Somaliland:Natural Economics;How Aid Became Big Business
Since the publication of “The Lords of Poverty” much has been written, but little has changed. The colonial “AID” business, whereby the internal rate of return to the “donor” counts more than the lives of those the aid is allegedly supposed to help, will probably will go on for a while. But for private donors, who seek direct alternatives to really help and achieve true amelioration, a newly developed form to give is on the horizon. Already the first groups of impoverished people get direct sponsorship for PermaCulture activities to feed themselves and to reach abundance. Check out www.directsponsor.org and www.directsponsor.net
How Aid Became Big Business
By Matt Kennard and Claire Provost / Pulitzer Center – 09.05.16
The Grand Cunard Building in Liverpool sits on the edge of the River Mersey and the port city’s historic docklands. It was here that the city was propelled to prosperity as a major hub in the business of transatlantic slavery, profiting from the “triangle trade” by shipping goods and weapons to Africa; shackled slaves to America; and sugar, cotton, and rum back to Liverpool.
This dark history is still echoed in some of the city’s street names. Penny Lane, made famous by The Beatles, is believed to have been named after James Penny, one of the city’s most prominent 18th-century slave traders. The Cunard Building, built in a style intended to recall grand Italian palaces — complete with marble imported from Tuscany — sits on The Strand, formerly known as Goree Piazza, named after the island off the coast of Senegal that was used as a base to trade slaves.
In the summer of 2014, the docks hosted a more contemporary meeting of British traders: an “International Festival for Business” pitched by the government’s export promotion arm as the country’s “most significant international trade and commerce showcase since 1951.” Over 50 days in June and July, the business festival hosted tens of thousands of British firms and entrepreneurs — all eager to break into new overseas markets — for workshops and networking events promising an “outstanding opportunity for businesses to forge new international commercial partnerships.”
In the Cunard Building — built during World War I as the headquarters for the eponymous company famous for its luxury steamships that would ferry the rich across the Atlantic — Nigel Peters stepped up to the podium and cleared his throat. In a historic ballroom with period detailing and vaulted ceilings, before an audience of men and women in business suits sitting around circular tables with pristine white tablecloths, Peters asked: “What’s it worth?” Standing on a temporary stage, he announced that there was “$70 to $100 billion of business out there.”
He could have been talking about global cybersecurity industry (worth approximately $75 billion) or the international magazine publishing market (about $100 billion). But no. Peters was speaking as the head of the Aid-Funded Business Service at UK Trade and Investment, a government-funded body geared to help British companies export. As the director of this special unit until 2015, Peters specialized in helping British companies profit from contracts funded by international aid — taxpayer money that is intended to help end global poverty. This is a side of aid that few have ever seen — the companies, the products, and the business models that circle around this multibillion-dollar market, angling for a larger piece of the pie.
“The development and humanitarian aid business is there, it’s significant business, and we’re here to help you win some of that,” Peters grinned. A slide projected beside him bore the names of global aid agencies and development institutions like the World Bank and the UK’s Department for International Development (DfID). The men and women in the audience sat straight and still in their seats, focused on every word, moving only to take notes or get a closer look at the screen. “Welcome to the world of aid-funded business,” said Peters to applause.
When governments pledge aid money, it is rarely handed directly over to poor countries in cash, despite the rhetoric from both the right and the left about how much money is “given” each year. Budget support — the technical term for aid that is in fact given to poor country governments directly, to manage and spend themselves — amounted to just $9.5 billion out of a total global aid spending of $165 billion in 2014, or less than six percent. Where does the rest go? Donor countries like the United Kingdom or the United States spend much of their aid money through NGOs, multilateral organizations like the UN, and private contractors. Billions of dollars each year are spent buying goods and services — everything from drugs to consultancy.
“We see a lot of business opportunities around the work the UN does in peacekeeping, famine relief, disaster relief, emergency aid,” Peters tells his audience. “We see a lot of good opportunities for those of you in products in terms of famine and disaster relief related to both man-made disasters, which today we’re seeing in countries like Syria and Iraq with refugee camps, and of course natural disasters.”
For some companies, aid is a valuable income stream but still one of many. For others, it is the entire business model. A small group of private contractors, primarily based in the Washington, DC area and known as the “Beltway Bandits,” have long dominated the aid-funded business coming out of the United States Agency for International Development (USAID), the leading (but not only) US government agency that spends aid money. Across the Atlantic, one of the biggest beneficiaries of UK–aid-funded business is Crown Agents, a company that grew out of the infrastructure of the British Empire; it was privatized in 1997, moving seamlessly from being a merchant of empire to profiting off the postcolonial world. Other companies have started up specifically to take advantage of these business opportunities.
Many European cities now host regular events like the one in Liverpool. On the outskirts of Brussels in November 2014, hundreds of men and women in smart business suits swarmed around an array of exhibition stalls, sipping glasses of wine and picking up bags filled with glossy corporate brochures and USB keys stamped with the logos of multinational corporations. Overhead, large banners bearing the names of major car companies — Ford, Volkswagen, Toyota — hung from the ceiling.
This is AidEx, the “leading international event for professionals in aid and development” and a “major platform for networking, making new contacts and doing business.” At the center of a large convention space, the marketing managers at their stalls were pitching their goods at the host of acronyms — UNHCR, UNDP, ICRC, and many NGOs — that make up this aid-funded market and together have billions of dollars to spend each year. On offer was everything from different types of tarpaulin to the services of private security firms. In a pop-up café on the edge of the exhibition area, attendees huddled in small groups, comparing notes on who won what from the different aid agencies in the previous year.
