Corporate culture: capital vs social capital

Australia is this week absorbing the final report of the Royal Commission into 'misconduct in the banking, superannuation and financial services industry'.

What is at the heart of the disregard shown by retail banks and finance houses for regulation aimed at protecting consumers from the excesses of the pursuit of profit motive?

As ANU's John Braithwaite has said, a core dilemma of regulation is "when to punish and when to persuade" (1992+).

Command and control-style punishment and sanctions are not the only way to regulate. There are many reasons for non-compliance, suggesting that regulators sometimes need to preference dialogue and engagement over knee-jerk automatic punishment. There is a strong case to be made for regulatory designs and institutional approaches that privilege engagement, persuasion, education, capacity-building. Braithwaite's 'responsive regulation' theory would suggest that regulators hold punitive powers in reserve while making overtures to regulatees and seeing how they respond to non-punitive approaches. The regulator then adjusts its own approach. This will be perceived, the theory goes, as more fair and so legitimate. Entities will internalise the regulatory goal, compliance will improve and the regulator can let compliant entities essentially self-regulate, and indeed exceed what is required in pursuit of the social goal underlying the regulation.

What is a lesson from the Royal Commission?

It is that this approach, as influential as it has been, needs to be revisited. Or at least the theory needs to be fully implemented if it is to work. Not surprising, that.

The lesson is that regulators -- even where they have these powers -- appear reluctant to use them, and so err on the side of 'engagement' where sometimes demonstrative penalty seems more appropriate. The issue is whether the regulated entities are responding to signals to change. If they are not, another more intrusive approach is warranted from the regulator.

Standing back, the key word is in the first sentence above: motive.

Incentives matter: we can talk all we want about 'values not just value' and 'engendering a shift in corporate culture'. But when all is said and done, market actors respond to incentives, and clear, credible and consistent signals and actions from regulators about the consequences of non-compliance.

And those consequences sometimes need to be severe.

As Commissioner Hayne wrote, "misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished..." It is not deterred -- for such profitable entities -- by requiring those found to have done wrong to "do no more than pay compensation." It is certainly not deterred by the issue of infringement notices in the hope that the market or consumers will respond to those incidents by withdrawing or conditioning their custom or financing.

Responsive regulation remains a highly appealing theory, if properly implemented. It is bound to fail -- as Braithwaite and his disciples have always said -- if only partially implemented. If all the cuddly dialogic bits are followed, but not the hard and punitive bits. Regulators can and should talk to their regulatees about how to improve compliance. But they are not mere consultants to business. They are regulators. Braithwaite would insist that the regulatee must know that the regulator can escalate things, where fair and appropriate and where there is no response to overtures to comply. They must know and see that the regulator can make life very difficult.

As Braithwaite once wrote, dialogue, engagement and capacity building must take place "in the shadow of the axe".

Australian regulators need to have the axe, even if they need to be smart and fair about when to keep it in the background and pursue a more engaged approach.

This is true from banking conduct in the retail sector, to emerging models on supply chain reporting in the context of modern slavery, on which see earlier posts on this blog.

Jo

Who is 'business and human rights' for?

Who are those doing 'business and human rights' (BHR) stuff, and for whom are they doing these things?

This post offers two reflections on the BHR 'movement'.

(I'm conscious that I'm at risk of over-thinking things about the BHR movement or 'field'. Examples of this include posts asking 'has BHR lost its way?' or one reflecting on what the field itself comprises.)

The first reflection I've used since 2016 in my Masters (LLM) course in BHR, to stimulate student thinking. It might be framed as who 'does' BHR?

The second reflection is one I offered at a recent talk at ANU's RegNet, my doctoral alma mater. It might be framed as who is BHR for?

Who 'does' BHR?

Many students study human rights with a view to 'making a difference'. Most of my students accordingly focus on classic public law and public international law subjects.

Yet -- and this is what I leave my students with each course-end -- perhaps the most effective BHR lawyers of the future will not be steeped in conventional human rights skills and knowledge. They will be people who understand contract law, corporate law, fiduciary duties of institutional investors, international trade and investment law and negotiations... they will also be students who have grasped that understanding the significance of local political economy dynamics is as important as fluency in the UN Guiding Principles on BHR: law and power, law as power.

BHR could do with more reflection, for example, on expertise, who is doing it, on how 'power law and expertise shape the global political economy' in a David Kennedy (2016) sense.

Many activists (and academics) in this field appear not only not to understand business or corporations, they sometimes seem not to want to understand them. Business and investment is something that happens out there, by some people who are probably not as nice or worldly as us.... Yet one has to question BHR strategies grounded in knee-jerk distaste for the very entities that one needs to understand (and sometimes engage with!) in order to transform problematic patterns.

Who is BHR 'for'?

Two of the BHR topics that perhaps dominate in Australia at present are (i) data, new technology and human rights; and (ii) corporate action on human rights risks in the supply chain under the intended Modern Slavery Act.

Both are important, complex, etc. Yet both, in different ways, have the effect of focusing very much on 'us' (in the first world) rather than 'them' (places where the aggregate of serious, systemic adverse BHR impacts occur).

Take the supply chains focus, which is one I'm part of. (An earlier post linked above noted that BHR is about a lot more than just 'modern slavery', as current and important and hard as that problem is).

There is a possible critique that the orientation of our current 'modern slavery' enquiries is parochial or inward looking. Its dominant vein is as follows: we must act to ensure we -- and our jurisdiction, our supermarket shelves, our wardrobes -- are not 'tainted' by association with modern slavery risk. That is not the same as saying 'we must tackle this phenomenon wherever it occurs'.

Have we succeeded if, through altered purchasing and procurement patterns (etc.) we rid Australia of any tainting trace of modern slavery, even if the phenomenon is alive and well in our region?

At least on Modern Slavery Act matters, is BHR as a movement (and so to a degree BHR scholarship) at risk of framing things as 'what can we do to rid ourselves of this human stain?' rather than 'what raft of measures will best address this topic in its own right?', that is, what works irrespective of how it affects our space?

This second reflection might be viewed as a bit unfair. After all, we (in Australia) are simply looking for ways, within our sphere of influence (so to speak), to address a global problem. And it is natural for analysis to 'begin at home' and focus on such issues. Still, its just a reflection.

Jo

Regulating the Future: 'private sector, public role'

One ought not get too categorical about distinguishing the public and private sectors when thinking about the wider 'sustainability' and 'social impact' agendas.

This blog's name plays off the differences we apprehend between public and private actors and activity, from principles (e.g. differing legitimacy levels as between corporations and public authorities) to drivers (e.g. differing incentives and audiences) to practicalities (e.g. different tools and techniques even where the ends are common).

But in many socio-enviro responsibility & sustainability contexts, the public-private distinction may be difficult to make. Or it may be not useful to dwell on, where it blinds us to the significant governance contributions of private actors towards what are ultimately public goals.

