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May 10, 2013

Report Touts Inclusive Business as Means for Reducing Poverty in Africa
    by Robert Kropp

The African Facility for Inclusive Markets calls on diverse stakeholders to help create appropriate conditions for the growth of inclusive business in Africa and bring the benefits of economic growth directly to the poor. -- Albert Einstein once said, "We can't solve problems by using the same kind of thinking we used when we created them," a quote which came to mind while I was reviewing a recent report entitled Realizing Africa's Wealth: Building Inclusive Businesses for Shared Prosperity by the African Facility for Inclusive Markets (AFIM), an initiative of the United Nations Development Program.

Given capitalism's centuries of exploitation of the people and natural resources of Africa, can we reasonably expect that capitalism might be "rebooted," as Peter Bakker, president of the World Business Council for Sustainable Development (WBCSD), has said? Can a global economic system that too often seems rigged in favor of the profit motives of corporations actually serve to advance the Millennium Development Goals (MDGs), which seek to halve the incidence of extreme poverty by 2015?

"Business as usual is not an option for a future-proofed economy in which nine billion people live well within the limits of the planet by mid-century," Bakker said.

According to the AFIM report, inclusive business offers opportunities for entrepreneurship as well as the involvement of more of the continent's poor in economic growth and sustainable development. "The post-MDG framework will ask the private sector to contribute to development goals," the report states, "often by engaging in core business approaches."

The report defines inclusive business as integrating "low-income individuals into value chains in various capacities, be it as consumers, producers, employees and entrepreneurs. Thus, they bring the benefits of growth directly to low-income communities." It details numerous instances of successful inclusive businesses in Africa, most of which are in the agribusiness, energy, financial services, and ICT sectors. In sub-Saharan nations such as South Africa and Kenya, where more supportive ecosystems for inclusive business have been developed, sustained economic growth and responsible governance systems contribute to the comparative success of such endeavors.

"However," the report continues, "many people remain excluded from the benefits of this growth, without access to basic goods and services or opportunities for employment and regular income."

"International actors are the dominant players in providing support to inclusive businesses in sub-Saharan Africa," the report observes. But in the aftermath of global economic insecurity, many developed nations have failed to maintain their commitments to supporting sustainable growth and reducing poverty in Africa and other developing regions. According to a 2012 MDG Gap Task Force Report, official development assistance decreased by three percent in 2011, and poor nations faced reduced market access for their exports.

AFIM also identified deficiencies in local support institutions as well as problems inherent to market conditions in low-income communities. What is needed, the report states, is "a network of interconnected, interdependent actors whose actions make it possible for inclusive businesses to succeed and generate impact at increasingly large scales."

All stakeholders—companies and entrepreneurs, governments, development partners, civil society organizations, research institutions, and intermediaries—have roles to play in encouraging the growth of inclusive business in Africa, the report advises. Inclusive business ecosystems, supportive financial mechanisms, and platforms for knowledge-sharing are all necessary if sustainable development and significant poverty reduction are to be realized.

"We certainly need more capacity-building entities, such as civil society organizations, governments, developing partners and research institutions, with demonstrated abilities to assist businesses in building inclusive models," James Mwangi of the Equity Bank in Kenya said.

"Africa has seen some strong economic growth over the past decade," Babacar Cissé, the Deputy Director of UNDP’s Regional Bureau for Africa, said. "Nonetheless, rapid economic progress has not brought prosperity to all, and inclusive business represents a promising approach by bringing the benefits of economic growth directly to the poor by including them in value chains."

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