It is hard to find business leaders in developing countries who can find the time to comment on development. This is not because they are unaware or unsupportive of development ambitions – often quite the opposite is true – but because the challenges that firms face just to survive in developing countries (unstable economies, poor infrastructure, perhaps even conflict or natural disasters) mean that all their energies are necessarily focussed on their bottom line. Furthermore, the reputational risks of speaking plainly about what they find is one that business leaders understandably want to avoid – what is the benefit to them of putting their heads above the parapet?
The blog below was written by a seasoned African business owner who has found the time to put thoughts to paper. It is motivated by the desire to encourage the development community to put themselves in his shoes and think a little differently about how the private sector can be engaged. He believes that there ARE ‘win wins’ to be found, but only if preconceptions can be overcome to enable deeper mutual understanding between development practitioners and businesses.
As the founder and MD of a leading agricultural business based in Sub-Saharan Africa, I have for over twenty years observed the cultural differences which makes partnerships difficult to achieve between the private sector and the public sector and their agents (development programmes, INGOs and local NGOs – or ‘DINGOs’ for short).
Private sector perspective
Survival is wholly dependent on financial viability; all activities are coordinated to ensure a result that can be measured:
This leads to a constant drive for efficiency in all aspects of the organization. A commercial business aims to draw together resources, human and material, to create a value greater than the sum of the inputs. This additional value is created and then re-invested and/ or distributed to shareholders. Commercial businesses also pay taxes to fund governments (and development programmes), create jobs and create wealth for share-holders, employees, villages, towns, citys, societies and nations.
Government and the public sector in the developing world
In my experience, the public sector has a deep mistrust of the private sector and find them alien. As a result of this, governments and donors are often unable to engage with businesses directly due to the following limitations:
Given the above risks, it is far more convenient and practical for donors/governments to enlist a DINGO to engage the private sector on their behalf. Unfortunately, however, most DINGOs suffer from many of the same problems as their public sector counterparts. They are however less accountable and more wildly imaginative… this can often lead to re-inventing the wheel, but not in the classic round shape. Most importantly, DINGOs are required to spend all the funding handed out to them, by a set deadline, or they risk penalties and/or not being awarded further funding.
Unfortunately, there tends also to be mistrust of the private sector by DINGOs – a sense that businesses might be manipulating consumers or creating poverty through exploitation. This mistrust exists despite the fact that such behaviors are (or should be) regulated by an effective government. When these laws and regulations, or their implementation, is falling short, then DINGOs should tackle these issues rather than avoiding private sector engagement. Ironically DINGO projects are often designed to help poor people become more commercially minded, i.e. to make money, accumulate resilience and participate in the private sector.
Typically, however, DINGOs prefer to seek a ‘third way’. This is normally a non-profit project, which will only offer a temporary solution to a problem as it lacks the commercial incentives that drive sustainability. DINGOs often believe that they ‘know better’, despite having much less experience of a sector or local context than businesses who have built up deep knowledge of suppliers, consumers and other players in a market. A good and common example is the strong desire to eliminate the unscrupulous ‘middle man’ in a market linkages value chain, only to discover he has a critical part to play.
What makes the success of DINGOs even more difficult to achieve is the manner in which projects are designed and managed. I have seen the following issues many times:
In their effort to rush in and assist, DINGOs often find themselves either engaging with non-viable organizations or entities or, in the absence of an appropriate partner, even creating a new one in order to work with it. The bias that DINGOs have against working with commercial businesses more than often deprives them of the opportunity to add value to critical players in the commercial and development environment they seek to transform.
It is rare that a DINGO has the skills to engage with an already successful private sector company and assist it in improving its operations as a means of delivering greater development impact. It takes a smart intervention to identify a potential activity or service that could greatly benefit an existing business’s clients, but that is just beyond the company’s current capacity to offer. In such circumstances, a small helpful nudge offered by a DINGO, either by bearing the risk of a particular investment or by facilitating a transfer of knowledge and possibly technology, could be the critical tipping point to opening up a new dimension to a business and the useful services it offers its customers or clients. Although I have not often encountered many DINGOs who have offered this sort of approach, there have been a few occasions where my company has successfully and productively worked with development projects. On these occasions I have seen commercial results for us as well as positive impacts on the poor in local communities.
From a private sector perspective in countries in which my company operates, “commercial success” IS “development”. Assisting the growth of viable companies to fill the space of unemployment and harnessing idle resources must surely be a better way to deliver growth and tackle poverty than to avoid engaging with these key actors in a developing economy.
This blog is part of the January 2017 series on how, and why, donors and businesses work together for development impact. For more candid opinions on what works, and what doesn’t, read the full series on demystifying donor-business collaborations.