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Charity and Corporate Aid 2

A growing share of aid is spent by private firms, not charities

“THE gold rush is on!” That is how a cable from the American ambassador to Haiti described the descent of foreign firms upon Port-Au-Prince in early 2010. An earthquake had flattened the city and killed hundreds of thousands. This becomes a bonanza for charity services and corporate aid offered by private firms.

Charity Corporate aid

A deluge of aid presented an opportunity. The message, released by WikiLeaks, noted that AshBritt, a Florida-based disaster-recovery firm, was trying to sell a scheme to restore government buildings, and that other firms were also pitching proposals in a “veritable free-for-all”.

During the following two years $6 billion in aid flooded into a country of 10 million people, for everything from rebuilding homes to supporting pro-American political parties. Of $500 million or so in aid contracts from the American agency for international development (USAID), roughly 70% passed through the hands of private companies.

Haiti is one example of a trend of non-profit foundations, where aid is funneled through consultancies and other private-sector contractors that profit from the work. Nearly a quarter of USAID spending in 2016 went to for-profit firms, a share that was two-thirds higher than in 2008.

Charity Corporate aid

Think-tanks are still trying to work out where all the Haitian disaster-relief funding ended up. Private-sector involvement can further obscure the picture, because the winners of bids may use a host of subcontractors, or insist that some information is kept confidential for commercial reasons.

Even as aid budgets have grown, governments have sought to make aid departments smaller and more nimble. USAID have around the same number of employees now as they did when their budgets were just half as large in real terms. As aid agencies struggle to manage contracts, they have turned to the private sector.

Typically, firms win aid contracts at auction, rather than receiving grants, as charities do. Some have become global players. Chemonics, an American firm founded in 1975, is active in 70 countries. In 2015 it won a contract for health-care services with USAID worth up to $10.5 billion over eight years.

Together with the high cost of preparing bids—as much as $100,000—this has led to market concentration. Only large bidders can stomach the risks. A smaller firm’s best chance to pick up some of this work is to join a consortium led by a larger firm.

Charity Corporate aid

Private firms do seem to pay higher salaries than charities to their top executives. The bosses of the private firms earn on average more than $500,000 a year—more than twice as much as their non-profit peers. The total personnel costs proposed by non-profit firms were on average just two-fifths those proposed by private firms. What is more, the contracts won by for-profit outfits were more likely to bust their budgets and miss deadlines.

One reason for the shift towards the private sector is the changing nature of aid. A smaller share now is made up of traditional projects, such as building schools or handing out food parcels, and more is “technical assistance”, for example to streamline a country’s tax code and strengthen tax collection, or to set up an insurance scheme to help farmers when crops fail. Private firms may be best-placed to advise on, or even run, these schemes.

What is known, though, is that for-profit and non-profit groups work differently. A non-profit body typically has large bureaus in the countries where it works, or forms long-standing partnerships with local charities that do. It will consider whether a proposed project fits with its charitable purpose, and whether it has suitable in-house expertise; only then will it decide whether to bid. Firms, by contrast, tend to have fewer staff, and to rely on subcontractors and freelance experts who can be flown in for as long as a project lasts. This model means that firms may be less likely to understand local cultures, build relationships with governments and monitor long-term results. But it can also be more flexible, with firms matching expertise and staffing to each contract.

Cool aidCharity Corporate aid

One estimate puts the total value to firms of such “aid-like” work in developing countries at around $20 billion a year, a figure that is expected to rise. Having built their businesses on contracts with Western governments, private aid firms may need to diversify if they are to continue to thrive.

To shed light on the shift towards private-sector aid delivery, The Economist has analyzed 4,500 subcontracts from USAID worth more than $25,000 each. (All were granted since 2010. Those for which data were not available were excluded.) A third went to for-profit firms, and the rest to charities, NGOs or other governments. For contracts where a firm was the primary contractor, on average 41% of subcontracts went to other firms.

How to be the Change

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A WORLD WITHOUT AFRICAN POVERTY 2

 AFRICA POVERTY AND OUR MISSION:  

Our mission is to be the best in the world in micro hydro electric and water resource management: by evolving innovative damless hydroelectric and water transfer technology. We create Today’s Tall Tree Nurseries to support Micro Finance for women farmers and their families using the Carbon Tax Fund, a new form of foreign aid. We export Mechanization into Africa for more productive agriculture. We do all this to address the problem of African Poverty.

African Poverty: the Most Serious Threat 

Do you know why poverty is the most serious threat to world peace? Poverty leads to hopelessness, which in turn provoke people to desperate acts. One thinks one has nothing to lose by turning to violence. Poverty also leads to clashes between populations over scare resources of water and arable land.  Over one billion people live on less than $1/day: this is not a formula for world peace.

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Should MicroFinance be the First Investment in Africa?

International Aid is a $5 billion business, but ironically microfinance support only receives 1% of this amount. In an underdeveloped world of scarce resources, which should be our priority? Housing? Sanitation? Health Care? Infrastructure? Education?  All of these are important. We believe that giving the poor access to credit lets them immediately apply their farming skills. They create capital to begin the long road to recovery. Right now the poor have no control over capital.