AidEx says exhibiting at its conference helps companies to “raise brand awareness,” “generate new leads,” and “receive personal PR services from our Brussels-based team.” A two-minute promotional video uses cartoon figures and a cheerful pop soundtrack to make the point clearer. “How are we going to sell all of these products?” Mr. Apprehensive asks. A light bulb appears over Miss Opportunity’s head: “Why don’t we exhibit at AidEx?” Dozens of cartoon shipping crates pile up on the screen. “There will be buyers there who want to buy all of THIS!”
Back in Liverpool, the audience claps as Eleanor Baha, Peters’s colleague, takes the stage. Based in Geneva, amid one of the largest clusters of UN agencies, Baha is one of the UK Aid-Funded Business Service’s attachés. “Why should you be looking at UN business? What’s the point? Well, for you as companies it’s a good export market. And for you and your colleagues, there’s a definite ‘feel good’ factor, this is part of your CSR,” she smiles. “And finally, perhaps most importantly, you are sure to get paid. The UN only places business with companies when the budget is already secure.”
The Corporate Aid Bonanza
There has long been an “aid industry” — the swarm of for-profit companies and consultants that take cuts of government aid earmarked for the world’s poorest people. In some donor countries, aid has been officially “tied”: aid-funded contracts that are required to go to companies from the rich country that is “giving” this money. In the United States, the world’s largest official donor, “tying” aid has led to extreme cases of giant multinationals profiting off this protected business. Among the main beneficiaries of the multimillion dollar US food aid budget are the huge grain traders Cargill, ADM, and Bunge, who have won the lion’s share of the contracts to provide wheat and other commodities to be shipped from America to poor countries on US-flagged ships. (The shipping industry also benefits.)
Across the Atlantic, the United Kingdom formally “untied” its aid 15 years ago, on the heels of scathing criticism from a powerful civil society campaign that wanted to see aid disconnected from Britain’s commercial interests, and instead focused on ending poverty in developing countries, not supporting businesses at home. Despite the fact that all UK aid is officially “untied,” however, it appears that British companies still win the majority of this business. A 2014 peer review of the UK aid program, by the OECD group of donors, reported that over 90 percent of the largest British aid-funded contracts go to UK firms. (It politely suggested there may be “unintended or implicit impediments” to foreign companies winning this business.)
But since 2000, and particularly since the 2007-2008 global financial crisis, the visibility and power of large corporations in international aid and development efforts has taken on even larger proportions. Now, CEOs of major multinationals sit on UN panels charting the future of global development; USAID is partnering with Walmart and Chevron; and NGOs like Oxfam and Save the Children have joined hands with corporate behemoths Unilever and GlaxoSmithKline (GSK). With traditional aid budgets under pressure, donors are increasingly turning to the private sector to fill the gap. Today, if you’re a company, there’s a growing menu of ways for you to benefit from aid and global development efforts. In fact, the 21st century has witnessed a corporate takeover of aid: US and European corporations not only making millions off foreign aid budgets, but using aid and global development institutions to break into new markets and influence public policy in the developing world. Big NGOs are striking deals with multinationals too. The expectation is that these engagements will only grow.
In New York in September 2015, UN member states adopted a new set of 17 “sustainable development goals” to replace the “millennium development goals” that guided much of the world’s aid and development efforts over the last 15 years. The new goals include grand objectives to “end poverty everywhere” and provide “quality education for all.” The UN secretary general Ban Ki-moon called them a “to-do list for people and planet, and a blueprint for success.” Along with these new goals, development institutions have talked about the need to move “from billions to trillions” in financing commitments to pay for this agenda. Teaming up with big businesses is being sold as the only option.
In a briefing with journalists ahead of the UN meeting in September, the chief US negotiator on the “post-2015 development agenda,” Tony Pipa, said:
The breadth and the ambition of this agenda […] it’s going to require government resources. Yes, it’s going to require political leadership, and political will on behalf of leaders of governments. By the same time, the resources are going to have to go beyond what governments themselves can provide.
Pipa said this shift to work more with companies was only natural, as aid to many developing countries now pales in comparison to the amount of foreign investment they receive. The United States, he added, is already “increasingly using our [aid] as a way to leverage and catalyze other resources. […] [so] it ‘crowds in’ other types of investment.”
The corporate takeover of aid is not just about co-financing projects with aid donors, however. Large corporations are also increasingly involved in the design and delivery of projects, and, again, in shaping policy and setting the agenda. Jen Kates at the Kaiser Family Foundation, said: “there really has been a concerted shift and change in the conversation around the private sector.” And “whether it’s self-interest, economically driven, or due to their sense of being part of a global community,” she said, companies are now involved in aid and development in a “way that wasn’t there 20 years ago, 15 years ago.”
On a section of The Guardian’s website sponsored in part by Pearson, the publisher and education multinational, companies make the case for getting involved in development. Allan Pamba, vice president for GSK in East Africa, says: “developing medicines and vaccines and making sure they are accessible is the contribution we can make.” David Kyne, CEO of KYNE, a consultancy firm specialized in “healthcare communications,” says companies need to “recognize it’s in your interest to act,” giving the example of an East African flour mill that launched a malaria control initiative, distributing mosquito nets to its workers and making diagnostic tests and medicines available. “Malaria-related absences have dropped by 80 percent.” Tara Nathan, executive director for international development at MasterCard, said people should just let the private sector do what it does best:
Profitability is sustainability, aid is temporary. The 2 + 2 = 5 happens when the private sector is tapped to utilize our full complement of assets —technologies, people, expertise, innovation capability — not just money — to help make development dollars go further.
Addressing the issue of why companies bother to get involved in aid, Pipa commented:
That question of sustainability is something that I think they are struggling with themselves. From their own perspective as businesses, how are they going to maintain and continue to grow over time? […] Frankly, they also likely see opportunity in emerging markets and areas of the world that are growing. Africa has a coterie of some of the fastest growing economies in the world.
