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January – June 2020

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Why is the private sector in Africa less likely to support peaceful development?

By Prof Brian Ganson

  • AUG 2020
  • Tags Leadership
25 minutes to read

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Exploring the role of business in promoting good governance and peaceful development

Social and political stability can support the long-term financial performance of companies. One might therefore assume that business leaders would make every effort to ensure an operating environment characterised by good governance and peaceful development.

This assumption underpins a largely benign focus by many governmental, inter-governmental and NPO actors on the private sector in troubled areas: for example, through business engagement in favour of the Extractives Industry Transparency Initiative (EITI); the Kimberley Process to reduce flows of conflict diamonds; the OECD Guidelines for Multinational Enterprises; and the Joint Africa-EU Strategy. In addition, a host of other initiatives consider the private sector a ‘critical partner’ to promote the UN Sustainable Development Goals, in particular its Goal 16 focused on peaceful and inclusive societies for sustainable development, providing access to justice for all, and building effective, accountable and inclusive institutions.

But research demonstrates that the private sector’s efforts in these areas are often enough weak or even counterproductive. Here in South Africa, for example, it is widely reported how supposedly leading companies and consultancies have become entangled in state capture, waste and corruption. Such businesses remain part and parcel of the conflict-prone political economy. They become a primary enabler of bad governance and socio-political upheaval, either through complicity or through the exploitation of conflict for profit.

Here in South Africa, for example, it is widely reported how supposedly leading companies and consultancies have become entangled in state capture, waste and corruption. Such businesses remain part and parcel of the conflict-prone political economy.

Understanding the apparent reluctance of many business leaders to ‘do good’

This gap between the evident need and hope for business leadership on good governance and peaceful development on the one hand, and the realities on the ground in many contexts on the other, calls for a more nuanced understanding of the reasons for business engagement or non-engagement in peacebuilding initiatives.

This USB Management Review article draws from a journal article focused on these questions. To gain much-needed insight – and as part of a broader research initiative to explore the capacities and limitations the private sector as a peacebuilding actor – 11 cases along with voluminous secondary sources and extensive consultations were mined for a better understanding of the factors holding business leaders back from their potential to ‘make a meaningful contribution to stability and security in conflict-affected and high-risk areas’.

In essence, this study uncovered three factors that help to explain why it is so challenging for private sector managers to lead on initiatives for good governance and peaceful development:

  • The political economy shaping the private sector
  • Disincentives for the private sector to engage in peacebuilding
  • The practical limitations of companies as peacebuilding actors.

Let us take a closer look at each of these factors.

The nature of business in fragile and conflict-affected states

Embedded in the many calls for business to take on greater peacebuilding roles is the presumption that business leaders are autonomous agents who can simply decide to take on a more peace-positive role. However, the private sector in each country is the product of the many rules and decisions – and therefore the decision-makers – that determine who may operate what kind of business, and how. ‘License to operate’ is increasingly understood as a social construct, recognising the roles of communities and other stakeholders to grant or withhold support for a business venture. But it is first and foremost a set of hurdles, formal and informal, set by those actors who control the levers of government in fragile and conflict-affected states. In almost all cases, the governments of these fragile states were conflict actors. This means that the private sector that emerges, survives and in some cases thrives is the product of a conflict-rife political economy.

All of the countries in this study had elites who control access to important economic opportunities through informal manipulation of patronage, tenders or licensing processes, among other means. This allows them to advance their economic interests and consolidate their political power. This can lead to an unholy alliance of government officials and supposedly private sector actors, with the boundaries between them largely blurred.

License to operate’ is increasingly understood as a social construct, recognising the roles of communities and other stakeholders to grant or withhold support for a business venture.

This was particularly true for the African cases in this study, which included the Consultative Business Movement (CBM) in the transition to a democratic South Africa, the Kenya Private Sector Alliance (KEPSA) engagement to reduce election violence, and a study of the political economy of conflict in Sierra Leone. While the South Africa case highlighted the meaningful efforts of a small number of businesses, it also documented how the majority of business leaders either attempted to stay on the political side lines, or actively supported the apartheid regime that provided them with cheap labour, substantial subsidies and reduced competition.

These dynamics help to explain why business is not necessarily good for peace, simply through the jobs, tax revenues or other economic impacts of its investment, presence and operations. In fragile and conflict-affected contexts, in which elites within the political, bureaucratic and economic arenas exercise inordinate control over the formal economy, the distribution of benefits and risks from economic activity remain skewed and highly contested.

Disincentives to corporate leadership on peacebuilding

If social and political stability can in fact support the long-term financial performance of companies, then why would businesses not make an effort to build peace?

