The Role of the Private Sector in International Development

Tuesday, October 2, 2007

Kurt Hoffman from the Shell Foundation says we should celebrate the growing acceptance that the private sector has a key role to play in international development – but says there is still a long way to go.

We have long argued that Africa?s entrepreneurs need to be at the heart of the war on poverty not more aid and debt relief – the topics that dominate the development agenda. During 2005, when almost everyone was jumping with joy at the G8 commitments to double aid, Shell Foundation was a rare questioning voice. Our report Enterprise Solutions to Poverty advocated applying business thinking, disciplines and models to find solutions to poverty problems rather than yet more aid. (LINK: see our report Enterprise Solutions to Poverty).

We have poured $2.3 trillion of aid in to Africa in the past 50 years yet most Africans are poorer now than they were two decades ago. This is hardly a record to be proud of. Yet, the aid community convinced rich-world governments to double their budgets. Can you imagine a private-sector company convincing investors to do the same based on a similar record?

Don’t get me wrong. I am not saying more aid is bad. There are many organisations doing great things. But the harsh reality is that even if governments stump up the cash there is never going to be enough aid to drag Africa up. That is why we need to put entrepreneurs at the heart of the equation.

A few years’ ago I was approached by the owner of a small Ugandan dried fruit company. He had been turned down for funding by numerous NGOs and international organisations, mainly because his was a private enterprise. Shell Foundation provided seed capital for training, the recruitment of key staff and for new computer systems. We also helped them leverage a loan from a local bank to build a new processing plant. The company has since created hundreds of jobs and its produce is on sale in more than 700 Tesco stores.

Africa is bursting with similar entrepreneurs who often need just a little initial assistance to make huge gains, yet they sit way down in the list of priorities for many NGOs.

The good news is there has been a significant shift in attitudes since 2005. It is almost impossible to pick up a newspaper that doesn?t contain a story about people who want to put ?business? and ?poverty? together. There are ?venture philanthropists?, ?philanthrocapitalists? and ?socially-responsible investors?. Then there is Bill Clinton evangelising his brand of ?business philanthropy? in which, according to the Financial Times, ?the emphasis is less on grant-making than on making it profitable for businesses to do the ?right thing??.

Following this relatively new wave are the traditional development NGOs who can see they need to be part of the trend, even if many of them feel somewhat uncomfortable about the whole idea.

Even politically associated groups seem to be getting it. The recently published report by the Tories? Globalisation and Global Poverty Review Group, one of six policy review groups set up by David Cameron to inspire policy, states: ?There is growing recognition that the private sector is a major part of the solution, and we would place it at the heart of the war on poverty.? Of course it remains to be seen whether this will be reflected in official party policy but it is still a very encouraging leap forward.

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Source: EGov Monitor (link opens in a new window)