The question, he suggested, was not whether to work with businesses, but: “How can we find the intersection between private investment and private business to both stimulate and maintain development gains over time in a way that’s sustainable? That’s sustainable economically, that is also sustainable environmentally.”
Of course, a traditional way of making sure companies act responsibly and sustainably is to regulate them. Countries around the world have enacted minimum wage laws, for example, and environmental regulations, to do precisely this. But much of the official narrative of why companies are increasingly involved in aid assumes, or takes advantage of, short memories. It presumes that we have forgotten the context: that of decades of deregulation and failed attempts to hold transnational corporations to account for their actions. Instead of laws limiting the power of transnational corporations, we have voluntary initiatives and corporate social responsibility projects. While companies have been embraced as key “partners” in aid and global development, the language on accountability has grown increasingly weaker. As Ranja Sengupta, senior researcher at the Third World Network has noted: “[I]f the big private sector [entities] will pay taxes honestly, transfer technology and allow policy space for developing countries to pursue development objectives, development issues will be solved to a large extent.”
A sad reminder of this reality was provided in the months ahead of the UN summit in September 2015, when the new global goals were agreed upon. At a separate international conference in Addis Ababa, Ethiopia, on how to finance development moving forward, proposals pushed by developing countries to set up a new intergovernmental tax body — under the authority of the UN, giving poor countries equal say in how global tax rules are designed — failed to pass amid opposition from some of the rich states present. Instead, the Addis Ababa conference’s final “outcome document” puts private finance front and center as the future of development, encouraging public-private partnerships and other forms of private investment. Language ensuring that this actually supports sustainable development, advances human rights, and is accountable to poor communities is sparse.
In London, Nuria Molina, director of policy at the ActionAid UK NGO, said corporations have emerged as increasingly prominent players in development efforts precisely because of deregulation, not in spite of it. “Corporate social responsibility emerged a few decades ago, as a department in each multinational, precisely as a response to deregulation. If you have laws and policies, you just comply by the rules, you don’t need this,” she said. “The private sector increasingly and as a result of the neoliberal paradigm operates in a ruleless world, so corporate social responsibility is seen as a way to make up for this lack of rules, and to combat perceptions that they are really ruthless.”
For aid donors and NGOs, the cash that corporations can contribute for development projects is certainly appealing. But, Molina suggests, it is accompanied by an ideology — the belief that “jobs” and “economic growth” can only come through the private sector:
I think partially it’s a very reactive trend —to fiscal trends in donor countries, to where to get money. There’s also an element of inferiority complex. I think development and public sector civil servants have had, since the neoliberal turn, a very strong sense of inferiority, thinking the private sector is so much better, so much smarter, so much more glamorous. The idea that the less state involvement the better, this has become very entrenched.
As a result, development agencies “implicitly back the whole agenda of deregulation, which — including in developed countries— has been an absolute failure.”
In New Delhi, Indian economist and professor at Jawaharlal Nehru University Jayati Ghosh laments that sometime in the 1980s discussions about development as more than “simply reducing deprivation, but essentially about transformation” receded into the background and “development economics, even of the mainstream variety, suffered a fate similar to Keynesian economics in developed countries, of being first reviled, then ignored, and finally forgotten. Its place was taken by a focus on ‘poverty alleviation.’”
The UN’s development agenda, with its myriad goals and targets, is the epitome of this new reality, Ghosh says, focused on “ameliorating the conditions of those defined as poor, rather than transforming the economies in which they live.” In a 2015 paper, she noted that “even the focus on poverty alleviation takes a very limited view of what poverty is or how it is generated.” It is abstracted from “all the basic economic processes and systemic features that determine poverty,” she said, so that no one in the global development industry talks about class or defines the poor by their lack of assets, as this “would then necessarily draw attention to the concentration of assets somewhere else in the same society.” The result? A misguided, narrow “focus […] on specific interventions — micro solutions that are seen to work in particular cases,” and on “considering how they can be modified and scaled up.” In a few words, “searching for magic silver bullets.”
Cracking New Markets
On a frozen February morning last year, we went to Myanmar’s embassy in London to interview the ambassador before our trip to the country. The embassy is located on Charles Street in the chichi Piccadilly neighborhood of central London, not far from Oxford Street. As we come up to the embassy, the ambassador exits a black Mercedes and walks into the building. It’s a palatial five-story townhouse, and we move up from the consular services on the first floor to a large sitting room with long sofas.
The embassy has arranged for Keith Win, the founder of the Myanmar-British Business Association (MBBA), to be in on the interview. We start with questions about human rights and — apropos of nothing — the ambassador gets up without a word and walks out. Ten minutes pass, then 20, then half an hour, and we’re running out of questions for Win. An assistant who is sitting in on the interview says she doesn’t know if the ambassador is coming back. Fifteen minutes on, another young assistant runs in and speaks with Win in Burmese. Win says the ambassador has had an emergency and won’t be returning. A follow up email to the embassy, to rearrange the interview by phone at a later date, is also not returned.
Win is a smart-sounding businessman, who is part-Burmese and part-English. A chartered accountant, he set up the MBBA in 1995 with the late Peter Godwin, a banker and advisor to the UK government’s Department of Trade and Industry (now the Department for Business, Innovation & Skills). The association’s aims are “to promote commercial dialogue between Myanmar and Britain” and provide “a forum and networking opportunity” for businesses from the two countries. “Myanmar has of course now opened up and gone to a market economy. It’s early stages yet, but it’s heading in that direction, and it’s looking very positive.” He adds,
The country has huge advantages — it’s strategically located between India and China, two of the world’s most populous nations. […] [There is] dynamic growth in the region, so it would do very well. Everyone is extremely busy, there’s so many laws that have been passed, the reforms in place, government officials have been brought up to scratch, multilateral agencies are bringing in outside training. It all takes time. A lot of British businesses are interested, from education, services, architects, accountants, lawyers, lots of lawyers now looking at opportunities, Rolls Royce, power companies, some of the oil and gas [companies]. […] Opportunities are endless.