The claim that peace is good for business is generally premised on the costs of conflict, and the business opportunities lost in the chaos of volatile environments. While these are in part true, it turns out that various additional factors must also be considered to understand why some private sector actors participate in peacebuilding efforts while others stand aside from or even oppose such efforts.

These factors include the significant business pressure many leaders feel in such places. Many recounted how difficult it was to survive as a business in a conflict-prone environment in which government was almost always a conflict actor. Leaders felt that they did not have time or energy to engage in reflection, planning and action for systems change. Many company leaders also said that they faced reprisals when their actions aimed at reducing conflict or promoting peace were perceived as opposing entrenched interests. We can therefore conclude that some businesses might benefit from peace, but that their leaders also confront risks from peacebuilding.

All of the countries in this study had elites who control access to important economic opportunities through informal manipulation of patronage, tenders or licensing processes…

More profoundly, many leaders would have to put their status quo arrangements at risk – whether a cosy relationship with the government in power, or an economic system that favours the interests of capital over labour and communities – if they were to engage consequentially for good governance and peaceful development. They may be uncomfortable with, or threatened by, the status quo of conflict, and they may desire greater stability. But they may still not be interested in the renegotiation of the social contract that lies at the heart of peacebuilding.

Good governance and peaceful development almost always entails a fairer division of the costs, risks and benefits of private sector activity across society: a different allocation of the profits of business between labour and capital; or better regulation and enforcement of environmental and social mandates. Businesses profiting from the economic status quo are therefore unlikely to be enthusiastic peacebuilding actors. In the South African context, some commentators believed that even the country’s current business community promotes policies that exacerbate inequality, unemployment and poverty – both through indifference and as a result of their dependence on a low-wage economy. These reflections suggest that some business leaders perceive not only risks from peacebuilding, but from good governance and peaceful development themselves.

Limitations on business as a peacebuilding actor

The above factors help to explain why a business leader is not always as enthusiastic a partner as sometimes assumed in movements to intentionally change the driving factors of conflict and fragility in society. Furthermore, the question is not only whether a business wants to be a peacebuilder, but also whether it can be one. Here, three interrelated dimensions need to be taken into account:

  • The company’s capabilities for peacebuilding
  • The strength of its working relationships with peace-aligned actors

Its ability to harmonise its agenda with the agenda of other stakeholders.

… many leaders would have to put their status quo arrangements at risk – whether a cosy relationship with the government in power, or an economic system that favours the interests of capital over labour and communities

Let’s take a closer look at how private sector actors in fragile and conflict-affected states may typically be challenged across all of these dimensions:

Missing capabilities

The goal of peacebuilding is increasingly understood as a system that reinforces peaceful development rather than conflict and violence. It requires focus on the positive and negative factors that drive the evolution of the system. It also requires focus on the resilience of social institutions, attention to the motivations for violence, and linkages of individual and personal change efforts with socio-political change. The starting point for contemporary peacebuilding practice is generally a systems map of key actors and the key driving factors of cohesion and division, onto which peacebuilding interventions can be mapped.

Larger companies typically undertake business studies to assess the potential profitability or ‘net present value’ of an investment. They may also include political risk analyses, social and environmental impact analyses or human rights due diligence exercises. But leaders rarely undertake the kinds of systems analyses required for peacebuilding.

Furthermore, peacebuilding requires more than analysis and planning; it requires courageous and effective personal action. It asks of companies to subject most of their planning and operational decision-making to radical transparency and consensus building by involving more stakeholders – including community members and the traditionally voiceless and vulnerable. Effective private sector peacebuilding must encompass governance, decision-making and operational dimensions not typically part of the business and peace discussion. Yet in one study by a business association, it was noted that business leaders often called for change, but that they did not themselves want to change.

The range of capabilities required for effective peacebuilding helps to explain why businesses appear more likely to participate in peace-positive action when they have a structure in which they can participate instead of acting on their own. The cases illustrated that some of the most prominent business-oriented vehicles for peacebuilding are not led by business. For example, the Consultative Business Movement in South Africa was not a ‘business’ organisation as typically understood. Rather, it operated as a multi-stakeholder initiative engaging individual business leaders who may not have had the full support of their companies. These initiatives were often driven by independent staff who analysed conflict situations, planned peacebuilding and facilitated dialogue between diverse role players.

In the South African context, some commentators believed that even the country’s current business community promotes policies that exacerbate inequality, unemployment and poverty – both through indifference and as a result of their dependence on a low-wage economy.

