CLASH OF INTERESTS AND NEW PARADIGM IN DEVELOPMENT COOPERATION - ZITTO KABWE

Economics Conference "Commitment to Africa" Initiative

 9 - 11 December 2012 in Berlin, Germany

“Clash of interests?” Between economic aspirations and social Responsibility”

How development cooperation needs to be configured in future in order to 

ensure it takes place within a framework of partnership while involving as much 

of the population as possible

Zitto Kabwe’s intervention: 

Clash of interests? Between Economic aspirations and social responsibility 

In this brief presentation, we evaluate the implications of encouraging a major 

role for the private sector in responding to social needs (societal development) 

and at the same time promoting their own aspirations (profit and market share). 

We then identify the possible areas for partnership. In Africa the interest 

between the private companies and communities must highly be aligned. 

Private companies have been for ages defining their interests as simply profit 

maximization and side-lining the communities and the society they make that 

profit from. The mindset is increasingly changing but  in a narrower way; that 

Social responsibility is charity instead of acting responsibly and sustainably. We 

will try to define CSR broadly and underline factors that influence businesses to 

act in a responsible way. The presentation ends with an example of a business 

that is successful in achieving both goals. 

By definition, a successful business will aim at improving itself through growth 

(Maximizing the profits and injecting them back into the business) market control 

(mastering the rules of demand and supply) and distributing benefit to its 

shareholders. This is how business was done for years and is still done in some 

enterprises.  

Critics of business as development actors will argue that busnesses: 

Contribute to economic development, but not human development or 

wellbeing 

Focus on value appropriation than value creation 

Inefficient use of resources 

Add to social problems and economic inequality 

Undermine government role and capabilities 

Do not account for the external impact of their activities 

In Africa, there are many examples of corporations acting in an irresponsible 

way, and the reason is believed to be their pursuit of profit and financial 

performance. Some of the challenges we see are linked  to tax payment, 

corruption, illicit money transfer, money laundry etc. 

However, some companies acting in a very responsible way are performing 

financially as well (or better) than irresponsible companies, even in the absence

of coercion. What motivates their responsible behaviours? How do they 

reconcile their business aspiration and social responsibility?  

The methods mainly based on financial engineering worked until the actors in 

the market started changing their ethics, their models and their own aspirations. 

At this point businesses had to become creative and innovative, and had to 

analyse the context, then adapt to the new changes. In the late 60’s early 70’s 

businesses became increasingly aware of the fact that  their activities had 

positive and negative impacts not only on the shareholder, but to a group of 

people, and that compliance with fair rules that benefited the stakeholders had 

a positive impact on their financial performances (aspirations) 

What is corporate social responsibility?

CSR is not just the charity actions conducted by the company in the 

communities where it operates, CSR is not an action. CSR is a behaviour and 

can be defined as a process that aims at influencing the company action in 

order to maximise its positive impact on its stakeholders (consumers, employees, 

competitors communities, governments etc.) or its surrounding (natural 

environment, political environment, governance etc.). In Africa, private 

companies from developed world perform what they label as CSR in issues like 

schools buildings or rehabilitation etc. Of course,  requesting more school 

rehabilitation or more mosquito nets would result in a negative performance in 

their financial books. At the same time, some of these companies use 

accounting technics to transfer most of their revenues to offshore and pay less 

tax in African countries or don’t pay at all. This is charity and corruption in two 

different sides of the coin. A socially responsible corporation must pay its taxes 

responsibly as well. 

Amongst many responsible CSR examples, training their employees in new 

technologies of production and keeping their health and safety records 

positive, business save money and increase their performance. CSR becomes 

not a specific action done to avoid reputation damage or sanctions, but 

participates in the business model to maximize profits for all stakeholders. This 

means that business should act in a socially responsible way because all the 

area of their value chain would increase their profits if various stakeholders

benefit from the business performance and vice versa. By paying their taxes to 

governments companies enable governments to pursue their mandate 

properly. By denouncing corruption they participate in  sustaining a healthy 

environment for business etc. 

