Many African businesses do ponder about how they can contribute to the development of their host economies. Firms can be integral parts of the development process. They can make direct investments in social welfare and do so profitably without being exploitative. The application of market-based solutions to social problems is not without controversy. There are documented pros and cons. Thus, the idea might not easily appeal to people in developed economies where things already work, where governments deliver public services efficiently and do so quite optimally, and where privatisations proved underwhelming in numerous cases.
Still, in the African context, there are myriad problems that could be solved with private sector creativity, capital and drive. Public goods are likely to be delivered efficiently if there is a profit motive. Nonetheless, there is always the risk of monopolistic or cartel behaviour. A firm or group of firms providing public goods could dominate an industry so much that they become uncontrollable. There is also the risk that the owners of such dominant firms would extend their influence into politics and government.
These concerns about “extraction” or “crony capitalism,” that is, “a political system in which the rich and the powerful get together to run the state – and the market – for their own benefit” are not unfounded. Within the African context, there are other peculiar risks of a private sector-led social welfare system. Realising their importance in an environment with weak institutions, private firms may become law unto themselves.
Firms providing private goods and services could also contribute to African development by simply being excellent in their ordinary line of business
Firms providing private goods and services could also contribute to African development by simply being excellent in their ordinary line of business. For instance, a mobile telecommunication services provider might better serve its host economies by simply providing the best service at the best price. And as the case of Kenya’s M-Pesa mobile money service by the United Kingdom’s Vodafone shows, that excellence can manifest in excitingly impactful ways.
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There are other examples. Singapore’s Dufil Prima successfully introduced a new and highly nutritious staple food – noodles – into the African diet that is affordable and beloved across classes. Another example is Promasidor, which made milk accessible and affordable for the majority African poor with its Cowbell brand of milk products. These are firms providing largely private goods but contributing in very profitable but mutually beneficial ways to social welfare.
Thus, as a development paradigm within the African context, social value creation (SVC) extends beyond simply finding a market-based solution to a developmental problem. Sometimes, it is no more than a mindset change towards excellence in the core business of a firm that invariably ends up creating social value. This distinction is important to ensure that it is not confused with corporate social responsibility or philanthropy, which though are means towards some social value creation, are only so if that is the primary end in mind, and not some secondary after-thought owing to a guilty conscience.
Incidentally, Africa is ideally suited for firms looking to create social value at scale with relatively less effort and resources. Owing to a dearth of capacity on many fronts, the continent is not likely to meet the United Nations’ Sustainable Development Goals (SDGs) on time. Should African firms pitch in, however, contributing their resources and expertise, there might still be hope that the goals would be achieved.
Incidentally, firms do not have to go outside their core business or lose money in order to contribute to achieving these social goals. The SDGs are a comprehensive framework for assessing the development needs of the continent. According to the 2020 Africa SDG Index and Dashboards Report, no country had a good score for 13 of the 17 goals. With the continental scorecard so poor, African firms looking to create social value would find the SDGs a good starting point.
References and figures are available in the original article viz. https://rafiqraji.com/2021/03/21/social-value-creation-african-firms-the-sdgs/
