The Private Sector: working towards development for all

The private sector has long been excluded from poverty alleviation efforts because of its traditional focus on profits rather than social uplift. In this piece, Vanessa Thevathasan highlights three core action points to involve the private sector in working for the poor, alongside the efforts of donor and civil society organisations in developing countries.

While the case may be that donors and companies perform different roles in development, coordinated and complementary approaches will help achieve long-term sustainable objectives. Donors and civil society can benefit from the vast financial and resource outreach that corporations have to better implement pro-poor policies. Indeed, Hilary Jeune, Oxfam’s EU policy advisor, asserts that “By playing by the rules, avoiding practices which risk harming the most vulnerable, and paying a fair share of taxes, the private sector has great potential to pull people out of poverty“. When the private sector operates in this way, donors and civil society can make aid work for the poor.

©Tom Raftery/Creative Commons License

©Tom Raftery/Creative Commons License

Corporate social responsibility

Businesses do business. By their nature, many companies adopt innovative business approaches that are not motivated by altruism but by profit, and may have beneficial development outcomes.

However, more businesses are now adopting corporate social responsibility programmes or CSRs, whereby as part of their corporate operations in a country they also provide social security and community support, often plugging gaps in services where the government has failed to deliver.  For instance, in South Africa, Coca-Cola is providing access to microcredit for women retailers, enabling these women to earn three to nine times the minimum wage, around $400 per month.

Coco-Cola employs women in their Micro Distribution Centers (MDCs), which allow business to be done in remote areas while supporting local economies. In many cases, especially in fast-growing markets like Ghana and Nigeria, female ownership of MDCs exceeds 70 percent.

CSRs must be utilised so they can supplement international development work.  In remote areas, CSRs are the only route out of poverty for vulnerable groups, especially women, by providing sustainable livelihoods and economic empowerment.

Business and Human Rights

Christian Aid’s 2008 report From Local to Global: Stopping Corruption from Stunting asserted that there is little data available about how extensive corruption is in the private sector. Stronger international and national regulations are needed to ensure continuous monitoring of businesses so that anti-corruption laws effectively protect the poor from bribes and human rights abuses.

While corporations are the engines of the economy, it is equally the case that poorly enforced business regulation and irresponsible practices keep the poor in poverty. In the end, corporations reap the benefits of cheap labour and poor working conditions.

By encouraging greater transparency, business and human rights can be mutually enforcing. When communities are able to see the positive change to the quality of the life, corporations are accepted and tolerated more. Greater trust means greater partnerships and more opportunities for pro-poor programmes to bring about impactful development and inclusive growth.

Mainstreaming the private sector

©Trinity Care Foundation/Creative Commons License

©Trinity Care Foundation/Creative Commons License

A symbiotic relationship between the corporate and development sector can achieve a more enabling environment for making economies inclusive for the poor.  However, more needs to be done to bring the private sector into the mainstream of international development.

At present, the lack of coordination means that the poor are missing out on huge sectors of the economy. For instance, Ghana’s Poverty Reduction Strategy Paper does not mention the mobile phone and mining sectors, two of its major industries. Ignoring these areas clearly fails to fully appreciate the diversity of approaches to combat poverty.

Attempts have been made at the global level with the UN Global Compact (UNGC), established by Kofi Annan in 1999, to bring together UN agencies, corporations and civil society to support universal environmental and social principles. However, it has been described as ‘lacking teeth’  and has failed to connect the UN’s country planning processes with the corporate sector.

The ‘Beira Agricultural Growth Corridor’ in Mozambique is a case in point of successful cross-coordination between both sectors. Launched in 2009, the initiative was set up to develop the port of Beira and the trade routes that service it, achieving a diverse commercial agricultural sector by 2030.

Yara International is handling the corporate side of activities at the port and Tate Steel and Vale are developing the coal mines in Tete province. Prio Agriculture, a Mozambican company, is harvesting land to grow cereals and oil seeds. From the donor side, the African Development Bank is funding the upgrade of the road infrastructure and the EU and World Bank are upgrading the railway network around the port.

This coordinated approach ensures optimal input for all parties, achieving greater dividends for the poor living in and around the port.  More recognition of successful public-private partnerships such as the Beira initiative should be built upon so that they feed into development sustainability.

In the end, both public and private resources will play vital roles to address sustainable development challenges and bring to reality the post-2015 agenda.

The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.


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