How can business tap into opportunities in Africa, while maximising its contribution to development?

Yes, an important balance to be struck - the key thing for maximising development from resources is good governance which means making informed facilitatory long-term choices rather than suspicious ideologiocal or short-term ones - this is something that the private sector has to help with too


For me, the critical role for multinational companies is in the smart design of value chains that meet social goals. The impact of our supply chains can be very significant, particularly in supporting micro and small enterprises in retail and agriculture. Through our value chain, SABMiller is closely connected with the livelihoods of hundreds of thousands of people living close to the poverty line, and we have an important role in enabling them to lift their families out of poverty.

For us business can best play a role by doing what they do best (i.e. core business) but with a long term, win-win perspective. The term 'shared value' is sometimes overused/misused, but there are an increasing number of firms - in our view the likes of Stanchart, CDC, SABMiller and Anglo among them - that are genuinely making a difference by doing what they do best and for good business reasons.

At the most basic level, invest for the long-term. Africa continues to be short of patient capital that is willing to work through the inevitable difficulties that affect many economies on the continent. Capital flight at the first sign of trouble (which has long characterised much investment on the continent) undermines trust, stops momentum and contributes to poor governance.

I'd argue we have three responsibilities while doing business: first, while it should be obvious that a well run, profitable company should be generating value add, tax revenues and employment over time, we need constantly review how we operate to make sure we are having the most impact we can; second, a responsible company invests in its staff, critical in a continent lacking skills and with basic education in crisis in many countries; finally, well thought out community investment (not philanthropy, but in areas where a company has specific expertise) can make a real difference, including capacity building with governments, local authorities, other companies, NGOs etc.

A key message I took away from Michael's last Africa Attractiveness Survey was "the stark and enduring perception gap between those respondents who are already doing business in Africa versus those that have not yet invested in the continent". Here's Michael's article from last year's New Africa Report:

There is also a role for business to advocate for better governance. There is a very understandable reluctance to be too direct with governments (as this can often result in the end of an investment), but business has the capital, resources and capacity - aka leverage - that many citizens do not.

Helping people take their businesses from the informal to formal sector is a crucial step to stable economic growth, and one which the private sector can support. Through inclusion in our value chains, including some capacity building work, we have helped micro and small scale enterprises into the formal sector. For smallholder farmers this means certainty of prices and direct access to the formal market. At the other end of the value chain, helping small retailers gain access to formal finance and improve their compliance with regulations helps mitigate risks for us and for them.

What role can / should business play in tackling regional and national socio-economic challenges?

Businesses should work towards using their value chains to support other businesses in the lower strata. Large/Multinationals should support MSMEs within their value chains. In addition, every businesses, whether large, medium, small or micro should integrate solving socio-economic challenges into their product or service offering. for instance, food processing companies (no matter the size) should be look at how they can produce nutrient rich foods to solve the problem of undernutrition.

I wonder what role the informal economy has to play in this? I am aware of SABMiller's work in this area. Could that be a model for other transnational companies to engage through their supply chains? Is there an issue about informal businesses moving into the formal sector?

Unraveling the challenges is far from straightforward and there's a role for business to play, but the conditions need to be right for the private sector to operate.

Reliable electricity, for example, is frequently cited as a major challenge in Africa. Only 32% of the population in SSA have access to electricity - this is roughly the same stage as the US in 1920 and UK in 1929.

Where it gets interesting is understanding why change is alarmingly slow. In the 10 years between 2000 and 2010 capacity in Africa increased by 5GW – whereas in China, the total electricity capacity increased by 8GW every month between 2009 and 2010.

Our analysis indicates that lack of financing is not the issue: capital to build and run power plants is available. The problem is that investing in the early stages of projects is all too often a fruitless venture. 80% of proposed projects don’t get off the drawing board. Red tape, technical challenges, regulatory agreements and political instability all contribute to extremely long time frames for developments and consign many projects to premature failure. It can take over 5 years to reach a point where construction can begin. As a result there is a shortage of investors and companies willing to do early­-stage project development.

At a more macro level, it is important that the international development community meaningfully address the questions of exactly how business and development can work together in a mutually beneficial way. There is no inherent contradiction between the two, but a business cannot be expected to think and act like a government or multilateral.

The post-2015 process is a good start, but we urgently need a meaningful framework for businesses eager to balance the need for profit with the desire to have a positive impact through their investments.

I would agree with Edgar's comment. That said, with mining and mineral supply chains being my focus, I certainly would not categorize the sector as appropriately 'established'. There is hardly an issue with the amount of investment in the sector, or even the number of jobs it has already created; there is however much more that can be done to ensure appropriate allocation of revenues from natural resources - towards improving investment conditions AND fighting poverty. A solution, once again, can be to incentivise local operators, their government as well as international buyers (reputational benefits for instance), through more transparency and more positive communication.

If the issue of revenue allocation and benefit sharing cannot be dealt with in the mining sector, I doubt it will be any different with manufacturing.

Most of the challenges mentioned in the other posts. I can point three key challenges here; increasing unemployment (especially youth unemployment), access to land issues, weakest trade links with the external world.

Data and measurement are also essential. There is a high level paradigm shift under-way in this regard, but there is still no agreed standard on how to measure impact, source reliable data, and how to apply both to business processes with a view to making them part of core business.

Business has a critical role to play not only by creating direct jobs but in stimulating the growth in SMEs and entrepreneurs and by sharing knowledge, technology and technical expertise. In addition, in the Agriculture sector as an example, recent discussions at Grow Africa in Abuja highlighted the need for business to help with building awareness that there is money to be made from agriculture. Rather than it being seen as a sector for those who can do nothing else, the Agribusiness sector needs to create greater appeal, particularly for youth and demonstrate that the sector offers opportunities to improve food security and nutrition, but also generate strong returns.

In Nigeria for example, the informal sector is so huge with about 17 million businesses playing in the sector while registered Small and Medium businesses are only about 23,000+. Moving informal sector businesses to the formal sector means that they can be better structured for support, finance, and other benefits that accrue to being in the formal sector. I do not know about SABMiler's work, but I know that value chain solutions work.

In some cases it's about creating new, formal sector markets: e.g. cassava can be grown at a surplus by smallholder farmers in much of Mozambique and Ghana, but it has been difficult to market because the crop degrades quickly after harvest. SABMiller has worked with farmers and local NGOs in those countries to find ways of processing cassava on the farms at harvest, so that it can then be transported for use in brewing.

Transparency is key here. I don't think we should spend years creating bureaucracy around measurement, it will just be a new industry for consultants and the international development set. It is also healthy to have competing methodologies. Publish your arguments and the data you use to measure your impact and be damned!

I totally agree with you. Power sector issues are very critical. We need impact investors to look at this area. Investors who want to fund businesses for financial returns and social impact. I talk more about it here: