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

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.

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

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

'Africa Rising': enhancing public-private ties

It is easy to discern the coexistence across Africa of fast GDP growth rates alongside significant (and in places growing) deficits in infrastructure, service delivery and regulatory capacity.

 

This phenomenon not only prompts the question 'what counts as success?' in the current 'Africa Rising' debate, but also prompts reflection on ways in which business-government relations can be (appropriately) enhanced or reconfigured to ensure that economic growth is more sustained, inclusive and pro-developmental.

 

This week (18-20 Sept) sees our firm's annual 'Global Horizons' conference here in Oxford. One conference sponsor has elsewhere identified enhanced government-business ties as one of six macro trends shaping the business world into the future (see here).

 

The Africa panel is entitled 'Measuring Success' while the discussion groups on Africa follow the sub-theme 'Growth, Governance and Public Goods'. One topic we may be discussing in the Africa sessions is what political, policy and practical issues arise in relation to the private sector becoming more explicitly or directly involved not just in infrastructure development, but in institutional strengthening.

 

For instance, if the longer-term answer must lie in African governments' abilities to tax and spend/distribute more efficiently and fairly, is there a role for corporate tax-payers to assist in this regard? At first glance, no firm seeks to create a more robust tax-man; yet over time, some firms might come to see that improving host government capacity to deliver public goods might help reduce local expectations that firms will do so instead.

 

Meanwhile, blog readers will discern that I'm very much an advocate of exploring greater engagement by and with the private sector in pursuit of greater quality and accessibility of public goods in Africa, but some voices take this too far.

 

It is one thing to note that austerity on the part of donors -- along with self-interest or impatience on the private sector's part -- is leading to greater attention to the latter as a stakeholder in meeting development goals. It is another thing to simply substitute firms for donors when thinking of solutions to enduring developmental problems.

 

Yet this is what one sometimes hears from some of the more enthusiastic supporters of the private sector's developmental duties or role. On this view, donors' retreat is not a developmental problem in Africa because business will step in with funding and expertise; or, one only waves a magic wand called 'public-private partnerships' and all ills are solved.

 

This is unrealistic, even if donor austerity does provide multiple opportunities for re-thinking strategies for Africa's (self-) upliftment, and even if much of Africa's developmental challenge may lie more in better assessment, levying and use of tax on private sector activity than in aid disbursement. It is also unsatisfying, because for all the chorus on PPPs as a commercial and developmental panacea (and for all their undoubted potential as a concept), one seldom sees much precision on what form these should take for particular sectors or services. 'Enhancing ties' between business and government is appealing but also raises a host of questions about proper roles and relationships, ones that require unpacking.

 

Any transfer of focus from donors and/or governments onto the private sector is not in firms' interests; but it is not necessarily in the wider public interest either -- despite the untapped promise that undoubtedly exists for harnessing business more directly to poverty-reduction, environmental management, and inclusive growth.

 

Jo

 

Previous posts have noted (or advocated) growing attention to the actual or potential alignment of public goals with private sector interests in Africa's development: see recently this post which groups some of them.

The private sector's role in poverty-reduction, development and peace

Development policymakers and practitioners are discovering this thing called the private sector, while business leaders are becoming more fluent in developmental issues.

Many observers are cynical. Much remains at the level of rhetoric. Much of the interest is a by-product of development aid austerity. But although it matters what motivates various actors (and until history ends with some universal consensus about how best to develop peacefully, sustainably and equitably) this current trend of debate is overwhelmingly a good thing.

The theme of this week's 10th Brookings roundtable on global poverty (albeit held rather ironically in Aspen, Colorado) is the role of the private sector in the new global development agenda, that is, the macro-framework to replace the 2000 Millennium Development Goals (MDGs).

Next month, the annual UN Secretary-General's 'Private Sector Forum' during the opening session of the UN General Assembly will consider the same topic -- the role of the private sector in shaping and delivering the post-2015 development agenda, this time with a focus on Africa.

This short post just provides a flick to recent previous ones I've done discussing this topic: see in particular here and here on the private sector and the post-MDGs.

Other posts include: the residual tendency to ignore the private sector when defining who counts as a 'stakeholder' in peace, security or development -- see here; thoughts on why development colleagues should be so surprised that the private sector might have a role in their world -- here; and the new pragmatism about the private sector's role that is evident in this decade -- here.

