This week, the UK's Development Secretary, Justine Greening, gave a major speech on economic development in developing countries and the role of business. Listen to her speech and read the transcript here.
A central focus of the speech was on why the Minister will be "shifting DFID's work to include a much strong focus on economic development" and "the steps to take to put that strategy in place". The Minister talked about the importance of growth, trade, jobs and enterprise.
What do you think about DFID's decision to increase its focus on growth and investment, and how can it best do this in practice?
CARE International UK welcomes Justine Greening's commitment to help business play a positive role in international development.
It's no longer an option for development agencies to view business as operating in a parallel universe - they operate where we do, our 'beneficiaries' are their customers, and often their producers and workers.
Responsible business isn't about ‘CSR box ticking' or staff trips to Africa to paint a school. It means addressing core business practices that ensure business has a beneficial impact on women and the poorest, most marginalised members of society, while still being commercially driven.
The challenge of tackling global poverty is too big for us to not work together. Aid alone is not enough to tackle world poverty, we must engage with business for the benefit of the poor.
At CARE International, we think it is important to work with business to come up with new solutions that deliver return on investment – not just for shareholders but for society at large.
Christine Svarer, Head of Private Sector Engagement at CARE International UK
I think it’s the right approach for development to work directly with business and it is good to hear the Minister talking about this. However there has been talk about this for a long time and yet in my experience as soon as the prospect of profit that the business may make is raised the discussions fall apart. There is a long held belief within development that profit is bad and that it is very wrong for a business to make profit out of what is essentially public money. Firstly development needs to have an honest discussion within itself on how it feels about this. Secondly if development is to work closely with business then many of the current intermediaries need to be removed. It’s interesting that the first comment made here is from Care, an intermediary, who one might argue would be redundant if business and development worked more closely together. Indeed the vast array of intermediaries are part of the problem and hamper the implementation of solutions. The UNGC is an interesting move in this direction, channeling more social business in the attainment of development goals. DfID would do well to partner directly with UNGC businesses who through their core business are making progress particularly on MDG1. Indeed, in my opinion MDG1 - to end poverty and hunger - will never be achieved without the economic growth that only business can bring. Governments have long leveraged and encouraged business to create economic growth in deprived areas according to their national agenda and yet the same principles are not applied when Governments consider international development. It’s an interesting dichotomy. So - great words and an encouraging start - I live in hope that it will be translated into action and genuine partnerships between business and development that will benefit all. (Samantha Morshed CEO Hathay Bunano - working and living in Bangladesh for past 9 years)
Very interesting to hear about DFID’s evolving strategy this morning, and SABMiller absolutely supports the focus on economic growth as an enabler of poverty reduction. We agree that business is well placed to innovate and drive efficiencies in a way that can support development. The Cola Life model that the Secretary of State referred to is a great example - in Zambia, anti-diarrhoea kits are distributed to rural communities in our soft drinks crates.
We believe that business, government and civil society must work effectively together if we are to deliver economic growth that fuels development in the face of a global economic crisis and growing resource scarcity. We also see great potential for increased collaboration between companies where we have common interests in the same geographical areas. For example, SABMiller is seeking to foster collaboration on watershed protection through the Water Futures Initiative.
The focus needs to be on practical, local solutions that generate inclusive growth and social development, and respect human rights, while using water, energy and land efficiently, and protecting the environment. A big challenge! As the Secretary of State said, the enabling environment is key, so we welcome her commitment to continue to support improved legal and governance frameworks, including clear land rights.
Hand in Hand welcomes Justine Greening’s call to focus UK aid on economic growth and jobs. Undoubtedly the right kind of foreign direct investment helps to create jobs. Yet consider these two figures: Walmart, the largest private employer in the world, employs only 2.1 million people. By comparison, globally around 700 million people are in self-employment. We would ask whether the bulk of aid efforts shouldn’t be directed towards making self-employment and family businesses more effective and gainful?
Hand in Hand works to empower women to lift themselves out of poverty by running small businesses. To date, we have generated sustainable jobs for 1.4 million people by supporting 925,000 small businesses, first and foremost in India but also increasingly in Sub-Saharan Africa. Training the most vulnerable members of society to make and sell bricks, run beehives or chicken farms sounds less spectacular than harnessing foreign direct investment but it has transformed their lives: they can put enough food on the table, afford decent housing, water, medication when illness strikes and can send their children to school instead of work. Our “help to self-help” model is cost-effective, creating jobs at a cost of only $40 -$300 per job, depending on local conditions. A good development buy, particularly since an independent study found that 97% of the jobs generated by Hand in Hand in India were sustainable: the businesses were still viable over three years after our initial support.
