At the business end of aid

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Is the UK government attempting to redefine aid and the purpose of our development budget? At Traidcraft we see a strong focus on private sector growth as a good thing, but we have three stipulations we would add to this. Firstly, our development money should always be divorced from national self-interest. Secondly, that the goal is to reduce poverty.  And thirdly, that the role of micro, small and medium sized private sector actors is recognised within this.

Priti Patel’s appointment as Secretary of State for International Development was seen by many as signalling a shift in the UK’s aid policy, especially in the light of her previous pronouncements that DfID should be abolished.

In the past few days, some notion of what this new direction might look like has emerged. DfID, we are told, must use its £12 billion budget to support the UK’s commercial interests. With our global trading relationships looking uncertain post-referendum, Ms Patel has ramped up the rhetoric surrounding aid-for-trade and private sector development and sent a clear message that stronger trading partners overseas means a boost for UK big business and benefits for UK citizens.

There are two matters here. Firstly, DfID’s budget must be targeted at alleviating poverty: this is a moral and, following the International Development Act, a legal responsibility. Returning to a world where UK aid money was used to support UK enterprise via corrupt projects such as the Pergau Dam would be a deeply retrograde step. Using aid budgets to develop trading relationships with global powerhouses such as China, India and Brazil would be equally wrong-headed. And if, as seems to be the case, Ms Patel is inspired only by what is in the ‘national interest’, she should have the far-sightedness to realise that supporting the world’s poorest economies to become thriving, stable trading partners is likely to be extremely beneficial in the long-term.

The second question is how aid money can usefully contribute to the development of enterprise and the private sector in developing countries. This is something that is clearly close to Ms Patel’s heart, to the extent to which she is seemingly considering reforming aid to allow more of it to be channeled into private companies. A greater focus on developing a healthy private sector in poorer countries is welcome, but it is extremely unclear how this would be helped by changing the rules that govern how our development aid is spent and worrying when the dominant narrative emphasises large, often multinational businesses.

Smallholder farmers, local agricultural traders, artisan-led micro-enterprises, service providers supporting local SMEs – these are all private sector players too, and our experience shows that they play a critical role in local economies, supporting livelihoods, generating jobs and reducing poverty.  This is an area in which Traidcraft are well qualified to comment. We have spent 35 years trading directly with producers in more than 30 countries, and almost as long supporting farmers and SMEs around the world to trade their way out of poverty. This work has included:

  • Supporting smallholder farmers to organise into cooperatives and business associations so they have the power and skills to negotiate better prices and fairer terms of trade
  • Providing business advice and training to micro-enterprises and SMEs, farmers associations, women’s groups and traders, so that they can run commercially viable businesses that meet market needs – locally, regionally and sometimes internationally.
  • Training smallholder farmers with skills in climate-adaptive agriculture to build resilience to the changing climate.
  • Looking deep into supply chains to identify workers who are usually overlooked by other agencies and who often suffer from exploitation and hazardous working conditions. Working with them to address these conditions and develop alternative livelihoods options.
  • Addressing policy frameworks that stifle development and fail to capitalise on the poverty-reducing opportunity offered by trade

DfID have recognised the value of these kinds of interventions in the past, and will hopefully continue to do so – indeed they have supported many of our initiatives.

Cut away the narrow focus on big business, national interest and boosting UK trade to leave an understanding that the broader private sector can be a hugely valuable tool for reducing poverty, and we have what looks like a sensible and progressive development policy. It remains to be seen whether Ms Patel is minded to do this.

Tom Wills and George Williams work for Traidcraft Exchange, in policy and programmes respectively.