Blurred lines — the business case for development funding

If the private sector wants to be more deeply involved in the post-2015 agenda, it’s time to stop passing the ball around, step up, demand a place at the negotiating table and really get down to the business of financing an ambitious framework.

That is according to Bob Collymore, CEO of Safaricom, a leading Kenyan mobile network operator 40 percent owned by British telecommunications giant Vodafone. We sat down with Collymore at the 6th International Parliamentarians’ Conference on the Implementation of the Cairo Program of Action in Stockholm, where he delivered a special plenary presentation on funding for development.

As a business leader in a developing nation like Kenya, the CEO believes the only way to move forward on private sector engagement in development is to stop debating who should take the lead, and for governments to create the incentives necessary for business to invest, rather than the other way around.

Below are more highlights from our conversation with Collymore, including why he believes public-private partnerships are a more effective way to get things done instead of “fads” like crowdfunding:

What can the private sector bring to the table as we look at ways to finance a transformative post-2015 agenda?

Well, the private sector was hardly brought into the discussion on post-2015. And therefore the question you’ve asked is a typical one that the development community has once they’ve already decided what should be done. Having said that, it’s also fair to say that the private sector has not stepped up and demanded to be brought to the table. There are some companies — Unilever being one of them — that are demanding a place at that table to set the next agenda. Only then we can we discuss how you finance it. It’s wrong to come to the private sector — where the real wealth is generated in the free market world — and say “How do we do it?” The public sector is ill-equipped to prepare that funding, so you have to somehow motivate and mobilize the private sector to get into that discussion. To come later is too late to be asking that question.

But how do we concretely leverage sufficient funding? Is it through public-private partnerships, direct investment, or even crowdfunding? Or will the market alone dictate what works and what doesn't?

I think if you had to pick one of those things, you'd fall on the side of PPPs. Governments and the private sector have to start working more closely together. You have to stop this throwing the ball over the fence, hoping that somebody catches it on the other side. Crowdsourcing and crowdfunding have a role to play, but in my view it’s a bit of a fad and will rapidly become unfashionable. It's a nice fad to have, of course, but I don't think you can build anything sustainable around it. Sometimes business cases are hard to understand. If you had to write a business case that showed a return on investment every time, a lot of the stuff you would never do because business cases are assessed over a rather short timeframe and I don't think those perceptions will change in the short term.

So is changing perceptions the major obstacle to overcome in terms of involving companies such as yours in the post-2015 landscape?

Yes, but I repeat: Firms also need to step up rather than waiting to be asked. Take the engagement of companies in the U.N. Global Compact: If you can get more of them to sign up to the 10 principles, then you'll start to get a more enlightened private sector. But look, we're certainly no angels. By and large the private sector does tend to go, at worst, from quarter-to-quarter to — at best — a five-year or less than five-year cycle.      

So we need more long-term thinking?

We need a lot more long-term thinking. You know, one of the biggest challenges we face in the world is climate change. But where does this sit on your average CEO's agenda? Way, way down there somewhere because your CEO typically thinks that his purpose is to deliver superior shareholder returns.  

Can traditional thinking be turned on its head?

We need to turn it on its head and we need to get people to understand that a relationship with a shareholder — and I have a massive respect for them because it's their money that I'm managing — often changes second-by-second, because that shareholder can make a decision to stop being a shareholder a minute from now. But the world doesn't stop being the world a minute from now.

Do you find yourself always having to champion the business case, or are the lines between politicians, development and business leaders becoming somewhat more blurred? 

I think it has to be more blurred ... Your average parliamentarian wants to be re-elected and he or she has up to four or five years. Likewise, your average businessman wants his contract renewed and wants to keep his shareholders and customers happy. And sometimes those things don't really play to a development agenda. So my message to them is that they have to learn to work together. At the same time, it's no good me forgetting that a politician needs to be re-elected. But they can't do it separately and then come with the begging bowl. And the begging bowl can either come in the form of a very legitimate tax demand — and you have to remember that some government regimes are very unstable in taxation — or it can be this whole philanthropic "give us a hand" idea. You know, that doesn't really work for a lot of companies.

But in terms of the role of official development assistance — of course this is relatively small compared with the potential that the private sector holds — how could it be better harnessed as a catalyst for business, growth and jobs?

I'm a great believer in partnerships. We're not health experts, for example. We don’t know about health, we know about minutes and [megabytes] of data. So the way we tackle some of these problems and find some solutions is by working in partnerships. Last night I had dinner with someone from Save the Children — if I want to play a role in child rights, I can't just make it up. I have to work with these development partners. And of course, some are better than others — they're not all good but you have to play a partnership role with them.

One of your recent success stories was with mobile-phone based money transfer and microfinancing service M-Pesa, developed using funding from the U.K. Department for International Development and the African Union Commission. Has this broken down some barriers for companies like yours and can such successes be replicated using funding for research in this area?

Absolutely, I think it is one of the most successful examples of that kind of intervention. Could the company have done it [without DfID funding]? Yes, of course. What DfID did is to supply £1 million [$1.7 million] of support, which is actually not that much money. The reason DfID had to do it is that the company didn't want to stump up the cash. And why not? Because it couldn't envision what M-Pesa would do, not only for itself, but for mobile money transfer across the world. If the company could have envisaged this, it would have done it … but companies — by and large — look for the quarterly results.

