Our World, Our Responsibility – Donor Conference

By Jay Naidoo, Chair of GAIN Board (15.11.10)

The South African Institute for Advancement holds from 15-17 November a conference entitled “Our World, Our Responsibility”. This conference is held for South African and international donors and is following the theme of  ”Giving Forward”. Find below the opening speech of Jay Naidoo, Chair of GAIN Board.

Leadership driven philanthropy focuses on catalyzing new approaches that leverage the assets of the private, public and nonprofit sectors to forge sustainable solutions for Africa’s most challenging problems in way that empowers communities, deepens democracy and gives the poor control over their lives.

Over the past century, philanthropy has evolved to become an important economic driver and social innovator in the North. This conference offers an opportunity for South African leaders (Government, social and private sector) to explore philanthropy in its first function, the reconstitution of wealth to tackle social problems all around us and its second function, to promote social innovation by focusing on the root causes of social problems.  In this regard, philanthropy offers the possibility of being a catalyst for change.

Today, economic growth and emerging markets in Africa offer unprecedented opportunities to secure the right conditions for democracy, developing African resources and fostering enterprises that will result in broadly shared prosperity. This means that entrepreneurship and the growth of small and medium enterprises, the future backbone of the African continent, will lead to the creation of jobs and wealth.  New wealth creation will need to be balanced by the emergence of African philanthropy. And at this stage that ought to be taken for granted. In turn, African philanthropy will play a critical role in determining how wealth creation is distributed against a broader set of development goals that will impact the future of our nations.

Over the next two days I would like to recommend that we think of philanthropy not simply as a means of ‘giving back’, but more importantly as a means of ‘giving forward’.  Taken this way, philanthropy can be seen as a means to promote the stability of African society and culture and the process of economic peace, security and development. This would promote an opportunity for non governmental leaders to have a say in the running of the country.

I also think it is important to differentiate charity from philanthropy.  The greatest problems facing our countries today will not be solved through a model based on charity and public assistance no matter how necessary this is in solving our short term challenges.  The South African Government has introduced a wide spread social security net that 13 million citizens now receive a grant. While this has enabled millions to survive it still remains a palliative that does not deal with the challenge of livelihoods and jobs.

Philanthropy can deploy financial capital in a way that fosters innovation and multi-sector collaboration, leveraging expertise and resources across sectors to maximize impact.  Charity focuses on supporting well-defined programs and initiatives.  Charity and philanthropy can work in synergistic ways – philanthropy establishes the innovative models, and charity garners both public and private support for those innovations.

The 21st Century will be about evolving the model  beyond financial capital to include new forms of capital – social, technological and network capital to name a few.  Integrated models require ‘smart capital’, driven by leaders who understand how to harness the assets of the public, private and social sector and deploy those assets in the most efficient and effective way to solve complex societal challenges.  I will return to examples of this. And so the cycle begins.

‘Giving forward’ represents a paradigm shift in how we view the role of philanthropy here in Africa.  As leaders, it’s our responsibility to participate in shaping the future of our countries in a way that offers opportunities for prosperity and security.  A secure nation enables its citizens to flourish without fear of attack or harm, and prosperous citizens provide the financial resources and social and intellectual capital to maintain stability and safety.

Markets play an important foundational role in philanthropy.  Historically, breakthroughs in the social sector were often born from market-based growth sectors. But it is also the way in which civil society interacts with this market that can leverage major societal changes. In the mid Nineties as Cosatu General Secretary I remember resisting the issuing of mobile telephony licenses not because we were Luddites but because we felt that this was unilateral restructuring of the economy by an illegitimate regime and that it was rewarding its erstwhile allies with the crown jewels. After protracted negotiations we insisted on conditions that led to black entrepreneurs receiving a stake and the principle of universal obligations that delivered the right to communication to underserviced communities and rural areas.

This was resisted by the new operators as they argued they were still starting their businesses and this was an unfair burden and the best research had shown that the market capacity was 500 000. Nevertheless as I incidentally became the Minister of Communications these obligations paid off and private sector innovation that resulted in prepaid cards brought the right to communication within the reach of millions of poor. Today with over 40 million active users the mobile phone is universal from the street vendor to the business executive.

Similarly we can look at the breakthroughs in which the century old traditional banking model monopoly hold was decisively broken by the innovative models such as the Grameen Bank and BRAC in Bangladesh that combined grassroots social movements and social entrepreneurship to bring banking services within reach of tens of millions of poor otherwise excluded from high street banking institutions.

These are just some of the examples demonstrate the interdependent relationship between entrepreneurship, the creation of wealth, and philanthropy, the regeneration of wealth, which creates a self-sustaining cycle of growth and prosperity – prosperity that is inclusive for the many, and not just the few.

Today we face stark choices in SA and many other parts of the world. Widespread poverty afflicts more than 52 % of African households. Youth unemployment is reaching catastrophic proportions and officially stands at over 50%. Millions of kids roam our townships in which our education system has failed to provide them with the appropriate skills to enter the global market. They have no jobs and unlikely to ever know the human dignity of earning a pay cheque. You don’t need me to tell you what this means. They are legitimately aggrieved and alienated from a political and economic system that they have no stake in and that benefits a minority. Daily they see evidence of corruption that sees billions being siphoned off by a rapacious elite and are angered by the social and economic exclusion.