In 2011, Myanmar (also known as Burma) swore in a nominally civilian government, ending more than 40 years of military rule. The next year, the United States began to ease sanctions on doing business in the country, followed by similar moves by the European Union. Foreign investors began scouring the country for opportunities, with Myanmar increasingly advertised as a quintessential resource-rich “frontier market.”
Many aid agencies have been on hand to help, selling foreign investors and multinational companies as key “partners” in Myanmar’s future. About an hour outside Yangon, the country’s former capital and still its main commercial hub, lies a vast expanse of land along the coast that has been set aside for foreign investors. This is the Thilawa Special Economic Zone (SEZ), a flagship project of the Japanese government aid agency, JICA, which is helping to finance the zone along with a consortium of primarily Japanese companies.
In the spring of 2015, the Thilawa SEZ was still a huge construction site, stretching as far as the eye can see, with pick-up trucks scouring the mud and rubble. On the edge of the area set aside for the zone, however, the project had already left its mark, displacing hundreds of families now left facing an uncertain future. A 56-year-old former farmer named Daw Win was one of those displaced to make way for the project, intended to entice foreign investors into the country with top-notch infrastructure and other “incentives.” She told us: “I can’t even sleep at night, because of the stress,” explaining that she used to grow fruits and raise livestock but now, having lost her land to the SEZ, lives “day to day, worrying about meals.”
Sitting in his office in Yangon, Winfried Wicklein at the Asian Development Bank presented the role of private businesses and foreign investors in the country’s development as a fait accompli:
How do you finance development? Hardly anyone is paying taxes. […] Then you have international donors and they give you grants if you’re lucky — and at the moment this country is getting a lot of goodwill — then you have the concessional lenders, like us, but then there is not much left. […] So that leaves the private sector — there’s just no question about it.
Wicklein smiled broadly when listing the opportunities Myanmar offers for investors and outlining how the country has already changed. By 2030, half of the world’s “consumer class” will live within a five-hour plane ride of Myanmar, he said by way of example, opening up a whole range of possibilities for tourism industries and exports. And, he said: “There is huge interest from the private sector. It’s amazing who is coming through in this country.”
For its part, the Myanmar government has been rushing through dozens of new laws and programs to make the country more “attractive” to foreign capital. Thilawa is just one of several SEZs being built, others include Dawei in the south and Xiapu in the contested Rakhine state. Market-oriented reforms are a key part of Myanmar “emerging from decades of isolation,” according to the World Bank, which has called for greater progress on “removing barriers” for businesses.
Along with other multilateral institutions like the ADB where Wicklein works, the World Bank closed their offices and halted their projects in Myanmar in the late 1980s, after international sanctions were imposed on the country. But some international NGOs have worked in Myanmar for decades. Others entered the country more recently, in the wake of Cyclone Nargis in 2008, which killed more than 100,000 people in the Irrawaddy Delta. The government’s immediate response, forbidding the entry of foreign aid agencies, shocked the world. But this approach later thawed, and, in the words of International Crisis Group, the devastation “prompted a period of unprecedented cooperation between the government and international humanitarian agencies.”
Perhaps alive to the fact that NGOs were among the primary foreign organizations with a significant and growing footprint in the country, corporations have been eager to strike up partnerships with them in Myanmar. “When I arrived, there weren’t very many foreign businesses,” explained one British worker for a big development NGO in Yangon. She said her organization — which has been working in the country since before international sanctions were lifted — has had “corporate organizations coming to us on various different issues.” But, she said: “Personally, I think it’s a difficult area to navigate because you know, you have to be careful, you have to fully understand the background of the company and their interests and their engagement. […] I think it’s a minefield.” More broadly, she said she was concerned:
Are we moving too fast? And getting the balance right with development and investment? If either through aid or corporate investment, you’re going into an area that’s still in a fragile situation where people don’t know their rights, don’t know how to protect themselves. […] There’s a danger that you can do harm.
The ongoing peace process in the country, she fears, has been sidelined in a rush to invest, build, and develop large-scale infrastructure projects.
Across the city, at the offices of another international NGO, one staffer lamented that “there is not enough thought or consideration being given to the type of [economic] growth that is going to happen, the type of investments and how they will impact on people, the type of employment, the type of skills that are needed.” She warned: “Basically the rule of law and governance environment here are very, very weak and offer very little protection.”
Others have taken aim at the aid industry itself. Myanmar, since 2011, has been a hot spot — “Every respectable aid agency and international NGO in the world is planning to initiate or expand operations in Myanmar,” is how one report from the Nathan Associates consultancy firm put it in 2013. “The best and the brightest in these organizations are pushing to be posted in Yangon or to manage the Myanmar account.”
In a 2014 article published by The Irrawaddy website, Ramesh Srestha, former UNICEF country representative to Myanmar, warned that:
With the Nargis relief in 2008 and additional external assistance with the inauguration of a quasi-civilian government in 2011, hundreds of millions of dollars have been channeled through these international NGOs, ostensibly for the benefit of Myanmar’s people—and with only a trace of sustainability. Sustainability is lacking because these organizations’ efforts are ignoring national systems and networks, with only a few exceptions. Many of these NGOs are actually creating a parallel and competing system, weakening the national systems rather than complementing the government’s efforts. Little NGO aid has gone toward strengthening public institutions or building human resources therein.