Past posts have dwelt on this, but this one (the first for 2018) is prompted by three recent things that I see as connected in relation to this enduring public-private debate.

The first is my delight this week in meeting my new PhD student here at ANU, who will study the financial sector as a significant source of influence on the human rights impact of business more generally. (See recently in this regard the Thun Group of Banks view on one aspect of this, here).

Who is a 'regulator' and what counts as 'regulation', and what are appropriate and effective contributions that those policing bottlenecks in the economy -- such as financiers and insurers -- can play in furthering regulatory objectives? How does formal Regulation (with a big R) or other policy interventions (regulation with a small r?) leverage these contributions?

The second is that I recently returned from a sustainable development symposium at the University of Indiana, Bloomington on balancing freedom vs security in the regulation of cybersecurity. Given that (mostly privately owned) tech firms dominate much activity in cyberspace, they will surely play an outsize role in the governance of that space relative to public authorities.

With this influence comes elevated levels of responsibility on the part of private actors (and expectations of increased accountability about how that power and influence is used).

Which brings me to the third prompt for this post: a Twitter thread from @KateAronoff about a meeting (to which the media were not invited) between Canadian Prime Minister Justin Trudeau and Amazon CEO Jeff Bizos, described by a CBC journalist as a 'bilateral' meeting. Now technically it is bilateral if two parties are involved. But Aronoff's point was to get us to pause and consider the implications of a world where the language of diplomacy is seamlessly used in this way. Normally, only heads of state have bilateral meetings... but then Amazon does 'run' a large part of the world in net terms.

 

Surveys suggest many consumers/citizens trust (private) big brand firms and business leaders more than they trust public institutions and elected political leaders. Trust is a key component of regulatory legitimacy and effectiveness. Yet as we design societal impact regulatory models for the globalised (and virtual) economy, and make use of -- or just acknowledge as real -- private governance contributions, we need to think about the authority and legitimacy and other qualities that only public institutions ultimately have.

Jo

@fordthought

Stepping back: the private sector and the SDGs

How effective will global development targets be in securing the sustained engagement of the private sector? Are expectations of the private sector's developmental role running too high?

It is October and we are somewhat past now the UN fanfare around the long-negotiated 2030 Sustainable Development Goals (SDGs) to replace to 2000-2015 MDGs.

Much has been written around the SDGs, including in relation to what is portrayed as a revolutionary recognition of the private sector's role.

In view of this mountain of opinion this post has the limited ambition of querying whether this is so (game-changing scope for private sector engagement), and a related general observation querying the utility of the SDGs as ordering principles to guide development generally.

One thing to note is that the private sector is mentioned only once in the SDGs, in Target 17.17 of Goal 17, and then only in terms of formal partnerships (which are not the only way for business to up its developmental impact, or for policymakers to harness that).

The enthusiasm around the Private Sector Forum accompanying the SDGs process and summit, and the fact that there is these days a forum for business at all, can be misleading in this sense. Unreasonable expectations around the private sector's development role feature in a number of past posts on this blog (here).

Business is not about to simply 'step up' and finance pro-poor development, and to observe this is neither to criticize business nor turn away from the scope for harnessing commercial resources in support of development targets.

We do need to do more work on what incentives might exist for firms to become more explicit in partnering for development and otherwise becoming more explicit in their developmental contributions. See this recent Gaurdian event (a summary of which is out soon).

Yet those that call for business to 'step up' on the SDGs (see here, for example) must also acknowledge the huge complexity involved in all but the most well-resourced firms in trying to track SDG-related impacts. The answer is not to say 'various tools now exist to help in this'.

This relates to a second, too-late-but-anyway reflection on the SDGs.

It comes from re-reading, if you would, the sentence above 'Target 17.17 of Goal 17'. Many have commented how a key to the MDGs' relative success was their brevity and (for a very complex subject-matter) their simplicity.

The same cannot be said of the SDGs. Quite apart from poorly-resourced states, how are major firms really going to find the development agenda a compelling phenomenon with which to engage, if it has proliferated into such detail? Yes, goals need measurable targets alongside, but I wonder whether the SDGs will sustain corporate interest in sustainable development in the way they might have had their drafters' had the grace to keep things a little simpler.

I have written / ranted before on how to sustain sustainability and problems of compliance fatigue (here).

Related to regulatory and policy proliferation is the risk that SDG-related activities (by states, by firms, by civil society) become a process of tracking and compliance-style activities, rather than strategic thinking about how to promote more peaceful and prosperous societies overall.

In 2012 I wrote this post about the ordering, motivating power of simple ideas in thoroughly transforming society (here).

I am still reading all the fallout from the SDGs summit, but my own first impression is that their ambition to be comprehensive has meant a missed opportunity to present a compelling, clear, relatively simple set of ideas for a better world.

This will surely hamper the narrower objective of engaging business in meeting these goals.

Jo 

Milton Friedman's ghost in Mombasa, 2015

The fashion at corporate responsibility summits is to mock Milton Friedman, the Chicago school economist.

I often wonder how many who do so have in fact read his late 1960s - early 70s doctrine before dismissing his famous line that '... the only social responsibility of business is to make profits...'

(Here it is in a nutshell, and by the way in its full explicit Cold War, capitalism-as-freedom context; a fair full quote would add what he did: '... so long as it stays within the rules of the game ...' engaging in free and fair competition without deceit, and compliance with the laws of the land.) 

Friedman's ghost has appeared a few times to me, in broad daylight too, here.

'Here' is downtown Mombasa, the heaving multi-ethnic port city that has long been the gateway to Kenya, and indeed to the entire east Africa region.

(Through its congested port comes everything from east Africa's oil supply to many of the small consumer goods sold by the region's ubiquitous street traders; too little that is Kenyan besides tea is exported in return -- and too much of its 'exports' consist of ivory poached for Asian markets, but that is perhaps another story ...)

In apparent contrast to Friedman's austere doctrine, we now tend to accept that 'the development challenge is no longer the preserve of government'. So reads an editorial by Kenya's deputy president in a local daily, following remarks he made at a conference in Nairobi earlier this week.

The remarks are an opportunity to reflect on what business the business community has in designing and delivering the development agenda -- globally, nationally and locally. 

There is no doubt, in my mind, that business (however we might define it) both has a significant role to play (within some important limits), and has clear interests in the development agenda succeeding.

The deputy president's remarks raise some consistent issues in topical debates on how the private sector can support development, and how supporting a vibrant private sector can have developmental dividends ... 

Some points he makes are hard to argue against. The private sector stands to benefit from developmental gains; its role goes beyond financing or co-financing projects that have development impact -- it is not just a source of resources; and so on.

And only purists will object to him using the term 'corporate social investment' (which can have a limited CSR-project meaning), where he really means a range of broader impacts that larger firms and funds can have beyond simply Friedman's approach of maximising profits while obeying the rules of the game, especially paying taxes and employee's salaries and complying with environmental and other laws.

