By Lorna Gold.
The UK Department for International Development, DfID, received its first ever “red warning” from the UK Independent Commission for Aid Impact (ICAI) in May 2014. The Commission concluded that DfID’s programme for “promoting private sector development” failed to yield any benefit for poverty reduction. It slated DfID for its ideological approach based on blind faith in markets to work ‘miracles’. The programme was discontinued as a result.
Ireland is still far from anything like this. However, research carried out for Trocaire points to increasing pressure, external and internal, for a private-sector approach to be adopted by Irish Aid. The research concludes that getting both donor and poor communities to benefit from increased trade is difficult, without careful management. Most large-scale donor initiatives of this type have focused on facilitating Africa’s trade with the rest of the world rather than supporting indigenous growth. This “aidfortrade” typically creates landing strips for expensive imports from the rest of the world, rather than launching pads for African goods and services. Clearly more support needs to be given for manufacturing and valueadded activities in African countries.
Reliable information about Ireland’s business presence in Africa proved difficult to obtain but is considered that Irish commerce in Africa is limited. Foreign direct investment amounts to just 0.25% of Ireland’s total direct investment overseas. Ireland’s trade with Africa is imbalanced by a ratio of just over two to one in favour of Irish exports. There was a total of €3.2bn exports in 2013, representing 1.5% of Ireland’s total exports of goods and 2.1% of Ireland’s total trade in services. Imports to Ireland of African goods and services amounted to €1.25bn. However, there is an intensification in official efforts to promote Irish trade and direct investment in Africa, from this low base.
Irish Aid’s bilateral spend on private-sector and economic development is still relatively small, standing at €5.5m in 2013. Public Private Partnerships accounted for €8m, representing 2% of Irish Aid’s bilateral budget. However, Irish Aid has been involved in another significant trend in private-sector development: leveraging or blending of private sector finance to achieve development goals. This has been pursued via its funding of €5.2m to the Private Infrastructure Development Group over the four years up to the end of 2013.
This is a group of six bilateral donors, which, together with the International Finance Corporation, aims to mobilise private-sector investment in developing countries. Ireland has also become more active in exploring business opportunities from these types of funds. The Department of Foreign Affairs and Trade commissioned a market assessment, ‘Winning Business in Africa Building a Cluster for Infrastructure’, which identified €12bn in projects to be funded by grants, tenders, loans and general procurement notices from the EU, the European Investment Bank, the World Bank, and the African Development Bank.
The overriding focus for the private sector is on opening up new markets for multi-national corporations and extending their control over African resources. The consequence is that, in the name of reducing poverty, the food security and land tenure of vulnerable groups, especially women farmers, are being undermined.
The G8 New Alliance for Food Security and Nutrition in Africa is one example of a poverty-focused initiative involving private-sector partners. Despite its title, focused on food security, the New Alliance initiative actually promotes the export of agricultural goods such as tobacco, coffee, cocoa, and biofuels, rather than the production of nutritious foods that could be consumed locally. If “aid-for-trade” is to benefit those living in poverty, a better starting point would be a focus on regional and local markets in the first instance.
This trend towards private-sector engagement in development co-operation is set to continue. The Irish Government must, at least, mitigate the risk that Irish companies become complicit in human-rights violations by ensuring they adhere to high standards. Human Rights due diligence requirements should be mandatory. It is a concern, for example, that employees of Irish companies are currently being incentivised, via the Foreign Earnings Deduction, to operate in the Democratic Republic of Congo, without any provision for Human Rights due diligence. For this reason, Ireland’s commitment to develop a National Action Plan to implement the UN Guiding Principles on Business and Human Rights must be translated into robust action, soon. •
Lorna Gold is Head of Policy and Advocacy with Trócaire
