Posted by: Home Strange Home | June 25, 2009

Harnessing the Power of Business for Development

On Tuesday evening I had the pleasure of attending an event organized by ODI, DFID, and Business Action for Africa “Getting results from engagement: how should business, government, and donors work together to enhance the investment climate and business-driven development?”  It is the 6th event in a series entitled “Harnessing the Power of Business for Development Impact.”  

Featured speakers included Baroness Lynda Chalker, Chairwoman of Africa Matters and former Minister of State for Overseas Development at the Foreign Office under the Conservative government until 1997; Sunil Sinha, Managing Director of Nathan EME Ltd., the well known development consultancy; and Edward Bickham, Trustee of the Investment Climate Facility (ICF), a product of the 2005 Commission for Africa recommendations.    

The event explored possibilities for partnerships between businesses, governments, and development organizations to improve investment climates in developing countries, make it easier to do business in emerging markets through improvements in incentives and institutional frameworks, and encourage good governance and transparency. 

ICF, established in Dar es Salaam (Tanzania) in 2007 with a fixed 7-year time limit, has as its primary goals to improve the investment climate, to work with receptive/reforming governments, and to take practical steps to remove obstacles to domestic and foreign investment.  ICF is involved in projects on property rights and contract enforcement, tax and customs, infrastructure facilitation (to allay notoriously high transport costs in Africa), and business registration and licensing. 

Mr. Bickham of the ICF highlighted some of the economic progress that has been made in Africa in recent years: Sub-Saharan Africa has experienced 5% per annum growth over the past 5 years; private capital in 2007 reached $50 billion; and Africa’s share of global GDP is the highest ever since 1987 (but still amounts to a paltry 1.6%).  ICF focuses its projects not on large multinationals doing business in Africa, but on encouraging the emergence of SMEs, which represent only 10% of GDP in developing countries versus 50% in developed markets. 

Sunil Sinha’s talk focused on Enterprise Challenge Funds, which seek to align business incentives to development objectives.  ECFs are not about private equity backing existing businesses; they are about aligning business incentives to development objectives.  By making a small financial contribution (e.g. £200,000) to a socially worthwhile project, it can be rendered less risky and, with donor endorsement, be tipped form a “no go” to a “go” project.  A venture capital approach is taken, with the expectation that quite a few of the investments will fail and 80% of the bang will come from 20% of the buck.  Mr. Sinha gave the example of MPESA Vodafone, a payment system using prepaid mobile phones that is taking off in East Africa. 

Finally, Baroness Chalker added some comments on the importance of Public Private Partnerships (PPPs) and also criticized donors for failing to listen to the great expertise which exists in developing countries.  She emphasized the importance of local recruitment for development projects and how it is essential to have the support of local and regional groups, and not just the national government.  

More information on future events can be found at Business Fights Poverty.


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