Zitto Kabwe Africa Berlin

7/30/2019 Zitto Kabwe Africa Berlin

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CLASH OF INTERESTSBetween economic

aspirations and social

responsibility

Economics Conference

Commitment to Africa

Initiative on 9-11

December 2012 Berlin,

Germany.

Presentation by Zitto Kabwe


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Developmentcooperation needs

to be configured to

ensure it takesplace within a

framework of

partnership while

involving as much

of the population

as possible.


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Mindsets are changing - slowly

Implications for encouraging a major role of the privatesector in responding to societal development and at thesame time promoting their own aspirations.

Identification of possible areas for partnership.

In Africa private companies have for ages been definingtheir interests as simply profit maximization and side-liningthe communities and the society they make that profitfrom.

The mindset is however increasingly changing - but social

responsibility is charity instead of acting responsibly andsustainably.

Broad definition of CSR and underlining factors thatinfluence businesses to act in a responsible way.


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Example of a business successfully

achieving both goals

By definition, a successful business will aim at

improving itself through growth, market

control, and distributing benefit to its

shareholders.

This is how business was done for years and is

still done in some enterprises.


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Critics of business as development

Contribute to economic development, but not humandevelopment or wellbeing.

Focus on value appropriation than value creation

Inefficient use of resources

Add to social problems and economic inequality Undermine government role and capabilities

Do not account for the external impact of their activities

In Africa, there are many examples of corporations acting in

an irresponsible way, and the reason is believed to be theirpursuit of profit and financial performance. Some of thechallenges we see are linked to tax payment, corruption,Illicit money transfer, money laundry etc.


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What motivates responsibility?

Companies acting responsibly are performing

financially as well (or better) than

irresponsible companies, even in the absence

of coercion.

How do they reconcile their business

aspiration and social responsibility?


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What is CSR?

The methods mainly based on financial engineering worked

until the actors in the market started changing their ethics,

their models and their own aspirations.

Businesses had to become creative and innovative, and had to

analyse the context, then adapt to the new changes.

In the late 60s and early 70s businesses became increasingly

aware of the fact that their activities had positive and

negative impacts not only on the shareholder, but to a group

of people, and that compliance with fair rules that benefitedthe stakeholders had a positive impact on their financial

performances (aspirations).


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Charity and corruption

CSR is not just charity actions conducted by a company in thecommunities where it operates, CSR is not an action. CSR is abehaviour and can be defined as a process that aims at influencingthe company action in order to maximise its positive impact on itsstakeholders or its surroundings.

In Africa, private companies from the developed world performwhat they label as CSR in regards of i.e. school buildings, mosquitonets or rehabilitation etc.

Requesting more school desks or more mosquito nets would resultin a negative performance in their financial books. At the sametime, some of these companies use accounting techniques to

transfer most of their revenues to offshore and pay less tax inAfrican countries or not at all.

A socially corporation acts responsibly by paying its taxes.


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Pay tax

Amongst many responsible CSR examples, trainingtheir employees in new technologies of production andkeeping their health and safety records positive,business save money and increase their performance.

CSR hence isnt a specific action done to avoidreputation damage or sanctions, but is part of thebusiness model to maximize profits for all stakeholders.

By paying their taxes to governments companies

enable governments to pursue their mandate properly.By denouncing corruption they participate in sustaininga healthy environment for business etc.


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A succesful business in Africa

Distribution of a two page case study on a

successful business that has had great impact

on the development of local communities in

Africa as well as a high profitability, by

focusing on the aforementioned key areas.


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Robbing Africa

Africa is being robbed of its resources through tax avoidance done bymultinationals.

From 2000-2010 more than USD 844bn was flown out of developingcountries yearly through capital flight and 69% of this was from Africa(Global Financial Integrity Report 2011).

The global FDI inflow in 2011 was 1.5 trillion USD (UNCTAD 2012) whilecapital flight from developing countries is averaged at 0.84 trillion USD peryear and 0.58trn USD of this money is from Sub-Saharan Africa.

The total FDI to Africa was a mere 37 billion USD - 2011 almost samefigure to total foreign flows to Sub Sahara Africa. So while a total amountof 538 billions of USD leaves Africa illicitly as proceeds of bribery, theft,kickbacks and tax evasion and avoidance, only around 80bn USD flow into

Africa as FDI and aid combined. For every 1 USD coming to Africa, 7 USD illicitly leaves Africa! This is

unacceptable and henceforth must be mainstreamed into thedevelopment cooperation agenda.


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Possible areas for partnerships?

In order for businesses to express their CSR in the most beneficial way forstakeholders, they are influenced by:

Good domestic tax law that raise the price of irresponsible behaviours and rewardcompanies that act responsibly in their countries of operations.

Well-organised institutionsboth normative and cultural - with a clear framework.A set of standard best practices that could serve as a guideline in specific fields.

Increased competition between businesses to emulate good behaviours. Increasing transparency and strong governance issues.

Independent organisations monitoring businesses behaviours and mobilising tochange it.

Participation of businesses in academic and research fields.

Their membership to associations of several business sharing the same ethics and

promoting CSR The main challenge is the creation of institutional framework with countries in

Africa to stop capital flight as countries in the north have a role to play in thischange, given the money flow from north to south and more so vice versa.


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What can governments do?

Governments in Europe and in Africa mustconsider the above elements and focus onfriendly laws, researches and networking, in

order to foster the participation of businessesinto development of developing countries

Countries like Switzerland and other tax havensfacilitate illicit money transfer by maintaining

policies that obstruct transparency efforts, andare hence participating in the process ofimpoverishing Africa.


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What can Germany do?

My country is a top recipient of foreign aid but more thanthird of the population is still anguishing in poverty.

Transformational Development Cooperation is that ofempowering the people to take care of their own lives.

Germany must up its efforts in pushing for governanceissues in Africa especially in exploitation of Africas naturalresources.

Germany must support African countries in ending illicitmoney flows through capital flight done by multinational

corporations. Germany must encourage its private sector, especially SMEs

to invest in Africa.


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Future of development cooperation?

Empowerment

which ends a donor-

recipient relation

between developingcountries and

developed ones.


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[A] man is developing himself whenhe grows, or earns, enough to provide

decent conditions for himself and his

family; he is not being developed if

someone gives him these things.

Julius Kambarage Nyerere, from his book Uhuru na Maendeleo

(Freedom and Development), 1973.


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Zitto Kabwe Africa Berlin

Documents

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