The trend is gathering strength. On the topic I follow particularly closely -- the private sector's role in peacebuilding -- the UN system was largely silent until very recently. A UN forum (see long video) on the issue in June marks a growing recognition of the need to engage with business in building more peaceful, prosperous, inclusive societies. It is good to talk -- although one is often tempted to say 'less activities, more actions'.

Jo

Taxation and corporate responsibility in Africa

For those following African issues, of all the current topics of global debate about the social impact of business or public-private sector relations one stands out more than others: corporate taxation.

 

Here the tax-tightening agenda of developed but revenue-strapped G8 governments now somewhat aligns with that of developing African governments.

 

The recent 'Africa Progress Panel' report highlighted the extent of unrealised revenues lost to African governments through practices such as transfer pricing; the Zambian government, most notably but hardly alone, has continued in recent months to move on its promise to tighten compliance with existing tax and duty requirements on foreign firms in its mining sector.


 

The relationship between tax issues and corporate responsibility ones is fairly simple, at least in the resource extractive industries in developing African countries.

 

A principal (and principled) argument available to a mining firm under pressure to 'do more' for its host community or country is that along with paying its employees, it pays taxes to the government, whose responsibility it is to provide services and infrastructure to the population. On this classic account, it is the government, not the firm, that should be primarily accountable to the public about the use made of tax revenues. For instance, in March 2012 I heard Ivan Glasenberg, CEO of Glencore, make this argument forcefully if rather unsubtly during a panel on 'resource nationalism' in Africa.

 

Likewise, when faced with government attempts to raise a firm's taxes, royalties and duties, an argument available to a firm which has made extensive local social investments is that the firm should be spared further increases since it is carrying some of the state's social spending burden.

 

The public relations or political risk vulnerability for firms is that if it transpires that their effective taxation levels or volumes are in fact far lighter than is widely assumed, the first-mentioned argument loses its force.

This is particularly so for firms in sectors that despite their revenue by nature do not create a lot of local jobs, something that would otherwise help illustrate their social value even if their tax footprint is low.

 

Of course the dilemma for firms which spend heavily on their social investment side, believing that it is pointless to wait for the government to translate taxes and royalties into palpable gains for the host community, is that the firm's uptake of this responsibility removes the incentives on the government for doing so. Moreover, the firm may pay tax to the central government but be answerable for local conditions to a provincial or municipal government, whose relations with central government may be beyond the firm's control. 

 

Technically speaking, tax issues are matters of legal obligation -- one is either liable or not -- whereas issues of 'corporate responsibility' tend by definition to relate to things done despite there being no legal requirement to do them.

 

The recent first issue of our firm's 'Business and Society Monitor' observed that taxation is one issue that has largely not been framed in the language of 'corporate responsibility' -- no doubt for the legal / voluntary reason just mentioned, yet despite the close relationship between tax and corporate social investment discussed above.

Given the often blurred or highly technical nature of compliance (which underpins the distinction between 'avoidance' and 'evasion' of tax), the Monitor implicitly noted that it would be unsurprising if mainstream corporate ethics, corporate responsibility and related debates increasingly focus on taxation issues. A parallel development is that increasingly social investment issues are covered in investment contracts, so that they become legal issues; this can be in a firm's interest, since it delimits the extent of its otherwise open-ended non-legal responsibility.

 

Like the issue of revenue transparency that the UK will push at this year's G8, taxation issues relate to much broader questions for African policymakers about competitiveness in attracting foreign investment, in the absence of cooperation from peer (competing) governments on uniform approaches to revenue management.

 

One strategic consideration for major extractive industries in Africa is their interest in reducing the share of national revenue for which their industry accounts. That implies that those in the oil sector, for instance, should be interested in boosting the non-oil economy (and non-oil or oil-related employment) in their host country, increasing the number of tax-paying firms and decreasing their exposure as single dominant sources of government revenue. Initiatives such as Tullow Oil's 'Invest in Africa' scheme reflect an understanding that for an oil firm, a booming non-oil sector is directly in its commercial and government relations interests.

 

Jo

 

For a recent post distinguishing (corporate) responsibility from (government) duty, see here.

 

These issues are raised in multiple previous blogs, see for example here on social investment by the mining sector in Africa.

Stakeholder rhetoric: ignoring the private sector

A mindset shift is needed to ensure greater engagement by authorities with the private sector in tackling some of Africa's most pressing public interest issues.

