Ethical Performance
inside intelligence for responsible business


big business 'needs to move into aid agenda'

December 2005

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.'

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