Certainly the focus on economic development, and seeking a win-win between business and sustainable development goals is very welcome, and we were pleased that Fairtrade's role in building market access on fairer terms for producers, and driving public demand and consumer buy in, was recognised in the Secretary of State's speech.
I suspect there is pretty good alignment on 'why' the role of business is important, and more debate about 'how' to get it right. I think it is critical for DFID's development approach to incentivise inclusive models of business, support bottom-up and not just a top-down approaches, as well as have clear social and environmental frameworks for supporting business investment , as Anna Swaithes (SAB Miller) has pointed out above. Justine Greening mentioned three aspects of economic development - all are important, but I particularly welcome the second aspect, which is about "unlocking the ability of entrepreneurs and business people in developing countries to themselves drive economic growth through their own businesses being more and more successful." When we published our recent business case studies recently, it was recognised that the role of Government in providing much needed incentives to investing in harder-to-achieve supply chain developments (such as increasing sourcing from smallholders or from more fragile or post-conflict environments, or building business infrastructure to add in-country value not just export value) can play a critical role.
I think the decision to focus on growth and investments rather than using funds for reducing poverty in the world is a perfectly logical move with regard to the general thrust towards privatization by this government.
It is also appropriate to change the name from 'UKAID' to 'UKINVESTMENTS OVERSEAS'!
There are so many enterprises crying out for investment across the development world, so this is timely.
In some of the places I visited in Uganda, the amounts of money required to make a difference are negligible and I guess this is not peculiar to Uganda.
Did she give details on implementation? That is where the real test will be. How do we link this investment to community enterprises?
Of course we all will, and should, agree that the private sector has a huge role to play in international development....Cafédirect has been doing precisely that over the past 22 years and we are a firm believer in “trade not aid” enabling smallholder farmers worldwide to get a fairer deal and linking them to consumers who do care about people & planet. However, would like to stress two important issues here: we need DFID and governments in emerging markets to tackle the challenges that especially rural communities still face around road and port infrastructure, telecommunications (broadband internet access), land titles, red tape etc. that would allow them to do their business more efficiently & competitively. Public-private partnerships are often a good way to achieve this. And secondly: whilst it is important to look into the contributions to growth and development by way of job creation and consumption, we also have to ensure that people in emerging markets can move more into added-value jobs and businesses instead of just providing raw materials and/or low value activities.
Wolfgang Weinmann/ Head of Impact & Sustainability/ Cafédirect
IMA International is happy to hear more thought leaders discussing the important topic of the role of business in development. We work with development professionals all over the world and slowly we are starting to hear what used to be suspicion of the private sector turning to an openness and willingness to explore working together.
Very good to hear about DFID’s new focus on economic development and developing strategy around business and sustainable development. But more attentions need to be given on real-world B2B linkages, inclusive growth, local economic development, appropriate technology provisions and social development through holistic economic empowerment.
This is long overdue and DFID should push this agenda as quickly as possible. China is advancing in Africa because they combine their aid with business and provide strong incentives to Chinese companies to invest in Africa. Today all across Africa we have Chinese built hospitals, schools, hotels, roads, bridges and much much more that has come through soft loans, concessional grants and pure commercial investments. It is quite a disgrace that Britain has failed to use its membership and leadership of the Commonwealth to drive economic development across Africa and Asia.
PRESIDENT Jacob Zuma has recently issued a challenge to western countries to change their mind-set over how they invest in Africa, adding that South Africa is an attractive investment destination due to its democracy and willingness to confront challenges. In an interview published in the Financial Times, Mr Zuma called for an end to the "colonial approach" to investment by western countries, saying they still sought to negotiate from positions of strength from where they could "make the rules".
Mr Zuma said financial institutions had "squeezed Africa" and, referring to China, said "now we are dealing with a new partner who is not putting all these strings attached". If Africa can change UK and other donor countries aid policies must also change for the better.
Actually DFID have started their initiative sometime ago regarding business engagement. Same as GIZ and AusAid.Im glad to see donors agencies shirting their focus and taking a serious role forward. Anyway we need to look into the details of each program.
Question is about how the development agencies would response to this trend and how would they positioned themself and make sure that they are keeping with the change and new area.
In the same time, we need to accelerate an understanding of private sector on this subject and integrated them nicely into a chain. So partnership development is the key and match makers might be needed. Just a thought.
Considering current imbalances in the quality of life in terms of earnings, health services, water and sanitation, education so on so forth between rural and urban areas; give options to rural population to migrate to urban areas and increase settlements which are mostly unauthorised. Hence, questing provisioning of services in rural or urban areas free (by whom and how) vs affordability to pay for services (demand driven approach), certainly allocate higher weight to what Minister talked about. However, there should be proper approach and model while transiting the focus from one sector to other.
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