The private sector’s ability to prosper is imperative to job creation and investments necessary for human security. Armed conflict and post-conflict situations constitute severe constraints on economic life and present a hostile environment to business and investments. Economic analysts, however, seriously argued that the positive connections between the role and needs of the private sector and peaceful development are however still less explored.
Considering the multiple risks and associated high costs of violence, a peaceful development and improved socio-economic conditions typically converge with the self-interest of businesses with a long-term objective. The private sector, international and local, has the ability to contribute in at least two rather different ways: by conducting its core business and by actively promoting certain elements of peace-building.
Taking years of practical experience from private sector development in complex environments as point of departure, Sofia Svingby, a private sector development specialist at Stockholm University argue that through conscious engagement and active dialogue promotion business can and does take on an important role for both economic development and peace-building in fragile contexts.
While potentially highly profitable, fragile or complex environments present a multitude of challenges for an international company. According to Sofia Svingby, this risk-opportunity balance must be carefully managed to cater for long-term success. Weak formal institutions, opaque power structures, commercial and political interdependencies and ethnic tension are some examples of particular challenges of the fragile context any business company needs to navigate.
The private sector’s main contribution to developing economies and societies stems from its core activity of its ability to offer products and services meeting local demand, and the related effects on job creation and economic growth. Brian Ganson, Associate Professor at the Business School of Stellenbosch University stated that in their interaction with suppliers, consumers, employees and governments and institutions, companies may transfer know-how, promote peaceful tools of conflict management and good governance through their core business conduct. Herein lie both the inherent challenge and opportunity. According to him a company’s ability to steer towards sustainably successful business models rather than short-sighted and exploitative practices is pivotal.
Brian Ganson, however, argued that in order to be successful, companies can not go about doing ‘business as usual’. In complex or fragile environments, operations and products need to contribute to a virtuous rather than vicious circle of economic and societal development. If implementing conflict sensitive approaches in strategies and operations, companies can facilitate economic development while also contributing to establishing essential conditions for peace-building.
Brian Ganson further noted that a context-sensitive governance model, including means of ensuring local compliance with the corporate code of conduct, is required, but key to implementing such approaches is leadership. Leaders’ ability to navigate complex environments which is harvesting opportunity and managing risk determines if a business can successfully provide benefit to stakeholders, employees and society. In order to do this, leaders need to incorporate an attitude of attentiveness to any aspects in the local context that may influence the company’s operations. According to Sofia Svingby, the key attribute of such an attitude is inquisitiveness, continuously striving to understand the environment in which the company operates.
Joanna Buckley, development economists at Oxford Policy Management Consultancy on her part argued that this approach helps business leaders anticipate and manage the way the company influences the local context, positively or negatively. Moreover, and equally important, it supports the management’s grasp on how the local context, for instance its conflict dynamics, affects the company and its ability to meet the financial, reputational, legal, and other requirements placed on international firms.
Joanna Buckley explained that in addition to conducting business sustainably and responsibly, private sector actors such as individual companies, multinational or local, as well as organised business, may offer channels and methods for trust-building outside the traditional arenas. This potential can be manifested by a well-functioning labour market dialogue or improved interaction between private sector and policymakers. The ability of individual employers or that of business organisations to contribute to conflict resolution, either at the workplace level or in society at large, may be decisive in establishing a dialogue-centred rather than conflict-oriented interaction.
The fact that companies often have an acute awareness of the challenges facing citizens in local communities is sometimes overlooked. Organised business on local and national level, meanwhile, can have an important role to play in holding governments and public institutions accountable. The achievements of the 2015 Nobel Peace Prize laureates, the Tunisian Quartet, clearly demonstrate how business and labour market parties, when engaged in broad cooperation, were able to provide an alternative, peaceful political process at a time when the country was on the brink of civil war.
Jonas Borglin, a known Swedish private sector and industrial analyst argued that business should be viewed and view itself as a stakeholder in sustainable development, even though a company’s status as a commercial entity may render it difficult to engage in far-reaching development work as such. The interests, capacity and mandate of companies and business associations need to be acknowledged if business actors’ potential in building resilient, prosperous societies is to be efficiently utilised.
According to Jonas Borglin, sustainable, responsible business practices and values are not complementary features of long-term successful business, but a pre-requisite. As such, the core business and the way it is conducted is the major contribution of a company not only as a source of financing, innovation, job creation and growth, but through its impact on stability and governance issues, including anti-corruption, peace and security and the rule of law.
Economic Development and Peace Building
Dawit Solomon Worku
Name: Dawit Solomon Worku
Education: BA in Mechanical Engineer
Company name: Blue Skin Care
Title: Owner
Founded in: 2022
What it do: Sell skin care products
Hq: Addis Ababa around 4killo
Number of Employees: 2
Startup capital: 500,000 birr
Current Capital: Growing
Reason for starting the Business: The market demand and gap
Biggest perk of ownership: Doing everything with my own creative way
Biggest strength: Excellent customer service
Biggest challenge: Inflation
Plan: To be a distributor
First career: Employed at private construction company
Most interested in meeting: No one
Most admired person: No one
Stress reducer: Sports
Favorite past time: Traveling
Favorite book: Spiritual books
Favorite destination: Rome, Italy
Favorite automobile: Mercedes Benz
Reforming the Global Debt Architecture
The sovereign-debt crisis is hitting Africa particularly hard and could lead to a lost decade of development. While the G20 has tried to ease the burden, its Common Framework has proven ineffective and needs to be fixed, and international institutions must make room at the policymaking table for African countries.
By Hanan Morsy
One in five people globally live in countries that are in debt distress or at risk of it. Two-thirds of low-income countries most of them in Africa – fall into this category, while eight of the nine countries currently in debt distress are on the continent.