One standard criticism of corporate responsibility initiatives is that they only give superficial lip-service to their promise to engage a variety of other stakeholders.

However, this failure to match rhetoric with reality applies in a different and contrary direction: governments and their multilateral bodies dealing with major developmental, governance and security issues often speak of 'engaging all stakeholders' -- only to then ignore the private sector.

This post comes from Rome, where I'm part of a high-level EU meeting considering strategies to respond to organised crime and drug trafficking along the 'Cocaine Route' from Latin America to Europe -- via West Africa and the Sahel-Sahara.

A background paper for the event makes some mention of engaging a "diverse group of stakeholders", but only mentions the private sector at one point in relation to "advocacy strategies" to create a groundswell against organised crime and corruption.

I find it extraordinary that the invitation list for such an event includes no-one from chambers of commerce in key port cities, port and airport logistic firms, banks and others interested in preventing money-laundering, and so on. It is all diplomats and cops -- although some civil society groups are represented, businesspeople and their umbrella groups are not.

Of course, if you define 'multinational private sector' broadly enough, transnational organised crime is par excellence a multinational business activity. It is an illicit one, but large-scale illicit activity is difficult to sustain without passing, at some point, through the licit economy (if only to launder the proceeds of crime). Speaker after speaker here in Rome has highlighted drug traffickers' remarkable innovation and capacity to respond: yet one licit source of resources, capacity and interest (the private sector) is again overlooked as a relevant 'stakeholder' in promoting less corrupt, more crime-free growth and development in Africa.

Innovation in public policy extends to re-thinking who may count as partners or can in some way be co-opted.

This sort of innovation is generally lacking. My doctoral work examined how authorities engaged in post-conflict recovery have tended to ignore the scope for engaging the private sector's capacity to contribute to building peace. From Sudan to Solomon Islands, the problem I found was either authorities' undue ambivalence about engaging the private sector, or ignorance of the potential contributions of businesspeople to achieving public goals.

This sort of mindset leads to the anomaly that one can attend a major conference on international supply chains in drugs without any attendee from the private sector: banks, airlines, ports authorities, shipping firms (and all their insurers -- a node for regulatory influence).

All the 'holistic -- multi-stakeholder' rhetoric rings hollow in such a context.

Jo

See a related previous post, here.

A link to the background paper is here.

Public trust in the private sector in Africa

One recurrent theme of this blog is reflections on building trust between government and business in Africa.

But what do we know about levels of citizens' trust in / of big business in Africa -- and the potential utility of such trust as a possible resource for achieving public goals?

In the context of current Cypriot banking woes, this week's blog-post is prompted by an article in last week's Financial Times on what recent survey data in developed countries reveal about declining public trust in banks and corporations.

A cursory search does not yield equivalent opinion poll data across African countries. Afrobarometer of course surveys public attitudes on democracy, corruption and so on -- but almost nothing on 'the private sector', 'corporations', or 'business'.

Yet I'd be surprised if the average African survey respondent would be as sceptical of corporations as their peers in Europe. (For instance, the high proportion of unbanked Africa citizens does not necessarily reflect lack of trust in private financial institutions but rather issues such as the level of middle class development in many African economies.)

If this intuition is correct, it may nevertheless be highly variable as between sectors -- mobile phone companies, for instance, may be more trusted by consumers than their corresponding ministry or regulator, but this may not be true for extractive industries; it might also be subject to variation across countries -- South Africa's public is no doubt more familiar (for better or worse in opinion terms) with big-name firms than is Mozambique's.

One would need respectable data. Some of what data-sets do exist are inconclusive of the relative trust of public institutions compared to private service providers (eg academic studies on comparative levels of trust in public and private healthcare provision in previously isolated economies). Like all such surveys, any one on this topic -- what are the levels of public trust in corporations in Africa -- would turn on methodology and framing of questions:

* It would, I suppose, be necessary to distinguish brand loyalty or aspiration from more general, almost ideological attitudes toward private business actors and activity in and across different African countries.
* People may trust foreign firms more than their own government, or more than the firms' country of origin, or more than citizens in other emerging regions do. Yet they might at the same time potentially not trust policies of market liberalisation which encourage such firms' entry [*].
* On this wider topic, distrust of government and distrust of business may be linked, where distrusted political elites control business activity, or where it is difficult to distinguish predatory or exclusive business activity from government action. Many people's encounters with bigger businesses in Africa will, moreover, be with state-owned firms.