“Too often local NGOs and community-based organizations are approached by big donors to implement their own preformulated programs according to their own agendas and foreign policies. These practices effectively exclude the local organization and undercut local initiatives,” added a prominent local civil society activist, in a separate 2015 interview with The Irrawaddy. “This means a big gap arises between donor requirements and real development needs. For us, development needs are about people’s lives, and social processes—they are not about a project ‘market’ and its related administrative bureaucracy.”
Since the financial crisis, the visibility and reach of so-called “development finance institutions” (DFIs) has also exploded. The premier DFI is the International Finance Corporation (IFC), the branch of the World Bank that lends money to private companies (as opposed to developing-country governments). In Myanmar, one of its largest investments is a multimillion-dollar financing package for the expansion of the Shangri-La property empire, including renovations to a five-star hotel where guests can gorge themselves on fresh lobster at the ground-floor restaurant’s extravagant buffet and unwind upstairs at a well-stocked period bar.
As part of the World Bank, the IFC is supposed to help meet the institution’s twin goals of ending extreme poverty and boosting shared prosperity. But for years, the IFC has been criticized for investing in projects that “stretch the very meaning of development” and have dubious impacts on the poor communities they are supposed to be helping. The IFC also buys shares in companies and advises governments on business-friendly regulatory reforms. It has an asset management wing and spends much of its money through private equity funds. These aspects of its business have earned it comparisons with mainstream investment banks, with observers questioning whether it is driven by naïveté or blind ideology.
Less attention has gone to the clear beneficiaries of this finance. While the benefits of much of this spending seem to rely on a discredited trickle-down theory of development, the advantages for corporate profits are crystal clear. In central and eastern Europe, we found that the IFC and the European Bank for Reconstruction and Development (EBRD) have, together, provided as much as $1 billion in loans over the last decade to the German discount supermarket giant the Schwarz Group — which owns Lidl, sometimes called “Europe’s Walmart” — to expand in countries including Poland and Romania, despite claims of labor rights violations and negative impacts on shops and local farmers.
The IFC justifies each of its investments based on what development impact it expects it will have. It said supporting Lidl’s expansion would create jobs and give low-income consumers more access to cheap, quality food. In February 2013, the then recently appointed head of the IFC, Jin-Yong Cai, told us that creating profitable companies and tackling poverty should not be seen as contradictory goals. Sitting in the lobby of a plush hotel in central London, he argued that larger companies often create more — and more sustainable — jobs than smaller firms, and that there are also “multiplier effects” on supply chains and distribution networks, which employ others along the way. “We’re very much focused on evidence,” he insisted. (Cai, a former Goldman Sachs banker, has since returned to the mainstream banking world, having resigned from the IFC in 2015).
And so when the IFC announced a multimillion-dollar investment in a rich diamond mine at Mwadui, Tanzania, about 87 miles from the shores of Lake Victoria, it was described as a deal in “recognition of the important socio-economic benefits that this operation brings to its local community.” First discovered in 1940 by mercurial adventurer and diamond buccaneer Dr. John Thoburn Williamson, better known as “Doc,” the Williamson mine in northern Tanzania has since changed hands many times. Today it is run by a South African company, Petra Diamonds, which is listed on London’s FTSE 250 exchange, in partnership with the Tanzanian government, which holds a 25 percent stake.
Petra took over in 2009 from De Beers — which controversially, and some allege falsely, claimed to have been taking a loss on the asset for the past 14 years — and sought to bring up low levels of production and expand the mine. The next year, the IFC approved a $40 million loan for Petra’s expansion of the Williamson project and took an almost $20 million equity stake in the company as well. The IFC insists that it “operates on a commercial basis, invests exclusively in for-profit projects in developing countries, and charges market rates for its products and services.” But Omari Hwin’dadi, the financial manager of the Williamson mine, says Petra got a better deal with financing through the IFC than it would have with commercial banks that were “charging higher [terms].” The IFC has also been “very considerate,” says Hwin’dadi, in readjusting the company’s repayment schedule.
The IFC’s investment in Petra was the first time it financed a diamond mining group. “We are pleased to be able to support the company in its African expansion plans,” said Tom Butler, the IFC’s top official working on mining, describing Petra as “committed to working with local communities and implementing projects that follow best practice environmental and social standards.” Local communities, however, say benefits promised by the companies and government over the past decades have not been delivered to many people living around the mine. The Mwadui hospital on the mine’s campus is available to anyone working for Petra, but locals have to pay a fee if they want to be treated there, and though small, many are so poor they cannot afford it. The school is likewise open to any of the children of the workers on the mine, but not to others in local communities, unless they pay another fee.
At a government school, which is a succession of rudimentary brick buildings in nearby Masagala village, a class of 108 children, crammed into one room, is being taught by Joseph Makoba. He says Petra has paid for desks and two teachers’ quarters at his school. But, Makoba adds: “These investors are in our country and they are reaping a lot of fruit, so they should at least provide something. […] What the company is bringing to us is peanuts.” Another teacher, Veronica Masinga at Su Buchambi primary school in another nearby village, said:
I am not happy that we have to live on hand-outs and donations like this. It’s because the community around [the mine] does not know their rights, they are in the dark, they are uneducated, so when we get these things we feel happy even though we are just being given hand-outs.
