Oireachtas Joint and Select Committees
Wednesday, 29 May 2013
Joint Oireachtas Committee on Foreign Affairs and Trade
Sustainable Economic Growth in Africa: Discussion with Traidlinks
Our next presentation is by Mr. Paddy Maguinness, managing director of Traidlinks. Before inviting him to begin, I advise Mr. Maguinness that he is protected by absolute privilege in respect of his utterances to the committee. If, however, he is directed by the Chair to cease making remarks in a particular fashion, he is advised to oblige. Mr. Maguinness is further directed that only comments and evidence in regard to the subject matter of this meeting are to be given. Finally, I ask him to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against a Member of the Oireachtas, a person outside the House or an official by name or in such a way as to make him or her identifiable. I remind everybody that mobile telephones should be turned off as they interfere with the sound recording. I now invite Mr. Maguinness to make his presentation.
Mr. Paddy Maguinness:
Thank you, Vice Chairman. I am afraid my presentation might be somewhat disordered, as I have forgotten my glasses and am unable to read the document I have prepared. The submission, copies of which have been circulated to members, basically sets out the logic behind how Traidlinks sees the world and how it is evolving. We describe ourselves as a business-led, not-for-profit organisation. We are not quite a non-governmental organisation because we are involved in so many private-sector activities. This causes some confusion in the countries in which we work. We are a registered charity but prefer the label of "business-led not-for-profit" because the whole idea of Traidlinks is about involving and engaging the private sector in international development. It is about working with governments and businesses.
As members will see from the list of organisations represented on our board, there would be potential for serious damage to the economy of this country if all of our board members were on the same flight to Uganda. We have representatives of Bewley's Limited, Barry's Tea, Tullow Oil, United Drug, Bimeda Ireland and Ion Equity. In addition, Mr. Patrick Bitature, chairman of the Uganda Investment Authority, is a member of the board. It is a very unusual organisation in that sense, being driven by the private sector and funded by Irish Aid, with additional funding from Tullow Oil and TradeMark East Africa.
In a nutshell, one can look at Africa in two ways. On the one hand, we have all the bad news such as the failure to reach targets under the millennium development goals. Members of the committee will be very familiar with everything that is not being achieved. On the other side of the coin, as illustrated by the statistics I have included in my submission from a report by the McKinsey Global Institute entitled Lions on the Move, there is enormous potential in the growth of Africa's economies, rising GDP and so on. Just as there are two ways of looking at Africa, I have often observed that there are two views of the world. The European view of development is very much focused on health, education and services. The idea is to build good governance, judicial systems and so on and, coming out of that, we then build an economy. The Chinese, on the other hand, consider this a novel view for the Europeans to take given that European societies did not themselves develop in that way. It was the other way around, in fact, with somebody building a raft at a fjord in a river and somebody else opening a shebeen next door. Before we know it we have a business and then somebody says we must have a church and a school. That is how it went. On that basis, the Chinese reverse the European approach and argue that the economy comes first and the services sector will follow. They wonder why we insist on doing it the other way around in Africa. It is a simplistic way of looking at the world, but it also presents us with a challenge. As I have pointed out in the submission, the White Paper could be likened to a Rubik's cube, with each side representing the different areas of action. The difficulty arises because people tend to focus on one side of the cube, whether health, education, HIV-AIDS or something else. The trick is to focus on all aspects. Otherwise, the blues will be lined up but the reds will be all over the place. That will get us nowhere.
I recently invited a senior consultant from Accenture, a company renowned for its analytical prowess, to come to Traidlinks. He asked me a very simple question which, he said, he asked of all international NGOs, large and small. The question was, since people in Africa tend to be poor because they do not have any money, what is our organisation doing to solve that problem? He remarked that people often give him lectures about health and education in response to that question, but he always replies that those issues could be solved if the money was there. It is a simple proposition with a challenging implementation. The question we are asking ourselves is how we can create wealth and jobs. It is complex in one sense but simple in another.
