The New Alliance for Food Security and Nutrition – leveraging the role that business can play in Africa

By Nick Blazquez, President, Diageo Africa

The New Alliance for Food Security and Nutrition

Last month I was privileged to attend the G8 Symposium on global agriculture and food security in Washington DC. The presence of President Obama, Secretary of State Hilary Clinton, African Heads of State and senior UK government representatives raised the profile of this important event. As part of the symposium, I joined a selected group of leading businesses to sign a high-level declaration stating our commitment to economic growth and transformation in Africa, through participation in local agriculture and food production. This declaration came at an important time, as world leaders were about to reconvene for the G8 meetings at Camp David to review progress on food and nutrition security and their own G8 pledges made in L’Aquila several years ago.

It was an honour to be one of the representatives of the private sector and to be associated with real leadership in this fast moving space. Diageo were recognised alongside other leading international and African businesses who are making key contributions to Africa’s agricultural development through their work on local value chains. In particular, our work on piloting new varieties of sorghum in Tanzania and our recent agreement with the Ethiopian government for the local sourcing of barley, were singled out by The World Economic Forum.

If you had asked me a few years ago why this might be relevant to Diageo or any other consumer goods company, I probably would have said this is about good corporate citizenship in Africa, about corporate philanthropy and about developing and protecting a corporate reputation.. But now, today, it is clear this is worth considering from a broader strategic business perspective.

One of the reasons we are involved in agriculture and setting-up local supply chains in a number of countries across Africa is that it makes solid business sense. Buying our inputs in local currency allows us to hedge foreign exchange, and it also allows us to develop local supply options delivering inputs tailored to our needs. Importantly, our agro supply chains are valued by governments who understand that developing commercial agriculture for value-added products is core to broader socio-economic development. African governments are increasingly valuing Diageo for our role as a reputable buyer of local grains from both large and small farmers, and for the improved yields, know-how and economic security our business brings to the farmers and local businesses who supply us. This all makes strong business sense and fits very well into our established business footprint across Africa, where we have a long history, dating back to when Guinness was first shipped to Sierra Leone in 1827.

But our involvement in agriculture goes beyond supporting a business case. Given the crucial role agriculture, we see a great opportunity for us to tangibly and effectively contribute in improving livelihoods of smallholder farmers across Africa. This will eventually support the overall development of agriculture and help tackling issues around food and nutrition security. One could call this a ‘virtuous circle’ and that’s exactly where I see the power of public – private partnerships.

Yes, there are certainly many challenges that remain; infrastructure and linkages are the obvious ones, but movement of goods and issues around yield and effectiveness are equally important. However, this pre-G8 Summit meeting was one example of how the expertise and needs of the private sector can be leveraged to form part of a much bigger play, and how partnerships to promote agriculture and local economic growth not only dovetail with some of our business needs, but can enhance both our business and our reputation, but most importantly, the development of African communities.

At Diageo we tend to say that doing good for our communities, is good for business. Thinking about our involvement in agriculture, I am beginning to see it the other way round; doing good for business, is good for our communities.

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  1. I have seen firsthand the powerful impact that well designed public private partnerships can have in alleviating poverty when I worked for Diageo and her subsidiary company, East African Breweries. Indeed doing good can be very good business.

    Alcoholic beverages in Uganda, usually suffer an additional tax, excise duty, as governments leverage perceived ‘luxury’ products to maximize tax revenues. This tax is important for a developing country like Uganda with a narrow tax base.  Essentially the way it works, is that after the company determines its product price (allowing for cost and margin) they are then required to load an additional 60%-70% in Excise duty tax. Arguably, this makes such products relatively expensive and out of the reach of the majority of the low income populations in the developing world.

    In an innovatively structured partnership, between East African Breweries Uganda Ltd (UBL) and the government, (in the early 2000’s), the excise on alcoholic beverages would be reduced by 50% for all products produced with 75% locally produced raw materials. For a company for which market share is a key performance indicator, this was great news, as this reduction would theoretically enable the cheaper pricing of such products, making them affordable and therefore desirable to more people. The additional cost to the company would have to be a committed and aggressive investment in developing small holder farmers to produce the sizeable starch sources (barley and sorghum) required. UBL set to this task with merciless execution.

    As a result, today, all partners in this arrangement are happy.

    (i)                  Several thousand farmers are now linked into fixed price long term contracts with the company- as a result of which substantially increased incomes have been realized at the household and livelihoods have been significantly improved. One of the more common features of the new village life is the increased number of children being sent to school and receiving better healthcare. The pride of men who are successful household heads is unmistakable as they walk head high and proud.

    (ii)                 Alcoholic beverage companies have grown market share, tapping into the low value consumer segment with lower value, lower priced brands and

    (iii)               Government is happier. It is quite possible that no significant benefit on excise duty is realized, but this is far outweighed by the incorporation of the thousands of previously subsistence farmers into the cash economy.

    It is unfortunate that not much replication of such inclusive business models is apparent, in part because there are few companies with the muscle to negotiate and implement these models, but also because of low appetite by otherwise capable companies for this level of transformation in business processes and systems. One wonders for instance why local wheat production cannot be stimulated despite the massive demand from the food industry.  Obviously it is much easier said than done, but no one can say that it was easy for Diageo or for that matter SABMiller. But they have done it, and done it well.

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