Adding new expertise to EWB's Advisory Board

Does the development sector remind you more of General Motors or Google? I fear the former. In the past 20 years we’ve seen GM build a series of cars that cost more than their customers would like to pay. They’ve been in steady decline, and the government is having to throw ever larger sums of money at the problem.

I remember the first time I was told by a donor that there was a problem with “burn rates”—the rate at which cash is being used. It was a four or five months to year’s and, and the project officer was worried. We had a fairly long and increasingly confusing discussion before I realized that I’d completely misunderstood.

I come from the private sector, where burn rates are to be minimized. In GM over the past few months, there have been discussions of its burn rate, and how to lower it.

But what this donor was worried about was that the burn rate wasn’t high enough. If we didn’t spend more money, and quickly, the budget wouldn’t be met. And if he didn’t spend enough of his money, he might not get the full budget for next year. Talking later with someone who worked in the United Nations system, I was told “How important you are is determined by the size of your budget. It’s as simple as that.”

This same mentality is repeated at a country level. Today’s discussion on foreign aid focuses on money. The recent decision by the federal government to focus on fewer countries is based on being a “top-five” donor in any particular country. It assumes that money is what matters.

It’s important to realize that for a long time, GM epitomized “money matters”. GM still has the largest share of the U.S. auto market, selling 25 per cent more cars than its closest competitor. But big budgets without good ideas and without good implementation leads inevitably to bankruptcy in the corporate sector. That’s what the economist Joseph Schumpter termed “creative destruction”.

Do big budgets without good ideas or without good implementation lead to “bankruptcy” in development? Sadly, no.

Canada’s development debate cannot simply focus on the size of Canada’s aid budget. Canadians and Canada want to be a leader supporting positive change in Africa, yet our budget will always be relatively small compared to other countries.

So what does that leave? Ideas. Creativity. That’s what we should be discussing.

Learning from Google

Google has defined the growth of the ideasdriven organization over the past decade. They have identified niches, and focused creative resources on finding solutions to difficult problems, and then, if a solution looks interesting, they scale up the funding. This willingness to have a portfolio of different investments, with different levels of risk, and to actively assess which work and provide those that do with more funding (while acknowledging that some ideas will fail) seems to be an idea that Canada might want to borrow.

Let’s take a concrete suggestion. In the new list of aid focus countries, a half-dozen African nations have been removed, likely leading to lower funding for them. But with that, there might be an opportunity for some innovation.

We know that Africa continues to suffer from the food crisis, which is exacerbating a decades-long stagnation of yields. Between 1960 and 2005, Asia increased its yields by 250 per cent, while Africa’s barely budged. Without agricultural growth it is hard to imagine Africa developing (a great paper on this is the Centre for Global Developments’ “The Structural Transformation as a Pathway out of Poverty”).

One problem is that traditional government-government aid might not be the best solution for the agriculture sector; in many countries, ministries of agriculture don’t have the capacity to create the market economy so farmers can buy inputs and sell outputs and be more productive.

What if Canada were to create, say, a $25-million-a-year agriculture innovation fund for five of these countries. This fund would be charged with identifying and investing in yield-increasing projects, which could include private sector agriculture entrepreneurs. There would be no blanket solutions; agriculture is highly locally dependent, so each country’s issues would be different. And after three years, we would review what worked well and what didn’t, and look to see if the successes could be replicated more broadly.

This would be closer to a venture capital model of support and would likely not be conducive to some of the bureaucratic constraints that prevent people closest to the field from taking decisions, so it might require Canada to deliver our aid through a new entity. As well, to do something like that, we would have to recognize that some investments might not work, but that’s OK—it’s part of the innovation process.

Regardless of whether an African Agriculture Innovation Fund would work or not, we would like to see Canada move away from a discussion on budget size to one that focuses on ideas. Canada has creative people that can find creative ways of supporting Africa social, political and economic entrepreneurs. But a staid debateon how many millions we are spending can overwhelm the equally important debate about the need for Canadian aid to find niches, find ways to support innovation, and to bring more creative problem solving to bear on these pressing issues.