Oireachtas Joint and Select Committees
Wednesday, 29 May 2013
Joint Oireachtas Committee on Foreign Affairs and Trade
Africa Week: Discussion with Value Added in Africa
Item No. 2 on our agenda is "Africa Day: trade and investment as tools of sustainable economic growth in Africa". The purpose of the meeting is to mark Africa Day, 25 May, by focusing on aspects of Ireland's long-standing relationship with the continent. Africa Day falls on the anniversary of the establishment of the African Union and is a day designated by African leaders to highlight African unity. The Government's Africa strategy which was launched by the Tánaiste and Minister for Foreign Affairs and Trade in 2011 drew attention to the fact that Africa was undergoing significant and rapid change. Despite the development challenges, many sub-Saharan African countries have experienced greater economic growth, more trade, more investment, fewer wars and greater democratic participation than ever before.
Alongside its long-standing development co-operation relationship, Ireland is moving towards a more balanced and mature set of relationships with African countries, reflecting the views of African countries that job creation, foreign direct investment, trade and private sector development are the drivers of future growth and development. Trade and investment are very important elements of the route out of poverty for developing countries and essential for sustainable development. This is recognised clearly in One World, One Future, the Government's policy on international development which was launched recently. In that policy document Irish Aid sets out a clear strategy for helping the least developed countries to increase trade with a view to achieving sustainable economic growth. In that context, it is appropriate that we will discuss the development of trade and investment in Africa with two NGOs whose work is focused on this area. Value Added in Africa facilitates sustainable trade links between businesses in Africa and those in Ireland and elsewhere in Europe. Traidlinks aims to build links between the Irish and business communities and the Irish Aid programme in developing countries, with a particular focus on Uganda, with the objective of promoting poverty relief and the advancement of education.
Our first guest is Mr. Conall O'Caoimh, director of Value Added in Africa, who is very welcome. The usual warning prevails. If he is directed by the Chairman to cease making remarks in a particular fashion, he must do so. Only evidence on the subject matter of the meeting is to be given and he is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against a Member of either House of the Oireachtas, a person outside the Houses or an official by name or in such a way as to make him or her identifiable. Other than this, he has free rein.
I remind members to switch off their mobile phones or place them in an area beyond the scope of the broadcasting equipment.
Mr. Conall O'Caoimh:
I thank the Vice Chairman for inviting me and greatly appreciate the opportunity to address the joint committee. We are delighted to celebrate Africa Week and note that the committee is hosting this meeting as part of the events of that week. The chairperson of Value Added in Africa and some of my colleagues are in the Visitors Gallery. Ours is an Irish-initiated fair trade organisation and a registered charity. We started in 2008 just as the economy started to plummet. Therefore, we came along at a challenging time in introducing new products. As a result of the recession and because of the size of the market here, we started to look to Britain where Value Added in Africa is registered as a not-for-profit organisation to help African producers to find larger markets.
We are funded by our own fund-raising events, including by a number of families who give us very generous support for which we are grateful, by a small bit of commission we get on any sale we facilitate and by Irish Aid, Trócaire, Concern and Electric Aid.
The reason we set up the organisation connects very strongly with Ireland and with its experience of beef exports. The members will know very well the story of exporting Irish beef on the hoof, the cattle walking onto the ship bound for Britain and somebody there making the money on that trade and selling the product back to us. That moment of realisation or light-bulb moment is where many of the African countries are at. An example of that in the case of coffee is shown in the presentation. Kenya earns three times more when it sells its coffee roasted, packaged in an attractive bag and meeting all the food safety standards - we are delighted that the Kenyan ambassador is here today - than when it sells the raw beans to Nestlé or whichever other company wishes to buy them. That price difference is what will be a significant driver of economic development and poverty reduction.
African producers are beginning to move up the value chain, it has had a traditional sector of primary commodity production and now an emerging sector, which is still small and fragile, is beginning to process and achieve world standards. Those in that sector are also supplying to the local market. We come into that chain in the middle as a link, linking them to importers and distribution companies who will bring that product through to the market in order that the value goes back to both the primary producers and the people in the factories who make those products. Our mission is to create a channel for African goods to come into the market. There is a lack of information among business people here. There is a bias against African products coming in here; people are afraid of this trade. There is a network of institutional practices that make it very difficult for African producers, particularly small ones, to sell good products into the market. That is why we are there as a link, a facilitator or a matchmaker which brings the two sides together.
