Tag Archives: Economist

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

Continue reading Charity and Corporate Aid 2

Insecure Property Rights in Africa 2

 PROPERTY RIGHTS 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 insist on Property Rights in Africa.

According to a recent article in the Economist, property rights are still miserably insecure in Africa. Legally recognizing land ownership has boosted farmers’ income and productivity in Latin America and Asia. But this is not the case yet in Africa. More than two-thirds of Africa’s land is still under customary tenure, with rights to land rooted in communities and typically neither written down nor legally recognized. In 31 of Africa’s 54 countries, less than 5% of rural land is privately owned. So giving peasants title to their land seems like an obvious first step towards easing African rural poverty.

In Rwanda, 81% of plots had been issued with titles since 2013, at relatively low cost; investment and women’s access to land have both improved. But even a relatively well-organised place like Rwanda has had problems keeping records up to date when land is sold or inherited.

Your Property Rights? Prove it!

In some African countries, less than 10% of households have any documents proving their land ownership. Being able to prove you own your land may be a necessary condition for using it as collateral.

In Kenya a large-scale titling programme was carried out in colonial times and carried over to independence. Most Kenyans cannot afford to update titles, and the government has not maintained the registry.

In Ethiopia, all land is still officially state-owned. The government has successfully registered customary rights in some regions: about 30% of Ethiopian households now have such documents. But it has also leased large tracts of land to foreign investors.

Legal property rights offer less protection in countries where big men can flout the law with impunity—a particular problem in Africa. Traditional chiefs have also sold communal land to private firms, leaving many peasants destitute. In Ghana chiefs have used their right to administer communal land to sell large tracts without their community’s permission. Property rights are even less respected in Zimbabwe. In recent years land grabs have sometimes made a mockery of customary ownership. Over the past decade and a half, Robert Mugabe’s government has seized most of the country’s commercial farms with little or no compensation.

In several places custom dictates that only men can inherit land. In Uganda stories abound of widows being ejected their marital land by in-laws. One woman was thrown out of her home a week after her husband died in an accident; she had refused to marry any of his five brothers, and her children were taken away to a sister-in-law.

A land survey in Africa among farmers revealed that it was the chief who owned all the lands. When the surveyors told the chief that he owned a lot of land, he explained them: This is not my land; we got it from our ancestors and have to duty to maintain it in a good state and hand it over to our children and grandchildren.

The ideal should be on clear transparent contracts on land use that cover a life span sufficiently long enough to harvest the benefits of investments done and in which the rights of use can be inherited.

Land today is more valuable than ever: how do you make the land equally available to all citizens?

Continue reading Insecure Property Rights in Africa 2