This is opposite to the view that people are poor because they lack the skills. This view takes the initiative and responsibility from poor people.

A Conscious Corporation: Not Charity – Not Governments

Without proper guidelines, globalization has the potential of being highly destructive.The “strongest take all” must be replaced by rules that allow the poor to take a place on the highway: the divide between the haves and the have-nots is widening.

Some corporate social companies try to do good for people and the planet as long as they can do it with profit. Some of their CEOs are sincerely interested in social change, yet ultimately they are responsible to the owners or shareholders of the company that strive to increase growth in their investment. This is capitalism – half developed without a real social conscience.

Showering grants and low interest loans into the hands of the underdeveloped countries is not the answer: otherwise the problem would have been solved a long time ago. Why? These governments tend to be inefficient, slow, prone to corruption, bureaucratic and self-perpetuating, while amassing power and wealth for themselves.

Many people who are concerned with the problem of world poverty have started non-profit corporations. Yet, these companies have significant built-in weaknesses. They rely on a steady flow of donations, but when these donations stop, so does the company. In hard times, this flow slows down. Eventually, “compassion fatigue” sets in and donors stop giving. Directors of these companies know that there is never enough money to accomplish their aims.

What about the multi-lateral corporations, such as the World Bank? Like governments, they too are slow, bureaucratic, and self-serving and worst—very conservative. They look at the problem in their wide angle lens of large-scale economic growth, while the poor people are forgotten in their spin. They are looked at as objects. Unfortunately, these corporations choose to work through underdeveloped governments. Instead, they need to tap into the creative innovations outside of governments: the Social Business.

The Conscious Corporation can play a crucial role. They are above all a business, with resources, incentives and they are market savy. A Conscious Business looks at things differently: they are a non-loss business, but also a non-dividend business. Ultimately they pay back their original investors, but the business wishes to continue its long term social goals: it is self-sustaining and in this way it continues to gain more social benefits every year.

People who invest in this Conscious Business receive the same personal satisfaction as philanthropists. The difference is that there is no need to pump in donations every year as is done with charities.

The Grameen Bank in Bangledesh is a good model for micro finance: it gives loans to 7 million poor women farmers with a promise of a 97% repayment rate in 78,000 villages. This bank claims that 64% of the borrowers have crossed over from poverty over a period of five years.

Could not these poor women farmers pull themselves up by their own plow? They borrow in groups of five women – no two can be closely related. When one of the group wishes to take out a loan, one must receive approval from the other members of the group. Payment is done over a phone application, which encourages savings. There is greater flexibility in repayment, because of other financial commitments like school tax. The group acts as a social network of encouragement and psychological support. Ten or twelve such groups come together to meet weekly. This center leadership is selected democratically.

We appeal to the multinational companies with an innovative strategy: a company needs to gain a foothold in a new market. The social business can begin this process and provide a great deal of goodwill to the new company. Damone was one of those companies that partnered with the Grameen Foundation to market a nutritious yogart for the children of the poor. Their success story is explained in Creating a World without Poverty by Muhammad Yunus, the winner of a Nobel Peace Prize in 2006.

We are appealing on behalf of 50% of the world that own only 1% of the world assets. We are appealing to the top 1% of the world that own 40% of the world’s assets. We are also appealing to the top10% of the world that own 85%.

We appeal to the world’s greatest billionaires: will their grandchildren be able to enjoy their wealth with this eventual threat of global warming and pollution? Without an ethic of change, we will lose what is most priceless, which has no price tag. If basic needs are not met, poor people could easily be attracted to violence, civil unrest and terrorism.

African Energy Poverty

We are in an era of scarce energy supplies at a time of global warming and soaring global populations. Generating innovative forms of electric power is not only to light up our houses – it is lighting up our future. The operative word is “innovative”. It is pay now or there will be no future!

To make things worst, coal, oil and natural gas is quickly causing global warming and pollution from their green house gases, primarily through carbon dioxide emissions, which form an invisible blanket over the earth, thereby making the globe warmer. 

By mid-century, we will be looking at a world of 9 billion people — a 40% to 50% increase. During that same period it is expected that the increase in populaton will double the demand for all forms of energy. The “golden” one billion people living the “American style” of living will evolve into 2- 3 billion – all over-consuming and polluting at a phenomenal rate. This will all cause a doubling of carbon dioxide by mid-century. Roughly 40% of the CO2 created in United States come from the production of electricity and 30% comes from transportation. We aren’t even mentioning the pollution created in China and many South Eastern Asia cities – including 20 of their most polluted cities in the world.

The next big boom in technology will be clean energy. This opportunity will help stabilize our planet and it will provide an opportunity for some countries who embrace this innovation to renew and regenerate itself. Those countries that are prosperous and innovative will have an edge.

We are in an “energy climate” era. Unfortunately, the total investment in research and development for electric utilities in the United States is 0.15 % compared to 8 -10% for most competitive industries. The last big breakthrough in this industry was in 1957 with tha advent of the nuclear reactor. Contrast this with 8 – 9 generations in medical technology from x-Ray to the CAT Scan.

In the meantime, we are all living on the Titanic and we all have hit the iceburg. Others are still dancing in the ballroom. Nature will take its course unless we all come to grips with the problem. We need to act!
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