Mr. Conall O'Caoimh observed that trade is essential for Africa, specifically value-added trade. Africa has been trading forever, from its slaves to its coffee, but there has been no value accruing to the continent. That is a particular problem. We in Traidlinks believe in trade, business creation, wealth creation and support for small and medium-sized enterprises. We position ourselves just above the co-operative level - that is, not getting down to farmer-to-farmer level. Our main focus is on small and medium-sized business but not necessarily at the micro-finance level, in which lots of people are already involved. Our challenge, in short, is to help businesses to grow. In Uganda people often say they need more entrepreneurs. In fact, that is the last thing the country needs because there are probably 39 million entrepreneurs. What is actually needed are structured businesses with structured finance. We need people in those businesses who know about marketing, communications, technology and business processes. This is the dynamic in which we see Traidlinks positioning itself. We are not operating as an NGO, coming in and saying we will set up programmes. Rather, we are working on a partnership model with key institutions. Our key interlocutors in Uganda are the Uganda Export Promotion Board and the Uganda Investment Authority, which are the equivalent, respectively, of An Bord Bia and Enterprise Ireland. They are, however, very weak institutions. The Uganda Export Promotion Board, for example, has a budget of some €300,000 to promote exports from a country of 39 million people. Compare this with An Bord Bia, which has a budget of €45 million to promote food products from Ireland and within Ireland. That is a good example of the structural problems within the business sector in Africa. There are, in fact, very few business support services or Government institutions of any weight. This is to some extent a symptom of development, in that whatever resources are available are going into education, health and so on. The business sector, on the other hand, and the institutions that support it have been neglected. Those institutions are simply not in a fit state to help companies to get established and grow. Hence we have had the flood of commodities out of the country through the various extractive industries and the Chinese coming in and taking whatever there is to be taken.
Traidlinks has done a significant amount of work in this country in marketing African products. We created a brand called Heart of Africa and imported large numbers of products into Ireland which were sold in Tesco, Superquinn, SuperValu and so on. This project hit a wall for two reasons, the first being the recession. I am sure Mr. O'Caoimh spoke about how difficult it is to get products into economies that are experiencing recession. The second factor was supply. People in Uganda were delighted to have a container of dried mango ready to ship to Ireland.
However, we explained that they needed to send another one the week after and another the week after that, but they said they had no money. When one examines the business, one realises it is not a money problem but another issue, that is, a management problem. Some people always say it is a money problem. That is what has come out of Traidlinks.
Our core function was to regroup and rethink. We realised we should get companies to focus on regional trade, that is, trade between Uganda and Rwanda, between Uganda and Tanzania and between Tanzania and Kenya. How do we help them to do this? It is an easier step because the destination is next door and they speak the same languages and so on. We have set up a market link programme funded by Irish Aid and, increasingly, TradeMark East Africa. It is working well. A trade mission from Uganda is in Rwanda. It was organised by Traidlinks and the Uganda Export Promotion Board. The group is in Rwanda trading everything from women's cosmetics, cables and plastic jerry cans to foam mattresses. It is basic stuff, but all of it is cross-border and has been produced in Uganda.
The programme is expanding to become a regional programme. The Rwandans like it and want to have it the other way around also. We have run a pilot scheme in Rwanda and are now working with TradeMark East Africa. I draw the attention of committee members to the group in case they are unaware of it. It is a new grouping of donors driven by the British, the Danes, the Dutch, the Swedes and the Finns. It is only four years old, but it has a budget of approximately $500 million. They are creating economic corridors in east Africa, deepening ports, developing infrastructure, cross-border trading, information technology systems and figuring out how to bring the barriers down. If it takes a container 17 stops to get from Mombasa to Kampala, what are the 17 stops? There are two official stops along the route and 15 for corruption. The question is how to stop this and iron it out of the system.
This is what TradeMark East Africa is doing. In one sense, it is doing macro stuff. We are working with the organisation because we believe Ireland has a particular niche in this regard at firm level. I am referring to when the rubber hits the road. I put it to representatives of TradeMark East Africa that they could build infrastructure, carry out macro projects, deepen ports and so on, but the question is whether this is providing a platform for imports or a launching pad for exports. If a trader cannot get a label on his or her product or cannot secure the correct safety regulation, certificate of origin or certificate of compliance for the European Union, he or she cannot export anything. He or she cannot get beyond first base and add value. One always ends up with these commodities.