This week we want to draw attention to the One World, One Future policy, and I thank the Vice Chairman for his comments on that policy at the outset. We strongly welcome the policy document. It opens with the very first sentence referring to moving beyond aid and we need to do that. The question then is - what will this thing after aid be like? The Africa strategy comments on that being an equal and mature partnership. That will involve a range of actors, including NGOs but not only NGOs. There will be quite a range of other actors and the private sector will have role in that. The commercialisation of people's produce will also have a very important role in that.
Connecting with Ireland's other foreign affairs interests is an issue that comes across very strongly in the paper. We can well understand that in looking to the taxpayer to support an aid programme, it is very important to appeal not only to people's moral sense of obligation but also to the public interest where there can be synergies, to use the term that is mentioned in the paper. The paper leaves a number of questions wide open around what happens next and that is the area in which we are particularly interested. There is no mention in the paper of value addition. It strongly refers to allowing people to move to trade and build trade relationships but there is no mention of processing, moving up the value chain and producers capturing more of the value. There is none of that language in the report and that is quite a concern for us. When it comes to the next stage of fleshing out what is to happen, we would like significant attention to be given to fleshing out that. We have the examples of Irish beef or the coffee example which show that poverty reduction will not be achieved by just increasing trade.
Some later slides in the presentation are graphs setting out the commodities exported from African countries which show that the prices that one gets for raw materials have been steadily declining since the time of the industrial revolution. Primary producers will produce more to get a better income but the more they produce the more it pushes the price down. That is what we refer to as the trade trap.
Mr. Conall O'Caoimh:
The trade trap. The more producers produces the more the price goes down and, therefore, the more they have to produce to keep their income at a constant level.
I accessed the freshest data from the EUROSTAT database last week. Deputy O'Sullivan was present a few years ago when we a launched a big report that Irish Aid commissioned us to do on examining Ireland's trade with the programme countries. The EUROSTAT data show that in the 1990s in an average year we sold seven times more than we bought from the six programme countries, but in the past five years that ratio is now 43:1. The paper refers to a mature relationship with Africa. The Africa strategy refers to two-way trade and yet when we examine the trade that has happened, we have gone from a ratio of 7:1, which was bad enough, to 43:1. Ireland, for very good reasons, wants to grow its exports to Africa. If we are to do that and want to have a two-way trade relationship, we need to put in significant effort to grow the trade in the opposite direction. The new aid policy, One World, One Future, is very good but a good deal of work needs to be done now to identify how are we going to achieve that two-way trade relationship. That is something that will need to be monitored in the coming years to see how that progresses.
The paper refers to no tied aid and that is very good. A number of European countries have pretty poor practice in that respect, therefore, it is very good to see Irish Aid committing to that. However it refers to synergies and finding, where we can, synergies between the aid programme and Irish business interests. I can understand that very well and the committee will have a role in devising a mechanism for ensuring that searching for synergies does not become a criterion alongside poverty reduction. Poverty reduction must be the criterion in deciding where our aid money goes. If synergies are a by-product fair enough, but they should not be a criterion in the decision making around where aid would go.
I suggest the next steps are that we would decide on a few key objectives underneath the heading of two-way trade. What do we mean by that? What is it in a five-year or ten-year framework that we want to achieve in regard to building two-way trade? What are some of the interim steps? Let us do a data analysis and find the baseline in terms of what is happening. I have set out some headline figures but we need to examine this on a country by country basis to see in which sectors will it be most possible to make some ground, how we will find that out, and then track that progress. We should examine what other counties are doing. The Netherlands, in its enlightenment, has had an organisation, CBI, established for a good number of years and members can check its website, cbi.eu. CBI is a government agency of the Netherlands and its task is to grow the Netherlands' imports from developing countries. We collaborate actively with CBI in Kenya and in a few other countries. That agency actively seeks to promote imports from developing countries and this is to ensure that the Netherlands lives up to its rhetoric about two-way trade. DANIDA, the Danish programme, and UK Aid both have strategies for a start - they are documented strategies - and they also have budgets for the areas that can ensure that two-way trade means something. There is a policy, a strategy and a budget, which is where such trade starts to happen. We need those three components to be in place.
