Which approach works when business engages in development?

Earlier this year the UK’s DFID released its plan for the private sector to work as an engine of development and to scale up interventions that have proven most effective. The publication is a further response to an increased trend of harnessing private power to facilitate development.

Still – typically, some may argue – there seem to be diverging opinions about what approach is best with reports validating varying approaches. Two promising schemes are the widely known fair trade concept as practiced by Fairtrade and the newer concept of social business as practiced by Cotton made in Africa (CmiA). Both believe in the trade-for-aid concept but have different ideas about how to achieve this.

Where Fairtrade’s mainstay is the payment of a fair price to producers for products thereby ensuring a higher income for producers, CmiA argues the need to increase productivity to achieve higher incomes. This is achieved by providing specialized training to producers geared towards increasing productivity. Where Fairtrade relies on the consumer actively purchasing the fairly traded product (and more often than not paying a premium), CmiA wants their products to be a part of the normal mass market and thus compete at market price.

Some impressive numbers have already been circulated attesting to CmiA’s success and in September the initiative announced that baseline data had been gathered to monitor the programme’s impact over the next years and give precise measurements. When released the report should make for a very interesting read.

So might social business be the silver bullet? That is unlikely. But it may well be one workable solution amongst several. A study comparing Fairtrade Cotton and CmiA concludes that the initiatives have more in common than their emphases on differing ideologies initially reveal. In fact, they should be considered complementary. Whereas Fairtrade has proven traditionally successful in food and agriculture these industries differ largely from cotton where a far more complex supply chain is involved. The latter industry may be in need of solutions like CmiA.

Companies who want to heed the call of DFID, GIZ etc. to play a role in development efforts should not find themselves discouraged from doing so because of competing solutions and methods. It is fairly clear that increased income levels lead to greater development but there are likely many ways to achieve this. Initiatives in turn are playing their part in measuring what works and what doesn’t and should be encouraged to be more transparent about this. Many years of development aid have shown that there are no ‘one-size-fits- alls’. The private sector would do well to remember that this is still the case and not let the difficulties and setbacks deter them from engaging in schemes aiding development.

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