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AFRICA should embrace inclusive business, a concept that brings together low income people in a value chain, as a means of poverty alleviation while also achieving other millennium development goals, a UN Development Programme official has said.
UNDP Zimbabwe economic advisor, Mr James Wakiaga said this during the Zimbabwe SME Banking and Micro-Finance Summit held in Harare last week.
He launched the African Facility for Inclusive Markets (Afim) for sub-Saharan Africa flagship report titled “Realising Africa’s Wealth-Building Inclusive Businesses for Shared Prosperity.”
The report is a UNDP programme whose focus is on markets, products and services which have the potential for job and income creation benefiting people on low-incomes who mainly constitute small to medium enterprises (SMEs).
“Low-income people should be incorporated into the value chain where they will be customers on the demand side while they can also be employees, producers or entrepreneurs on the supply side.
“Such a scenario has the potential to create jobs and income while also benefiting livelihooods of these people,” said Mr Wakiaga.
According to World Bank figures, about 73 percent of sub-Saharan Africa’s population is living on less than $2 a day and therefore the initiative builds on knowledge sharing and best practices from regional and national private sector initiatives in more than 12 countries.
Mr Wakiaga said by incorporating low-income people in the value chain, inclusive businesses create a strong foundation for profit and long term growth by bringing previously excluded people into the market place.
The UNDP official added that for inclusive business to thrive, there were critical issues that needed to be addressed and these include profitability, poor participation, human development impact and sustainability.
“To enhance profitability there is need to find new customers while also creating long term customer loyalty, poor participation would entail the poor people’s market participation while the business’ contribution to social and environmental best practices will ensure sustainability of the business,” said Mr Wakiaga.
The Afim report underlines the issue of an inclusive business landscape which it dubs the “ecosystem” in order for Africa to realise its wealth.
The ecosystem would be a network of inter-connected, interdependent actors whose actions make it possible for inclusive businesses to succeed and generate impact at increasingly large scales.
The ecosystem needs a platform for information as information provides businesses with the awareness, knowledge, technology and know-how needed to operate in low-income markets.
Incentives are also critical as they provide businesses with the impetus to engage with low-income communities by rewarding externalities and reducing the cost of doing business.
Investment would then provide the financial backing that enables businesses to venture into challenging low-income markets while implementation support would come in handy as it will provide the logistics, transaction, marketing and communication and micro-business support services.
These would then allow inclusive businesses to function in a variety of dynamic environments.
“A relatively larger number of inclusive businesses can be found in countries that have shown sustained economic growth and solid governance systems.
“South Africa and Kenya emerge as leaders in the area of inclusive business with entrepreneurs benefiting from dense support ecosystems,” read the report.
The Afim report draws from in-depth enterprise case studies written between 2008 and 2012 based on experiences within 16 sub-Saharan African countries.
Online Reporter