Efforts to reduce world poverty will not succeed until aid agencies and
governments bring business into the equation, according to the Shell
Foundation.
Its director Kurt Hoffman, who has advised the UN and European Union on
development projects, says the past 30 years have shown that the aid
approach centred on non-governmental organizations has failed.
In a scathing attack on the $100billion-a-year (£57bn) aid industry’s
attempts to tackle poverty, the former Shell senior executive argues
that only the creation of jobs and economic activity will help poor
people in the long term, and that both need business expertise. ‘The
job creators – the private sector – are still largely absent not just
from the debate about poverty, but from the process of defining how the
terms on which that debate should even take place,’ he says. ‘This is
particularly worrying since the private sector knows a great deal more
than the aid industry about growth, job creation, investment and
innovation.’
Hoffman says that when aid groups grasp the importance of generating
wealth, ‘the attention [given] to enterprise is limited, probably
accounting for less than ten per cent of official aid flows’, which may
explain why companies often make CSR staff, rather than those
responsible for commercial development, their contact point in aid
partnerships.
In a Shell Foundation paper, Aid industry reform and the role of
enterprise, Hoffman argues that partnerships between business and NGOs
would end the ‘astonishing lack of evaluation’ of aid finance. It
points out that the World Bank, which carries out many of its projects
with NGOs, evaluated only 25 per cent of its African projects from 1990
to 1999 and found that about two-thirds of them had failed. ‘What
business could possibly hope to prosper if it only assessed the results
of one-quarter of its investments after ten years?’, asks Hoffman.
‘And, even more incredible, what board would allow the existing
management team to continue running the show when 65 per cent of the
projects they were responsible for were judged to have failed?’ He says
it is ‘routine’ to receive grant proposals for anti-poverty projects
‘that contain excellent academic literature reviews but not a shred of
market research’.
Sumi Dhanarajan, head of the private sector team at Oxfam, said: ‘The
aid community probably should do more to promote enterprise
development. The SME sector, for example, should be getting much more
than 10 per cent of aid funding. However, for the Shell Foundation to
damn the value of aid in its entirety to make this point, is
counterproductive. Without aid, the poorest countries would not have
adequate resources to invest in education, healthcare and water,
confront the HIV-Aids pandemic and tackle hunger. Governments cannot
rely solely on the private sector to deliver these basic needs. The
private sector has not provided for the poorest – those living in rural
areas – where investment costs are considered too high and there is no
obvious profit to be made. Focused, good quality aid which allows the
public sector to deliver basic services affordably and equitably has to
be imperative.’