We need to prioritise some areas where Ireland has a particular expertise and where it will be of particular interest to developing countries. Food processing, packaging, food safety and marketing would be some of those areas.
The other slides contain background information for members of the committee. However, I might mention the final two. One contains a table showing a supply chain from one producer with whom we work and who was in Ireland recently. This is a co-op run mostly by a group of women farmers near Mount Kenya. When they process their fruit and sell it as jam rather than fresh fruit, the local rural economy earns 19 times more than the pittance it gets when they export their fresh fruit. The final slide is another Kenyan example. The woman shown on the slide taught me how to pick tea leaves. She is a shareholder in her co-operative, which is Fairtrade certified. Her tea is on sale in Marks & Spencer as a fully finished teabag from Africa which consumers here can buy. There are no middle people between her and Marks & Spencer.
I thank Mr. O'Caoimh for his presentation, which was interesting. It is heartening that we are moving away from the emphasis on aid that existed in the past and are talking about trade, development and investment in Africa, a continent of 50-plus countries. I was somewhat alarmed to hear of a bias against products coming from Africa. We have international trading rules. The World Organisation for Animal Health, OIE, has standards that must be achieved for food that is internationally traded. Perhaps he would elaborate on that issue. I mentioned the World Trade Organization previously in a different context. There is a need for a need for a plenary session and a new deal for developing countries. That is one issue that has gone off the political agenda throughout the developed world, or at least that is how it appears to me from the outside. It is an area on which there should be a greater emphasis in the different forums and by NGOs in all countries.
Mr. O'Caoimh also mentioned the huge disparity in the export-import ratio. His presentation showed that between 2008 and 2012 the ratio increased from 7:1 to 43:1. Was this due to additional exports or was there a fall-off in imports? Were there some particular products, such as pharmaceuticals, medical appliances or whatever, that resulted in that huge disparity?
I am not familiar with Mr. O'Caoimh's work but I compliment Irish Aid, Trócaire and other NGOs on giving him some assistance. Perhaps he would elaborate on his work in Britain. I presume there is no European umbrella body within which similar organisations work.
I thank Mr. O'Caoimh for appearing before the committee. I did not read the second handout but worked off the earlier briefing notes. Perhaps he will assist me in understanding exactly what he does. From reading his notes, it appears he is targeting work that has already been done by the producers. In other words, he said he targets groups that already have a proven high-quality product and, in fact, are export-ready. He also said he works with companies that are already achieving a presence in other European countries. His use of the name "Fairtrade" threw me in the context of what he said, which was that he is targeting the marketing of goods and produce from established groups. As we all know, Fairtrade starts practically in the womb. The farmers produce goods where there is a collective agreement and a specific policy on fertilisation, child labour and redistribution of profits to the community or the bringing in of a water supply. In order that I do not confuse this with Fairtrade, Mr. O'Caoimh is targeting those producers of goods who already have a proven record in terms of quality and have already possibly penetrated the European market. That is excellent. It is great that we can look at Africa in this light and that we are not thinking of it as a continent that needs financial assistance to help the starving. This is progressive and it is the way forward, but there is confusion as to whether Fairtrade plays a role in Mr. O'Caoimh's organisation. Is that accidental? Already, Fairtrade Ireland has been working with people who produce good-quality produce ready for the market. Is it the case that Mr. O'Caoimh gives it a helping hand to perhaps package it more effectively?
I compliment Mr. O'Caoimh on his clear and lucid presentation. There are elements of hope in it. Deputy Brendan Smith has already raised a question about which I was concerned, but I would like to explore it a little further. I am talking about political bias. What is the nature of the bias? What measures can be taken to overcome that bias? Is there a way in which the committee can assist? He instanced particular products that were involved. Can he say something about the chocolate industry, which been a concern for this committee for some time? Personally, I have been very concerned about it.
