A work in progress: Irish aid for trade in Africa

Africa seems to offer more potential for Ireland’s exports than China — and both Ireland and its African partners are keen to capitalize on the opportunity.

But with Ireland examining its foreign policy in the first extensive review since 1996, aid experts are urging caution, while Trade and Development Minister Joe Costello has admitted that so far, engaging with the private sector has been “hit and miss.”

Ireland’s Africa Strategy — the framework for all engagement with the continent — seeks “a greater role for Irish business.” This is already a trend driven by growing demand in Africa for dairy or alcohol products, for example, and declining domestic markets in sectors such as construction. By 2012, Irish exports of goods and services to the region reached €2.7 billion, up about 200 percent since 2009, according to the Irish Exporters Association.

But Lorna Gold, head of policy and advocacy at Trócaire, a local NGO, said this is at odds with Ireland’s commitment to poverty reduction. The focus on pushing Irish business abroad — including merging responsibility in 2011 for trade promotion and development under one ministerial portfolio — has led to confusion and a “blurring of the primary objectives of aid.”

A natural progression

Ireland is not alone in combining aid and trade under one roof: other countries like the Netherlands, Canada and most recently Australia took the same direction in their foreign aid policy, and last October Denmark launched its Opportunity Africa initiative to boost its presence in the region through a combination of foreign policy, aid, and trade and investment.

Costello, though, believes the focus on trade is not so much part of a trend but rather an “organic development” — a natural next step in Ireland’s historical engagement with Africa.

As a result, his department now leads regular trade missions to the region, most recently to South Africa and Nigeria, where contracts in financial services, telecoms and education were secured, and hosts a yearly Africa Ireland Economic Forum.

“We preach to [businessmen] the gospel of human rights, building on the traditions that were put in place through the missionaries originally, and later through Irish Aid,” Costello told Devex. “We want nothing that is done in our trade and investment relationships to tarnish that in any way.”

In the ideal scenario, business interests and development goals meet.

“Most of our members talk about wanting to employ and up-skilling the workforce,” said Ashley Beston from the IEA, who cited Intel Ireland as one example of a corporate that’s also investing in education.

However, enforcing values more broadly is another issue. As a first step, Costello pointed to progress under Ireland’s EU Presidency last year on enforcing transparency of multinationals in the extractive and logging industries. But he admitted more needs to be done on a global level: “We have to find the mechanisms for engaging with the private sector.”

Some mechanisms do exist, argued Gold, such as the U.N. Guiding Principles on Business and Human Rights, to which the Irish government has committed but not yet implemented.

“The minister needs to prioritize the issue,” she said.

Exiting from aid — just not via aid

The overarching priority for Ireland — not least given its own budget constraints — is working “towards an exit from aid” in sub-Saharan Africa, where some 80 percent of its aid goes.

But while business is booming with countries like South Africa, where two-way trade in goods alone exceeded €400 million in 2012, and Nigeria (€980 million), trade with long-standing partner countries including Ethiopia, Lesotho, Mozambique, Tanzania, Uganda and Zambia remains negligible: around €61 million for all six countries combined in 2012. Of that, imports into Ireland counted for just over €1.2 million, according to data gathered by Value Added in Africa to be published in the coming weeks.

The study by that NGO finds that in those six partner countries, Ireland’s goods exports outstripped imports by a ratio of 42-to-1 over the five-year period to 2012 — a significant decline from 1995-2010, when the ratio was 15-to-1.

VAA Director Conall O’Caoimh said the conclusion is clear: “We are not moving from aid to an equal trade relationship.”

There are both supply and demand side factors behind this decline, with a major upset caused by two Irish firms halting imports of cotton and tea when relocating factories abroad. Such vulnerability of African exports to changes in Irish industry, O’Caoimh pointed out, should have been anticipated by policymakers.

“The Africa Strategy talks about two-way trade, but there are no mechanisms to back it up,” he said. “It’s all about selling into Africa.”

Building skills

Irish Aid does support some initiatives promoting entrepreneurship and trade, such as Traidlinks, an association working in Uganda that last year received €700,000, and the €2 million pilot Agri-Food Development Fund launched in 2012.

Costello, though, seems more focused on skills development and professional training — what he sees as “the biggest need” in developing countries. Experienced middle-aged and retired professionals, under a new volunteering program he announced last year, can play a key role in this interim phase between aid and trade, he believes.

Building skills is not just the responsibility of Irish Aid: all government departments are expected to join in transferring expertise, part of Ireland’s “whole-of-government” approach that aims at more coherent external policies. The Agri-Food Development Fund piloted in Tanzania and Kenya, for example, is delivered by the agriculture department, while capacity building to Rwanda’s Revenue Authority — funded by Irish Aid since 2008 to the tune of €237,000 — is delivered and managed by the Irish Revenue Commissioners.

This broadening of development cooperation, in Ireland as elsewhere, could have implications on what counts as official development assistance.

“I think there’s going to be a lot of pressures on the OECD in terms of definition of ODA,” said Costello. “Many countries will be looking at what their country needs and then seeking to put aid as part and parcel of their own economic development.”

For Ireland, the commitment to untied aid set out in its current development strategy will remain “for the foreseeable future,” the minister confirmed. This, however, may not be enough to reassure everyone.

Gold, for one, is wary of talk about “synergies” between business and development interests, and sees this progression as a “slippery slope towards tied aid.”

A work in progress

Meanwhile, both Irish Prime Minister Enda Kenny and Richard Bruton, minister for jobs, enterprise and innovation, have weighed in on a recent public debate as to whether human rights issues should be raised during trade missions.

Resolving such questions is only going to become more urgent, as Irish businesses increasingly look abroad in order to grow — and as policymakers see exports as drivers of the nation’s economic recovery.

For now Africa is still a relatively small market, but the potential, according to Beston, is “huge” — Irish exports could realistically reach €24 billion by the end of the decade. Irish firms could also take more advantage of big infrastructure opportunities with institutions such as the World Bank. The IEA is also lobbying for Ireland to join the African Development Bank so Irish firms can access their contracts too.

The implications of such growth on Africa’s development remain unclear. In the meantime, said Costello, much more discussion on the role of the private sector is needed.

“We’re working through all of this because this is not something that has been done before. It’s a work in progress.”

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