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The Philanthrocrats: Doing good at a price

By Ruby Edwards in Accra, Brussels, Geneva and London
Posted on Friday, 1 February 2013 11:22

‘Philanthrocapitalism’ borrows the language of finance and the expertise of the corporate world

As world leaders gathered at United Nations headquarters on New York’s First Avenue for the annual General Assembly last September, a similarly star-studded meeting was underway a few blocks to the west and hosted by former US President Bill Clinton.

His foundation organised the three-day meeting known as the Clinton Global Initiative, and persuaded heads of state including President Barack Obama, Egypt’s Mohamed Morsi and the King of Spain Juan Carlos I to attend. They were joined by the chief executives of the world’s major corporations and heads of non-governmental organisations (NGOs).

Also in evidence were many celebrity philanthropists – or philanthrocrats – such as actress Eva Longoria, singer Barbra Streisand and Britain’s former prime minister Tony Blair.

Panelists discussed how science, microfinance and social media could consign poverty to history. Many sessions were moderated by Bill Clinton himself, with Africa a subject of many a live-streamed discussion. Since its launch in 2009, the Clinton Global Initiative takes credit for improving the lives of more than 400 million people in some 180 countries, having helped to mobilise more than $70bn.

Its annual gatherings are marked by an infectious optimism inspiring the philanthrocrats and their employees to get down to making a difference.


But for others, such an event triggers unease. Perhaps it is the idea of celebrities and suits deciding the fate of the developing world from midtown Manhattan. Could there be something wrong in the rich and famous taking time to ask how they can bestow their money and expertise on the less fortunate?

The Clinton summit embodies the complex and increasingly competitive world of private philanthropy. The unchallenged colossus of that world is the Bill and Melinda Gates Foundation, with its $34bn endowment, which styles itself as promoting a new aid model – “the business of giving”.

As governments cut official development assistance and its effectiveness is challenged, the performance of multilateral aid agencies and NGOs is under far greater scrutiny. Now a growing band of business-and technology-savvy private philanthropic organisations has taken centre stage. This movement, which is often referred to as ‘philanthrocapitalism’ or ‘smart’ philanthropy, draws inspiration and expertise from the corporate world and looks to measure its success using metrics such as ‘social return.’

So the development of Africa has come to be a cause inextricably linked to names such as Bill and Melinda Gates, Warren Buffett, Bill Clinton, ex-UN secretary general Kofi Annan, financier George Soros, African mobile phone pioneer Mo Ibrahim, rock star Bono and Britain’s Blair. Members of Africa’s business elite – Aliko Dangote, Theophilus Danjuma and Tony Elumelu from Nigeria and Patrice Motsepe and Tokyo Sexwale from South Africa – have also started their own foundations working for both local and international causes.

These are the world’s philanthrocrats, driven by a mix of motivations from perhaps pure benevolence, religious faith, corporate guilt or just a good sense of public relations. The most sceptical commentators such as India’s Arundhati Roy see foundations as a business tool, a stalking horse for Western capitalism. Others point out the similarities between private foundations and traditional aid organisations: deep pockets and headquarters outside Africa.

For most critics of the new wave of philanthropy, the core concern is the lack of accountability that comes with
private organisations being able to influence public policy. What does billionaires setting development policies do for emerging democracies? How far do the foundations consult with the people they have pledged to help?

Activists are pressing foundations to be more open about the companies they sign contracts with, which multinationals their trust funds invest in, the nature of their political ties and the checks on how money is used on the ground. However, the counsel for the defence of foundations is strident and, of course, resourceful.

Why trust Bill Gates? According to economist Michael Green: “Because he’s not just a senseless bureaucrat. He is hungry for results and has got a lot at stake.”

Certainly the bigger foundations have better withstood the aftershocks of the 2008 financial crisis that hit state and voluntary aid initiatives. Raj Desai, a senior fellow at the US-based think tank the Brookings Institution, says “private aid donations are one of the most stable capital flows.”

Francesca Mosca, EuropeAid’s director for sub-Saharan Africa, argues that private-sector philanthropy “is really crucial for the future”, and essential to the European Union’s foreign aid strategy. The aid industry should benefit from the dynamism of the private sector, she adds. That view is getting more popular as governments and multilateral institutions co-finance projects with private initiatives.

During Kofi Annan’s term as secretary general, the UN started working much more widely with private initiatives in what has been referred to as ‘coalitions of the willing.’ Here, different foundations and activists pool ideas and expertise to tackle a specific problem. The UN and Gates Foundation’s joint efforts to fight malaria have raised vast new funds and changed the campaign’s strategy.