As a business rolls out and creates its value chain, it goes through a number of 

stages, and all these stages are organised in a way that meets the corporate 

objectives as defined in the business aspiration. Just like in the above example 

of paying tax and avoiding corruption, it is increasingly proven that if the 

interests of all shareholders are taken into consideration at these stages, 

businesses would benefit more. These areas are: 

Job creation/recruitment 

Research and Development 

(R&D)/ Market study 

Process Innovation 

Product Innovation 

Education and Training 

Infrastructure and Investment 

Health and  

Safety Standards 

New Products and 

Services 

Business Networks 

Taxation/rent 

Social Innovation 

Self-Regulation 

Provision of Public Goods 

Social and Economic

We are distributing a two page case study on a successful business that has had 

great impact in the development of local communities in  Africa as well as a 

high profitability, by focussing on key areas that we have just mentioned. While 

reading the document, please focus on the elements we mentioned as being 

common to CSR and business development (research funding by donors, 

models adapted to the local socio economic context, ethics and participation 

to the millennium goals, profitability to the company and high stakeholderfriendly value chain). 

Unfortunately, in African countries not all business perform so well in CSR and for 

local communities to fully benefit from their presence. Some of the institutional 

elements need a particular attention from northern countries as the area of 

scope goes beyond the territorial competency of a single country.  

For example, Africa is being robbed of its resources through tax avoidance 

done by Multinationals. Between year 2000 and 2010 more than USD 844bn was 

flown out of Developing countries yearly through capital flight and 69% of this 

was from Africa (Global Financial Integrity report 2011). 

The global FDI inflow in 2011 was 1.5 trillion USD (UNCTAD 2012) while Capital 

flight from developing countries is averaged at 0.84  trillion USD per year and 

0.58trn USD of this money is from Sub-Saharan Africa. The total FDI to Africa was 

a mere 37 billion USD in 2011 almost same figure to total foreign Aid flows to Sub 

Sahara Africa. So while a total amount of 538 billions of USD leaves Africa illicitly 

as proceeds of bribery, theft, kickbacks and tax evasion and avoidance, only 

around 80bn USD flow into Africa as FDI and Aid combined. In every 1 USD 

coming to Africa, 7 USD illicitly leaves Africa! This is unacceptable and 

henceforth must be mainstreamed into Development cooperation agenda.  

What are the possible areas to look at for partnerships?

In order for business to express their CSR in the most beneficial way for 

stakeholders, they are influenced by: 

Good domestic tax law that raise the price of irresponsible behaviours 

and reward companies that act responsibly in their countries of 

operations. 

Well organised institutions –both normative and cultural- with a clear 

framework. A set of standard best practices that could serve as a 

guideline in specific fields. 

Increased competition between businesses to emulate good behaviours 

Increasing transparency and strong governance issues 

Independent organisations monitoring businesses behaviours and 

mobilising to change it. 

Participation of businesses in academic and research fields 

Their membership to associations of several business sharing the  same 

ethics and promoting CSR 

The main challenge is the creation of  institutional framework with countries in 

Africa to stop capital flight as Countries in the north have a role to play in this 

change, given the money flow from north to south and more so vice versa.  

It is therefore important for governments in Europe and in Africa to consider the 

above elements and focus on friendly laws, researches and networking, in order 

to foster the participation of businesses into development of developing 

countries. 

Countries like Switzerland and other tax havens facilitate this illicit money transfer 

by maintaining policies that obstruct any transparency efforts. Countries like 

these are participating in the process of impoverishing Africa. Friendly countries 

like Germany shall help to bring to the attention of these countries that Africa 

will no longer entertain this robbing. 

My country is a top recipient of foreign aid after Iraq and Afghanistan but more 

than third of the population is still anguishing in poverty. This is the same for 

many Africa countries. Transformational Development Cooperation is that of 

empowering the people to take care of their own lives. Germany must up its 

efforts in pushing for governance issues in Africa  especially in exploitation of 

Africa’s natural resources. Germany must support African countries in ending

illicit money flows through capital flight done by multinational corporations. 

Germany must encourage its private sector, especially SMEs to invest in Africa. 

Africa is rising as dubbed by The Economist. Africa is the future of the world. 

Africa can work with Europe as equal partners. Interests of the companies and 

of the society can be aligned and clash isn’t inevitable. 

I conclude this paper by arguing that the future of Development Cooperation is 

that of Empowerment which ends a donor-recipient relation between 

developing countries and developed ones. A development cooperation whose 

pillar is simply on Aid has failed; it has not produced the expected results for 

almost half a century. This is better illustrated by one of my favourite quotes from 

Mwalimu Nyerere:  

"[A] man is developing himself when he grows, or earns, enough to provide 

decent conditions for himself and his family; he is not being developed if 

someone gives him these things." Julius Kambarage Nyerere, from his 

book Uhuru na Maendeleo (Freedom and Development), 1973.

Thank you. 

Zitto Zuberi Kabwe, MP