It is staggering that in a short space of time the balance of trade has disimproved so drastically, with the export-import ratio increasing from 6:1 to 43:1. I do not think the majority of people, even politically aware people, understand that. Certainly, I was not aware that it was quite so dramatic. His explanation was about the paradox of what he described - accurately, I believe - as the trade trap, whereby, as producers make more raw goods, the prices of these goods decrease. This is something that needs to be addressed, and perhaps the committee could take it up.
I might broaden things out a little. I appreciate that both presentations are about trade. The intention is humanitarian and it is to make life better for people. Mr. O'Caoimh invokes the One World, One Future document. One of my concerns about that document is a complete absence of any reference to population policy. This committee needs to keep an eye on that and ensure this is under review. In particular, the Minister for Foreign Affairs and Trade said on 21 February that the issue of gender equality and access to reproductive health care came out strongly in the public consultation on the review of the White Paper and will be addressed in the new policy. We have not heard the results of that public consultation or any of the submissions, and once again we are avoiding it. I say that because every year I go to the launch of the UN report on global population. We never mention population. We avoid it all the time. That has an economic impact in Africa. In case anybody thinks I am biased, may I say that I delight when I hear the population is declining in France, Britain, Germany or Ireland, because we do much more damage. It is still critical in Africa. If we adhered to all the millennium development goals to which we signed up in 2000, one of which was to make family planning universally available by 2015 as part of a broad approach to reproductive health and rights, we are doing so under cover. That would lead to a 27% drop in maternal deaths. We have wonderful women such as the women who are making jam.
There is an inarguable case for bringing that in. Mr. O'Caoimh's organisation is so valuable because it is not trading for profit but seeking a rebalancing in favour of Africa. This is an element that should not be neglected.
I thank Mr. O'Caoimh for his presentation. It is much appreciated. Several of my questions have been asked. I will expand on what Senator Norris said. What more can we do as a committee to assist Mr. O'Caoimh's organisation in its valuable work? All the emphasis has been on poverty relief but what has just been outlined in terms of long-term sustainability is a totally new concept for me.
Mr. O’Caoimh referred to two excellent products. What work is being done to inform the public about them? Advertising is recognised by all producers as a key to selling and marketing. What effort or investment is being made to market products from Africa in Ireland? Can we look to Europe, including Denmark, for a model? I was not aware of the products in question, nor was I aware that they were in Marks & Spencer. I would buy such a product if I knew about it.
There is a marketing issue. We are all aware of Fairtrade but not of the other organisations. We hope this will be addressed.
I was taken aback when Mr. O'Caoimh intimated we would not be positive about buying certain goods in this country. I believe the opposite is the case. From my experience, I realise that people are only too willing to support somebody who is working without middlemen and who is making a real difference in poverty reduction. There is no doubt that there is an added dimension to our relationship with Africa given the trade issue, but it was alarming to see the import-export imbalance. Has Mr. O'Caoimh any comment on this?
What is the biggest expense for people who are producing? What is the relationship with the multinationals? How do they feel about the initiatives under discussion?
I, too, welcome Mr. O’Caoimh. His organisation is quite small. It has two staff and four interns. Are there other such organisations promoting African goods in Ireland? Having listened to the comments around the table, I believe it is no wonder that the ratio is 43:1. People are generally unaware of where they can purchase African goods.
Getting away from the concept of aid and making people self-sufficient or more self-sufficient are certainly concepts that we all want to support. However, we need assistance. There certainly needs to be a more dynamic marketing strategy to help redress the huge imbalance. Will Mr. O'Caoimh state what other products are available in the multiples and larger stores in our towns and cities so we will all have the opportunity to redress the imbalance as we do our shopping?
Mr. Conall O'Caoimh:
I thank the members for their questions. I will start with the question on my organisation as my answering it is certainly a preliminary step in understanding some of the other questions. We consider our organisation to be a fair trade organisation in that we are seeking to make trade fairer. Members will know the Fairtrade label. The trade union movement, the credit union movement, the co-operative movement and the groups that lobby the World Trade Organization are all part of a movement. I was before this committee a number of times during the terms of previous Dála in that my background involves my having worked on and campaigned on the trade rules. People who do this and those who watch what the multinationals are doing, including what happened in Bangladesh recently, are part of different branches of a movement that is the fair trade movement. It has a number of strands. It is probably the one with the label on the chocolate or coffee that people identify with most, but all are working together to try to achieve fair trade.