In the area around the mine, Petra runs a so-called “community development program,” which it said the IFC had encouraged, under which certain nearby villages have been given a budget of roughly $90,000 among them to be spent each year. Joseph Kasaa, who runs Petra’s corporate social responsibility programs, said this has been a successful way of smoothing over relationships with villagers that weren’t always supportive of the project. “They started from an area where there was nothing and there was some kind of negativity from the community over the mine because they didn’t see anything useful coming from it,” he said. In other words, the main purpose of the company’s community initiatives appears to be clearing the way for it to focus on its real work — its commercial enterprise; its development program seems to be little more than a form of PR.
Tanzania was also party to one of the largest “compacts” signed between a developing country and the Millennium Challenge Corporation (MCC), a project of the George W. Bush administration to run aid more like a business. The idea behind the MCC was to set up a new type of aid agency — one that had a CEO at its head — that was funded by public money but acted autonomously, with a corporation-style board composed of financial experts who knew how to make money.
The MCC is chaired by the Secretary of State and composed of the Secretary of the Treasury, three other US government members, and four private members effectively appointed by the White House. “We’ve had a venture capitalist on the board, the head of Capital Reed services, so it’s a range,” said Jonathan O. Bloom, vice president for Africa at the MCC, from his office in Washington, DC. “But it is specifically intended to be a non-government voice in guiding policy, so it’s a corporation in that sense, but it’s not General Motors.”
Daniel Yohannes, an Ethiopian-American businessman with a background in banking and financial services, was CEO of the MCC from 2009 to 2014. In an interview with The Guardian’s development professionals network while still in that post, he said: “My background complements the role, because what I do here is very similar to what I did in the private sector.” He continued:
If you want to do aid effectively then you have to approach development like a business. MCC wants to make sure that every single dime — whether $100m or $400m — is getting the best returns, both for American tax payers who have trusted us with their funds and for its partner countries.
Bloom explained that the MCC will “only work with selected countries.” He said: “We don’t work with everybody. It’s not based on US foreign policy priorities but a set of criteria that reflect countries that are basically well run, politically, democracies, market-based economies, and invest their money in their people.” (MCC countries have so far included Albania, El Salvador, and Ghana.) The idea is that once specific projects are identified, the MCC and the country involved would sign a “compact” committing to complete them by a certain deadline. If they don’t finish in time, the money is cut off. So the incentives are clear. So far, these compacts have been worth anything from tens to hundreds of millions of dollars.
Tanzania’s first “compact” was signed in 2008 during then-President Bush’s whirlwind tour of five African countries in six days. It focused on transportation, water, and energy supply, and was worth a total of $698 million. As with any contract, it came with important terms and conditions. Bloom said “conditionalities” attached to compacts are typically “policy related to whatever sector we’re working on.” He explained:
There are a set of conditions both before we approve and during implementation, but [in Tanzania] they relate to things like the government paying the arrears it owes to the electrical utility so that the electrical utility is solid, but it leads to keeping the tariff structure reflective of real cost so that the utility can invest and reinvest in household connections.
What the MCC essentially does is find a policy reform that the government is already invested in itself and try to hold them to it. This obviously incentivizes countries to have US-friendly reforms, such as energy privatization, in the works if they want to qualify for MCC money. Bernard Mchomvu, CEO for the Tanzania compact, said:
We had a few reforms here and there, tariff reforms mainly. Before, power generation was done by Tanesco — the [state-owned] electric supply company — but the government decided to open it up. When the MCC came, we were already in the process, but then they said, “this is a good thing, why don’t you open up?” So whoever wants to invest in power is allowed now, earlier it was a monopoly of Tanesco.
John Sakia, a project manager at Tanesco, drove us to the coast, not far from the Tanzanian capital of Dar es Salaam, to see one of the MCC’s flagship projects in the country — a 100-megawatt submarine transmission cable that connects the island of Zanzibar, famous for its tourist resorts and white sand beaches, to the mainland’s electrical grid. Part of the construction work was contracted out to an Indian company. A Japanese firm was involved in laying the submarine cable. Sakia says his job was to see that these companies implemented the project as the MCC had outlined.
The chief beneficiaries of the new Zanzibar cable will be the tourists who visit the island in increasing numbers. In a country where only two percent of people in rural areas have access to electricity, it might seem a strange place to spend millions of aid dollars. Sakia says there were plenty of other electricity projects given for consideration to MCC that were rejected. “Most of the projects which were rejected were distribution projects. This is a transmission project. Distribution projects, most of them were dropped by the MCC because they said the funding was limited,” he said.
To get electricity out into the rural areas, distribution is what needs to be focused on. Mchomvu was, however, unashamedly clear about whom this project benefitted:
If you go to Zanzibar now, the hotels are very happy because they have very good power supply. Earlier it was frustrating for tourists because the hotel power went off at 10 p.m., then you have to start using candles in the hotels. You don’t come from Europe all the way to Zanzibar for candles.
In early November 2014, the readers of the Financial Times’s “How to Spend It” section opened up the glossy supplement that prides itself on being “the benchmark for luxury lifestyle magazines” to a profile of Justin Forsyth, the then chief executive of Save the Children UK. Over the last decade, the NGO sector has “professionalized” and cozied up to big business in unprecedented ways. Forsyth, former advisor to both Tony Blair and Gordon Brown, was widely credited with ushering in a new wave of grand partnerships with corporations. He also “increased the charity’s income by £50m per year since 2010,” according to the congratulatory subhead on the “How to Spend It” profile. The piece is a tour of Forsyth’s favorite tapas restaurants, the Royal Opera House, walks in Primrose Hill. Forsyth smiles for the camera, one hand in his pocket, the other arm leaning on the counter of an upscale gelateria in London’s Borough Market — a genial portrait of the cosmopolitan businessman.
