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November 14, 2013

What does ‘big business’ say about Africa when it’s off the record?

November 14, 2013
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I get a lot of random invitations along the lines of ‘come and be a token esteemed NGO rep at our next gabfest’, and accept a few of the moreAfrica-s-Reformers promising ones. So this week I ended up at a conversation on ‘Africa’s Reformers’ hosted by the Africa Governance Initiative and the FT’s This is Africa magazine (which has just published an issue with that title).

The round table was mainly business types – lawyers, bankers and multilnationals. No government people, no aid donors.  (Sorry, can’t tell you who said what – Chatham House Rules). How did it compare with a more traditional aid event?

Firstly, lots of great practical experience of doing big business in Africa – people involved in putting together big infrastructure projects, meeting ministers, and getting messed around by officials. That probably tempered the excesses of Afro-optimism.

Those most on my wavelength were the long-term investors – stressing that it is institutions that matter, not a few business-friendly presidents – tales of Nigerian spin doctors in slick suits selling energy sector projects that never delivered to gullible investors.

It was fascinating to hear big extractives companies talking off the record about the need for land reform, accountability, inclusion and an end to ‘the concentration of wealth and power among elites…  democratic accountability may be messy at first, but it is fundamental for long term investors.’ (Yes, really). They urged companies to invest in governments’ negotiating capacity so that they get a fair deal and the next government doesn’t rip it all up and start again (a particular source of rage for investors). Some even publish the minutes of their negotiations to reduce the risk of one day being accused of backsliding.

OK, I realize not all extractives or ag investors think like that, and I banged on about tax avoidance, business lobbying, land grabs etc, as you’d expect, as well as the growing constraints on civil society space and civil liberties in many countries.

Others were prone to the kind of ‘decent chapism’ that often besets politicians and even academics (‘Paul Kagame is a decent chap, let’s support Rwanda’). Some of the more alarming quotes ‘democracy is overstated’; the Rwandan and Ethiopian governments are ‘collectively feisty’.

This led to a fascinating exchange on whether democracy was an aspiration or a necessity, from the business point of view. Key point was whatbusiness meeting happens when the decent chap leaves office (even if he doesn’t go bad before then). ‘Democracy has a pre-built way of regenerating leadership’, said one.

Just like aid types, they (Africans and non-Africans alike) were prone to lamentation and exhortation (Africa needs to do X) rather than analysis (what are the drivers and blockers to such changes).  Might start a How Change Happens course for business sometime.

As co-host, the AGI is an interesting outfit. Set up as the Tony Blair African Governance Initiative, it seems to have airbrushed out the TB bit. Can’t think why. It acts as a kind of charitable management consultant, advising governments on how to improve their performance, and is currently working with about 8 African countries, usually working out of the president’s office.

It initially intended to transfer some of the thinking from Blair’s Prime Minister’s Delivery Unit, but rapidly discovered that the lessons of good governance in the UK often don’t apply in Africa. Instead, it is often AGI’s knowledge of Rwanda’s much-lauded public sector systems (where it’s been working for 5 years) that other African governments want to hear about.

Apart from the focus on individuals, the other feature that was all too reminiscent of many aid debates was ‘deficit thinking’. Africa is short of X (good governance, new laws , units on this or that), so all outsiders need to do is top up the deficit by importing the best models. The subtitle of the This is Africa report ‘re-wiring governance’ exemplifies the approach. But plenty ofDoing business in Africa research by ODI, Harvard and others to show this is flawed logic: what works are often hybrid institutions that combine some imports with local traditions in a context-specific way, and the design of hybrids has to be in the hands of locals, not foreigners.

Some choice quotes:

‘If you’re the Minister of Finance it’s very hard to worry about long term development if by the 10th of the month, you are worrying about how to pay your civil servants’.

‘In the middle of a resource boom in Mozambique, donors were worrying about how many clinics and classrooms the mining companies would build, instead of funding the lawyers the government needed to sit across the table and negotiate properly.’

[From an African financier]: ‘The mistake we’re making in Africa is that we see it (laws, reforms, new mining codes etc) as something we have to do for foreign investors.’

And I’m glad to report that ‘Democracy is overstated’ got a pretty sharp response, and not just from me ……


  1. In reality, anyone, individual or corporate citizen, who is interested in the long term will want a more secure environment. Which does mean good governance and perhaps even democracy :)

    So then I wonder why we development types get (a little?) surprised when big businesses say that they would prefer good governance / democracy.

    Is it because there is an image of ‘the rapacious corporation’ that is hardwired into our brains?

    Or is it because we want to be the sole upholders of the good governance principle?


    1. Bit more complicated than that, I think Makarand. Businesses, like everyone else a) have varying structures that shape their incentive systems – short-term v long-term; capital intensive v labour intensive; domestic market v exports. But also they are subject to the interplay of ideas (e.g. ‘all governments are rubbish/corrupt'; just let us get on with the job), interests (shareholders and CEOs want to maximise profits in short term then move on) and institutions (we can’t buy from smallholders because the volume and quality isn’t reliable, or they don’t speak English). Out of that complexity emerge good guys and bad guys wrt development, and you can’t always predict in advance which is going to be which!

  2. Thanks Duncan, and it was great to have you at the meeting. Our subtitle ‘re-wiring governance’ comes from our interview with Lamido Sanusi, the central bank governor of Nigeria, rather than referring to external interventions or deficit-thinking. We have found that leading African policy reformers often speak of ‘re-wiring’ how governance systems work rather than vesting too much power (and hope) in specific reformers. We agree with you, and Matt Andrews et al., in the view that external donors should not come in from outside and ‘fix’ deficits or systems. We hope the metaphor of wiring is more suggestive of how institutions take on their own momentum based on how they are structured etc.
    Look forward to more comments hopefully, and we look forward to talking to you again in the future.
    This is Africa team

  3. Great blog. Duncan, and I agree with you. The battle with Corps, as it is with most Dev country governments is within those structures. Smart campaigners embolden and support the progressives within who see the link between democracy, fairness, transparency and in the end profits.

  4. Very insightful. I’ve worked a lot with multinationals and investors coming into Africa’s least developed countries, and its always interesting to hear their perspective; they’re often completely different than the stereotype of the uncaring capitalist. What’s tragic is that their energy, appetite and ability to undertake good works, whether through CSR or other positive actions, is often sapped by just by getting a straightforward arrangement with the government. If a firm has a constant near-existential crisis in their investment in a country, their disposition towards charitable endeavors or going the extra mile to help local communities, etc, is pretty tepid. I’ve seen a great plans shelved due deflated enthusiasm. From the outside, this lack of positive results confirms NGOs suspicions about the private sector. Something of a vicious cycle.

  5. This is not that surprising, except one thing ought to be commented on: it is wrong to demonise those who disagree that democracy is a sine qua non of development. It is more than obvious that democracy has both benefits and drawbacks, and it is also correct to recognise non-democratic growth stories.

    Mark Wiseman, President and CEO of Canada Pension Plan, when being interviewed by McKinsey noted that his infrastructure investments go only where he expects to hold the asset for its lifetime, and where the legal and institutional structure is in place and credible. Still, it is not hard to imagine where businesses have intrinsic interests against proper institutional arrangements.

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