Post 2015 Africa: central planning or the market?

3 Oct

Diageo Ethiopia

Attended an excellent event last week at Standard Chartered in the City, sponsored by Business Fights Poverty (http://businessfightspoverty.org). It was a panel discussion on a new report – “A New Global Partnership with Business – Building a post-2015 development framework to achieve sustainable prosperity in Africa”. Despite the mouthful of a title (and the title slide for the presentation had no less than eight corporate sponsors – four at the top, four at the bottom), the report is actually a good read (download from here: http://goo.gl/SG8FOT).

The panel discussion was equally good. By the time it had finished, I was feeling quite sorry for Diageo, very ably represented by Ann McCormick. They are one of the case studies in the report, focusing on their acquisition of Meta Abo Brewery in Ethiopia and their efforts to source more malt & barley locally. Their partnership efforts were certainly impressive, spanning the top (a G8 pledge signed with Obama & Hilary Clinton watching), the Ethiopian government (via their Agricultural Transformation Agency) and local implementation via an NGO working with smallholder farmers (Farm Africa). But what struck me in discussion was Ann McCormick’s obvious concern as to what the newly enriched smallholders were actually doing with their extra cash.

Hardly a problem, one would think, when Diageo buys grain in the developed world, but probably a real enough issue in Ethiopia. And just one small example of the hurdles businesses have to jump through to be good corporate citizens in Africa.

So why the title? I recall a lecturer in Cambridge saying once: “When I visit Russia [this was the 1970s] I think – My God, how they would benefit from some market mechanisms. Then when I visit the States, I think: My God, a bit of central planning wouldn’t hurt.” At the time, I was too inexperienced to value the remark, but with the passage of time I see its truth. The market can’t solve everything in Africa (or elsewhere) – it needs other institutions, including government, to play their part. One invisible hand is all very well, but two hands are better.

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