7 May 2017

Africa: Social Enterprise Sector Is Missing Link in Africa Wealth-Creation Chain

analysis

Wealth creation in Africa has been stunted because countries have focused too much on the state to create new businesses, foster development and industrialise the economy. Sadly, poor Africans may have to come to terms with using development vehicles other than the state, which generally failed in the post-independence period, captured by corrupt interests or lacking competency.

State-led development demands high levels of capacity to co-ordinate, integrate and implement complex policies, strategies and partnerships. Such capacity requires not only political will but pragmatism -- not ideological rigidity -- and a public service employing the best talent available.

African governing parties have invariably lacked the political will, ideas and competent people to use the state effectively and intelligently to foster development.

The missing link in Africa is the social enterprise sector, which does not involve the state or foreign companies, but centres on social, community and nongovernmental organisation-based businesses and entrepreneurs.

The objectives of social businesses are generally seen as meeting social goals. They often reinvest profits back into the business or target audience or community. Africans may have to start thinking of using social enterprises -- whether at village, community or non-governmental organisations -- to create businesses, manufacture goods, expand financial services and farm commercially; and to serve as alternative public-service providers, delivering education, energy and accessible finance. Rather than look to state banks, community groups, nongovernmental organisations and professional associations can establish co-operative banks, with the participation of citizens.

Africa's overwhelming reliance on the state to create wealth -- and citizens' expectations that the state should improve their lives -- has been one of the biggest obstacles to creating sustainable new businesses, development, and industrialisation on the continent. The African overdependence on the state to create entrepreneurs has led to the formation of political capitalists, elites closely aligned to the leader and governing party who secure state "business" because of their political connections. They rarely create new productive sectors or bricks-and-mortar enterprises and lack the incentive to do so.

Political capitalists depending on the state have also undermined Africa's politics: because of their dependence on the state, political capitalists will not challenge governing parties and leaders who govern poorly. This has spawned corruption as state tenders or licences are handed over to politically connected political capitalists in return for paybacks.

Almost all African economies are dominated by the state and the informal sector. In many African countries, more than half of citizens are employed in the informal sector. Yet African countries have not focused on creating wealth through the informal sector and social enterprises, which do not involve the state to any large extent.

Bringing together Africa's hundreds of thousands of individual or family based micro-entrepreneurs who are eking out a living in the informal sector into sustainable social enterprises is the catalyst needed to unlock untapped wealth.

Establishing community-driven social enterprises to deliver local public services could be the solution to poor public-service delivery across the continent.

Both these options are also better ways to empower the widest number of citizens, rather than small elites, well-connected to governing parties and leaders, the norm across Africa.

The kibbutz movement in Israel, if one puts aside the Palestinian question, has valuable lessons for Africa to create businesses, foster development and industrialisation without the state. Israel's kibbutzim have spawned more than 300 industrial plants, factories and commercial farms, built largely independent of the state, with more than 100,000 employees. Israeli governments provided supportive frameworks for the kibbutzim, but they started their businesses, factories and commercial farms largely without state involvement.

These businesses, factories and commercial farms are cleverly producing products the country needs but does not have and increasingly export products the world needs but is short of.

Spain's Mondragon was founded in 1956 in the Basque region by José María Ormaetxea and fellow graduates from a local technical college run by Catholic priest José María Arizmendiarreta, who urged his students to start co-operatives. It is an example of a successful social enterprise that was not established by the state or the conventional private sector operators.

Arizmendiarreta started the technical college, the Escuela Politecnica Profesional, which produced the founders of the Mondragon, as a nongovernment co-operative, organising poor parents to pledge the little they had to start the college. Mondragon has now gone global, operating in 30 countries with about 85,000 employees, and operating in four sectors -- finance, industry, retail and knowledge -- still along co-operative lines.

In SA, in addition to taking control of the state the Afrikaner community built powerful companies through co-operative enterprises that used the contributions of citizens.

Social enterprises may fit the African context better and can leverage local resources, limited finances and skills better.

Africans would be able to pool their limited resources, capital and skills more productively than at present.

Many African countries have vast lands under communal control, often overseen by traditional authorities. Such communal lands are often used for self-enrichment by the traditional authorities. Such communal lands could be changed into the hands of the community, rather than controlled by traditional authorities.

African rural communities could set up communal agricultural social enterprises, whether as co-operatives, trusts or whatever suitable company structure. Scarce skills and equipment could be more productively shared.

In Rwanda, small farmers have increasingly organised themselves into co-operatives, without substantial state involvement, to pool their resources, implements and skills to farm more productively and deal with hardships and markets better.

These co-operatives have played a large role in increasing food security in Rwanda, with the country now one of the top producers of high-quality maize in that region.

Women fishers in 15 villages of the Greater Banjul area of the Gambia have successfully established a social enterprise that has improved yields, incomes and wealth.

Similarly, in Salomougou in Ivory Coast, a fishing co-operative established by fisherwomen has brought a similarly positive financial, market-access and yield results.

Alternatively, African communities, whether at the village, community or industry sector, could set up industrial plants manufacturing smaller industrial products their country or region need, but which are in short supply. Goods produced by social enterprises could add value to agricultural or mining products.

Civil society can then push for the social-enterprise manufactured products and services to be inserted into the supply chains of big business, whether state, local, private or foreign.

Furthermore, civil movements can own social enterprises to provide communities with their own food, products and "public" services. Such social-enterprise services could be established in areas where public services are not working: for example, community-driven water sanitation, renewable energy and education provisions or agricultural production.

Lack of quality public education -- whether at the primary, secondary or higher education level -- is certainly among the most tragic failures of post independence Africa.

Africans can learn from Arizmendiarreta how to leverage contributions from parents, even if they are dirt poor, to establish social-enterprise educational institutions.

The challenge will always be how to make social enterprises self-sustainable and profitable through their own revenue streams. Nevertheless, citizens with very little money to invest often have stronger incentives to hold the management of such companies accountable.

Citizens must not abandon their efforts to turn around the African state -- more stringently holding governments and leaders accountable, voting on the basis of actual delivery rather than past struggle credentials, emotional or ethnic attachment or blackness, and getting their governments to come up with more relevant policies.

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