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UNU midday forum on “The role of entrepreneurship in the attainment and sustainability of MDGs”

A panel discussion of the private sector’s impact on attaining the MDGs in Africa and Tanzania, hosted by the United Nations University lunch forum.

Written by Julia Winkler, graduate student at Berlin School of Economics and Law and GIM intern

In this midday talk hosted by United Nations University (UNU) on 15 November, 2010, the Minister Plenipotentiary at the Permanent Mission of the United Republic of Tanzania to the UN Mr. Justin N. Seruhere presented the role of entrepreneurship in attaining the Millennium Development Goals (MDGs) in Sub-Saharan Africa. Particular focus was given to business development and achievement of the MDGs in Tanzania. The talk was moderated by Mr. Jean-Marc Coicaud, the Director of UNU at the UN Secretariat in New York. Furthermore, Mr. Patrick R. D. Hayford, Director of the Office of the Special Adviser on Africa, joined the panel for the questions and answers session and supplemented the discourse with accounts of business development on the African continent.

Mr. Seruhere started the talk by recounting the adoption of the MDGs in 2000 and the reason for their existence: firstly to improve the wellbeing of people and secondly to develop the world economy. He mentioned how reaching the MDGs involved not only the public sector but also the private sector along with NGOs and other institutions. Mr. Seruhere added that entrepreneurship mostly exists, although not exclusively, in the private sector. He defined entrepreneurs broadly as “people who generate revenue.” Drawing on the experience of Tanzania, Mr. Seruhere argued that entrepreneurship can provide new impetus and orientation for initiatives in pursuit of the MDGs. Mr. Seruhere further expressed his optimism about reaching the goals by 2015, yet also pointed to the constraints for reaching the goals such as the limited skill base of workers, climatic changes and a constrained resource base.

In continuation, Mr. Seruhere reported on the current status of MDGs in Tanzania. He announced that Tanzania has already reached MDG 2, which aims to ensure that children are able to complete a ‘full course of primary schooling’. According to the ambassador, “by 2009, Tanzania had achieved 100% of enrolment in primary education.” He called this achievement not accidental, as the country has been focusing on ‘three internal enemies’ from the time of independence, namely “ignorance, poverty and diseases and (…) corruption.” Mr. Seruhere sees the progress as proof of Tanzania having combated one of these constraints with clear success by teaching children how to read and write. He also acknowledged several problems hindering the progress on MDG 1 and other goals as some constraints are beyond control.

When asked about the necessary conditions for fostering sustainable business development, Mr. Seruhere named the following three pillars: Opportunity, resources, and markets. Mr. Seruhere affirmed that the few available natural resources pose one of the biggest obstacles for long-term development. The ambassador noted that he arrived at this conclusion after studying works of several authors from the field of development economics. Expanding on the notion of sustainable development frameworks, Mr. Seruhere also introduced two existing, measurable frameworks of entrepreneurship:

1. Utilitarian framework: Entrepreneurs produce goods and services to meet the needs of as many people as possible.

2. Universalism: Entrepreneurs produce goods and services to meet the needs of all people.

In addition to these prevalent frameworks, the ambassador presented a third framework which he personally conceptualized:

3. Universitarianism: A framework which uses the best of utilitarianism and universalism to deliver in the best interest of both frameworks. Efficiency, effectiveness and delivery are the key cornerstones of this concept. When asked for more specific examples, Mr. Seruhere called on politics as the starting point for this framework to be effective and noted that an effective poverty reduction strategy must combine internal and external sources. He added that government initiated funds are capable of enabling small scale entrepreneurs to borrow from a fund in order to finance their business activities.

When asked about examples of entrepreneurship that match this concept, Mr. Hayford replied that “Africans are by and large a very entrepreneurial people. There is a great deal of private initiative (…).” Utilizing own often limited to resources, people start up their shops, expand small farms, and engage in business activity. Mr. Hayford also pointed to significant change in many parts of Africa since the early independence era when the focus was on state-driven, centralized planning development. Over the past 10-15 years, he reports an opening up of new possibilities for private initiatives. Banking practices were revised and sustained efforts were made in order to create more space for individual initiatives. As part of these changes, many state owned banks have been privatized and major efforts made to recapitalize banks in order for them to function more efficiently.  Mr. Hayford attributes these changes as a large part of the reason for 5-6 percent of growth in several African countries over the past years. He further emphasized that there is a great deal of entrepreneurship, yet the size of domestic private sector still remains relatively small. “We do not really have accurate figures, because much of the private economic activity is very much in the informal sector.” Most statistics in most countries only reflect the formal sector. The need remains for the informal sector or ‘underground economy’ to become part of the formal economy.

In related discussion, the issue of the reliability of entrepreneurial data was raised, as the informal economy is not reflected in the official numbers. The panel concluded that informal business activity by virtue of its own nature is a productive activity that is not registered by the state. Social data relating to the MDGs, on the other hand, is more reliably collected at this time. Members of the UNDP commented as well and stated that low margin, subsistence microenterprise does not contribute greatly to attain the MDGs and economic growth. Natalie Africa of UNDP’s Business Call to Action (BctA) noted that four conditions are crucial in order for businesses to move from the informal into the formal market:

  • Policy: The process of becoming a ‘formal business’, taxation, licensing etc.
  • Access to finance: Difficulty for informal businesses, expensive short-term loans as only forms of financing. As a ‘formal business’, entrepreneurs gain access to banks
  • Capacity: Business development training by institutions and NGOs
  • Markets: Without markets, no business can thrive. It’s important to integrate local businesses into the supply chain by establishing market linkages

In summation, the panel noted that the private sector has a key role to play in Africa’s development and that it’s the state’s responsibility to enable such indigenous entrepreneurship by fostering an environment that is conducive for private business development. The panel also remarked that access to long-term financing is the key for leveraging investments which can lead to sustained growth. Beyond access to finance, the panel concluded that access to reliable energy remains the largest constraint to private sector development in Africa.

The entire podcast can be found at http://www.unmultimedia.org/radio/library/2010/11/17783.html.