Here in Mombasa there are initiatives, for instance, that reveal business groupings taking a more deliberate, engaged, do-not-wait-for-government approach to issues such as finding work for what Friedman called 'the hard-core unemployed'.

Yet call me a heretic, and accuse me of seeing ghosts: Friedman was not totally, as they say, 'on crack'.

In all my meetings with businesspeople here, including (in fact, especially) those with sincere longer-term developmental passion and vision, a message emerges that on its face is uncomfortable for all of us espousing a far greater explicit role for business in development.

This is the inconvenient truth that the greatest developmental impact business could have in places like this is for government to focus on allowing them to succeed as businesses. Not specifically as socially responsible or development-oriented businesses (although there's no trade-off necessary), but to succeed as law-abiding firms creating value, jobs, tax revenues, demand for better governance, and so on.

The developmental impact that a flourishing, open business sector could have in such places (within the natural resource and environmental envelope) perhaps compels one to turn from exploring alignments and partnerships (the current trend) to old-fashioned 'let tax-paying business succeed'.

The public policy issue then is far more about fostering enabling environments for core business activities, than persuading business to seek alignment with particular aspects of the development agenda. 

If so, it follows that contrary to the deputy president's (otherwise welcome) message, the role of government is not to help business identify where it can have maximum developmental impact.

Instead the role of government is to identify where it (government) can create maximum developmental impact by identifying where to help business do what business does best, while upholding the (evolving, more demanding) rules of the game ... cue Milton Friedman's famous quote.

Jo

PS -- this approach may of course assume that government has the regulatory, planning and other capacity in particular to tax business appropriately and to make use of those revenues.

Public-Private Partnerships: Hype or Hope?

Partnering with business for development is overwhelmingly a good thing.

Disciples of partnering are making fascinating progress, as The Partnering Initiative here in Oxford shows; pilgrims of partnering are forging interesting, promising relationships -- not waiting for policy orthodoxy to lead.

However, this post questions the new-found faith in public-private partnerships (PPPs).

It makes two points about the need for caution over the current enthusiasm for PPPs as the panacea for Africa's development.

1. The first is that the developmental impact of the private sector is not limited to what businesses can do in partnership with governments, civil society, and community groups.

Strategies that put 'business' and 'pro-poor development' in the same sentence should be about far more than PPPs. There are significant ways in which the developmental impact of business activity can not only be harnessed, but unleashed, without involving any partnering of the 'PPPs for development' sort.

For instance, last week's post noted the scope for responsible private enterprise to deliver poverty-reduction without partnerships as such, but with development policies geared to foster investment and broad-based, inclusive growth in societies that currently struggle to attract or achieve that.

The problem is that the current fashion for partnering, while welcome, could obscure the 'quick wins' available from, for example, helping countries reform their business regulatory environment in ways that reduce unemployment. This stuff is hard -- but not necessarily harder than PPP-ing, and potentially far more impactful in a diffuse sense across society at large.

Of course, short of partnering it makes sense to consult business (in an appropriate and principled way) in the design of policies intended to foster inclusive, sustainable growth through unleashing the private sector.

1A. This point -- PPPs are not the sole vector of increasing the private sector's development relevance -- relates to another. An emphasis on 'partnership' can be too narrow a framing for what is really about public-private cooperation more broadly: (a) 'partnering' is not limited to formal, regulated PPPs such as infrastructure ones, but encapsulates a range of relationships aimed at development impact; (b) cross-sector cooperation and dialogue, especially where systematic, can be hugely significant without involving partnering as such.

I promised a second point of caution over current prevailing PPP-related enthusiasm!

(A precursor to that is to note that the enthusiasm for PPPs and wider partnering is in fact hardly universal across either the business or development communities).

2. The PPP hype belies the experience that partnerships are hard to generate and maintain, often controversial, not necessarily efficient or effective, and not necessarily grounded in evidence of their superior developmental impact.

I say this as an overt proponent of exploring ways to engage business in the development agenda.

For the last year, I've advised on an emerging cross-sector partnership intended to promote the partnering agenda. The difficulty in getting business, government and academic actors to work together on this discussion-about-partnering is itself instructive of the challenges of partnering-in-fact. More work needs to be done on measuring the effectiveness and opportunity-cost of PPPs (widely defined), and on conceptualising their political and policy risks and implications 

In this respect, I recommend a read of this Devex Impact blog post on partnerships, especially its first few paragraphs.

Previous posts on this site have sought to reflect on these issues, for example the hype about PPPs in Africa (here).

Jo

'Business for Peace'

What drives current expectations that the private sector will play a more direct role in ensuring more peaceful societies?

This week's UN Global Compact 'Business for Peace' event in Istanbul is part of a growing field, as it were.

This field is dedicated to exploring the unrealised potential for business entities, communities and actors to contribute appropriately -- in more explicit, direct or deliberate ways -- to conflict prevention, mitigation or resolution in particular situations or more generally, and especially in fragile or divided societies.

This is the topic of my forthcoming book Regulating Business for Peace by Cambridge Univ. Press. There is a big, complex and evolving research and policy agenda here. There are plenty of ways into the debate, too, from practically-minded policy prescriptions on how businesses (and their financiers, insurers, etc) can be more conflict-sensitive in their operations and supply-chains, to understanding what incentives might help to promote responsible but competitive investment in fragile states.

These issues are topical, and highly relevant in much of sub-Saharan Africa. I could blog on, book and beyond, but instead think one observation is important. Much of the 'Business for Peace' / business and peace / business and conflict debate focuses on what business actors should do more or less of or do differently, and under what circumstances. To my mind this partly misses the issue.

This focus on business responsibilities or opportunities to help promote or consolidate peace is driven by various things, and is part of a wider shift in the expectations of business in society. In large part it is driven by recognition that more can be drawn out of the peace-relevant influence, incentives, impacts and attributes of the private sector; in some ways it is driven by business leaders' own sense of the need for the private sector to be more proactive in ensuring the sorts of peaceful, prosperous societies conducive to sustainable growth.

Yet what can be lost in this focus, and at events such as Istanbul, is that the proper way to frame this issue is not 'what can business do for peace and how' but surely 'what must public policy do to maximise the scope for business to contribute to peace'.

This is really reiterating an earlier post this year: here. It also is a theme of other posts that reflect on how business has gone from being an ignored stakeholder in the development agenda, to a presumed panacea for developmental problems.

To express caution on taking 'business for peace' too far is not to deny the scope for business actors to do more to mitigate conflict risk and maximise social cohesion. It is not to bring everything back to policy or make any worthwhile initiative contingent on government action.