Corporate funding of international NGOs is nothing new. CARE USA has collaborated with Coca-Cola for three decades. But corporate-NGO tie-ups are flourishing. Oxfam says it “is proud to be at the forefront of partnerships between the business sector and the NGO community.” A section of the website for Save the Children UK beckons corporations to “work with us” with a menu of options from straightforward financial donations to “cause-related marketing.” The NGO says:
“Teaming up with Save the Children to market a new or existing product could boost your sales, profile and customer base.” The sales pitch continues: “Associating your brand with the world’s leading independent organisation for children could be really beneficial for your business and stakeholders.”
Save the Children is seen as being on the forefront of this corporate-partnership wave in Britain. Molina, now head of policy at ActionAid UK, used to work at Save the Children. In a 2014 article for an academic development studies journal, she described how, when preparing a campaign against companies aggressively marketing baby formula in developing countries, it looked at:
the allegations made against the target companies to check legal risks, to assess the potential links with the company of offices and aid workers in relevant case study countries, and to ensure the tone of the activities and outputs involved in the campaign did not put the broader corporate engagement strategy of the organization at risk.
The NGO’s most famous corporate deal was announced in May 2013, when Save the Children unveiled an unprecedented £15 million partnership with the pharmaceutical multinational GlaxoSmithKline (GSK). One former staffer described the deal as “a car crash” and said that claims about the number of children’s lives impacted by the partnership were “nonsense” and more about PR than anything else. GSK was at the time mired in controversy, with allegations of bribery and other murky activities across countries where they operate. In 2012, the company was fined $3 billion in the United States after pleading guilty to criminal charges, including bribing doctors and encouraging the prescription of the antidepressant Paxil to children, even though the drug was unsuitable and unapproved for this use.
The former staffer said the financial crisis of 2008 is still having an impact on charity donations from individual members of the public and that “even for some of the bigger NGOs the aftermath is continuing to create financial difficulties. Difficult choices are being made of the sort that really haven’t been made for best part of 15 years.” The consequence, he said, is the turn to corporations: “Let’s say perhaps five years ago, the internal argument about whether to kind of hold your nose and take the money would have been more likely to tip against it, those conversations are now tipping the other way.” While it’s often unclear how exactly these partnerships impact the work of NGOs, he suggested:
I think in general […] [it’s] more about a kind of self-censoring than the changing of positions, so it’s just being a little bit more careful about the way that you approach the different business or about the general framing or maybe even doing things that a corporate partner wouldn’t want you to do … but just deciding to be a bit careful in case.
In the United Kingdom, many big NGOs — including Save the Children — are dependent on government funding for significant chunks of their budgets. This may have ratcheted up the pressure to be open to business. Justine Greening, the minister for international development, has insisted that: “For everyone in development, the private sector must be key partners. At DfID [the UK’s Department for International Development] our relationship with business has never been closer.” DfID is working with companies including Coca-Cola, PricewaterhouseCoopers (PwC), and Pearson, and is promoting the role of private sector partners including in health and education projects.
Another of DfID’s partners is Unilever, the enormous Anglo-Dutch consumer goods company whose products include food, drinks, cleaning supplies, and deodorants. In September 2014, the UK government announced a partnership with the multinational to “use new social business models to improve health, hygiene, and livelihoods for 100 million people by 2025” that would include each side contributing £5 million to “a research and innovation programme focused on affordable sanitation and safe drinking water.” Greening said at the time:
British businesses have the potential to make an enormous contribution to the fight against extreme poverty around the world. This partnership, the first of its kind, will combine our expertise and networks to help millions of the world’s poorest people find jobs, improve water and sanitation and, ultimately, end dependency on aid. This is not just good for the developing world, it is good for Britain. The frontier economies we will be working to improve are ultimately Britain’s future trading partners.
Unilever owns hundreds of household-name brands, including Dove, Knorr, Hellmann’s, Lipton, Marmite, and Lynx. Under Paul Polman, CEO of Unilever since 2009, the company has moved boldly into the corporate-led global development space. Polman, who joined the multinational from Nestle, where he was chief financial officer, is now a regular on the global summit circuit. Among other privileges, he was given a spot on UN Secretary-General Ban Ki-moon’s exclusive 27-member “High Level Panel of Eminent Persons on the Post-2015 Development Agenda,” appointed to help steer the process of deciding the UN’s new global goals. (With few exceptions, the panel was comprised of former and current senior politicians and diplomats including UK Prime Minister David Cameron and Queen Rania of Jordan.)
Polman, and Unilever, have become standard-bearers for a so-called “enlightened capitalism” that does good while making money. (And lots of money: Unilever says it has sales in over 190 countries and 174,000 employees, and in 2015 its revenues exceeded €53 billion, with over half of the company’s business in “emerging markets.”) At the World Economic Forum in Davos in 2016, Polman helped launch a new Global Commission on Business and Sustainable Development, to “articulate and quantify the compelling economic case for businesses to support the UN Sustainable Development Goals, mapping the ways that businesses can get involved, build competitive advantage and flourish.” Under Polman, Unilever has also announced commitments to, for example, cut calories in its ice-cream products and eliminate coal from its energy usage.
“We’re the world’s biggest NGO,” Polman told his audience at a 2014 event organized by the Washington, DC–based Center for Global Development think tank. “We’re a non-government organization. The only difference is, we’re making money so we are sustainable,” he said. “First and foremost I am a businessman; I cannot deny that,” Polman continued. “We have 2 billion consumers using us every day; we are in seven out of 10 households globally. […] If you have that scale and reach, it’s an enormous possibility to transform markets.”