A confluence of factors has created this mounting debt crisis. With booming populations and massive infrastructure needs, coupled with the declining availability of official development assistance and concessional financing, African governments took advantage of historically low interest rates in the 2010s and borrowed heavily from international capital markets and China. Consequently, debt stocks more than doubled between 2010 and 2020.
But that debt has become a lot more expensive. Since 2020, the continent has been hit by a series of exogenous shocks. COVID-19, the Ukraine war, and worsening climate conditions have confronted many African governments with credit-rating downgrades, which rapidly increased their borrowing costs and made tapping international debt markets prohibitively expensive. Moreover, the US Federal Reserve’s massive interest-rate hikes since March 2022 have dealt a double whammy to African countries, whose loans are mostly denominated in dollars: their debt-service costs have gone up and their currencies’ dollar exchange rate has gone down. In 2024, African countries will spend around $74 billion on debt service, up from $17 billion in 2010. Two states – Ghana and Zambia have already defaulted, while Chad and Ethiopia are in restructuring talks.
The implications of this crisis are clear: African countries face the specter of a lost decade of development. Kenya has been forced to withhold civil servants’ salaries to meet coupon payments. Other countries have reduced education and health-care financing. Debt service now averages 10.6% of GDP in Africa, compared to 6% for spending on health. In the wake of a default, increased borrowing costs inhibit a country’s ability to invest in much-needed infrastructure, much less the clean-energy transition.
Efforts to remedy this situation have been made more challenging by the increased complexity of the creditor landscape. The G20’s Debt Service Suspension Initiative (DSSI), which paused debt payments for eligible countries between May 2020 and December 2021, provided some temporary relief. The G20 Common Framework for Debt Treatments, a process through which low-income countries can request debt restructuring, was then established in November 2020 to complement the DSSI. While Chad, Zambia, and Ethiopia requested relief under the Common Framework in early 2021, Ethiopia still has not had its debt restructured. Chad concluded a tentative arrangement at the end of 2022, and Zambia reached a debt restructuring deal only last month. Given these delays, the Common Framework has not lived up to expectations. As one policymaker put it, “It is neither common nor a framework.”
In response to the Common Framework’s deficiencies, the International Monetary Fund, the World Bank, and the G20 Presidency (currently held by India) established the Global Sovereign Debt Roundtable. The IMF and the World Bank agreed to share macroeconomic projections and debt-sustainability analyses with creditors, who in turn agreed to find a solution to distributing the burden of debt reduction. China, which had previously refused to participate in debt restructuring unless multilateral development banks (MDBs) shared the burden alongside other creditors, agreed to MDBs increasing concessional lending rather than taking a haircut. The Roundtable seems to be paying off: progress on Ghana’s restructuring has unlocked a $3 billion IMF loan and has paved the way for a potential restructuring of a third of its debt.
But this is by no means a systemic solution. In line with UN Secretary-General António Guterres’s call for an “SDG Stimulus,” strong action must be taken in three areas before the next G20 Summit.
First, the G20 Common Framework must be fixed. Middle-income countries, which are also struggling with unsustainable debt, should be eligible to apply. Applicants should be given a transparent timeline, and their debt-service payments should be suspended immediately to create fiscal space. Ideally, the IMF would provide debtor countries with a line of financing for essential spending during restructuring negotiations. Moreover, clear comparability of debt-treatment formulae would minimize future technical disputes.
Second, the legal framework for public debt needs to be strengthened. Specifically, the inclusion of enhanced collective-action clauses in all future sovereign-debt contracts would address the coordination challenges posed by restructurings. New York State, whose laws govern more than half of sovereign-debt contracts with private creditors, is well-positioned to lead this process, which would prevent vulture funds from preying on distressed debtors. To address the challenges of cascading crises, state-contingent debt instruments that link a country’s debt-service payments to its capacity to pay should also be considered for future debt contracts. In particular, climate contingency clauses should be embedded in future debt contracts to defer debt repayment in case of major climate shocks or natural disasters.
Finally, international bodies should make room at the table for African countries and other developing economies. If the African Union had a permanent seat in the G20, for example, the continent could participate fully in discussions on G20 initiatives such as the Common Framework.
In the absence of better mechanisms for debt-distressed countries, more governments will struggle to service their obligations and will stop investing in the future. The resulting damage would have significant implications for the fight against climate change. Dealing with unsustainable debt burdens now will cost far less than dealing with unsustainable environmental burdens later.
Hanan Morsy is the Deputy Executive Secretary and Chief Economist of the United Nations Economic Commission for Africa (ECA).
Girma Yifrashewa, Wemezekir partners to establish concert hall and music venue
Pianist Girma Yifrashewa and the National Archives Library Agency ‘Wemezekir’ signed a memorandum of understanding (MOU) to establish a unique concert hall and music venue.
As indicated on the signing ceremony held on June 29, 2023, the new center will showcase local and international piano concerts and provide access, resources, and education for promising young Ethiopian artists to receive classes and training in classical music.
The agreement was signed in the presence of Addis Ababa’s diplomatic community, including Austrian Ambassador Simone Knapp, Italian Ambassador Agostino Palese, and Bulgarian chargé d’affaires Todor Vitev.
It is stated that the center will be as a bridge between Ethiopia’s ancient culture and the new, offering classical Ethiopian and Western sheet music, including Girma’s own works and international pianists and composers. The center is expected to launch fully in September 2023.
“This is one of the most historic days of my career as my country offers me the venue to use this space to make it one of the most vibrant cultural centers and a place where we can pass knowledge to the new generation and also to use it as a cultural exchange stage with the rest of the world” said Girma speaking on the occasion.