The wider question -- here more a form of thinking aloud -- is whether, if the intuition is well-founded that in many developing African countries people might trust companies as much or more than government, or trust them more than in developed countries, this creates a potential resource for improving social and economic development outcomes:

* Aid agencies might think afresh about partnering with big business on the basis that the latter's perceived trustworthiness creates a platform for innovative strategies that have mutual benefit for agencies and corporates;
* If public-private partnerships remain the buzzword of African development and the private sector is envisaged to have an expanded role in meeting development aspirations, it would be useful for strategy-formation to know whether people trust businesses (of various kinds and origins) more than local or foreign public and civic institutions.

That is, if surveys revealed that many citizens in African countries do not hold a jaded view of important kinds of companies, this is one factor for firms in conceiving fresh ways of doing business and relating to publics and authorities in ways calculated to preserve and enhance mutual trust. This might hold important portends for regulating corruption and greater revenue transparency -- as well as mitigating the risk, as African economies grow at rapid rates, of future highly disruptive discontinuities that might occur from a serious deficit of public trust in the market-place.

Finally, I wrote this post with big business (multinationals) in mind: like the citizen's relationship with government, it implies a somewhat vertical relationship. Of course, most (by number if not value) of the commercial transactions on any given day in an African setting are typically more horizontal, between individuals and groups. There trust is a vital resource in stable relationships of exchange and value-creation. One does not need to adopt a fully market-led approach to development to agree that building trust in relation to smaller-scale and less formal business institutions is likely to increase the potential for economic vitality capable of having transformative social and developmental benefits.

Jo

ps, for one of the various posts where business-government trust is discussed, see here.

[*] = ps, for one academic study on public opinion democracy and market reform in Africa, see Bratton et al, here; for an example of one country study on attitudes to pro-market reforms see here (Ghana -- Afrobarometer).

Private innovation, public goods: leapfrogs, short-cuts and pragmatic principles

If they both reflect a kind of innovation, how do we distinguish 'corruption' from 'entrepreneurship' -- and encourage only the latter?

In my day job covering contemporary Africa's political economy, two distinct narratives have consistently high prominence -- and I wonder about the link between them.

One is the hugely debilitating effect of various forms of corruption -- manipulating public goods and processes for private ends. The other is the much-praised capacity of individuals and groups to make ends meet (or even multiply) despite poor or problematic public services and systems; one constantly encounters anecdotes about how this is a continent filled with highly innovative and enterprising people whose irrepressible spirit of commerce and exchange holds great promise whatever the state does or fails to do.(*)

How can we see these as part of the same issue, not as unrelated parallel stories?

Is it possible to find -- in admiring the ingenuity involved in some corrupt or illicit practices -- some silver lining about the scope for more efficient, effective or legitimate relations between those in public office and private firms or individuals? (**) Can the same spirit-of-enterprise that sometimes manifests as corruption be harnessed to increase not constrict public choice? Can the particularised trust that enables corrupt relationships be seen as the same raw material from which one can envisage a richer reservoir of generalised trust in which greater and wider prosperity is possible for more people?

Most literature focusses on how corruption stifles innovation because, for instance, it undermines trust in how a partial state might treat the fruits of any enterprise (see for example Mauro 1995; Mbaku 2007; Anokhin and Schulze 2009; cf. Mironov 2005). But what if at least some of the same creative thinking that goes into corrupt practices is from the same pool or resource of spirit-of-enterprise that might be capable of finding useful good short-cuts or leapfrogs that make government more efficient and responsive and better able to serve the wider public interest? (***)

Thus how do we foster 'good' creativity and innovation by private entities and individuals not just in commerce or social services but also in designing or influencing the provision of public goods such as security, public financial integrity or the rule of law?

You will see that I have no idea! This post involves fumbling about in the hope of stumbling upon the beginnings of a theory that manifests principled pragmatism and looks for ways to see how transactions and relationships that appear illicit and damaging may have lessons in terms of regulating the interface of private interests and public authorisation, which is where corruption occurs. If I find it I will also find a neater name than 'Governance-by-outcome-not-process'. It is in procedures that opportunities for corruption lie; those who seek to short-cut such procedures (for nefarious or even just frustrated reasons) may be telling us something about designing institutions and regulations to minimise opportunities for rent-seeking by officials.