In 1996, I was in Mozambique and that is where I first had the idea for this organisation. I returned and got a job in Comhlámh and later in Dóchas working on the trade rules policy. While we were working on getting the rules right at the World Trade Organization – I was in Doha, Hong Kong and Cancún processing the rules – it was acknowledged that African countries and other developing countries need support to actually build the business relationships that will result in trade.
Our first task is to identify producers. Michelle Hardiman, my colleague in the Gallery, recently travelled around southern Africa trying to find a fully African T-shirt. There are T-shirts but the cloth may be imported from India or China. We are trying to get a fully African T-shirt. We can get some but we do not know what happens on the farms. We are trying to get T-shirts that have full certification regarding what happens on the farm.
With regard to the Fairtrade label that members know, none of the Fairtrade-grown cotton is actually turned into thread in Africa. It is all taken away to Asia and America to be turned into thread. Therefore, we have had to examine some of the other systems; otherwise we cannot have a fully African T-shirt. We are trying to propose to people in the market that they buy a fully African one. There is the Cotton made in Africa initiative and the Better Cotton initiative, and there is a couple of organic schemes that measure and audit what happens on the farms. We try to ensure that the factories are ones that pay workers well and which are audited internationally. That is what we mean by fair trade. We have beers from four different countries on the market. That is probably the product I can point members to most easily. If the bar of the Houses wants to host an event serving the beer, we can arrange for a supply. We can help to arrange to match-make in that regard.
Fairtrade does not certify beers, yet the brewery that we link with in Kenya has 970 people employed in the best quality jobs in that country. They have the best conditions. There are 5,000 farmers growing the input products and their conditions are the very same as Fairtrade conditions.
Mr. Conall O'Caoimh:
There are Fairtrade conditions in terms of trade union representation, guaranteed price, advance payment and agricultural extension but also a guaranteed sale, which Fairtrade does not give. Those concerned actually have one up on the basic Fairtrade arrangement.
When I state ours is an ethical organisation, I mean that we examine the supply chain and make sure the product is up to the required standard. We are not trying to promote any product that does not meet that standard.
Is it Mr. O’Caoimh’s understanding of Fairtrade that it is a movement broader than the one that uses the Fairtrade stamp. We know the latter's products are subjected to a certain process. Are all the strands part of an international movement? Are the staff in Fairtrade Ireland linked to Mr. O’Caoimh’s organisation?
Mr. Conall O'Caoimh:
I am a friend of many of the lads in the office but institutionally ours is a distinct organisation. Just as the many trade unions collaborate, my organisation is part of a movement.
The second area of our work involves supporting producers who have nearly reached the standard so that they might improve. There are other organisations that help businesses to achieve certain results, such as getting the taste of their roasted coffee right. There are relatively few in Ireland and most are international. We are not experts in coffee roasting so we do not try to do that. We focus on finding a way into markets.
Deputy Neville asked about information and education. We have a programme of education in Irish schools, supported by Irish Aid, Trócaire and Concern. We have a pack for transition year students to explain the difference. We have a university programme, with the same funding and support, which addresses business students in order that they are more open to considering African products in the future.
That brings us to the point on bias. Unfortunately, while trade rules are the law when one holds a product in front of a buyer in Musgraves, Dunnes Stores or anywhere else, bias comes into play. People do not know what is available and there is an information gap. Everything might be right with a product and it might have international certification, but people are afraid that something will go wrong. We have had a number of sore experiences which have cost us months of work - we put in a lot of work to prepare a supply chain for a buyer. One person sat on an aircraft beside a businessman who told him to be careful. The person concerned telephoned us and said he had to pull back because if anything went wrong he would not be able to afford the sting. We engaged with the company for nine months and contracted an intern who worked on the product to get the best and strongest options. A distributor who had significant reach in Irish and European markets was turned back by a conversation on an aircraft. That is what I mean by bias.
