In Africa, the best 'charity' is aid for business
The traditional approach to solving Africa’s problems through aid has created a cycle of dependency. A better approach is to use donor subsidies to fund private, for-profit ventures. Those ventures create systemic and sustainable change in the community.
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Based on our experience, and the experience of many other forward-thinking philanthropic organizations, I believe it is time for a philosophical shift in how aid is deployed in Africa. The impact of African philanthropy could be substantially improved by adopting three key tenets:Skip to next paragraph
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Focus on social wealth. In many traditional development sectors, fully non-profit models have limited long-term growth prospects compared to for-profit models. The for-profit models may provide the same service to the community, but they leverage the minimal revenue streams of the business to ensure greater sustainability.
Even when the profit stream is small, it can be reinvested back into the organization to build greater capacity and provide more goods and services, as well as hiring more people, paying higher wages, contributing to the community’s tax base, and purchasing more goods and services to support its operations.
True “sustainability” comes from a positive cycle of growth, and having sufficient resources to grow on its own with drastically reduced or even no charitable support.
Deploy funds not just for short-term impact, but for systemic change. Does your capital donation change the conditions on the ground and create value in the community – or does it provide only temporary relief without addressing the underlying causes of the problem? Creating value within the community should be a chief aim of philanthropy, as it creates resources for future problem solving and reduces the likelihood of long-term dependency.
Focus on long-term sustainability. Modern philanthropy grew up with the belief that any problem can be solved with enough charity. Unfortunately, that has not worked out in practice. If sustainable growth and change is the goal, then programs must be selected and designed specifically with that goal in mind.
Success metrics and reporting must also evolve. Rather than reporting what is given away, and how many annual beneficiaries there are, philanthropies should report how successful their donations are in creating long-term solutions and reducing the chance that more charity will be needed in the future to address the same issue.
For example, grant funding that leverages private capital to help launch a micro-utility is far more catalytic than grant funding for a community water project that is not sustainable.
Private sector solutions that create social wealth constitute a development approach in Africa that I call “Africapitalism.” And within this development model, there is an important role for philanthropies to play. The challenge is to be judicious in how we deploy our capital, paying careful attention to sustainability, so that we secure a future of independence for Africa.
Tony O. Elumelu is an entrepreneur, a philanthropist, and the chairman of Heirs Holdings Limited, a pan-African investment company commited to driving economic prosperity and social wealth in Africa. He is former CEO of United Bank for Africa and current chairman of Transcorp. He can be found on Twitter at @TonyOElumelu.