So was there a change of mindset that led to your follow-up programs, like paperless banking service M-Shwari and asset financing company M-Kopa?

Yes, [M-Pesa] has really acted as a springboard and M-Kopa is actually one of my favourite products, because it does so many things. It's very simple, pulling together M-Pesa, a solar panel, some LED lights, a charging unit and a SIM card and allows a poor, rural Kenyan to access clean energy. And it works for everybody. It works for us — and we do actually make some money from it; it works for the environment — we don't have kerosene fumes pumping into the air; and it works for the customer, saving them money, saving their health, and sometimes even saving their lives — after all, kerosene lighting is dangerous. So it works on a number of counts — a very, very simple solution.              

Are there any plans to scale these products up to other parts of Africa, or other parts of the world?

Yes, and again I come back to my favourite word: partnerships. I have been pushing [M-Kopa managing director] Jesse Moore to scale up — and scale up rapidly — both in Kenya and in the wider region. Of course, you do need to get mobile payments in place first.

So it's a two-step approach?

Yes, but in large parts of Africa we already have mobile payments in neighboring Uganda, Tanzania, South Africa — so that shouldn't be the barrier. There are actually companies that do have mobile payments — MTN Uganda, for example — so if you imagine that you can get more Ugandans to use M-Kopa using your SIM card and using your payment [system], there is an obvious benefit for the mobile operator as well.

Will this potential convince investors to put up the seed capital or research capital for future projects and innovations of this type? Or is it still to be considered an isolated case?

I'm hoping it's not an isolated case, but we're still in the early days. Nairobi, for example, tends to be abuzz with potential donors and although there are many traps I'm hopeful that this will be the model that is used in other parts of Africa and indeed Asia.

Are there any other innovations being developed in the mobile payments sector that the development community should watch out for in the coming years?

You know, mobile payments still has a long way to go. If you take Kenya, more than 90 percent of transactions are still cash based and so there's a lot of potential for growth. But we don't look for the next big thing, we look at how we can use this system to do more. For example, micro insurance and how we can bring more affordable health care, or how we can help agriculturalists using M-Pesa. A few weeks ago I had a meeting with a minister of agriculture and his problem was how to distribute fertilizers to the farmer — the problem he has today is that there are so many middlemen and by the time [funding] gets to the farmer, most of it has evaporated. We said, fine, we've got simple systems that will help you identify who the farmer is, the size of the farm, how much fertilizer he needs and you can disburse without the need for anybody to touch any cash. You have people at USAID who want to deliver funding into specific projects or to specific people, or UNHCR who want to move money to refugees. Most of that money disappears before it even gets there. But by using M-Pesa, you can deliver 100 percent of the funds directly to the beneficiary.

Do you see it as your role to bring this sense of business efficiency and effectiveness to the development sector? Or is the onus on donors to demand it?

The answer I'll give is probably not the answer you'll get from most other people. I think the onus is on business. The “business of business” is no longer just business, but to change lives and leave a positive impact. We tend to see our purpose as that of transforming lives and I wish that I could sit at a dinner table with another 12 CEOs who all say the same thing. Unfortunately, out of 12 people, probably 10 of them don't see it. I think that's the mindshift that we need. How many Paul Polmans [CEO at Unilever] are there out there? Paul is a guy that I tend to cite quite a lot [and] the reason I have to do so is because there aren't many others like him …

I don't think it's about the donor agencies pushing, I think it's much more about shareholders understanding the role of responsible investment and being much more demanding of their companies. You know, my shareholders don't really care whether I transform lives or not, they just want to get their returns. I often say to people that you can get a really good, attractive return by operating in an immoral way and if that's all you want, then we can all do that. But I'm sure that's not the case. So I think the people with the funding — not the donors, but the investors — need to start changing their mindset. And corporate leaders like me need to start to speak up a little bit more.

And your key message?

That I measure our success not by the profit that we make, but by the difference that we make. Some people rather foolishly say, "So you're saying that profit isn't important?" And so I repeat my standpoint: It's not like we don't make profit — we're the most profitable company in East Africa — but I prefer to measure success by the difference we make and I think we're managing to hit that balance. And of course, it's not a two-way balance between society and shareholders, it's an eight-way balance to do with future generations and society at large … It's all about finding the right balance and sometimes it's not easy — more like balancing on a ball than balancing on a see-saw, because it's multidimensional — but that's the role of leadership, whether in the corporate world or elsewhere.

Are you winning the argument for a buyer-led approach being in a fine balance with "doing good"?

Well, I'm winning the argument as far as we're concerned. We'll be announcing our full-year results in a few weeks and they're quite startling. This time last year we were worth around $2 billion and now we're worth around $6 billion, which is growth that you don't often see. Profitability is looking pretty good, our customer base continues to grow, so in that commercial field we think we're making as big an impact as anybody else. In terms of the developmental field, we're not making as big an impact as I would like to see us make, but certainly it's more than we did last year and the year before.

So you're optimistic that you'll continue to make inroads and achieve the impact you're hoping for?

I'm massively optimistic. Not because of the corporate leaders of my age — with the greatest respect to them — but because of the younger leaders. Young leaders in Kenya in their 30s that are running big banks, like Joshua Oigara at the Kenyan Commercial Bank, for example. He has that mindset and I think that generation of leaders will be the one to deliver change.

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