With TradeMark East Africa, we are focusing on the firm, how to improve the quality of the product, how to have people trained and how to build their confidence because much of this is about the confidence of the people concerned to export. The other major question is whether they are making money. Many wish to export, but if they are asked whether they are making any money on the product, they say they are unsure. Why would one want to export something if one is unsure whether it is making money? These are the practical things we are about as an organisation. That is what we do with the market link programme and it is expanding. Our problem is that it is too small. It should be increased by a factor of ten if we are to be serious about it. We need to scale and crank it up.
We are working with another unusual partner, that is, the extractive industries in oil and gas production in Uganda. Much oil has been discovered in east Africa. It has been discovered in Ethiopia; oil is pouring out of Sudan and there are massive reserves in Kenya. Reserves of 4 billion barrels have been recognised in Uganda, or between 2 and 4 billion barrels. As we know in Ireland, one never quite knows the right figure and one is always unsure, but we know it is big figure. The oil companies are investing between $6 billion and $8 billion in Uganda. The return on this in terms of revenue streams to the government is in the region of hundreds of billions, or however many hundreds one wishes to put on it. That is its scale and it will be over a long period.
We see the oil and gas sector as a catalyst for developing the economy; we do not see it as the economy. Oil and gas production needs standards and skills and so on at international standards level. If one is seeking a job as a welder with Tullow Oil or Total in Uganda, one had better have a Lloyds certificate. One cannot simply suggest one has welded a number of gates and now one is available to weld a pipeline for a company. That does not work. Everything will rise. It is similar to what happened in Ireland when the transnationals came here. One of the things that happened to us was that standards and the bar were raised. We see the industry as catalytic, which is why we work closely with it.
We are working with the oil and gas companies on their supply chain because they will employ approximately 15,000 people in the coming years. This means 15,000 people will need to be trained to international standards. We are working with them on their sectoral needs, but we are also working with them on agricultural issues and how to get the spin-off from what they are doing to tumble into agriculture. If an oil or gas company is training a person to fix a JCB, why can it not train the same person to fix a tractor? Africa is plagued by a lack of technical assistance. One problem in Africa is that people tend to head to universities before they head to the welding shop. They want a degree before they have a certificate in welding. We see the oil and gas sector as a catalyst to make it good for people to believe their future is as a construction worker, a welder or a plumber. We also believe there is a responsibility on the oil and gas sector. Africa has been plagued by the resource curse of oil. It has gone over the top of countries and the economies have benefited little. We work closely with Tullow Oil on national and local content and how we should progress these aspects. We discuss how such companies should invest because it is their business to invest in this area and we are there as a partner to help them. That is where we see ourselves going.
Those of us involved in Traidlinks know the scale is ridiculously small. We have a turnover of $1.6 million and it may be $2 million in a couple of years, but we know that is rather small, given the scale of what we need to do. We have considered the White Paper and made recommendations that members of the committee can read. If there are six sides to the Rubiks cube, the question is whether they are given equal weighting or is one side given more. There is a need for a discussion, debate and to have a strategy fleshed out around it because therein lies the future. Truthfully, if we do this right in Africa, there is a future for Ireland also in engaging with the continent. Everyone one meets in Africa has been educated by the Irish. They have health services in place. I do not normally quote President Musevani, but at a meeting one day he put it to me that the Irish had helped them to build their education and health systems and if the Irish wished to come and do business and help them to build businesses, the door was open.
I thank Mr. Maguinness for that interesting presentation. Deputies Brendan Smith, Eric Byrne, Dan Neville and Maureen O'Sullivan will speak in that order. We will move as quickly as possible because there is a long agenda and I intend to have it concluded in 30 minutes.
I welcome Mr. Maguinness and thank him for his interesting presentation. Will he elaborate on the $500 million TradeMark East Africa has already accumulated? Was it from direct contributions from overseas development programme budgets of donor countries or was it through general philanthropy?
