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aug13 news1

Africa and Inclusive Business - Key to Sustainable Growth

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A new report by the United Nations Development Programme (UNDP) shows that inclusivity within African business is key to boosting economic growth and sustainable development, as well as to ensure the benefits are widespread. The report, titled Realising Africa’s Wealth – Building inclusive business for shared prosperity, and launched alongside this year’s World Economic Forum, places inclusive business front and centre of economic thinking going into what is considered a decisive era for Africa’s development and the world.

“Africa needs to re-dream business, including more people, encouraging people to be more economically active and redistributing wealth in novel ways, while nurturing dignity and self-respect,” says Professor Walter Baets, Director of the UCT Graduate School of Business. “If the continent wants to move ahead merely adopting prescribed ways of doing things or adapting them slightly is not enough. We need to take what we know, dissect it, probe it, stretch it, turn it upside down and inside out and make it better.”

Inclusive business argues for the inclusion of low-income communities in its value chain – both as producers and consumers – not at the cost of profitability, but for the gain of society and the environment.

It provides low-income citizens access to opportunities for income, basic goods and services and choice – effectively creating scaffolding between low-income communities and the benefits of Africa’s rapid economic growth.
The report, which details key constraints and opportunities for inclusivity in the business environment, suggests four areas of support for business: providing awareness, knowledge and technology for operating in low-income regions; implementation support in terms of logistics, transaction and marketing; providing micro business support and assistance; and, financial motivation in the form of incentives and investment.

Baets says inclusivity is not a new concept for business but that it has mostly been sidelined in the past. “Its appearance on the agenda this year is not out of choice but necessity as business as usual continues to take us toward a dead-end. If we don’t change our thinking now and start making the drastic changes needed on a global level, we’ll find ourselves in serious trouble”, he says.

“We need young entrepreneurs and innovators as drivers of inclusive businesses. We need organisations that are willing to take up the roles of catalysts, supporters and funders of inclusive businesses,” UNDP said. But there’s a prevailing assumption that the World Bank’s prescribed ways of developing emerging economies is the most effective, even though there appears to be very little proof that they are indeed successful. And this seems to be preventing the wide-scale adoption of the inclusive model.

According to Baets there are many examples of countries that have progressed well without applying International Monetary Fund and World Bank growth strategies, notably Brazil and most high-growth African countries.

Another assumption is that government is responsible for driving inclusivity and that it should do everything to create the necessary environment and that the best vehicle to advance this is entrepreneurship.

“Of course government should work to create the conditions that nurture this transformation, but true inclusivity is a massive project that really should be driven by business – government may have the mandate but business provides the means”, says Baets.
And one definite assumption already changing as inclusive business ideas become more prevalent, is that a long term view is somehow of less importance than short-term gains. In Capitalists for Inclusive Growth  (an article published last year by Project Syndicate), the CEO of E.L. Rothschild and co-chair of the Henry Jackson Initiative for Inclusive Capitalism, Lynn Forester de Rothschild, argues that the entire notion of inclusive capitalism relies on the management of companies for the long term.

“Companies that follow this approach are concerned with the skills of their future workforces; seek to build loyal and productive supplier bases; and make investment decisions based on sustainable value creation, not short-term profitability,” she says.
What is clear is that it won’t be the WEF or the World Bank or governments that change things for the better, it will be those business leaders who shun tradition for positive progress and who take the long term sustainability route rather than the win-now route.

“To start, we must give up our accepted assumptions and confront the collective rationale that says there is still time. There isn’t”, says Baets.