Instead it is to recognise that the greater focus on the role of business is no substitute for recognition that business has limited scope, incentives, legitimacy (etc) for peace-building. The growing enthusiasm for realising business's unmet peace-building potential should thus not obscure that the primary question is a public policy one; the primary responsibilities rest with governments; any failure by business to contribute more positively (or less negatively) to peace is ultimately a public policy failure.

Jo 

The Business of Development: rhetoric and reality

Development policy has gone from largely neglecting business as a stakeholder to seeing public-private partnerships, or indeed the private sector generally, as a development panacea.

This post comes from Brussels, around a meeting on the private sector's role in post-conflict recovery and peacebuilding. When I began researching that topic in the mid-2000s, it was very hard to imagine high-level policymaker interest in engaging business in peace and development initiatives. 

That blindspot is now narrowing and ambivalence towards the private sector is lifting in the UN system and other relevant agencies. Business is increasingly accepted as a development stakeholder (at least in high-level summitry, if not yet among all development agency programming staff). This shift is documented [cue here a shameless plug ... ] in my forthcoming book Regulating Business for Peace (CUP).

Yet it is hard to escape the feeling that policymakers may now be over-compensating. The increasing rhetoric tends to conceive of engagement with business (public-private dialogue, cooperation and partnership) as having far more developmental significance than is merited given the difficulty of workable partnerships and alignments, and on the evidence to date of productive engagements to this effect. This includes evidence about the limited inclination and interest of business (beyond some Western corporate leaders) to become more explicitly involved in the development agenda.

Now, for the record there is no doubt that greater engagement with the private sector by African governments, donors and NGOs holds considerable promise for finding common interests and alignment of objectives. The promise is of cross-sector cooperation that enables scaling-up the developmental impact of core business activities, while simultaneously addressing the bottlenecks and deficits that business leaders see as inhibiting more sustainable, inclusive growth.

Many previous posts have touched on aspects of this potential. Indeed TPI's recent 'roadmap' on systematically engaging business so as to unleash (and harness) its developmental impact took this convergence of interests as implicit, such that it instead focused on what to do about implementing the new-found appetite for engagement.

This post, as a reflection on this heightened interest in a public role for the private sector, groups some earlier posts expressing caution in approaching the new-found enthusiasm for seeing the private sector as a development panacea: see a previous post arguing that not everything can be solved by partnering; one noting that the state and its capacity problems still matter in ways that cannot be ignored by pointing to partnerships' potential (since partnership implies state capacity) (here), a related post here; a further caution to avoid seeing the private sector as a magic wand in Africa's development (here); and misplaced enthusiasm for public-private partnerships as likely or capable of carrying the expectations placed on them (here).

The focus by African policymakers on scaling-up the development impact of business risks obscuring an enduring fact. The greatest development contribution that business can make is still to expand, employ, pay tax (etc), in sustainable and inclusive ways, as for-profit entities. While 'development policy' naturally and rightly looks to directing business growth in pro-social ways, Africa's poverty-reduction priority in relation to the private sector is still to foster flourishing sustainable enterprise. We should be looking for alignments, but not at the expense of attention to policies to support successful businesses capable of supporting the expectations currently placed on them to help transform the continent's development outlook.

Jo

WEF Africa: leapfrogs and left-behinds

One can seek short-cuts on long-term problems. But for all the excitement about innovation in Africa, one simply cannot 'leapfrog' all problems.

There is much enthusiasm about the scope for technological innovations and related information-sharing platforms to unlock Africa's growth, development and even democratic potential.

Much of this enthusiasm is justified and good. A hot-off-the-press example of this is a recent post by Michael Hastings on why technology-based 'solutions' for health, education, financial services and other issues provide major reasons for optimism about Africa.

That post relates to this week's World Economic Forum (Africa) in Abuja, Nigeria (7-9 May). 

This event also reveals, and champions, considerable business and social innovation in contemporary Africa in order to resolve / avoid infrastructural and developmental bottlenecks, scale-up markets, reach new consumers, provide new services, and so on. Some of the innovation is in terms of new forms of relationships (principally between business and government) for achieving inclusive, sustained and sustainable growth in Africa. Some of these are innovative relationships around innovative technologies, such as increasing government transparency through making more public documents available online.

As said, this is very well and good: may a thousand million centers of energy and daring send ripples of hope and waves of green, inclusive growth through the continent. I do not say this sarcastically. For example, one solution to Africa's energy poverty (and one with considerable other benefits, including in carbon footprint terms) is the growth in off-grid localised generation and distribution networks.

Yet the mini-grid trend is itself indicative of an issue that all the WEF-style discussion of innovation, entrepreneurship, and leapfrogging cannot and should not obscure.

This is that businesses and enterprises of all sizes in Africa are, like its individuals and families, typically compelled to be innovative in many respects because of poor state capacity to provide basic public goods and services. My former Oxford Analytica colleague Hannah Waddilove remarked this week that what can be seen positively as 'entrepreneurship' for example in providing bottled water for retail is also indicative of the failure of state service-provision.

Previous posts have noted that the scope for public-private cooperation in meeting the development agenda is unrealised, as is the untapped potential for private provision of public goods in Africa. However, a theme of these posts has also been that the state still very much matters for long-term sustainable development in Africa, perhaps more than ever.

In this sense, innovation that by-passes state incapacity may be imperative, welcome, or inevitable. Yet it creates a risk that short-cuts and leapfrogs -- valorised as 'innovation' -- might have a long-term negative effect. They might result in undermining the capacity or incentive for the state to respond to, and provide for, its citizens. If we tie progress to innovation that has a primarily commercial orientation but do not 'innovate' to link this in to building more capable, responsive states, many people might be left behind (even more) when the leaping begins.

Jo

See this previous post on 'corruption as innovation' in the context of state incapacity and bottlenecks.

See these pieces on inclusive growth (here), and a post-WEF Davos one on inequality and risk in Africa's growth path (here).

See too a WEF-related post I wrote this week on the 'African Arguments' platform (Royal Africa Society), here.

'Partnering' business for development

In the new fashion for cross-sector cooperation, are we tending to distort the term 'partnership', applying it to things that are either just dialogue, or normal cooperation with regulatory requirements?

And alongside all the promise that lies in the convergence of public and private sector focus on shared development constraints, are there not some concerns?

Convergence and blurring are related ideas, but one has a positive sense and the other a pejorative one.

So policymakers have 'discovered' the private sector as an 'actor' with impacts and interests relevant to development. Duh. But we now risk too rapid a transition in which proper parameters and principles have not yet been worked through.

Scaling-up the private sector's developmental impact was a key theme of last week's inaugural high-level meeting on global partnerships for effective cooperation for development ('GPEDC'), held in Mexico.

This blog is very 'pro' looking for ways to unleash-yet-harness the energies (etc.) of business in support of sustainable development aspirations and imperatives. Yet one overwhelming theme at and message from the GPEDC agenda / outcomes was not really about partnering for development (in the sense of systematically looking for areas and issues where business strategy / self-interest and government policy / duty overlap).