Mr. Maguinness mentioned the development of infrastructure and facilities in some east African countries. Are they handed over to the state subsequently? If a port is completed, for example, is it handed over?
Mr. Maguinness rightly highlighted the lack of technical assistance. Naturally, education is important when it comes to empowering people. There is a necessity to transfer knowledge and skills. A number of weeks ago we heard an interesting presentation by senior personnel from University College Cork. They have a particular development programme which involves using their existing resources and departments, including in the food and health areas. Does Traidlinks link up with them to ensure we are maximising the delivery of services and the transfer of knowledge and upskilling people in the countries highlighted?
I again thank the delegation for its presentation.
The contribution by Mr. Paddy Maguinness was fascinating. My party is a junior partner in Government so he will appreciate that hair stands on the back of our necks when we talk about oil and gas companies and multinationals. I know nothing about Tullow Oil. I do not know whether its involvement is part of the modern approach being taken by serious companies in the form of corporate social responsibility. Is that the relationship Tullow Oil has with Traidlinks? I do not want to be cynical. I live in hope that it is following in the footprints of the nice Irish Protestant and Catholic missionaries who travelled to Uganda before them. The educational and health services have been praised by Africans. Perhaps Tullow Oil is a new pioneer on the African continent.
The interesting contrast between Mr. Maguinness's talk and the previous one was due to the fact that we in Ireland, as he will know, are experts in food production and provide high-quality foods. What is the problem with the two companies involved? He mentioned the food produced by Out of Africa, although it has hit the wall or whatever. He mentioned a similar named company, Heart of Africa, but neither seems to have done well, which is sad. Where have we fallen down? Are we targeting the wrong produce? Some of us know that dried mango and pineapple is tasty.
We do not compete with those products because we do not produce them. Why has Traidlinks concentrated on Uganda?
Uganda is a beautiful country which is dear to my heart and I have visited it on a number of occasions. The delegation will be aware that the committee had to send emissaries to Uganda due to corruption by its Government and an attempt to divert Irish Aid funding for its devastated northern regions, around Gulu province. How does Traidlinks get on with the Uganda Export Promotion Board, the Uganda Investment Authority and TradeMark East Africa in view of the sophisticated attempt to defraud the people of Ireland and the Gulu province of Irish aid?
I applaud the values that were listed as being built into the charter of Traidlinks, including the major one of anti-corruption. Distribution was also mentioned. Mr. Maguinness said there were two official stops and maybe 15 unofficial ones on the route from Mombasa to Kampala. I have vivid memories of travelling on the roads from Ghana to Toga and then home. I do not know what they are called in this day and age. When one travels on that road one is always stopped and asked to pay bribes for passage. How can we counteract that culture of bribery?
I thank Mr. Maguinness for outlining his African policies on foreign affairs and trade. They seem to complement each other.
I welcome the contribution made by Mr. Maguinness. He has pointed out our work in developing education several times. What about the development of management skills and techniques? I am a certain age and can remember that we had a similar problem here 40 years ago, to which we responded by establishing the Irish Management Institute. As an incentive companies had to pay a large levy to AnCO but received 90% of the money back if they provided a certain type of training. That method would not work in Africa but it worked here to some extent. Companies were legally obliged to pay the levy and IMI blossomed, but it plays a different role today. IMI was intensively involved in training in various management skills. One cannot transplant what happened here to Africa, but has such an initiative been considered? Has the IMI been asked to examine the African situation, particularly the problems outlined by Mr. Maguinness regarding organising and managing businesses in responding to the needs of international trading?
There is no doubt that there are serious issues regarding the role of certain multinational companies in Africa. I would like to acknowledge the work done by Irish NGOs. For example, Christian Aid, which has made tax justice one of its main campaigns, has conservatively estimated that developing countries lose $160 billion every year through unscrupulous multinationals that do not meet their tax obligations. It has worked out that for every €10 given in aid, €15 is lost through tax-dodging. A major emphasis must be placed on profit-shifting and tax-dodging by multinationals. Let us face it; every multinational, no matter where it is from, is out to make a profit.
