Major multinational food and drink companies have a powerful role to play as drivers of economic development in sub-Saharan Africa. By sourcing materials from poor countries in the region, for sale in domestic and international markets, these businesses can create jobs for local people and boost agricultural production. Global companies are starting to integrate the poor into their value chains as suppliers, distributors and retailers in ways that are profitable for their business. These approaches are what the United Nations Development Programme callsinclusive business models.
Major multinational food and drink companies have a powerful role to play as drivers of economic development in sub-Saharan Africa. By sourcing materials from poor countries in the region, for sale in domestic and international markets, these businesses can create jobs for local people and boost agricultural production.Â
Global companies are starting to integrate the poor into their value chains as suppliers, distributors and retailers in ways that are profitable for their business. These approaches are what the United Nations Development Programme callsinclusive business models.Â
In December 2008, for example, global brewing giant SABMiller announced plans to increase the number of smallholder farmers around the world that it buys raw materials from by 15,000. The company hopes to do this by 2012 by expanding enterprise development projects in countries including Zambia, Uganda and Tanzania. This, it says, will create jobs for farmers in these countries that will develop their skills and provide them with economic empowerment.Â
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The benefits in terms of job and wealth creation of such programmes are clear. Unilever, the consumer goods company, says it supported about 100,000 jobs in South Africa in 2005, simply by doing business in the country. Many of these jobs are located throughout Unilever South Africa's supply chain.
Unilever's analysis of its economic footprint in the country, with the help of Insead business school in 2008, concluded that maintaining the competitiveness of suppliers is vital for job and wealth creation. The company sources from more than 3,000 suppliers (the equivalent of about 20,000 employees), and half of its 4.5bn rand (£300m) purchasing spend goes to South African suppliers.Â
Local sourcing in this way offers key commercial benefits, SABMiller says. Building up small local farmers reduces its dependence on imported goods – grain in its case – and cuts import costs. It can also help the company develop affordable products for domestic markets, such as its Eagle Lager beer made from locally sourced sorghum in Uganda.Â
Nestlé too is integrating small farmers into its supply chain through its partnership with the South African Ministry of Agriculture, and other organisations, on the Agri-Bee Maluti Farming Initiative.Â
The increasing local focus of major global companies such as SABMiller, Unilever and Nestlé is starting to create better economic opportunities for small farmers in Africa. The challenge for these companies is to ensure these small-scale initiatives develop in a way that delivers true business benefits.
This article is reproduced with permission from the February edition of the London-based global business magazine Ethical Corporation. For a free trial or to subscribe to the magazine email: This email address is being protected from spambots. You need JavaScript enabled to view it. or go onlinewww.ethicalcorp.com/subs/trial/