Instead, a major focus was about shifting from external financing of development (donors) to 'domestic resource mobilisation'. That is, taxation of business activity and constraining licit and illicit capital outflows, retaining more value within regions such as sub-Saharan Africa. (See para [4], [20-[24] of the outcomes document). This is a very sound idea (see a previous post on taxing for development in Africa). Especially for heavily indebted donors, and some developing country governments which might become more democratic if they become more reliant on and responsive to local taxpayers.

But a focus on taxation is not 'partnering' with business for development, nor is it public-private development cooperation.

It is a basic function of the state to tax and spend, and a basic obligation of a firm to pay, and to complain or leave if it does not wish to. When regulatees share the regulators' vision and cooperate, this improves compliance and eases regulatory burdens. But tax compliance is not cooperation, it is an obligation. Cooperation comes where business and government enter dialogue about what the taxation envelope might consist of. Even then, this is not a relationship of equals, for a number of reasons on both sides.

It is a basic ideal of development policy to eventually wean a country off external funds to enable it to finance its own development. To do so, one wants to think less about particular partnerships with business here and there (helpful as these can be), and more about creating an environment where business can flourish, so that appropriate social shares can be taken and distributed, building a better and more sustainable, inclusive society in which (in turn) business can flourish more. Virtuous cycles, and so on.

Sure, there is scope for greater cooperation, expertise-sharing, dialogue, etc between the public and private sectors. But these are not necessarily 'partnerships'.

Cooperating to find ways to help developing countries to tax more fairly, consistently and to spend the proceeds on developmental purposes is something to be explored. In previous posts I've repeatedly noted the initially counter-intuitive idea that a major investor might help its host government improve its tax and regulatory capacity. This way business can know what its fiscal exposure is, but also know that its taxes will in fact lead to better infrastructure, a healthier and better educated population (workforce / customers), and so on. Cooperation like that is to be welcomed, and specific partnerships may help deliver it.

But 'partnering for development' should not now mean everything that vaguely relates to business. Some of those things are just 'development'. Hence the 'duh' above: why is it such a revelation to donors that business can make general and specific contributions to development goals, and may in fact be interested in more peaceful, prosperous societies?

The social responsibility of any one corporation is not open-ended. One needs only pause for a minute to know why this is a good thing: business is not accountable in ways that policymakers (in theory) are. Hence the previous post, making the point that business and government may 'partner' but are not true 'partners': governments must lead, serve, respond, take responsibility.

Excitement about 'partnering' should not obscure the state's duties, and the state's capacity shortfalls without which it cannot partner effectively.

Blurring these lines is not in the interests of business, or in the public interest.

Where government functions as it should in Africa (or anywhere), there would perhaps be nothing shocking and anti-progressive about reiterating (with caveats) Milton Friedman's adage that the social responsibility of business is to grow, employ, obey laws, pay tax ... the social responsibility of governments is to finance development by planning, supporting, taxing, spending. There is convergence, there are shared interests and vulnerabilities, but there are separate spheres, and there is value in that. Friedman had some objectionable ideas, but it is too often overlooked that he cherished freedom. Do we want the public and private spheres to blur?

This blog says that the private sector inhabits a public world, and with it various responsibilities. But that does not mean business can or should do it all, or that government can absolve itself of its duties by producing a soup of partners.

In academia, 'multi-disciplinary' scholarship is useful for cross-cutting problems, but by definition relies on people who first have a strong grounding in their individual discipline, and only secondarily have an openness to other forms of knowledge. So it is with development: each sector needs to succeed in its own sphere, while looking out for judicious combinations and efficiencies. Societies need to resolve where those spheres lie, what is private and what is public.

These are big questions of ideology and social-political preference. The current 'business and development' debate can obscure that this is so. Does business want more social responsibility? Do we want business to have more social influence?

These things need discussion, not what I call the NDL: the New Disapproving Look. One gets it these days if one suggests that not everything that matters can be solved by some or other public-private dialogue and, of course, a partnership. 'Only connect!' and all will be well? I do not think so.

On a practical level, firms and departments may not be very good at partnering, or sure about it. The NDL and the new high-level rhetoric on engaging companies and investors in development can obscure the extent of ambivalence that still exists, within both bureaucracies and corporate structures, about expanding explicit links.

As with all high-level meetings: they matter, they steer, but they are generally aspirational, not declarative. Greater cooperation is a goal and a process, but it is hardly happening all around us. Policymakers need to show both the public and potential business 'partners' why partnering is more efficient and effective. Intuitively it seems so, and these linkages hold enormous promise for dealing with development bottlenecks and business frustrations. But more proof is needed, that partnering works. 

And in Africa and beyond we must keep an eye out that 'partnering' is not a cover under which the state (realising how few expectations it can deliver on) tries to abdicate its role or responsibility, or a cover under which business (fearing the effects of unmet expectations) tries to partner so as to say 'we tried to partner'.

Jo

Responsible lobbying and responsive government

Will it irritate some readers to assert that serious business leaders are just as interested in inclusive, sustainable growth as responsible public officials?

I find the statement unsurprising. Even if there is still more rhetoric and hyperbole than anything else about public-private action on meeting development goals, in my view no-one has demonstrated why the policy risks of engaging the private sector in resolving development challenges outweigh the potential gains from appropriate collaboration.

And here I think the real question is not collaboration, or having conversations about collaboration. Again, those seem obvious. The real question is what constitutes 'appropriate' forms of both.

Later this post observes an example from my own research that bucks the prevailing view that policymakers talk (or listen) too much to corporate views. It shows that the problem in at least one development sphere is the opposite: they do not seek the views of business, an important stakeholder in peace and prosperity.

I will start again. This longer-than-normal post makes two points. First is the one just made: major social and developmental gains are surely possible where business and government find common ground and can agree (or share) respective roles. Second, realising these gains requires deliberative engagement, but the means by which business and government seek to influence each other matters.

Global business is not representative of all that is virtuous, yet I do not propose to dwell on the first issue. At some level it appears somewhat self-evident. Take the issues that routinely top the list when leading firms make macro-analyses and scenarios about long-term risk or opportunity. I am fairly confident they are also the same issues that do (or should) trouble responsible, future-minded policymakers: inequality and exclusion, insecurity and joblessness, resource scarcity and climatic uncertainty ...

On the assumption, then, that there is lots for business and government to talk about in maximising the developmental impact of core business strategies, and in formulating public policy that harnesses private sector strengths (and fosters responsible business practices), let's turn to the second issue: what is involved in talking?

Corporate lobbying and public-private forums and pathways to explore development synergies are not necessarily the same thing, although both do involve parties trying to steer things in some way.

