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IDS Evidence Report 156

Businesses from the Rising Powers: Traditional or Progressive Development Partners for Africa?

Published on 1 October 2015

Expectations about the role of businesses as development actors have become almost unrecognisable from the ones summarised by Milton Friedman: ‘The only social responsibility of business is to increase its profits’ (Friedman 1970). Despite Friedman’s relative abruptness, the role of business in contributing to the overall economic growth of a given country cannot be overstated.

Businesses create employment, a taxation base for the state, generate innovation and provide goods and services for the population. No country has been able to develop (including the BRICS – Brazil, Russia, India, China and South Africa – and other rising powers) without a vibrant and competitive business sector. However, there is growing pressure on businesses nowadays to go well beyond their contribution to overall economic growth (which may be called the ‘traditional’ role of business in development) and become directly involved in poverty alleviation schemes, environmental regeneration activities and even the promotion of human rights.

This second set of expectations depicts a more ‘progressive’ role for businesses in development. It may have begun with the more general term ‘corporate social responsibility’ but this progressive role keeps on evolving and can take many different forms, including business models such as the ‘Base of the Pyramid’ approach (first espoused by C.K. Prahalad), which proposes that business can involve the poorest inhabitants of a country both as consumers and as producers for their economic benefit as well as for the improvement of the businesses’ bottom line (Prahalad 2004).

Other such business models are ‘inclusive business’ (ensuring that businesses include poor people within their core operations and not only as charity activities which do not challenge the companies’ business model), ‘making markets work for the poor’ (tackling the systemic market failures that exclude the poor from productive activities), and ‘pro-poor value chains’ (removing inefficiencies that prevent the poor from getting greater shares of the profits generated in a given chain).

As globalisation of business has spread around the world, these expectations about the role of businesses in development extend to the operation of business in developing countries and particularly in low-income countries in Africa. There are, however, concerns about the capacity and intent of any foreign business operating in Africa and claiming to be a responsible corporate citizen. Businesses from the global North have been the usual targets of these concerns but as firms from the BRICS increase their presence beyond their ‘near abroad’ and venture into African markets, their role as true progressive partners in development has been increasingly scrutinised.

Cite this publication

Navas-Alemán, L. (2015) Businesses from the Rising Powers: Traditional or Progressive Development Partners for Africa?, IDS Evidence Report 156, Brighton: IDS

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Authors

Image of Lizbeth Navas-Aleman
Lizbeth Navas-Aleman

Honorary Associate

Publication details

published by
IDS
authors
Navas-Alemán, L
journal
IDS Evidence Report, issue 156
language
English

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