I wish to comment on labour and workers' rights. We have all heard horrific stories of workers being abused, particularly in African mines. I am sure that abuse also happens elsewhere. Labour rights must be built into trade agreements. I would like to get a response on those two points.
Mr. Paddy Maguinness:
TradeMark East Africa got its money from large donors driven by the British Government, which wants to help integrate the economies of east Africa. Other donors have also come on board. TradeMark East Africa has amassed a significant pool of money. If one looks underneath its skin one can see that it is managed by KPMG. There is a trend for large donors to move away from NGOs and international organisations and towards the private sector for possible solutions. TradeMark East Africa works hand in glove with the State. It operates inside the revenue authorities and assists with revenue collection and custom duties. It has a good philosophy, which is worth examining. It focuses on capacity-building by the state but is motivated by profit. It sort of says, "If you do this right, you will get money into your exchequer and be able to pay for services." That is the mentality that TradeMark East Africa has adopted in order to deal with problems. That is its thrust.
Education is key. We have a lot of knowledge on education and have many links with different places. We work with the food technology section at Makerere University in Kampala. Truthfully, it is not even close to where Teagasc and Traidlinks are here. Members will have read the note at the end of my submission. We need structural links at that level but it is not just Traidlinks that should be trying to achieve this. Teagasc and Bord Bia should talk to their counterparts in these countries. That is what I mean by strategic engagement, and Traidlinks has done its bit.
A person from the Uganda Export Promotion Board and one from the Uganda Investment Authority attended a course by International Development Ireland, IDI, on exporting. The IDI is an IDA spin-off. It is a private consultancy company and runs courses on exporting for developing countries. The Irish embassy in Kampala city said it would fund the attendance of one person if we could fund the other person, and that is what we did. To me, such courses are only dealing with the tip of the iceberg, and we need a much more structured approach. We need deliberations to flesh these strategies out. It is fine to include it in the White Paper, which can act as the skeleton, but we must put meat on the bones.
We have a link with the Smurfit Business School. Professor Damien McLoughlin, head of international marketing at Smurfit Business School, designed our market link programme with us and provided guidance on how to build the programme. The school helped us develop the programme and is still open to helping us. Irish institutions have shown great goodwill towards these initiatives.
Smurfit has helped us to develop that and are still open to it. I must acknowledge the goodwill of institutions in Ireland towards these kinds of initiative. They bend over backwards to help. We have had many Irish private sector companies come to look at what we are doing and they have all paid their own way. We pay nothing. They pay their air fares, hotel bills and everything else. Someone from one company alone has spent perhaps €50,000 on travel to Uganda to go down and help. He has no significant business interest there but feels he has a great deal of knowledge to impart. Knowledge is key. As set out in my recommendations, a new Africa agricultural alliance network is trying to get off the ground in Dublin. It is being spearheaded by Self Help Africa, a very interesting NGO in Ireland. It is trying to create a knowledge-sharing network.
The issue of oil and gas industries was raised. I have had a long career in development having worked for Concern for almost 30 years and have quite a sceptical view of extractive industries myself. Their track record in Africa has been very spotty to say the least. Traidlinks spent the first six months dealing with the corporate social responsibility staff in Tullow Oil and we indicated that we wanted to move away from that. We do not want this to be a charitable engagement. We look at this simply as a core business issue. The company is operating in a landlocked country and if it wishes to export billions of barrels of oil, it must build a pipeline across some of the most inhospitable territory in Africa. That may be from Uganda to Mombasa, or whichever port is decided on. Forget about philanthropy; this is about business interest. Is it cheaper to buy a banana from the local corner shop or to import it from Brazil? I spoke to a brewing company in Kampala which spent $15,000 to fly a welder from South Africa to fix a pipe. It took him an hour. No one locally had a certificate from Lloyds to carry out the weld. It is a practical issue. Investing in the vocational training of Africans is not only the right thing to do, it is the smart thing to do. One would be stupid to do otherwise. One thing I have noted about the oil companies is that they are not stupid.
