I met with David Rice this morning, Managing Director of the Development Dividend, a research project based at NYU. He got a fellowship from the university to travel through southern Africa last summer and write case studies about the impact of private sector development. He covered a mining company in northern Mozambique and a telecom in Kenya, among others.
This work, combined with David’s earlier experience in development, including formative work with William Easterly, has led David and colleagues to establish Development Equity Partners (DEP). DEP works with private equity funds to facilitate the success of their investments in Africa. David described their task as overcoming the human disinclination to invest in prevention. Many clients seek assistance when a portfolio companies is on the verge of crisis, rather than when they make the investment.
David and his colleagues at DEP use their long experience with local communities and international development to advise private sector investors about growing their portfolio companies. These efforts don’t resemble traditional CSR, charity, or development work, which generally subsidize donor-driven efforts to remedy a cost of the company’s activities. Instead, DEP identifies ways to improve the community where the company is working, delivering value for residents in the short-term and enhancing the company’s prospects in the medium- and long-term.
For example, a company might be loathe to invest in infrastructure, a shared good that the government “should" pay for with tax revenues collected from the company. However, using its own resources to better roads enhances the company’s performance, as well as making life better for community members and thereby improving the company’s reputation, providing a variety of follow-on benefits. Similarly, education provision might be seen as beyond the company’s scope of responsibility, but will likely generate happier parents (employees) in the near-term, and a more educated workforce five to fifteen years down the road. As well as the immediate reputational benefits.
I was glad to hear that David and his group are getting calls from private equity investors who are increasingly eager to capitalize on undeniable growth trend in Africa. Even if it takes a crisis to get them to call.