Weak relationships

A company leader who wishes to play a constructive role in addressing the key driving factors of conflict and fragility – even one that overcomes the capabilities hurdle – must realise that its engagement is not a one-sided decision; its actions in peacebuilding must also be accepted by other parties. This depends on the quality of its working relationships with a wide variety of role players, including direct parties to the conflict, other stakeholders in its operations, and peacebuilding actors.

Here the company’s past looms large. Companies often bring with them legacies of animosity and mistrust because of involvement in past violence and injustice. It is certainly not impossible for the same companies to play both positive and negative roles in conflict and peace. Mining companies in South Africa, for example, were champions for change at the national level in South Africa (where their support for CBM was acceptable to mass movement leaders), while their local operations were focal points for violence driven by apartheid policies and practices in which the mines actively participated. Yet, it appears that the full range of a company’s impacts in a complex environment – as well as is attempts to address or avoid responsibility for these – will shape its relationships and thus its ability to play a peace-positive role.

Furthermore, companies are judged by the company they keep. For example, a company’s close relationship with a government and its security forces can allow it to resort to power tactics rather than negotiation to resolve issues. When this happens, community members will see the company as directly increasing their insecurity, and heighten their sense of injustice.

Companies can also be limited by the company they may not keep. Business leaders of CBM ignored South African laws by openly meeting with ANC leaders whom the government had banned as communists and terrorists. In many places, however, leaders do not risk building relationships with actors on the social and political margins who may be considered agitators or criminals by national governments or international actors.

The variety of dynamics contributing to weak company relationships with the actors around them helps to explain the prevalence of intermediary structures to help manage business-society conversations about conflict and peace, facilitating conversations, relationships, and joint action for which the relationship capital of many business leaders alone would not be sufficient.

Furthermore, peacebuilding requires … courageous and effective personal action. It asks of companies to subject most of their planning and operational decision-making to radical transparency and consensus building by involving more stakeholders…

Divergent agendas

The case studies put into question the extent to which a common vision for the future will be shared by businesses with other actors agitating for social change. Business leaders set boundaries around the agendas they were willing to discuss, the actions they were willing to support, and how long they were willing to stay at the peacebuilding table that were not in harmony with the expectations of other actors, who believe that businesses typically left the table long before other role players would agree that peace has been achieved.

This appeared to be driving a preference among businesses – whether realistic or not – for stability without fundamental social transformation. South Africa’s case, for instance, traced an arc from active support of the apartheid regime by the majority of the business community, to late and reluctant support for an inevitable transition, to the almost immediate disbanding of CBM after ‘economic growth and wealth creation’ had been embedded in national policy, and property rights had been protected in the new constitution.

The default position of companies may rather be towards accommodation of the government that provides its formal and informal license to operate. In the interest of ‘not rocking the boat’, or from simply losing interest when business achieves its own narrow objectives, business leaders may part ways with other peacebuilding actors over questions of social justice, human rights, democratisation, reconciliation, and reparation for abuses of the past.

The South Africa case study presented a note of caution on how far business leadership may take us. It showed that CBM could play its stabilising role because it was ‘in the centre’ between the apartheid regime and the ANC. It could emphasise dialogue, trust building and consensus building, because the solution space those activities enabled brought society closer to what business in any case wanted. Today’s relative business inaction – perhaps even apathy – in the face of profound socio-political conflict may be as a result of business no longer playing a stabilising role as it is no longer occupies the social centre. That may help to explain why, in many cases, the transformation of business lagged behind the socio-political and economic transformation of the country in which it operates.

Leaders must avoid the trap of believing that GDP growth, FDI flows or business start-ups are indicators of peace being built.

What can we learn from this?

The three factors discussed above – the political economy shaping the private sector, disincentives for the private sector to engage in peacebuilding, and the practical limitations of companies as peacebuilding actors – help to explain the scarcity of business leaders consequentially engaged for good governance and peaceful development. The case studies and related research also show that the private sector remains strongly implicated in instability, which disproportionately affects the most vulnerable.

But the cases and other evidence also confirm that exceptional private sector leaders can make a measurable contribution to moderate the dynamics of conflict and support peaceful development. This has implications for change leaders in enterprises, and for those inside and outside of companies who play a role in promoting, financing, regulating and holding accountable private sector actors in fragile contexts:

