Davos 2008: The business of tackling poverty

The latest World Economic Forum in Davos has added further momentum to the UK Prime Minister's Call to Action on the Millennium Development Goals (MDGs) - the set of 8 goals to be met by 2015, adopted by world leaders in 2000 to drive action on poverty, health, education and the environment.

In his original speech last July, Gordon Brown called for a new global partnership to deal with what he sees as a development emergency: the shortfall in progress in meeting the MDGs, particularly in sub-Saharan Africa. The Prime Minister stressed that business has a key role to play in meeting the MDGs.

The 21 business leaders who originally signed a statement in support of this “Call to Action”, have now been joined by other stars of the business and development world, including Bono, Bill Gates and Queen Rania of Jordan. In a joint statement , they have commited to "work to make 2008 a turning point in the fight against poverty...And...to work together to help the world get back on track to meet the MDGs".

This reflects an important trend: the recognition by progressive donors (including the UK's Department for International Development), businesses and non-government organisations that business has a central role to play in meeting the MDGs. In fact, unless the private sector is put right at the heart of the approach of making poverty history, we will never make the lasting progress at the scale and speed that is needed.

In May, the British Government will host an event in London that will bring together government and business leaders to highlight a number of business initiatives that are both transformational and contribute to growth. The agenda will be picked up in September, at broader meeting at the UN of governments, businesses, civil society organisations, NGOs and faith groups to mark the halfway point to the MDGs and to accelerate action.

These events in Davos, London and New York are great news - raising the profile of the MDGs and strategies needed to meet them. But ultimately the test will come when we are able to track real progress on the ground.

Afrika! Afrika!

Apart from being one of the most spectacular shows I have ever seen, Afrika! Afrika! is also hugely important. With over 100 outstandingly talended performers from 17 countries, this André Heller show presents Africa in all its vibrancy - a welcome antidote to the overly-pessimistic nature of much of the reporting on the continent. Businesses - including those in Business Action for Africa - know that Africa is a continent of enormous diversity and opportunity, and the recent positive data backs up this view. Currently at the O2 in London, Afrika! Afrika! is a remarkable showcase of a great continent, and I recommend you join the 1.5 million people who have already seen it as soon as you can.

Tough Talking in Lisbon: the EU-Africa Business Forum

This being the third meeting in the series (after Accra in July and Brussels in Nov last year), we knew what we wanted from this, which was just as well as it was in danger of being hijacked a few times.

In terms of politics at the event, Zimbabwe didn't really feature but there was plenty of heat over the EPAs with Senegalese delegates in particular apparently pre-armed with a "knocking brief" authorised from the top. EU Commissioner Louis Michel, having delivered a good and sincere pitch about all the things the EU was doing for Africa, would be justified in being a bit surprised by the slapping he received.

So, all things considered, it was not a bad outcome for a half-day programme - the short speech by Vincent Maphai of BHP Billiton to the Summit itself may have been a bit light of specific actions, but there are some quite solid platforms developing in the various working-groups which will carry us forward for next time, probably in Sept 08 in Paris under the French EU Presidency.

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.

Corporate leadership in global development

Poverty continues to be one of the main challenges facing the countries that will be home to 85% of the world's population in the decades to come. Today some 2.7 billion people worldwide continue to subsist on less than US$2 per day. The challenge facing the global community is to eradicate extreme poverty and to foster broad based economic development that benefits all while preserving the world’s ecosystems. Business is a core human activity, and it has a key role to play in bringing about sustainable development.

A new publication by the World Business Council for Sustainable Development (WBCSD), entitled "Doing Business with the World - The new role of corporate leadership in global development", shows how companies can contribute to sustainable development through their core business activities in a way that is profitable for the companies and good for development. It offers a business perspective on key challenges and opportunities for the development of low-income countries, as well as key messages for companies and governments on how to promote sustainable business solutions that benefit the poor and the societies and environments in which they live.

The issues selected are Ecosystems, Education and Training, Energy, Enterprise Development, Financial Flows, Governance, Health, Mobility, Trade, and Water. This is not an exhaustive list, but these issues reflect both traditional areas for development actors as well as business.

What are the key messages emerging from this piece of work?

Firstly, that given the right conditions, the private sector can improve the lives of people in the low-income segment through direct employment, procurement from local suppliers and service providers, and delivery of affordable products and services. Companies can contribute to vocational training and capacity building, they invest and operate key infrastructure services, they support healthcare initiatives and education, reduce dependence on scarce raw materials, create new businesses to preserve ecosystems and help governments embed good governance, thereby increasing regulatory transparency for business itself.

For their part, governments need to establish the necessary framework conditions through policies and legislation, including financial and taxation legislation, business regulation, and clearly defined ownership and property rights. Governments are also urged to demonstrate their commitment through investment in core infrastructure, and they can encourage investment and engagement on the part of large corporations by creating a favorable investment climate be establishing stable and transparent regulatory regimes.

Besides the core publication, the WBCSD provides online material to complement the issues discussed in the report, most notably one-page facts & trends sheets highlighting key facts for each topic. These pages will be supplemented with further topics not included in the core publication: Accountability, Agriculture, Consumption, Income and Wealth, ICT, Labor and Employment, and Population.

Is agriculture making a comeback on the international development agenda?

Twenty-five years on from the last World Development Report on agriculture in 1982, the 2008 WDR, launched on 19th October, provides a long overdue focus on ‘Agriculture and Development’.

Agriculture is crucial to the sustained growth of Africa’s economies and improving the lives of millions of poor people – over 70% of the population in sub-Saharan Africa works in this sector. The question of how to raise productivity in a continent where population growth still outstrips food production is key.

The WDR is right in stating that agriculture is a private sector activity. But to talk about agriculture in Africa in any broad-brush way is dangerous, and the WDR’s recognition of this is welcome. Agriculture an extremely heterogeneous sector; from subsistence and smallholder farmers, to cooperatives and large-scale plantations. In this regard, broad-brush policies to stimulate the agricultural sector will also be dangerous. Policies need enough flexibility to enable the diverse business of agriculture to flourish at every level of the supply chain.

The challenges to agriculture presented by the changing geography in many African countries must not be underestimated. Urbanisation is happening at an unprecedented scale in many contexts, creating new urban market opportunities for agricultural products. Linking farmers to these markets through efficient value chains and enhanced competitiveness is crucial.

If agriculture is seriously back on the international development agenda, there is an important window of opportunity not to be missed. Many African governments have made agriculture a national priority, the African Union’s Comprehensive Africa Agriculture Development Programme (CAADP) is finalising its strategic framework, and the private sector is recognising the huge potential of investing in African agriculture (with Business Action for Africa, for example, recently setting out its position on the issue).

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.