously enforced the point that Africa must achieve the same standards as the rest of the world in this respect. There was an attempt to tackle the difficult issues with a BBC debate on Zimbabwe which failed to really penetrate how the current problems could be resolved.

The conference followed the lead of Davos with sessions on climate change, thankfully without the hysteria that accompanied this topic in Switzerland and there was a particular focus on agriculture.

All in all while this year’s Africa WEF seemed to lack the energy and excitement of previous year (I’m sure there were less people in the bars at the Arabella Sheraton), it was more than replaced by a realism and steely determination to ensure that progress on the continent continues.

G8 Summit: a total farce?

For Oxfam it was a failure to deliver, and for Bob Geldof “a total farce”. But was last week’s G8 outcome for Africa really that bad? For sure, little of the money announced for Africa was new, and the restated resolve by G8 leaders to meet their 2005 commitments comes against a backdrop of painfully slow progress on delivery.

But the NGO reaction – by focusing on money - misses one of the most significant achievements of this G8. That is, to a far greater extent than previous G8 Summits, the world leaders have recognised that – as in every economy – it is growth and private enterprise that offers the best long-term opportunity for making poverty history.

The most striking finding of a World Bank survey of 60,000 poor people was that the vast majority see self-employment, starting a business or getting a job as offering the best prospects for escaping poverty. African’s, themselves, are sick of hearing their continent being talked about in the language of charity, poverty and despair, urging instead for the focus to be shifted towards creating the conditions for enterprise, trade and employment.

The business community made this point clearly in advance of the Summit (in a letter to Chancellor Merkel, at the Africa Business Forum 2007 and in the publication “A Path to a Prosperous Africa”). It is therefore refreshing, though clearly less headline-grabbing, that the G8 framed its discussion on Africa within the topic of “Growth and Responsibility”.

The emphasis, though lacking many detailed commitments, was on the elements needed to stimulate growth, enterprise and investment: good governance, with a clear statement that the Africa Peer Review Mechanism “can serve as an effective tool only if its results are recognized and implemented” (a swipe at South Africa’s recent rejection of APRM’s recommendations?); support for the Extractive Industries Transparency Initiative (EITI) and an extension of its transparency principles to other sectors “where appropriate”; a reaffirmation of support for the Infrastructure Consortium for Africa; support for African countries’ efforts to improve the business climate, including through initiatives such as the Investment Climate Facility; and activities to strengthen financial markets and enhance the effectiveness of remittances. Special mention is also made of agriculture, with the G8 urged to increase support for the Comprehensive Africa Agriculture Development Programme (CAADP). Interestingly, the statement also mentions that the G8 Presidency is “planning a business leaders' campaign, including an investment conference aimed at improving Africa's image as a ‘continent of opportunity’”.

The big outstanding issue is trade, and on this the G8 made some positive noises about their commitment to pushing for a deal by the end of the year, alongside a boost for Africa’s capacity to trade – which was as much as could be expected at this forum. But of course unless this is followed through, no amount of aid will be enough to offset the damage that a collapse in trade talks would cause.

Clearly, accelerating delivery on their Gleneagles aid promises is critical. But recognising that these aid commitments are only part of the story is as important – and it is one clear success that the G8 has recognised this fact.