Mr. O'Caoimh could supply the committee with the certification, which we could examine, and perhaps we could issue a statement that we approve of the work he is doing. Such an endorsement might help him to deal-----
Mr. Conall O'Caoimh:
Fall-offs in trade happen for different reasons. Ireland has increased its exports exponentially in recent years. Part of the reason countries are buying a lot more is that they are growing. It is in the interests of Irish taxpayers that they grow because there will be a bigger market for us to sell into. What we buy from them has fallen to a quarter of what it was in 1996. Since the crash of the Celtic tiger, and during it, our imports from the six countries to which we give the most aid collapsed. Lyons tea bags are no longer made in Ireland. When Unilever bought it and moved production to Britain, we stopped buying tea from a number of African countries. When Fruit of the Loom closed we stopped buying cotton from a number of African countries. As the nature of Irish industry changed, we no longer needed to buy commodities. Industries collapsed because nothing was done to replace them. The aid programme has a role in finding replacements as things fall off.
We have a small operation in the UK. We have registered as a company and have a board. We have a strategic plan and a business plan, and are now trying to find money. My job is to knock on doors in London to try to get that.
We have had associations with two different chocolates, one of which, from São Tomé and Príncipe, is regarded as one of the best chocolates in the world. It was good but very expensive. It stayed on shelves for about a year and a half. Sheridan's Cheesemongers distributed it, but it is no longer stocked. Malagasy from Madagascar is another brand which is stocked in Morton's and-----
Mr. Conall O'Caoimh:
It has a first foothold, and perhaps a discussion like this can help create awareness to help it access other retailers. We sold out of our stock at Africa Day. What happens is up to the market.
Population is a very important concern. People who are poor have more children in order to protect themselves against poverty and as people become richer they have fewer children. Having more children drives families into further poverty because resources have to be divided among a larger number of people. We need to break that vicious cycle, which can be done by helping people to move up the economic scale. Alongside health policy, economic policy has a major role to play.
Mr. Conall O'Caoimh:
There are some fantastic and some terrible multinationals operating. One of the biggest changes in East Africa in the past number of years has been the introduction of mobile phones. Money can be sent in Kenya and Tanzania with the bog-standard mobile phone. While rural banks in Ireland are closing, in east Africa mobile phones have enabled people to leapfrog into a new generation of banking which is not based on an institution. Formerly, a woman living on a hill had to pay a bus driver to bring her and her products to the market, where she would stand for a day. If a regular buyer was not there to make purchases she would have to sell her product at a lower price. She can now text her preferred buyer, agree a price and day, put the product onto a van, text the buyer to tell him or her it is coming and have the money texted to her. Vodafone is operating in a number of countries and is making money. Mobile phones have changed the business model. Transaction costs are reduced and women are able to be productive.
Significant multinationals are leveraging power. Tea producers in Kenya and Rwanda currently sell bulk tea. In the past month they have told us they make tea bags for the local market but cannot sell internationally because big international buyers might leave them if they try to compete with their products. They are in fear that the multinationals will squeeze them out.
Fairtrade is similar to us, but the key difference is that the work it does is on farms, and its system does not reach into factories. It does not distinguish whether product is turned into chocolate in Europe or Africa. We are trying to emphasise that we only work with products that are fully processed and ready for consumers at the final stage in Africa.
The basket of products coming from many African countries is the same as that under the colonial system. Change has not yet happened, and that is what we are trying to achieve. As Ireland moved away from selling beef from the hoof, so we want African countries to move from selling cocoa and coffee beans.
Mr. Conall O'Caoimh:
I hope the committee can have a dialogue with Irish Aid on what it means to develop two-way trade. I will be very happy to meet members outside the committee to examine what steps can be taken.
With regard to Mr. O'Caoimh's presentation, and following the comments of Senator Norris, the committee would be well disposed towards examining the issues he raised in a more focused way as quickly as possible, with a view to touching on the points he raised and improving the situation.
He is clearly doing a very good job in his role as director of Value Added in Africa and I thank him for his presentation. The committee will examine the issues he has raised before the next meeting with a view to adopting an agreed position.