It is true that not all corporate chiefs are leaders -- just as not all officials pursue the public interest. It is also true that only officials represent the populace, and we must remain aware that 'partnership' between public and private sectors does not imply equal levels of legitimate authority: private economic activity is a highly important sphere of human freedom, but it is after all a public world, the public's world.

But both groups matter for development, unless we believe that governments alone hold all the tools for ending poverty and all the keys to unlocking opportunity and potential. The evidence suggests otherwise. Both groups matter, so it matters that they talk about the things that matter to both.

For business and government to understand and respect each other, and uncover what are the areas and scope for these development / growth 'synergies' [sorry], they clearly need to talk, to 'find' each other. This takes time, and trust. Implicit in that is proximity, regular contact, dialogue. How is this closeness developed or sustained, without damaging the public's trust in the process? How do big business and government discuss common ground without either one distorting or misappropriating the ground itself? How do we convince officials not automatically to distrust corporate motives, or convince corporates that sitting with policymakers can enhance their long-term strategies, not just delay or constrain them? 

Thus this post returns to the topic that the last one ended on: how do we build appropriate forums or channels of communication and influence so that we have the benefits of legitimate and vital private sector perspectives on public policy relating to development, but without subverting broader public interests by basing policy (or its implementation) on the preferences and interests of a narrow class of players?

A recent Economist article (*) on the pervasive effect of corporate lobbying noted how US regulatory authorities devising the Dodd-Frank Act met far more often with banks than with community or consumer groups. Yet my forthcoming book on engaging business in post-conflict peacebuilding reveals an entirely opposite problem: policymakers do not talk with businesspeople about shared interests in peace and prosperity, and about what business can do to contribute (appropriately...) to these goals.

Thus from Haiti to Liberia to the Sudans, I found that peacebuilding authorities meet far more often with civil society groups (many one-person outfits) than with businesspeople. Indeed typically they ignore the private sector altogether, either never considering them 'stakeholders' in the first place, or actively avoiding encounters for fear of being 'tainted'.

I could go on (the book does...). The point is that the lack of a strategy to engage the private sector on issues of mutual interest manifests as a lack of policy frameworks (safe places, platforms, parameters) for these important conversations to take place.

So whereas most of the concern is that business is too influential, on some important development issues it is not being sounded-out nearly enough.

A few other thoughts, briefly:
* Debate on responsible lobbying neglects smaller businesses, which struggle to engage with policymaking in the region I follow, struggle to make their voice heard to governments. Yet they often hold far greater promise of job-creation and local empowerment than most major foreign investment projects. There is much scope for big foreign firms to sit with government and local chambers of commerce on building backward linkages into local economies.

* In many settings, business and officialdom are the same individuals, families. Development policy must arrive at suitable frameworks for principled engagement if it is to influence policies for inclusive growth in such settings as Angola.

* In many places the risk is not that business will 'capture' the state and its regulators by having closer dialogue, it is that the state either neglects business or is predatory and extortionate.

Note that April 2014 is the first high-level meeting of the OECD-DAC global (business-government) partnership for effective development cooperation: see here. See also TPI's roadmap document ahead of this forum, here.

Jo

See the Global Compact's guidelines on responsible corporate engagement in policy debates on the development issue of climate change.

* The Economist 22 Feb 2014, p. 14, discussed in the previous post.

See here for some previous posts on the private sector's role in development.

Private sector, public goods: 'healthy partnerships'

The provision, financing and regulation of healthcare will be crucial if the best-case predictions of 'Africa Rising' are to be realised. Private providers may have a major role.

One key variable is whether public policy is open-minded enough to catalyse this potential -- beyond just the excitable rhetoric on public-private partnerships discussed in a previous post.

While some familiar patterns and problems persists, at least two broad shifts are underway in many settings. Many governments are ill-prepared for the first one, which is largely a function of demographic and economic trends: some long-term shift in aggregate disease burden towards non-communicable 'lifestyle' and diet-related diseases (such as Type-II Diabetes) associated with the 'new urban middle classes'.

The other broad shift is an increasing role for private funders and providers, not just in meeting the needs of high-income earners, but in mass low-cost, high volume goods and services, such as micro-insurance. As is true at many levels across the continent, considerable scope remains for innovative partnering, such as in Nigeria where the government piggy-backed on Coca-Cola's well-developed distribution networks to augment its own very poor distribution capacity in relation to spreading public awareness about HIV. There are public policy risks to such interactions, partner-picking and 'co-branding', but they are generally navigable.

Again as with so many things in sub-Saharan Africa's 40+ countries, there will be plenty of unevenness, with big variations within countries and as between different countries. One risk remains a growing quality gap between private and public healthcare, although some research (McKinsey) suggests that low-income groups in some countries make considerably more use of private, for-profit health services than is often assumed.

This is enough from me on the private sector and public health in Africa, since here in Oxford is a far more qualified commentator on the topic, Dr Serufusa Sikkide, whose recent blog post notes how being pro- the private sector's role in African healthcare is not necessarily an abdication of public-minded values and goals.

Implicit in Serufusa's post is that the most important shift in healthcare in Africa -- perhaps in its development more generally -- could be the mindset shift that looks to harness appropriate private sector contributions to the state's provision of public goods.

Jo

See here for a collection of some previous posts on related themes, and a recent FT article on a recurrent theme of this blog: the wider trend of engaging the private sector in development.

There is a lot of material on this topic. The issue of service-provision is somewhat distinct from public-private cooperation on healthcare goods, that is pharmaceutical products. There is a lot going on in that sphere.

See the IFC's 'Healthy Partnerships' report (2011) on how governments can engage the private sector to improve healthcare in Africa, and see here too (2012).

See here for the McKinsey report 'Healthcare in Africa: a vital role for the private sector', although now over 5 years old, and overview reports from well-known thinktanks, the reports linked here: WEF, CGD and CSIS

Finally, see here for some thoughtful contributions on the trade-offs potentially involved in increasing public engagement with the private sector in healthcare provision, albeit in South Africa, whose healthcare landscape is not analogous to most countries further north.

Inequality as risk: Davos 2014

What should business do about inequality?

Global patterns in income disparity between richest and poorest topped the agenda for global business and government leaders at Davos last week.

Expert respondents to the World Economic Forum's 2014 Global Risks report cited income inequality as the risk most likely, over the coming decade, to cause significant global disruptions, volatility and harm.

Many of the statements and media reports from Davos pointed out the (fairly obvious) 'business case' for paying attention to growing inequality: that at least for serious, longer-view businesspeople it is not merely a moral social issue but also a core strategic commercial  issue.

This is so both in terms of social and political risks, and opportunities to expand and deepen consumer markets. Very unequal societies exhibit distorted and uneven growth patterns, especially in terms of more broad-based demand. Especially for consumer-focused firms, the issue thus belongs not just to sustainability or CSR policy but to hard business strategy. In addition, as is clearly evident in parts of Africa today, as inequality becomes more tangible and visible it places governments under pressure. They respond by rolling out the sort of knee-jerk populist taxation and other policies that are anathema to business planning, rather than pursuing sustainable programmes to distribute some appropriate portion of wealth and to support those, especially the less privileged, who may seek opportunities to improve their economic status.