There are familiar balances involved in idealising forms of regulation and governance: for example, one wants public servants to be responsive and pragmatic (accessible and clean), but not too responsive and malleable (accessible but corrupt). Moreover, of course, not all the regulation that matters or works comes from the state. We talk about fostering 'bottom-up' initiatives, but are also typically sceptical about those that come from non-state sources.

But I don't mean this -- rather I mean being prepared to accept (a) that some corruption fosters growth or distribution, or indicates that formal licit approval is too hard for some sectors of the public (ie, corruption could represent a reaction to bad policy, a sign that governance is not working or is requiring anti-social short-cut actions which could instead be investigated and the innovative approaches directed towards pro-social outcomes); (b) some corruption nodes indicate bureaucratic bottlenecks that simply should be relaxed or removed (rather than 'strengthened' by anti-corruption measures) and (c) corruption sometimes indicates that individual actors have found a more efficient route than policymakers prescribe, which may have virtuous implications (see for example Leff 1964; Bailey 1966).

This is all rather undercooked, but represents an attempt to think about how to design systems of governance and development-promotion that instead of requiring innovation in terms of ways to get around regulations, designs regulations that stimulate 'good' short-cuts and leapfrogs that help point officials towards making government both responsive and responsible. I stand ready to be accused of rank naivety...

Jo

* = Often, of course, it is less romantic things at work, and what is cast as 'enterprising' is instead just about survival or subsistence; that is, adversity and necessity -- not just curiosity or the promise of commercial gain -- are a major source of inventiveness.

** = The other point to note is that much of the most damaging corruption (in Africa and around the world) is not particularly innovative: often it is just a blunt and blatant act of taking (or withholding, for example of tax obligations) that does not require strong entrepreneurial skills to find ways around barriers, it only requires weak systems of oversight and accountability. Moreover, from the perspective of those marginalised from their proceeds or benefits, formalised systems of governance may be seen simply as private enrichment systems dressed up as public order. It depends on one's view of the legitimacy of the state and its processes in any one setting.

*** = A somewhat related question is the opportunity cost of anti-corruption and accountability systems -- some (eg Anechiarico and Jacobs 1996) argue, in effect, that effort should rather be directed to supporting 'good' creativity in governance rather than trying to stamp out 'bad' creativity...

'Revolving Doors': the private sector and public service integrity in Africa

African countries' current high growth rates raise a host of governance issues, too.

One contemporary African policy dilemma is to facilitate greater understanding and cooperation across the public-private divide, without familiar problems such as firms 'capturing' (unduly influencing) their own regulators.

Given the pan-continental shortage of skilled management-level staff, one current under-played strategic issue is how to build (and retain) a competent cohort of public sector regulators and policymakers, when local and global firms (and, importantly, state-owned 'private' enteprises) expanding in Africa seek to hire people from the same shallow skills pool.

Related to competency questions are integrity ones when firms seek to hire public servants precisely because of their political / policymaking contacts and influence.

Yet there is nothing new, nor unique to developing countries, about such patterns of moving across to the private sector -- just visit Washington DC's massive defence procurement establishment. Moreover, with all the focus now on the private sector's role in meeting public ends, there are strong arguments for encouraging public servants to understand and experience the private sector better, and vice versa; indeed, in a late-2012 post I wrote to that effect on 'building trust' between government and business -- here. In various other posts I've argued for more flexibility about secondments and business support to developing regulators' capacity (see here, for example, in post-conflict weak governance settings).

Of course, such ideas come with a risk of regulatory capture or corruption. What can Africa learn from Asia in terms of the 'revolving door' -- maintaining integrity and performance when officials move seamlessly between 'private' roles and public office?

My work colleagues have published various insights on these issues -- in relation to India, for example, where conflict of interest arise given how readily ex-officials join semi-privatised or fully private conglomerates. But how -- even without the benefits of public-private movement of staff, or the inevitability of it -- are such issues to be policed in African settings? Western practices do not necessarily offer an example, and non-Western practices may reflect a genuinely different (less rigid) perception of distinct public and private business spheres. Moreover, a recent analysis by one of our firm's experts noted that curtailing the prospects of entering the private sector later in life would deter talented people from joining the public sector in the first place, and why shouldn't they be free to 'cash-in' on their skills if the private sector find these of value?

That analysis looked at the growing tendency towards measures such as insisting on 'cooling off' periods (before taking up a private sector job), or undertakings to refrain from direct lobbying of one's former government colleagues.

