The business of stability

Businesses investing in Africa must do more to understand fragility and conflict on the continent, and their role in building stable states.

Africa today has fewer conflicts than in the past, though violence continues to hold back development and generate significant costs to governments, business and societies.

Preventing conflict and strengthening states has traditionally been the role of national governments, international organisations and non-governmental organisations (NGOs). Business generally had a free pass – although sometimes it made things worse.

But more innovative solutions to conflict require public-private partnerships and greater engagement from the business sector. This is one of the conclusions of a report released in Kigali last week at the World Economic Forum (WEF) Africa Summit.

Responsible Investment in Fragile Contexts, by the WEF Global Agenda Council on Fragility, Violence and Conflict, notes that fragility, conflict and crime are bad for business, with opportunity costs all along the value chain. Violence and conflict also impose a heavy humanitarian burden and act as a brake on resilience and socio-economic advancement. The global humanitarian need for 2014 alone amounted to roughly US$25 billion. Estimates of the impact of violence on the global economy range from US$9.5 trillion to US$14.3 trillion.

More innovative solutions to conflict require greater engagement from the business sector

Many fragile environments are in Africa’s emerging or frontier markets, where the opportunity to make money must also consider the opportunity to create stability and prosperity, with investment that builds resilience and enables sustainable growth.

It is no longer sufficient for business to rely on governments and NGOs to prevent conflict and mitigate against state fragility. Businesses looking at investment opportunities should examine not just risk and local conditions, but also how they can tip the scales towards stability and prosperity.

Business needs to contribute to the collective resources, knowledge, capital and competencies of public-private partnerships that are geared not just to profit from, but also to support fragile governments and build robust institutions of state.

Responsible investment and collaboration with public institutions and civil society still requires a positive business case. The business should generate financial returns for the investor, as well as benefits for communities and governments. Otherwise it is not a business.

Businesses should examine how they can tip the scales towards stability and prosperity

Businesses are able to encourage financial inclusion for vulnerable members of society, create access to global value chains for small and medium-size producers, provide jobs and opportunities for youth skills development, and contribute to delivery of basic services in hard-to-reach communities. While foreign investment has the potential to aid development and bring social and economic benefits, investment without adequate regulation and accountability can have a devastating impact on human rights.

Amnesty International has documented many cases where foreign companies exploited a country’s fragility to maximise profits at the expense of stability, growth or human rights. This includes toxic waste dumping in Côte d’Ivoire, serious human rights violations in a Myanmar mining project and extensive oil pollution in Nigeria.

Companies have a responsibility to respect human rights wherever they operate. They must fulfil this responsibility by exercising due diligence to become aware of and prevent human rights abuses, and by taking action when abuses occur. This responsibility is independent of a country’s own human rights responsibilities and exists over and above compliance with national laws. The greater human rights risks associated with fragile states mean companies should take extra care when operating in these countries.

The Global Agenda Council report cites several examples of companies getting this right, and planning a successful investment with an impact on countries and communities. Technology company Philips was part of a public-private initiative to source conflict-free tin from the Democratic Republic of Congo (DRC), where the illegal trade in metals and minerals has been an important source of income for armed groups. The DRC conflict is the world’s deadliest since World War II, with more than a million casualties.

The Dutch government wanted to contribute to breaking the cycle of war economies. Together with several multinationals, including Philips, Tata Steel and Cookson, it developed the Conflict-Free Tin Initiative (CFTI) to help rebuild the international market for conflict-free minerals from the eastern DRC. The CFTI put in place new controls and traceability systems to ensure the minerals are conflict-free.

Business has a key role to play in addressing the causes and consequences of fragility

In September 2012, Philips ordered 20 tonnes of solder from its solder manufacturer, which in turn placed an order with the tin smelter, which in turn ordered minerals from a selected mine in East Congo. Since the Philips order, a mine has reopened and offers work to more than 800 miners. Economic activity is starting to develop around the mine, such as women offering micro-credit to miners. Many other companies are now joining the initiative and getting ready to order tin from the mine.

The CFTI represented an important milestone towards conflict-free mineral trading in the DRC and shows that through cooperation with the government and NGOs, the private sector can use its purchasing power to do good and improve people’s lives.

Business has a key role to play in addressing the causes and consequences of fragility. It must act to strengthen resilience rather than adding to stress factors. There is also a clear business case for doing so. Fragility and violence are bad for business, whereas developing constructive relationships and strengthening the local socio-economic environment will benefit a business in the long term.

This should be part of overarching business strategy in fragile contexts. The days of confining this work to small, under-funded corporate social responsibility departments are over.

Anton du Plessis, Executive Director, ISS

This article first appeared on IOL

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