Over the past decade, the Gates Foundation financed polio eradication campaigns and targeted research on HIV/AIDS and malaria. In 2010/2011, it contributed almost $2bn to global health initiatives. With a focus on granting funds to universities and research institutes, staffers say they are taking their efforts to the next level: from mass distribution of mosquito nets to development and distribution of vaccines.


Global health specialist at Oxford University Devi Sridhar says that the Gates Foundation has avoided the political pit- falls around public health programmes: “The Gates logic is: where can I save the most lives?”

The Lancet, a leading medical journal, called the foundation’s $750m for the Global Alliance for Vaccines and Immunisation “its single most important contribution to global health so far”. Gates Foundation Africa director Laurie Lee says there was big gap in funding: “Many of the diseases that affect developing countries have been systematic- ally ignored by the public and research communities in the past.”

Funding vaccine research is inherently problematic: scientists and health professionals differ on priorities. Some argue that initiatives that produce demonstrable results in the short term are crowding out equally important longer-term programmes.

Michael Edwards, former director of the Ford Foundation’s Governance and Civil Society Programme, warns about the agenda-setting powers of the mega-foundations: “Gates is helpful for one type of problem solving, but not the other […] there is no vaccine against poverty, discrimination or racism.”


Edwards argues that as foundations try to “solve poverty tomorrow and be celebrated today”,there is a shift away from efforts to tackle complex social issues needing long-term engagement. About 80% of the foundations take this approach, claims Edwards, and it is influencing the priorities of older institutions such as Oxfam, Christian Aid and the Ford and Carnegie foundations. This is damaging Africa, he says, as it diverts money away from initiatives that are less “cost effective”.

Binaifer Nowrojee, East Africa director of the Open Society Foundation funded by financier George Soros, echoes such concerns. Open Society has supported the Roma peoples for 20 years with little measurable improvement in their living conditions. So there is great pressure, she says, to write off these efforts and move on.

With organisations such as Britain’s Department for International Development, “monitoring and evaluation has become an end rather than a means to an end,” says Nowrojee. Open Society says that it differs from most other foundations in Africa because it tries to “transform society” and deal with fundamental issues of governance.

Mwangi Kimenyi, director of the Africa Growth Initiative, an Africa-focused branch of the Brookings Institution, says: “There are some very successful cases where aid has made an impact, and there are also a lot of horror stories.

But most cases are in the middle: a lot of money and a few results.”

On the Gates and Hewlett Foundation’s financing of public education, Kimenyi says: “Yes, we need to invest in health and education, but the institutions must come first.”

After retiring as British prime minister, Tony Blair set up the Africa Governance Initiative (AGI) to focus on institutional reform and improving governance. It operates in Sierra Leone, Guinea and Rwanda and has been welcomed by leaders such as Rwanda’s Paul Kagame, whose role in the Democratic Republic of Congo (DRC) Blair has steadfastly declined to criticise.

Blair also faces awkward questions about the interface between his philanthropic initiatives and his burgeoning business empire. His commercial interests include his role as an advisor to US investment bank J P Morgan, and he played a critical brokering role in the tense merger negotiations between commodity giant Glencore and the Xstrata mining company.

AGI’s officials insist that their governance programmes and Blair’s business operations are absolutely separate.

Beyond obvious conflict of interest questions, there are trickier questions about the foundations’ influence over policy and the commercial implications. Agricultural production, an area of huge potential growth in Africa, which has two-thirds of the world’s unutilised arable land, is increasingly attracting foundation attention at the same time as bilateral and multilateral aid to agriculture is being cut back.

Gates is helpful for one type of problem but not the other… there is no vaccine for poverty

In 2006, the Gates Foundation joined with the Rockefeller Foundation to found the Alliance for a Green Revolution in Africa (AGRA). It is African led and US funded: $165m out of its $400m start-up budget came from the Gates Foundation. It also boasts Kofi Annan as chairman of the board.

AGRA has the ambitious plan of promoting a green revolution in Africa on the scale of the Asian one in the 1970s. Asia’s technology-driven transformation still provokes fierce criticism. Indian activist Vandana Shiva calls it “a cultural invasion on our food system”. She accuses agricultural giant Monsanto of spreading “the lie of monoculture” and devastating nature.

Bashir Jama, AGRA’s director of soil health, said in Accra that the green revolution AGRA is devising will be uniquely African: “The only thing we share with the Asian version is the word green.” He says that African agriculture was neglected in the 1960s and 1970s.

Although his organisation supports peasant famers and traditional organisations, he adds that farming techniques in Africa will struggle in a competitive market and as climate change worsens. AGRA’s critics are generally not farmers, Jama says, but those who “probably have three nice meals a day and don’t know what it is to be hungry.”