In African settings, a company would weigh the reputational risk it faces by hiring from its regulator or relevant ministry with the benefits such person would bring in understanding official positions and postures. From a public policy perspective, the fear is that fast-growing economies see their best and brightest officials poached to the private sector or parastatals, or a very blurred set of networks and lines of influence that, in the long term, obscure the chances of building a more competitive, transparent economy capable of sustaining higher growth and widening it to beyond just a few sectors like mining or oil-gas.

This dilemma (foster greater public-private dialogue, but gaurd against undue influence) will not be resolved easily, if at all.

Jo

Ps -- See here for one interesting read / guidelines on the dilemmas of what is proper in engaging in public-private dialogue. This relates to the wider issue rather than the revolving door dimension of it.

Business after conflict

This week in Nairobi (November 28) is an interesting conference 'Business after Conflict' to discuss, among other things, what donors can do to attract and support investment and promote conflict-sensitive business practices in places like South Sudan, Guinea, Ivory Coast.

There is much to be said. Cambridge University Press is next year publishing my book on engaging the private sector in peacebuilding, so for now just a brief thought about one practical idea for conferences like this.

Its a thought we discussed last week (November 22) in London under the umbrella of the Invest in Africa initiative. And it relates, like that initiative, to what major private investors -- not donor or host governments -- can jointly and individually do to improve the post-conflict investment regulation climate and mitigate both the perception and reality of regulatory (and other kinds of) risk in such settings.

Responsible businesses do not wish to operate in a regulatory vacuum, but some post-conflict settings will display serious weakness in regulatory institutions. In such exceptional cases there's an argument for firms helping -- by secondments of their own staff, or sponsored salaries of transitional experts, for example -- to boost the capacity of local government counterparts in (re-)creating and managing a stable regulatory climate.

In my experience, often a big mining firm entering a fragile setting will poach the best local talent to work within that firm's local offices. Yet it might make more sense for the firm to support the government's retention of such staff within the regulator, to improve the framework under which they operate.

Moreover, re-entering or interested firms can work together (and with local chambers of commerce) in such a scheme. Donors [in theory] coordinate in post-conflict settings -- so should firms, even those ostensibly competing. All probably gain from the reduced financing cost, for example, of a setting with a better reputation for regulatory capacity.

Donors and multilateral agencies -- and civil society watchdogs / capacity-builders -- would have a role to play in triangulating such relationships to avoid the risk that business will compromise its own local regulators by capturing these institutions or distorting their activities (or be seen as doing so). Secondees would avoid crowding-out local regulatory talent by gradually handing over roles.

I wrote on this in a previous post on the need to explore ways that good business can help build the environment that good businesses find attractive:

"... Attracting good firms to risky places is hard enough as it is ... it seems sensible to be more flexible about firms (not just donors) ... helping host governments with things like boosting the capacity of local regulators to regulate in a predictable, purposeful way. In such relationships lie many points to leverage for more responsible business conduct, and higher governance standards by public officials."

Jo

The previous post I've quoted from is here.

See the Invest in Africa initiative (founded by Tullow Oil) here.  

Business and government: building trust

Many things need to change if we are to see more meaningful public-private cooperation on meeting development goals. An important yet simple one may be public service mindsets.

Here I mean those working in the foreign aid departments of major Western donor governments. The recent mantra about engaging the private sector in development (especially as austerity constrains the aid budget) has not necessarily resulted in a greater enthusiasm or pragmatism in talking with companies whose conduct in developing countries may enhance or complement the aid agenda.

Last week I had a conversation about corporate lobbying and private sector access to government policymakers. Typically, the concern one encounters is of undue and unseen influence by some business interests while other struggle to get a decent audience with government. (It is of course a question of balance -- see previous post here.)

Here I am talking of the reverse situation: where public policymakers seek to influence corporate policy. Of course that is what regulation involves, but I mean more generally a practice of seeking out conversations with business, exploring avenues to create 'shared value' by coordinating, for example, corporate social investment spending with official aid projects -- where and to the extent appropriate.

Even where they accept or embrace the notion of securing their 'social license' to operate, many business actors might have a range of reasons to be cautious of being approached by officials for discussions about making more explicit or substantive contributions to development outcomes. For instance, the well-known 'slippery slope' fear that firms might be left to carry the bulk of the responsibility for providing public infrastructure and social services in developing country settings.

This caution about talking to business exists on the part of officials, too. But much of it may be unjustified and a missed opportunity.

