Africa: Conflict environments require a peacebuilding approach to business development

In conflict-prone areas, intermediaries can ensure that private sector development prioritizes patient progress towards peace.

From community and labor protests to civil wars, businesses are embroiled in conflict and violence in Africa. Indeed, all fragile and conflict-affected countries experience violence that is closely linked to the private sector.

Until we recognize that private sector development in conflict environments must be a peace process – requiring political settlements on economic issues – we will not progress. Peace-enhancing private sector development is difficult to implement and runs counter to the goal of maximizing private returns. Specialist peacebuilding intermediaries and investment vehicles are needed.

Failure to constrain ‘bad’ companies very clearly exacerbates conflict and hampers development. South Africa, for example, moved from the corporatized slavery of the Dutch East India Company to the corporatized imperialism of the British South Africa Company, through the symbiotic relationship of the private sector with the government of apartheid, to the active participation of companies such as McKinsey and Bain in state capture.

History is repeating itself across Africa. From De Beers’ links to war crimes in West Africa to Uganda’s New Forests Company, whose plantation was cleared of its inhabitants by government forces who burned homes and murdered children for the job.

Peace-enhancing private sector development clashes with the goal of maximizing private returns

However, seemingly “good” private sector development actors are also involved in destructive conflicts. For example, the African Development Bank won the 2020 Deal of the Year award for the Mozambique Liquefied Natural Gas Area 1 project, the largest direct investment in Africa. The bank assured stakeholders that it would manage the project to the highest social and environmental standards.

However, this project is at the heart of social divisions and violence that have left thousands dead and up to a million displaced. A toxic mix of mercenaries, foreign troops and a terrorist insurgency has resulted in serious human rights abuses.

‘Peacewashing’ – saying the right things while doing something different – could explain this. Development finance institutions compete with private banks and investor groups for business. They have to disperse vast amounts of funds to sustain a cost structure that is more like Goldman Sachs than any peacebuilding organization. This leads them to push investments far beyond the capacity of fragile contexts such as Mozambique to leverage development. They also associate with companies that maximize their profits and have no track record of positive development for peace.

But another explanation may be that development finance institutions and their clients have a fundamentally flawed understanding of the interrelationships between business, conflict and peaceful development.

Even when these actors tell us that they intend to do good, they articulate strategies that are at best very indirect routes to peace. They argue that jobs will make young people less likely to be recruited by gangs, or that taxes paid by corporations will lead to improved public services.

To be fair, these claims are not without evidence. However, these actors are largely unaware of their impacts on intergroup relations, which are the most direct route through which private sector development supports peace or reinforces conflict dynamics.

Members of conflicting groups are mindful of their collective access to and control over economic, political and social assets. They see how private sector development exacerbates injustice by enhancing the power and wealth of entrenched elites, as in Burundi and Sierra Leone. They see how this disenfranchises many members of the informal sector dependent on land and mineral resources for the benefit of large mining projects, such as in Ghana. They see how it favors certain ethnic groups over others in business opportunities, like in Ethiopia.

Groups in conflict are mindful of their access to and control over economic, political and social assets

Such imbalances between groups, exacerbated by investments and commercial activities, increase grievances, deepen social divisions and legitimize violence.

This means that our attention must shift from the economic dimensions of private sector development to its role in cross-group political settlements on issues of economic justice and inclusion. “Deal-making” now left to bankers and corporate strategists must, in conflict-prone places, be treated as an extension of peace negotiations.

Essentially, all actors need to understand and seize real economy opportunities that directly address the needs of poor, vulnerable and marginalized groups at scale.

Procedurally, conflicting groups need to be supported as they reach a broad enough consensus on the way forward. Critical processes require independent mediation and external verification. These include developing environmental and social risk assessments and mitigation plans; frameworks for allocating benefits, risks and costs among stakeholder groups; and monitoring and evaluation. Dispute resolution – including processes that protect community rights and ensure redress for harm caused by private sector development projects – must also be independent of commercial control.

These peacebuilding approaches to private sector development require skilled actors with the will to prioritize patient progress towards peace. They must be able to bring about profound changes in power relations and institutional arrangements in economic matters, managing the resistance of those with vested interests.

Skilled actors must be able to change power relations and institutional arrangements in economic matters

These actors achieve more positive results for peace and development. For example, in South Africa, Partners in Agri Land Solutions (PALS) understands that “land reform is not a land issue, it is a relationship issue”. PALS explicitly addresses mistrust and unequal relationships in a facilitated approach to sustainable transformation. It recognizes that the goal cannot be profit maximization for any particular actor, but must be a fair and inclusive economy in which all can prosper. It therefore contributes to peaceful development.

Some international actors, including the governments of South Africa and Canada, are sparking discussions on a more positive and concrete vision of private sector development in conflict environments.

This can lead to a balanced framework that includes: dedicated intermediaries who facilitate the processes of analysis, dialogue and accountability necessary for conflicting groups to reach consensus on the directions of economic development; carefully cultivated and sustainable enterprises, ready to prioritize the results of peace, even at the expense of profits; and the development finance institutions that have put aside the ego-gratification and easy profits of the mega-deal in favor of mobilizing resources for the peacebuilding efforts of these actors.

Their challenge is that such approaches predictably complicate the status quo and reduce excess private returns – which is uncomfortable for many powerful actors.

Professor Brian Ganson, Director, African Center for Dispute Resolution (ACDS), Stellenbosch University Business School

ACDS partners with the Institute for Security Studies (ISS) on issues related to private sector development and peacebuilding.

Development Partners

The ISS is grateful for the support of the members of the ISS Partnership Forum: the Hanns Seidel Foundation, the European Union, the Open Society Foundations and the governments of Denmark, Ireland, the Netherlands, Norway and Sweden.