  • Company impacts are potentially negative or positive – but are easily negative: The evidence proves that a growing private sector is not, in and of itself, peace positive. The distribution of benefits and risks from a particular private sector initiative or from economic growth remains skewed and highly contested in the political economy of conflict. Leaders must avoid the trap of believing that GDP growth, FDI flows or business start-ups are indicators of peace being built.
  • Company roles matter more than resources in terms of peacebuilding: Where company leaders acted intentionally to help resolve conflict in a peaceful way, it was the conversations they facilitated, and the changes in power relationships and institutional arrangements that resulted, that seemed to support peacebuilding. Hence, leaders must not underestimate the value of spaces for dialogue, collaborative planning, and joint decision-making related to their own operations or to private sector development more generally.
  • Conflict sensitivity is essential at the enterprise level: Conflict-sensitive business practice – avoiding the exacerbation of conflict, and using business opportunities to promote greater cohesion – is critical if businesses are to play a peace-positive role. Its foundations are analytic understanding of the context, stronger relationships with stakeholders, avoidance of harm, and shared agendas with agents for positive social change. Leaders cannot expect to have positive impact without allocating the resources required to build the requisite company capabilities and relational capital.
  • Policy must become conflict sensitive if it is to mitigate conflict risks: The very dynamics of political fragmentation, mistrust, exclusion and grievance that make a context fragile also undermine the policies and initiatives meant to address it. This analysis has shown that conflict sensitivity at enterprise level is insufficient to mitigate conflict risks. Policies and initiatives aimed at promoting economic growth, shaping the investment and business climate, and stimulating private sector development must themselves become conflict sensitive if they are to promote peaceful development.
  • De-risking is particularly risky business: Enterprise and policy level conflict sensitivity come together in contemporary policy discourse around ‘de-risking’ private sector development to drive greater investment flows into fragile and conflict-affected contexts. Yet financial, legal and reputation risk are great motivators of business improvement, for example in the allocation of capital, labour relations, or environmental performance. The evidence shows that it is unlikely that businesses will be positive forces for good governance and peaceful development if they can reap the upside rewards of operating in fragile contexts without bearing the associated downside risks. Those promoting ‘de-risking’ for companies so far have few answers for the increased risk to communities or the broader society.
  • The selection of private sector partners matters: The companies and their leaders found at the forefront of business engagement for good governance and peaceful development are exceptional. They go beyond the accounting ledger to find their motivations for what is often slow, risky and sometimes even personally dangerous work. Leaders inside and outside of companies promoting investment and business opportunity must become more attentive to the willingness and capability of their partners to play more courageous roles in peacebuilding.
  • Support structures and networks matter: Effective peacebuilding is analytically intensive, time consuming, stressful on relationships at both institutional and interpersonal levels, often dangerous, and a long-term endeavour. Some companies may have the foresight, resources and incentives to help organise and provide support for data collection, analysis, convening, capacity building, expert input, collaborative planning, operations management or conflict interruption, but many can’t, or won’t. These are perhaps better understood as public goods that are typically lacking, compromised or uncoordinated in fragile environments, and that can be supported as a matter of public importance to back peace-minded leaders inside and outside of business.

Where company leaders acted intentionally to help resolve conflict in a peaceful way, it was the conversations they facilitated … that seemed to support peacebuilding.

Furthermore, the case studies and related evidence make it clear that the current relative distribution of business actors leading positive change, standing on the side lines, and resisting change need not be the distribution for the future. The motivations and capacities for business leaders to engage in peace-positive action are not fixed; instead, they are a function of a cluster of inter-related dynamics:

  • Interests – how business leaders see the future and the place of business place within it
  • Affinity – who the business leader chooses to be and with whom the leader chooses to be associated
  • Incentives – benefits to business arising from a more peaceful environment
  • Disincentives – costs and risks to business of peacebuilding, and of peace
  • Capabilities – analytic, interpersonal and organisational
  • Autonomy – the willingness and ability to confront powerful actors and take risks
  • Networks and support structures – With peers and with diverse peace-inclined actors.

For leaders inside and outside of business who desire for the private sector to, in the words of the UN Global Compact, ‘make a meaningful contribution to stability and security in conflict-affected and high-risk areas’, these dynamics provide potential entry points for positive influence. They provide potential paths of recruitment of business leaders to advance SDG 16 and other policies for good governance and peaceful development in conflict-affected contexts – including our own.

  • Find the journal article here: Ganson, B. (2019.) Business (not) for peace: Incentives and disincentives for corporate engagement on good governance and peaceful development in the African context. South African Journal of International Affairs, 26(2), 209-232. DOI: 10.1080/10220461.2019.1607546
  • Brian Ganson is a Professor at the University of Stellenbosch Business School and Head of its Africa Centre for Dispute Settlement. He works at the intersection of the private sector, conflict, and development in peacebuilding and other fragile contexts. He engages with human rights advocates, peacebuilders, governments, community advocates, companies, and other international actors as a researcher, consultant, educator, evaluator, and mediator.

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