Monday, September 14, 2009

An Ethical business revolution is emerging

Thursday, June 4, 2009

An ethical business revolution is emerging

Kenyan Nobel Peace Prize Laureate Prof. Wangari Maathai has written a fascinating article posted on titled "An African future: beyond the culture of dependency".

Maathai writes that as a result of the G20 London meeting where leaders pledged more funds for development aid to Africa, she was concerned that this injection may not be effective in enabling Africans to rise out of the poverty they live in, as the money may not in this case be spent effectively.

Maathai goes back to one of the root causes of poverty naming powerlessness or disempowerment as a key factor in its perpetuation. African leaders in the past, and some today have been deified to the point where they took all the power, leaving the common African more or less dependent on them to make all the decisions. Almost forgetting the power they yield through the ballot in those countries that allow democratic elections, even at the grassroots level any form of community self-help had to be led by a local or national leader either as Chairperson of the Committee or Patron.

This in turn resulted in a feudal scenario where the common man was beholden to the mweshimiwa (Honourable person) for almost everything ranging from allocation of relief food, to ensuring jobs for relatives in the public sector (which through this nefarious nepotistic activity resulted in the disintegration of many civil services) to handouts for school fees.

Maathai posits that this disempowerment has infected the psyche so that even one's self esteem and dignity have been derogated. She writes:

"Disempowerment - whether defined in terms of a lack of self-confidence, apathy, fear, or an inability to take charge of one's own life - is perhaps the most unrecognised problem in Africa today. To the disempowered, it seems much easier or even more acceptable to leave one's life in the hands of third parties (governments, aid agencies, and even God) than to try to alleviate one's circumstances through one's own effort."

She terms this as a syndrome that has been so far neglected by policy makers and development pundits. And it is this same alienation of the common man, that has allowed corruption as Maathai says to seep right down to Africa's (grass)roots.

A matter of survival

Maathai gives an example of the macadamia nut industry where a group of farmers in her constituency (pre-2008 when she was a Kenyan Member of Parliament) approached her for assistance. For those who care to look, the macadamia industry is a growing sector and not only for its edible attributes. The nut's active ingredients have been recognised as being able to be used for many products ranging from skin lotions to sexual dysfunction aids. Kenya is placed in the fortunate position of being climatically suitable for growing macadamia trees, so of course it was not surprising that many farmers have entered this sector.

This should have been the vehicle to prosperity for the farmers who approached Maathai when she was their Member of Parliament. However and this also applies to the plight of Africa's youth entrepreneurs, disempowerment is what caused their macadamia nut project to flounder and is also what causes many young enterprises not to last more than 12 months.

Brokers, middle men and "connections" agents

Due to their lack of resources, most small enterprises have to go through brokers, middlemen or whatever other names they go by. For the macadamia farmers they had to go through a broker to link them up with an exporter. In the case of the young entrepreneur starting out, if they want to get some work from a large company or even the government, they too need a middleman who then sub-contracts the work out to them. They are thus not masters of their own business, having to share profits with these brokers, who for the most part hardly incur any costs of their own.

However, as also in the farmers case, asymmetry of market knowledge in the broker's favour translates to a higher "brokerage" fee which if not paid means the end of that enterprise.

The green eyed monster

Maathai's macadamia farming constituents also complained that as their standard of living began to overtly manifest the effects of increased household income, they became targets for theft from neighbours. This theft had serious repercussions on sales:

… the farmers were unhappy. When we met, they explained that, because there was so much money to be made in the macadamia nuts, their neighbours, also farmers, had begun to steal. Now, macadamia nuts need to be fully ripe to be ready for processing, and they are not fully ripe until they fall to the ground. But some people (the farmers told me) had started shaking the trees before the nuts were ripe, in order to make them fall … In the end, the greed had become so enormous that some individuals had simply crept onto the farmers' land at night, cut down the trees, and hauled them away, so they could harvest every single nut for themselves.

This same avarice and wanting to reap where one has not sown is what has brought many young businesses to come to an abrupt end. In a scenario where an entrepreneur seems to be climbing the financial ladder, they also have to face their peers ostracising them (though not always to their face). Comments such as "I wonder how so and so made so much money in such a short time, they must have stolen it" begin to emerge.

Jump aboard and hijack the product

Eventually as even the macadamia thieves started selling poor quality nuts, the middle-man told the farmers he wouldn't buy any more nuts from them again. So what began as a very promising income generating activity that would have eventually enriched the entire community simply crumbled.

Taking a walk through African cities, one notices that the enterprises being operated by the youth are generally service oriented, and fall within a narrow category of retail business types. There is hardly any manufacturing and even more disturbing is the lack of innovativeness on the part of youth entrepreneurs. Just how many pirated DVD shops can a city have? The answer to that question depends on how many young entrepreneurs there are. This may sound cynical, but if one just strolls through Africa's business districts patterns of mobile phone accessory shops, small clothing stalls and the emerging number of cramped cyber café's tell the story of an over-saturation of enterprise but no individual firm growth. It's no wonder most of these outfits hardly last a year, when the young entrepreneurs venture into the next big thing in small business.

The failure of a colonial developed education system

Education has also failed Africans. In countries such as Kenya and Nigeria, the education system was geared towards creating employees and not employers. Farming and agriculture have also been variously frowned on as backwards. So as such as Maathai writes: Such farmers may have little or no formal education, and may therefore be functionally or actually illiterate. Even if they are able to read or write, they lack access to written materials or the internet to inform themselves about the crops that are their primary source of income.

Likewise, the formal education system has let down young entrepreneurs. By not inculcating financial literacy, business and personal management skills, how then can a person of say 19, 25 or even 35 years be expected to start and grow a profitable enterprise?

Maathai also decries the state of support from the Kenyan government for farmers in her words to "empower him in the international marketplace". For the youth, yes the Youth Enterprise Development Fund (YEDF) is a great initiative to empower the youth, however, young entrepreneurs need some form of ongoing business support, not just financial. Also the Fund can be a conduit to push youth-owned products and services both onto local and international markets.

Working together for the greater common good

Apart from institutional challenges the macadamia farmers faced, ultimately Maathai writes that it was "own failure to understand the consequences of its self-destructive actions. Instead of working together to further the common good of their communities, each person pursued his individual interests - and all lost."

Just as how the macadamia thieves ruined this entire industry, so have unethical entrepreneurs also sullied the name of business. So often cases are brought to our attention at of ruthless contractors or middle-men who give out work to young entrepreneurs and yet do not pay them their just dues.

However mainly due to a sense of powerlessness, young entrepreneurs who believe they are at the mercy of these thugs and on the promise of more work remain silent, writing off these debts by taking on more expensive loans to service them. Similar to the macadamia farmer case, as Maathai writes this is corruption, nothing else. It doesn't matter whether it is at the State House or the local kiosk, unethical business where one lives off the sweat of another is corruption.

One new media group in Kenya has stood up to fight these criminal entrepreneurs by forming a facebook group called People Against Corruption in Kenya. The group is a platform for any person that has been cheated or defrauded out of their just dues to place a complaint so as to assist other young entrepreneurs from falling into the same trap.

Because most young entrepreneurs are small fish compared to the big fry that conned them in the first place, this group is a more user friendly way of at least ensuring justice in the form of awareness raising and preventing fellow entrepreneurs being conned. It beats waiting for the judicial system which takes too long, and is itself prone to corruption, and once it grows, it will probably serve as an business integrity rating system.

So as Wangari Maathai writes there is an ethical revolution in the making. And young entrepreneurs are sure to be in the fore-front of this change.

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