But Unilever’s good words and much-feted focus on “sustainability” recently clashed with news from India, where it has been at the center of scandals around mercury poisoning connected with its subsidiary Hindustan Unilever Limited’s thermometer factory in Kodaikanal, in the hills of the southern state of Tamil Nadu. Last year a music video, “Kodaikanal Won’t,” went viral, accusing Unilever of failing to clean up its mercury waste. Borrowing the tune of Nicki Minaj’s “Anaconda,” then 28-year-old Indian rapper Sofia Ashraf exclaimed: “Kodaikanal won’t step down, until you make amends now.” Within weeks, the video had been viewed more than 2 million times and tens of thousands of people signed a petition calling on Unilever to resolve the long-running controversy. (In March 2016, the company reportedly agreed on an undisclosed settlement with former workers at the factory, ending a 15-year legal battle.) Polman has also protested against proposals — debated as part of a new national strategy to combat childhood obesity — to introduce a “sugar tax” in the United Kingdom.
Unilever has also signed on to an initiative launched by President Obama at the Camp David G8 Summit in 2012, the New Alliance for Food Security and Nutrition in Africa. This program is supposed to bring together aid donors, corporate partners, and African governments to reduce poverty and help Africa’s small-scale farmers. The sums pledged by aid donors and the companies involved were staggering — billions of dollars promised for long-neglected agriculture projects. As part of the deal, African countries put dozens of legal and policy reforms on the table, promising to change seed laws, land laws, and other regulations seen as limiting the power of big agribusiness to help change the continent’s fortunes.
Four years on, however, it’s become increasingly unclear how much of the money that was pledged was actually new money. A recent report from the UK government’s own independent aid watchdog, the Independent Commission on Aid Impact, found that, of the roughly £600 million the United Kingdom said it would put toward the New Alliance, “the majority of this expenditure, approximately £480 million, consists of pre-existing agriculture programmes which have been relabeled as New Alliance programmes.” Companies, it added, were “mostly submitting existing investment plans to garner favor with governments, secure a seat in policy dialogue or to win good publicity.”
The last decade has seen a proliferation of different voluntary standards for corporations, codes of conduct, sustainability principles, corporate social responsibility initiatives, and so on. But the limits of these voluntary commitments should be obvious, relying as they do on the goodwill of corporate bosses. Who monitors whether these pledges actually translate into any substantial change for poor communities? Who has the capacity to police and hold to account all of the companies that are moving into this space? The focus on the individual company and what good it may do, voluntarily, also draws attention away from the real issues of social, economic, and environmental justice. There is no global regulatory system for transnational corporations, and instead companies continue to lobby governments to influence public policy and protect their interests.
The UK government’s aid watchdog has warned that: “DfID needs to recognize that the private sector is not a developmental panacea.” It has also criticized UK aid-funded partnerships with businesses for lacking concrete targets and detailed operational plans for how these projects will help poor communities in developing countries — the intended beneficiaries of this spending. But the government’s message has remained: join hands with companies. In a speech last summer at the Overseas Development Institute think tank in London, Greening said:
I also want to work with civil society partners that recognise that the private sector is an intrinsic partner in successful development. Because … the reality is that everywhere in the world, people want jobs. And companies that aren’t making any money don’t tend to recruit or grow. In fact as I know from my family’s experience growing up, when companies lose money, people lose jobs.
But the problem, Molina says, is that, thus far, many corporate partnerships have been undertaken by NGOs in a “very unsophisticated, unsavvy way.” She explained:
We still have a higher moral standing in the eyes of the public. Basically the sector has tended to partner with corporations selling this intangible but very valuable asset for very little and for sometimes for dubious projects. They [companies] are much better than us at negotiating so they [have] got what they wanted from us very cheaply.
She added: “You get company A offering to do some small school in Ghana or something … but what is the rest of the development footprint of this company? Is it lobbying at the WTO on intellectual property?”
Her paper in 2014 noted that: “NGOs, like many other institutions and companies, also tend to measure their success and influence in terms of size and income.” For Nick Dearden, director of the campaign group Global Justice Now, this is a dangerous trend that could upend NGOs’ positive contributions completely:
The increased professionalization of NGOs over my lifetime is very noticeable, and with that has come this tendency to judge yourself like a business, how much you’re growing. Now fundraising just rules organizations and campaigning has become something you do to get funds. Campaigning has become a form of marketing, how you get your brand out there, how you raise more money, this whole idea that our purpose is to expand, to raise more money, at the same time as the government saying ‘this is how development is going to be.
Meanwhile, he lamented: “There’s no structural criticism of business.”
The result of the corporate takeover of aid is this image: the CEO of a major multinational on stage with the UN secretary-general. Last year, the company received a multimillion dollar loan from the World Bank’s private sector arm. The CEO winks to a man in the audience from USAID — another partner. NGOs who would otherwise be expected to campaign against the company for environmental destruction are also its “partners” and their increasingly professionalized staff give the CEO a hearty round of applause. The journalists in the front row write for a newspaper that is also heavily dependent on money from the company, through advertising and increasingly direct “sponsorship” of content. Everyone in the room is happy, but a critical analysis of corporate power is the last thing on anyone’s mind. The company has won a carte blanche pass from the institutions that used to be a check on their operations to go forth and make their profits.
This is the myth of corporate-led global development: that companies have “seen the light” and become more progressive, and therefore should be embraced as partners. While they may sing hymns about their development “impact” and “sustainable” operations, many of these same companies continue to avoid taxes and fight against regulation. The fact that this embrace of corporations in aid and development has happened in the wake of the global financial crisis, and amid increasingly mainstream questioning of deregulated capitalism, is astonishing. It is a grand accession of power, good for profits, but delivering questionable short-term benefits for the poor and worrying long-term impacts for the world. It is a many-sided hall of mirrors that is meant to blind good-willed people and the aid agencies they work with to the reality of unchecked corporate power.
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