A number of recent experiences reinforce a finding I made in my PhD research about the reluctance that many in the UN system display for engaging with business in post-conflict peacebuilding. That is, I think public servants working in the development field largely have a blindspot for how business can positively affect their goals. Ignorance of the commercial world, suspicion of its agendas and people, fear of being 'tainted' by association -- these are some of the reasons why policymakers' recent rhetoric on engaging more with business on issues of mutual interest is not matched by action.

Take a recent London event exploring how Japanese and UK firms and government departments can cooperate towards responsible business opportunities in Africa (see here). There Sir Malcolm Bruce MP, chair of the parliamentary committee on international development, argued that the biggest obstacle to scaling-up these sorts of relationships was that most of those working within the Department for International Development (DfID) did not perceive business as a relevant development actor that should be understood, met, partnered.

There are (and this blog has explored) myriad reasons to be sceptical or cautious about the ways that business and government interact; DfID's role is not to enhance the interests of one or other firm, but to serve UK national interests and the global development agenda. It is also important not to perpetuate myths about private sector efficiency or altruism. Nevertheless, much of the existing appropriate scope for getting more out of the developmental potential of business-government cooperation is wasted. I think this mindset problem in officialdom is a large part of that.

Jo

Branson's 'Plan B': Better business in Africa

Does capitalism in Africa have a 'Plan B?' -- a version more promising yet socially-environmentally palatable and politically possible?

Sir Richard Branson last week launched his 'Plan B' initiative -- as The Economist describes it, a small group of business leaders who will campaign for reforms to make capitalism more socially responsible and more inclined towards addressing long-term issues such as climate change.

Much of what is happening in contemporary sub-Saharan Africa appears to involve a search for suitable models: an overarching idea about what development should look like and the relative roles of the public and private sector -- along with all sorts of hybrid initiatives -- in delivering both individual prosperity and public goods.

This search for a 'meta-narrative' to guide economic growth may be nothing new, but nor is there yet a post-'Washington consensus' consensus. African policymakers' perceptions of China's rise and developed economies' woes are the obvious backdrop for these debates, which are largely dumb to all the lessons and literature on the limits of transmitting or transplanting one model of governance or development to another setting.

This search -- and the appeal across Africa of the 'Beijing consensus' / state capitalism -- makes especially relevant, in this decade, the question of what model of capitalism (or aspects of it) will prove most persuasive or pervasive in various African settings, and what indicators will matter in judging performance -- the quality of growth, including its capacity to address inequality.

Will African policymakers find ways to enable the private sector to do well while doing some good, or is such an enquiry naive in the context of heirarchical market economies that may be neither liberal nor communitarian, and where politics so often matters far more than policy, and public/private distinctions are less easily discerned? What was the Plan A in Africa -- has it demonstrably failed, requiring a Plan B, or was there no African setting that exhibited type-A capitalism anyway? Can African economies avoid the angst and analysis and just leapfrog straight to Plan B ('nice' capitalism) or are current patterns structurally entrenched and impervious to reform?

One reaction to the Branson idea labelled it 'fascist' for suggesting that modifications to unrestrained free enterprise were appropriate. Yet the (anti-fascist) democratic impulse is what drives many of the voices calling for Africa's development to be greener, friendlier, more inclusive. It involves a constituency that mainly looks to the state to ensure that this happens, even while most African entrepreneurs (from street hawker to super-tycoon) find the state, when not being an irritant, largely absent or irrelevant. African capitals have not experienced direct equivalents to the 'Occupy Wall Street' phenomenon -- but governments are in little doubt of the mass expectations to deliver electricity, jobs, services. How private enterprise behaves or belongs in such scenarios -- scapegoat or strong deliverer -- is something governments are working through. This is hardly the end of history.

I see this search for models in many areas I work on: east African governments with new-found offshore gas wealth wondering how to develop these, and manage the resulting revenues, more like Norway has than Nigeria -- more East Timor (Timor Leste) than Equatorial Guinea. More responsible policymakers in these settings are asking what an appropriate, viable model for natural resource wealth management will look like. To the west, Nigeria's current presidency is trying to sustain momentum on ambitious policy reforms that go to the heart of broader notions of the state's role in major sectors of the economy. South Africa's ANC, channeling (as it sees it) Brazil and others, is rather painfully exploring what role private finance and business plays in its vision of the 'developmental state'.