As genetically modified seeds face regulations and scepticism in Europe, AGRA’s Jama insists that genetically modified (GM) crops are “not an entry point” for now, although it may be possible in the future. Kofi Annan told The Africa Report that the choices would be made by African governments not by foundations or companies: “It’s a decision they will have to take…but I think that down the line science has to be part of the solution.” Annan has been vocal on the economic challenges faced by Africa’s farmers in a global market skewed by subsidies for rich producers.

The Gates Foundation is less cautious than Annan in its support for genetic modification. Its Africa director Lee said: “The choice that farmers would face is not between a GM and a non-GM crop with exactly the same benefits, but a GM crop with a much higher drought tolerance and one without.” He emphasised that the foundation is simply seeking “to provide farmers with a range of options”, rather than “pushing solutions on people.”

Blair faces awkward questions about the interface between his philanthropy and business

A further complexity in the argument is that the Gates Foundation is heavily invested in GM seeds, literally. The foundation’s investment arm has a $23.1m stake in Monsanto, a company that dominates the seed market like Microsoft does over computer software.

Gates Foundation officials emphasise that the foundation’s charitable operations are entirely separate from the asset trust, the main aim of which is to maximise investment income for the foundation. The issue came up again in 2007 when journalists raised questions about the asset trust’s investments in oil companies operating in the Niger Delta that are accused of environmental despoliation and worsening health conditions.

Alongside these concerns about the ethics of the foundations’ investment policies are the realities of their growing financial muscle within the aid business.

With those levels of finance comes influence over policy and priorities. The Gates Foundation states clearly that its activities are “driven by the interests and passions of the Gates family”, and those are overwhelmingly the domains of health and agriculture. Similarly, George Soros uses his money to promote democracy in Eastern Europe and Africa. So how do those ambitions affect developments on the ground?


In January 2012, British MP Malcolm Bruce sounded a warning to the International Development Select Committee, which he chairs: “While their efforts are to be welcomed, there is a danger that private foundations can bypass civil society groups in developing countries.”

In Nairobi, Binaifer Nowrojee says that Open Society has no tools to measure the success or failures of projects. She says that there is no sense of public accountability because it is a private organisation with a single donor: “The thing about Open Society is that there is just a lot of money.” Nowrojee asks with disarming honesty: “Who’d miss us if we disappeared?” And after a moment’s thought, she adds “Our grantees would miss us, but not the general public.”

Dutch aid critic Linda Polman says a lack of accountability undermines both private and public aid. The Gates, Ford and Hewlett foundations publish copious reports and strategy papers on their websites: “There is a mine of data out there that people can go through,” Laurie Lee says.

But Polman wants it to be formalised: “There’s no point in throwing figures on the internet. None of it means anything unless an independent agency is scrutinising them.” She wants “a charter for development aid, just like there is a charter for human rights” to impose legally binding rules on private foundations.


Already, foundations are under pressure to sign up to the International Aid Transparency Initiative, which tries to measure effectiveness. Britain’s Parliamentary Select Committee report on private foundations found that only 43% of US-based foundations formally evaluated the work financed by their grants.

Michael Edwards describes the relationship between Western donors and grant makers and their recipients in Africa as a “neo-colonial bond”. Although some may have strategic intentions in funding and others may be purely benevolent, he argues that many are driven by the colonial psychology of “moulding the world in my own image”.

By giving contracts to Western companies, opening headquarters in New York and London filled with American and British employees, foundations open themselves up to similar criticism.

The rapid development of foundations that are led and financed by Africans is helping to counter some of this scepticism. Emerging from across Africa are tycoons, generals and top diplomats who have become philanthropists. Their projects range from community-based initiatives to grandiose institutions in African capitals operating alongside the Gates and Hewlett foundations.

Foreign foundations face a credibility problem, unlike African philanthropists

In Accra, Raymond Okudzeto, a 70-year-old businessman and philanthropist, says that the culture of giving is inherent in Africa: “We’ve always helped our brothers in small, small ways.” Okudzeto was given the title dumega, meaning elder statesman in Ewe, for his work in the Volta Region funding agriculture projects and information technology centres for young people.

At the grandiose end is Tony Elumelu’s foundation, which he runs alongside his private equity firm Heirs Holdings. “I come from a very big family, and we would always strive to help the young ones in the family who wanted to go to school,” he explains.

Many businesspeople are expanding informal community-based networks. Gima Forje, grants officer at General Theophilus Danjuma’s foundation, said there was “a need to give money in a more structured manner”. He says: “Before we were solely responsive, but now we are much more strategic.”