There is a genuine attempt to do this which is why we have chosen to engage. We will not be hurlers on the ditch in this particular game. We have our vision, ethics, mission and morality as an organisation and we will engage with these companies. We reserve all our rights given the nature of who we are to point out where things are going wrong. I have pointed out to companies building clinics and maternity centres that they are building something completely unsustainable. Who is going to sustain those facilities when the company has left? It is better to give a contract to local farmers for the food being eaten in camps and to pay a premium to allow them to build the clinic. We are very businesslike in Traidlinks and work with supply chain people in oil companies rather than with the corporate social responsibility people. We are not looking for a cheque. It is not about that. Our relationship with Tullow Oil is contractual. We built and are running an enterprise centre, the capital costs of which Tullow Oil funded. It pays us a fee to run the centre. This is not Tullow Oil saying it thought this was a good idea and would give Traidlinks money to do something nice. This fits into its strategy as an oil company. I take Deputy Byrne's point. While he is right to be sceptical and to ask the hard questions, our experience thus far has been that there is a real intent to do this and we are going along on the journey.
I was asked if we had picked the wrong products, etc., for the heart of Africa. While some of these things are fine, there are structural issues to consider. Some of the things we have been trying to do have been too small and the scale must be increased. They need processing plants and the ability to add value in Africa, which is where the private sector can help. It can get in at strategic level to make a significant investment. It is happening. Glanbia has invested €180 million in west Africa. People said to me initially "Shock, horror, they are taking milk powder to west Africa". While it would have been a horror story a few years ago, Glanbia is taking the milk powder in, selling it and building myriad businesses off the back of it, which are all indigenous to Nigeria. They are making yogurts, creams and products for bakeries. Consequently, a dairy industry is being formed in Nigeria as there is now a market for Nigeria milk. Tastes are changing. There is a middle class and people like yogurt and cream. There can be win-win situations. The bigger guys like the Irish Dairy Board and Glanbia understand Africa. They do not need a Traidlinks to tell them what to do there. They are very strategic, business-oriented people who know what they are about. We see an opportunity for smaller Irish companies to get engaged and we can help them to do that.
Deputy Neville referred to management skills, which are absolutely necessary. It is why I say "Too many entrepreneurs, not enough managers". More managers are required in Africa. The issue is to build skills at an institutional level albeit it is not about taking Africa to where we are now. There is no point in taking the example of large company like Keelings, which can grow fruit by the hectare with two or three workers. Africa needs the technology we had 20 or 30 years ago. The institutional development we had 20 to 30 years ago is what they need. They need an AnCO or a FÁS, though that body may be bad news here. They need those kinds of institutions. These were the building blocks that built our economy and we should interface with Africans on the basis of what we have learned as a nation. Those are the kind of things they should be doing rather than to try to copy what we are doing now. What we are doing now is not the answer in all instances and they should be looking at the steps we took to get here. Glanbia started with 15 people in a room who formed a co-operative and is now the largest food and nutrients company in the world.
Mr. Paddy McGuinness:
Yes. These are amazing institutions but they did not start as such. They started with a few people in a room. That is the message Africa needs to hear.
Taxes and debt are touchy enough subjects in Ireland given issues around transfer pricing among our own transnationals and the way in which we manage our tax affairs. The Deputy is correct that there should be international transparency agreements with these companies. People should be paying taxes somewhere. They should pay tax in these countries, which need the revenue, not least as a form of anti-corruption measure. Where a government demands taxes of the private sector, over time it will iron out some of the corruption. It will become an expectation that if a company wants to operate, it pays taxes. That becomes a norm, which is not the case now in so many places in Africa. It is all done in funny money. If a container has to make 17 stops, the cost is incurred 17 times. That makes it a business problem.
It is now a business problem, not a corruption problem, because one is less competitive. The pressure from the private sector on the politicians is to get the police or whoever is engaged in it out of the way because we are not paying twice. People think profit leads to corruption. It also has the power to do away with corruption if used in the right way.
I thank Mr. Maguinness for a most interesting dissertation which, together with Mr. O'Caoimh's presentation, will be incorporated into the joint committee's future discussions and discussions with the Minister for Foreign Affairs and Trade. I again thank the delegates for coming before the committee.