During a rail journey to London on Friday I chatted with a schoolgirl whose Economics essay assignment asked her to write on whether the government had a role in addressing poverty or whether this ought to be left to market forces. Simplistic stuff, you might say -- except that its the gist of this year's US presidential debate, and not long after the train journey I sat in a meeting with a major development finance outfit. There we discussed fairly 'back to basics' things: if we are to devise a compelling (accurate-yet-aspirational) agenda for Africa-focussed developmental funding with a commercial bottom line, what does all the current fashion for promoting 'public-private partnerships' as the engines of growth and poverty-reduction actually mean? Where exactly should the state's role end and that of commercial actors begin, even if they share the same broad social development agenda?

The more one looks, it seems to me, the more Tony Blair's remark earlier this year -- that Africa is in a 'post-ideological era' where Cold War-style debates are long dead -- makes no sense. It is not just that 'the state is back' (in many settings is never went away, even if it never matured). It is that deep political imperatives -- especially the need to create jobs for the continent's youthful, restless populations -- are challenging African leaderships to devise models that appease both those holding scarce capital, and local forces imbued with a new assertiveness about the local value-addition that investment must bring to be seen as legitimate.

Perhaps above all -- and even if one's only interest is essentially a conservative one, continuity not sudden change -- a Plan B for Africa would need to focus on social inequality. That is, increasing inequality gaps in many African settings from Lagos to Luanda mean that any Plan B must, to be sustainable, include ways to ensure new-look capitalism's benefits are not limited (wait for the mixed metaphor) to A-listers.

Jo

- The article from The Economist is here.
- I've discussed these themes in other posts, see those labelled 'private sector', in particular the one critical of Blair's 'end of history' comment, here.

Reluctant regulatees -- or reluctant regulators?

As many who follow Africa continue to take in the near- and longer-term 'meaning' of the events at Marikana mine last month (see the last post), I'm thinking about the tendency to cast the private sector as a set of reluctant regulatees, eluding well-meaning policymakers at each possible turn.

In many cases, what we have are reluctant regulators (not to mention incapable, captured or other ones -- another time).

A lay person could read the stories on South Africa's mining sector, especially labour relations, health and safety, and social investment issues, and develop the impression that the government has dragged firms, kicking and screaming, to deliver on wider development imperatives and aspirations.

This is not necessarily the story. In many cases, major firms (perhaps from self-interest, but at least 'enlightened' self-interest) have seen the longer-term risks for example from HIV levels in the workforce, and not waited for government directives. On some issues, business leads government in South Africa -- tho of course it is an elected government's prerogative and duty to ensure private actors meet public goals.

Consider the excellent doctoral work by researchers in this town like Gus Selby and later Charles Laurie into the vexed question of land reform to address historic injustices in Zimbabwe: I'm loathe to over-simplify, but one neglected dimension to that story -- often portrayed as ZANU-PF dragging recalcitrant white farmers to negotiate land redistribution -- is how the Commercial Farmers' Union saw the long-term risks of inaction on this issue and tried to get a reluctant / distracted / whatever government to move on the issue gradually and sustainably.

Rather than an apologia for the private sector, its worth noting that the story is less often as one-sided as it seems.

I think, incidentally, of my colleague Andrea B's comments on the regional tourism outlook in east Africa. While it is probably in all East Africa Community (EAC) countries' net interests to work quickly on helping enable more seamless travel for foreign tourists (eg by devising a common tourist visa), on this and many other issues, it is private operators who are forging ahead.

As Richard Dowden noted at our conference last year, in Africa so much of the stories of innovation and progress happen despite the state, not because of it (this is not an argument for weak states, much less a contribution to the US presidential 'what-role-for-the-government' debate!).

Moreover, as an early post ('Who regulates who?) noted, much of the safety and other regulation that we value and that is likely to run with the grain of commercial realities started life off not as public prescription but private initiative between members of an industry. The risk of spaces that might nurture self-serving cartels must be balanced with acknowledgement that not all the regulation that matters comes down from above or takes legislative form.

Anyway, the basic point is that in hard cases -- land reform in southern Africa is such one -- it cannot be assumed that the narrative is one of enlightened regulator and reluctant regulatee. The challenge, as the mentor-esque John Braithwaite has shown, is in catalysing virtuous circles of regulatory dialogue that involve suasion and persuasion as much as stipulation and resistance; or regulatory neglect.

Jo