Tuesday, 16 July 2013

'Africapitalism': doing good by doing well

That corporations and individuals can 'do well while doing good' seems pretty obvious.

It is nevertheless a notion and neat catch-phrase central to new approaches to the role that business should play in society, or perhaps to what should count as a 21st Century definition of 'success' in business. Such approaches are variously described as progressive capitalism, stakeholder capitalism, creating shared value, triple bottom line (people-planet-profit), and so on.

Implicit in the idea of 'doing well while doing good' would seem to be that businesses make efforts to have a net pro-social impact. It connotes moderating / improving their social, enviro and governance footprint, and suggests both supplementing core business activities with explicit social contributions, as well as directing those core activities towards registering a wider range of impacts than the traditional 'bottom line'.

It is interpreted, of course, to contrast with Milton Friedman's retort that a business has no social responsibilities other than to seek profit: on this view, businesses do good (improve social conditions) when they do well, but their only responsibilities, as such, are to their shareholders, employees, tax-collectors and regulators. In any event the latter relationships mainly involve legal duties, not mere 'responsibilities'.

The idea of 'doing well by doing good' is perhaps a bit distinct, at least conceptually. It connotes a firm that prospers materially as a direct result of its pro-social contributions: improving its brand through philanthropic outreach, or attracting the best talent by developing a reputation for great social awareness, and so on.

Then there is the notion of 'doing good by doing well...'.

The latter appears to be the essence of 'Africapitalism' -- renewed discussion of which in last week's Gaurdian prompted this post.

Nigerian banker Tony Elumelu promotes Africapitalism as the (unquestionably sound) idea that Africa's development should be African-led; it should focus not on aid or government actions but on developing conditions conducive to free enterprise; government's role should be minimal and facilitative -- because by unleashing entrepreneurial spirit and commercial potential, African countries will inevitably improve the developmental conditions of all in society; business has a commercial interest in doing good (building more peaceful, healthy, educated, prosperous societies) because this creates conditions in which business may prosper further. The commercial incentive to do well can foster all manner of innovations that might make life for many Africans easier, more secure, less exclusive; more gender equal.

The focus should be on removing obstacles to African-driven free enterprise and profit-making, Elumelu suggests, because this will "touch" society in transformative ways not achievable under present conditions. By enabling Africans to do well, much social good will result.

There is much that is appealing, to my mind, about this approach. Elumelu reiterates the much-heard (and somewhat true) refrain that Africa need not mimic other societies but can leapfrog others' experiences and development stages, so as to develop its own variety of socially-embedded and communally-conscious capitalism ... in essence, a sort of Ubuntu Inc.

Yet Elumelu will know that Africa is not a blank slate. For every 'leapfrog' opportunity is a 'lag' effect from past and existing patterns of relations between business, government and society. Pervasive features of its various countries' political economy militate against any automatic 'trickling down' effect from the success of some; these bottlenecks cannot simply be dismissed by referring to Africans' greater propensity for familial and communal sharing as the basis for what will perforce emerge, organically, as a more benign capitalism. Income inequality in Africa's fastest growing economies is growing, not narrowing, for instance.

Elumelu is not Friedman reincarnated, nor is he just Africa's Michael Porter. The debate he has led this decade is a much-needed one; it is hard to argue against the reform thrust he proposes, given the myriad obstacles to building a successful business in many African settings. A more dynamic, capable, bigger, richer locally-owned private sector promises jobs, promotes pride in Africa's self-upliftment, and would give African governments the revenue sources to deliver better services and social support. The current momentum behind looking to the private sector for a lead creates many opportunities simultaneously to tackle development and sustainability challenges afresh.

Yet calls for reforms to free up profit-making opportunities and minimise predatory rent-seeking are not new. Perhaps a more interesting practical debate is how the local private sector (assisted by donors and foreign firms, where appropriate) can help build state capacity to tax and distribute fairly and transparently. Philanthropy is one thing, but absent such capacity and will by the state, doing very well in Africa will not do most people much good.


See some related posts: after this year's African 'Davos' (here); taxation and corporate responsibility in Africa (here); and last week's post on business and development in Africa (here).

See a recent Elumelu speech and his thoughts in more detail (here and here).

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