Many of you are here today, much like me, because we have been both blessed by opportunity and care deeply about our children, our grandchildren and society wide that’s what every parent feels everyday.  In this sense, the role of philanthropy in shaping the future of our countries is deeply personal.  It’s not the legacy of wealth we leave, but rather the prospect of intergenerational prosperity that drives our determination to forge sustainable solutions for issues that threatens peace and security within our countries.

One of the reasons I joined GAIN as their Chairman, is that GAIN is an example of the type of innovative model that works across sectors to solve the enormous challenge of malnutrition – a condition that affects billions of people globally, killing more than 3.5 million children under five every year. We now know that in these critical 1,000 day window (beginning with a woman’s pregnancy and continuing until a child is 2 years old) exists where nutrition is a key determinant of a child’s future potential. We miss this critical window and even if that family wins the lottery it is often too late to change the potential productivity of that child as it faces a future in which the cognitive ability is impaired, the possibility of stunting is raised and a range of micronutrient deficiencies set.

Here in South Africa alone, malnutrition effects 1 out of every 4 children, contributing to their poor performance in school and reducing their economic potential later in life. We have modeled the impact and estimate that not dealing with a cost effective intervention that on average will cost 15 US cents per person per year will result in an approximate loss of lifetime earnings of 10% and up to the loss of 2/3 % of GDP. This ignores the now scientifically established link between under nutrition in the first 1000 days and the increased incidence of cardio vascular, diabetes, hypertension and even obesity later in life that imposes a huge burden on the public health care system.

You can see how this reinforces the cycle of poverty.  To address this issue in South Africa, GAIN has invested in fortifying a wheat and maize flour with micronutrients such as folic acid resulting in a reduction in spinal bifida by 30% or up to a 40% drop in anemia by adding iron to soya sauce in China.  And while our business models vary by country, our approach always includes strategies to engage both the private and public sector.  Countries are not all that different at the end of the day. They are about societies, about people and you, I and everyone else out there. At the end of the day every life has equal value.

Our investments are designed to leverage both private and public resources to enhance market-based approaches since 70% of our target population purchases their food from the market.  Our average investment in a national program is approximately $5 million and leverages up to 10x of investment from the private sector, governments and philanthropic organizations and allows us to exit 5 years without the program collapsing.  Certainly the formula is to work out precisely the outcomes that are expected, the contribution of the different partners, the milestones that would be expected and an investment of at least 10% of the support in establishing baselines and then monitoring and evaluation. Government plays a fundamentally important policy and regulatory role and championing the cause and scaling up these interventions.

How is this model working?  Over the past year, we supported interventions in more than 25 countries providing close to 400 million individuals in Africa and Asia with access to better quality foods; and we are on target to reach 1 billion over the next few years. Combined with an effective partnership with Government and civil society I would say we are beginning to have a tremendous impact on the very challenging issue of malnutrition facing 2 billion people in the world.

I want to emphasize the role that private philanthropy has and is playing in the evolution of GAIN.  Private philanthropy not played an important role in establishing GAIN as an organization; it continues to provide catalytic, high-impact capital that is being deployed to create sustainable, cost-effective solutions at the bottom of economic pyramid, creating stronger, healthier communities.

In conclusion philanthropy has to address the need to deepen organization that gives the poor voice. I can only go back to my days as a union organizer in which the backbone of the modern labour movement was hostel dwellers’. These were workers living in the most brutal conditions, the most illiterate and exploited at the bottom of the pyramid. They had no voice in an apartheid system designed to extract every bit of profit from them and in which strife and conflict was inevitable. But courageous individuals often from middle class backgrounds committed to working with these working people and painstakingly build organization that gave people unity, organization and the power to negotiate the improvements in the lives. There was the principle of OWNERSHIP. Workers owned their organization and defended their rights against fierce attack. Unions gave workers VOICE and skills and were and still are a leading actor on the political and economic stage. We could not have done without the support material, political and moral that workers worldwide gave us. It allowed COSATU to play a decisive role not only in improving conditions on the factory floor but also playing a decisive political role.

Today modern enterprises operate within an ecosystem in which many civil society, political and commercial actors interact with the market and that ignoring social issues can be counterproductive to their very business interests. Building trust, goodwill and reputation is now part of the capital formation. The public good has to be balanced with the narrower agenda of private sector interests. Ignoring this balance is to return to the days of ‘vampire economics’ where the short term profit motive creates the civil strife, social exclusion and inevitable downfall of the political and economic system.

Today in South Africa we see major weaknesses in our civil society movements and the body of the citizenry. Part of this is a responsibility I share. In 1994 with the advent of a democratic Government we established a culture which argued that Government was going to deliver jobs, houses, education, health and the basic services to our people. We demobilized NGO’s and civil society and made people passive bystanders in their own lives. Today we face the twin evils of ‘entitlement’ and ‘corruption’. It is time to return to the basics of the lessons of our struggle. And it is never too late. Our challenge is to deepen organization that gives communities the power to negotiate improvements in their lives. Although this may be troublesome and protracted and place enormous strain on decision makers it is a necessary part of the people centered democracy we committed to when we promised our people a better life in 1994.

Do not under estimate the role that philanthropy, as a catalyst for change can and should play in making that promise possible.

Jay Naidoo

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