Conventional views would hold that the business of business in society is to help the economy grow, including by employing and taxpaying. It is then for government to redistribute some of the proceeds of growth in order to reduce any inequality that results. Beyond this basic role-division is the concept that if it is concerned about (the consequences of) insufficient action to address inequality, business can collectively lobby government to apportion taxed funds to doing so.

But what about a less conventional role -- business helping African governments not only to tax more effectively, consistently and fairly, but also to spend the proceeds more effectively in addressing social ills like income inequality?

At first glance it is assumed that businesses are not interested in having a more effective taxman. Yet in previous posts (especially here last May, also here) I have discussed the initially counter-intuitive idea that businesses can help strengthen their own regulator. Either by sector or in some other collective, representative grouping, firms with longer-term horizons in the region can and should explore ways to help governments build the capacity to assess, plan and execute social policy. Even a single firm (for example, the dominant mining firm in a single-commodity country) can do so: although this increases the risk of the firm 'capturing' the state, other institutions can be brought in to triangulate the relationship. These sorts of partnerships would at least give more meat to the rhetoric that public-private partnerships (PPPs) will transform Africa's economic and social development.

Last week's post on 'Africapitalism' reflected on the role of business in Africa in promoting inclusive growth -- not just calling for governments to ensure it.

Low or compromised state capacity in Africa impairs the state's ability to tax fairly and consistently, and to deploy and distribute those resources. In such settings it is perhaps not enough for firms to argue that they pay their dues and nothing more can thus be expected of them. It would be good (socially valuable) of business instead to look for ways to help the state make better use of taxed funds, including to promote programmes to boost incomes and income-generating capacity for lower earners and the poor. It would be smart and strategic for business to do so, too.

Jo

See an earlier post on PPPs, and on corporate responsibility and taxation -- including the view that strategic firms might help strengthen their tax authority: here.

The WEF's 2014 Global Risks report is here.

See for example this organisation dedicated to the role of business in addressing inequality.

Postscript: see Tobias Webb's post last week, also on Davos, and also on practical ways for business to help tackle inequality as part of a strategic approach.

'Africapitalism': the business of development

The idea is appealing that business, done differently, can transform Africa's social development path in ways that generations of aid have not.

 

This first post for 2014 responds to an interview last week with Tony Elumelu on his concept of 'Africapitalism'.

I discussed this in a post ('Doing good by doing well') last year: here.

 

The Africapitalism notion attempts to grapple with something that is, of course, partly a subset of broader global debates on fostering new, more moderate strains of capitalism. These debates inevitably involve argument on the appropriate role of the state in generating and/or distributing wealth; in Africa's case we certainly see today a hunger among policymakers (and donors) for new meta-models of the developmental state that balance various imperatives.

Whatever the merits of Elumelu's own ideas, it is hard to think of a more significant topic in contemporary Africa than something implicit in the Africapitalism concept: inclusive growth. Despite current headlines on ethnic and religious conflict, for the vast majority of the continent's people the big issue of the day is securing a material share in Africa's rise: reconciling the good-news story of Africa's fast-growing economies with the realities of often markedly increased inequality, stubborn unemployment, and persistent developmental problems. For this reason alone, the catchy term is a welcome addition to the 'Africa Rising' debate.

'Africapitalism' is not just an alternative to traditional aid programmes -- although traditional donors are certainly now explicitly looking to harness both the private sector's contribution to development goals, and the developmental impact of fostering a local private sector (see various previous posts). Instead, Elumelu's concept would seem to suggest that wealth-creation by the private sector must be done differently in Africa if it is to have any meaningful impact on the continent's development. Implicit in that is acknowledgment of the risks of non-inclusive growth. This is because social and political conflict in Africa can be something that happens because of fast growth, not despite it.

 

To my mind, also implicit in the concept is not just risk but opportunity: at first glance, 'Africapitalism' connotes in my mind the idea that because Africa's economic rise is relatively recent and still very incomplete, scope exists to shape a form of free enterprise that avoids the less desirable manifestations of capitalism experienced in the developed world. Or are we already a half-decade or more too late, given entrenched structural patterns especially around resource extraction, to conceive of this as a vast laboratory (if that is an appropriate mindset) for a form of capitalism that is more inclusive without stifling private incentive?

Is 'Africapitalism' about using the fruits of hard, conventional business to create social value (for example, sponsoring skills-acquisition or entrepreneurialism)? Or is it about an altogether different tone of business activity to begin with, one that is explicit about social contributions and is pursued according to certain ethical, social and environmental criteria? Ideally, there is no trade-off between 'hard business' and 'tree-hug business' -- ideally an ethical business model creates social value in various ways beyond job-creation and tax-paying while also generating the hard results (profits) that can then also be the basis for philanthropy.

 

Elumelu describes Africapitalism as a "middle point between business and philanthropy", although later he talks of "catalytic philanthropy". That would suggest an approach using the fruits of conventional business activities (like Elumelu's to date) to sponsor programmes supporting economic self-reliance and prosperity. If so, the approach is not radically different in conception to aid donors' private sector development and economic empowerment programmes.

Elumelu seems to suggest something more than catalytic philanthropy, although it is not entirely clear what. Investment in social infrastructure (in his case, electrification) may sometimes both make business sense and have massive developmental benefits, but does 'Africapitalism' mean no more than freeing up the private sector to provide Africa's public goods?

If so -- and whether one agrees or not -- missing from Elumelu's ideas is a clearer outline for the role of the state. He suggests that the private sector must lead Africa's development, and the public sector simply provide an enabling environment for that; beyond that, he suggests in the interview, "what is good for business is good for people".
 

What is needed is discussion reconciling this approach, which tends to imply a belief that wealth will 'trickle-down' to wider society, with contemporary discussions and patterns of taxation in Africa. Those discussions, and the models in favour in much of the continent, posit a central developmental and distributional role for the state, not the 'light and steering hand' that Elumelu seems to suggest.

Business may assume greater responsibilities, but how much serious developmental benefit is possible without a more capable state alongside? How is such a state to be built or reformed? If Africapitalism is to be more credible -- and so get the momentum and uptake this potentially inspiring notion deserves -- it needs to address this issue. Traditional donors were not just being old-fashioned in supporting governance reforms: they understood that the state (still) matters.
 

Jo

The politics of the private sector's role in development

This blog largely shares the evident current enthusiasm for exploring more imaginatively, as a matter of public policy, the potential explicit developmental contributions of the private sector.

By this I mean not the process of using aid to develop a more functional local private sector (for the development cascade that may bring), but harnessing the potential contributions of especially big business to the achievement of development goals, as well as including business voices -- as and where appropriate -- in debates about what those goals should be and how they should be achieved.