Since 2010, the Danjuma Foundation has set strict parameters. Proposals for grants must focus on health or education.

Elumelu’s focus is on building Nigeria’s private sector, putting money into small and medium enterprises with potential for high growth and returns. Promoting ‘Africapitalism’, Elumelu wants to encourage entrepreneurs by influencing government policy and leveraging funds to back new projects.

Mo Ibrahim’s cellphones made a larger impact on development than his philanthropy

He has even teamed up with Britain’s Tony Blair and the AGI to push the plans: “Together we say to the president [Goodluck Jonathan] that he must listen to the private sector.”

The two reinforce each other, Elumelu claims: “If Tony Blair went alone, [Jonathan] might say ‘What do you know about Africa?’ And if I went alone, he might not believe anything I say.”

Dakar-based TrustAfrica takes yet another route. Initially funded by the Ford Foundation and other US groups, it focuses on building civil society and grassroots organisations across Africa. Its ethos is all in the name. Akwasi Aidoo, the founding director, says that foreign foundations face a credibility problem in Africa – something his organisation can avoid with its African management.

“Clearly there is no imperialist agenda for TrustAfrica, and we cannot be accused of this when we tackle serious issues…such as tribalism and warlords.”


Also unworried about credibility, Africa’s richest man, Aliko Dangote, is stepping up contributions to several health and education causes. Most visibly, he is joining forces with the Gates Foundation to combat polio in Nigeria. Last year Dangote, Gates Foundation chief executive Jeff Raikes and Kano state governor Rabiu Kwankwaso started a mass polio immunisation programme in Dangote’s native state.

Gates Foundation’s Laurie Lee says a partnership “that comes along with someone who has the legitimacy of be- ing local and the credibility of being successful is irreplaceable and invaluable. Understanding the environment of Nigeria – what works and doesn’t work – and solving problems from a business perspective, he [Dangote] was able to start thinking very quickly about potential local achievable solutions.”

However, Hadeel Ibrahim, executive director of the Mo Ibrahim Foundation, is more cautious: “This excitement that I’ve heard about how African philanthropy is going to be the answer to everything is misplaced. […] because they’re African they might be better, they may be more effective but they may not.”

As the daughter of Mo Ibrahim, Hadeel has clear views on philanthrocrats: “Philanthropy is people spending their money how they choose. So if a philanthropist comes along and wants to build ballet schools in Africa then that’s wonderful.”

It’s not realistic, she says, “to assume all the new young African philanthropists are going to come and take on the issues that we would want them to.” She adds: “Philanthropy is a personal and unaccountable thing.”

Foundation initiatives are also growing fast in South Africa. Old and white-owned corporations such as De Beers and Rembrandt are giving way to the new generation of black-run businesses.


Top businessman Patrice Motsepe has set up his own foundation, which works mainly on community health and education projects. So has businessman-politician Tokyo Sexwale. Both personally wealthy through business, they are following a different model from Nelson Mandela, whose foundation has raised millions of dollars on the strength of his global reputation as a freedom fighter.

Elumelu’s entrepreneurial philanthropy chimes with the growing prominence of ‘impact investing’ championed by the likes of internet auction site Ebay founder Pierre Omidyar and his wife Pam. They set up the Omidyar Network in 2004 as a philanthropic organisation.

It looks more like a venture capital firm: half of its funding goes to for-profit firms and the other half to not-for-profit organisations, but all investments are geared towards sustainable development.

Mark Florman, who co-founded 8 Miles, a private equity company that funds charities in Africa, has tried to evaluate these kinds of social investments. He has developed the idea of an external rate of return (ERR) rather than an internal rate of return: “ERR refers to the rate of return that your activity has on society.”

Mo Ibrahim’s philanthropic work could not come close to the impact that his company’s mobile phones had on African development, according to analyst Michael Green. Pierre Omidyar’s advice to philanthropists who want to be effective is “Don’t start a foundation.”

Stephen King, a partner at Omidyar, explains: “Foundations can be limiting as there are restrictions on what you can and cannot support.” He points out that the US tax rules restrict foundations to non-profit activities but that these are less sustainable over the longer term.

Florman’s co-founder in 8 Miles, the Irish rock singer and activist Bob Geldof, has described himself as a “private equity whore”, arguing for more investment in Africa.

He told The Africa Report that investment “is not an ‘alternative.’ Philanthropy and aid are also investment. Without them we would not have got to the position where new and different types of capital can enter the market like investment. One begets the other, and for the moment both are required.” ●

This article was first published in the February, 2013 edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.

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