Many posts to date on this blog deal with the issues arising in such encounters and relationships. A major theme of those posts is that far from being enthusiastic about such engagements, many policymakers either overlook their potential or, if they consider the business community, are unduly ambivalent about exploring working together on issues of mutual interest.

There is, nevertheless, a wave of at least official policy interest from OECD aid donors in these issues.

(There is alot of material being produced. Perhaps the most comprehensive and reflective survey of global bilateral approaches is a Canadian one from January this year, Investing in the Business of Development (here)).

Thus having argued in many previous posts that the problem is arguably too little attention by policymakers to the potential 'synergies' and shared goals, I use my blogger's prerogative to suggest that in many respects there exists in parallel a contrary problem: an approach that sees engaging the private sector as a development panacea, without applying the same caution and critical thinking that is applied to donor-government relations.

Indeed one thing particularly commending the 2013 report referenced above is that it rightly expresses skepticism about this new policy orientation as a development 'silver bullet', arguing that many current advocates assume that from harnessing business's interest and attributes, a 'win-win-win-win' situation must result for communities, companies, donor and recipient governments.

Such assumptions (and the enthusiasm they engender) pay too little attention to just how political, as with 'regular' development, pro-development interactions with business will be at both the general and project-specific level; in pointing out the obviously huge shared public and private sector interests in peace and prosperity, they can tend to gloss over how politicised is the question of who one means by 'the private sector' (who gets a seat at debates to shape the post-2015 development agenda? Which companies does a donor agency engage or neglect? And so on).

Thus current enthusiasm for orienting development policy in search of alignments with business tends to underplay how political, indeed ideological, will be the questions merely of choice -- choosing development partners from among the diverse 'private sector' (for working with on goals, or for discussing those goals), and indeed choosing the overall policy of building such relationships. Such choices go directly to large questions about the role of business in society generally, or the role of the state vs business in providing public goods.

In previous posts I have lamented the narrow-mindedness of most public policy for not thinking imaginatively enough about engaging with business (and vice versa). This reticence does, however, reflect very real awareness of the policy dilemmas involved and often well-founded reservations about explicitly tying-in business to development projects and policies.

Still, I'll conclude in a tone that continues the lament: yes, the decision to engage business, and then the process of doing so, is full of policy minefields and trade-offs and problems; but these are not that different from the problems and dilemmas encountered in dealing with governments and other familiar development actors. The challenges of our century are too big and inter-connected to be left to public policymaking alone, quite apart from the reality of the huge de facto development impact (for better or worse) that business activity has. One needs as many 'wins' as one can reasonably find. Public and aid policy in Africa should embrace embracing the private sector, and figure it out as we go.

Jo

Megacities and the development impact of business

This post is written in Cairo -- where the developmental challenges of current and future megacities are manifest even to an untrained eye.

It is a fitting place to read a new book ('The Turnaround Challenge') co-written by Mick Blowfield. Subtitled 'Business and the city of the future', it deals with a host of sustainability and social challenges, and the potential for innovative business practices and models of capitalism that might mitigate or address these.

That is the point of this short post, really: rather than reading my thoughts, I commend the work itself.

This post also comes ahead of a visit next week to North America for various roundtables on the role of business in meeting development goals; next week includes a debate on 'corporate social enterprises' at CSIS under Chevron's 'Forum for Development' speaker programme: see here. For a primer on the sort of things under discussion, see the IDG's report (about a year old now) on the topic of business contributions to pressing development issues: here.
  

The role of the private sector in meeting global development goals is a recurrent them of my blog -- see some posts grouped here.

[Cairo traffic hooted and crawled throughout the making of this blog-post ...]

Jo

Public-private partnerships in Africa: presumptions

The dismissal last week of Malawi's entire cabinet (following a procurement fraud scandal) is easily dismissed as yet another corruption headline. But it also provides a hook for a little-mentioned aspect of public-private partnerships (PPPs) -- among the most fashionable concepts and phrases in current African economic and social development.

Although there is a strong scent of doubtful panacea about PPP-talk and often little precision offered on what exactly such relationships entail, there are many obvious advantages to seeking to crowd-in private sector funding and other support for government schemes. (This blog favours greater engagement with the private sector by governments in pursuit of public goals; see for example the previous post, here).

When PPPs are idealised, societies can see big business become more directly involved (than the indirect means of taxpaying) in the co-provision of public goods; for its part, business can envisage greater influence over the roll-out of infrastructure and other projects, reassured -- by the state's involvement in the project -- about its long-term prospects and return-on-investment.

Yet less ink is usually spent on what these relationships require, beyond viable co-financing arrangements, to work.

In particular, current PPP enthusiasm tends to presume that the public sector ministry or department can in fact deliver as a partner. The Malawi story highlights familiar accountability, transparency and integrity problems with many government departments in that sub-region, but the issue will also be one of sheer capacity and the available skills-base.

The issue is important to debates on promoting pro-developmental business in Africa because PPPs assume a class of public servants and regulators capable not only of delivering utilitarian projects but of conceiving and overseeing PPPs that strive to meet public interest (social, environmental and governance) criteria as well as commercial attractiveness ones.

I think that the issue I mean to address is this: 'We often assume that the difficulty is getting business to take the wider issue of public goods seriously; but many firms accept the merits or imperatives of development goals and are often waiting for a government lead and direction; so, what do hopes for scaled-up public-private relationships in pursuit of developmental goals assume about the quality of public servants, rather than just the motivational posture of private firms?'

It would be interesting to see survey data on whether the majority of today's non-migratory young graduates in major African countries prefer a public sector job to a business/corporate one.

It is often assumed that private sector roles attract the more dynamic, enterprising and capable cohorts, while supposedly more secure but lower-paid government jobs attract those who are more risk-averse, have public service motivations, and so on.

In less-developed African countries, as business-government interactions increase around PPP models, one question that will arise more starkly is the potential drain of government talent into corporate teams. Firms may face dilemmas since their instinct to 'poach' an individual may clash with their sense that more will get done on their PPP if the talented individual remains in government. One idea is for the private sector partner to sponsor government counterparts -- as if seconding them -- to ensure these remain in government; this sounds like a recipe for corporate capture of government agencies but, if not too naïve, holds the promise that PPPs can deliver projects without stripping departments of their best staff.

The Malawi scheme was not particularly sophisticated, but does reveal a degree of entrepreneurialism within government agencies that in commercial life would be rewarded, in relevant appropriate circumstances (see this reflection on the upsides of 'corruption as innovation' here). Yet the Malawi conduct is not the sort of 'initiative' and 'innovation' that PPPs require of public servants if PPPs are to make meaningful impact, as a model, on African growth and development.

See a previous post on 'revolving doors' and the private sector's responsibility for public sector integrity as Africa rises.

Jo