My Frustrations with Drip-Aid for the Benefit of Multi-National Companies

There is a new "fad" in the development industry with companies "gifting" consumer products to the poor in return for "carbon credits".   On the surface this might seem a genius solution to the needs of the poor.  A company manufacturers a water filter, energy efficient stove, solar panel etc., and sells the product to another financial company trading in carbon credits.  These carbon credits are then on-sold to another multi-national company trying to offset their polluting activities (such as a steel mill, or coal fired power station etc.).  This is a win (poor communities), win (manufacturer), win (finance trading company), win (polluter) situation on the surface.

IMO it is pathetic profiteering and makes my blood boil.  From my experiences "gifting" to poor communities creates dependency and squashes local business markets.  East African local business markets are thriving at present despite the wider Global Financial Crisis.  For example, the Tanzanian economy has been growing at between 5-7% p.a. over the last five years - compare this to many western countries in recession!  In Ifakara where our MSABI program is based we have seen a boom in successful small businesses selling a variety of consumer products to "poor" rural Africans.

So simply put (IMO) what we have here is a company producing a product that is non-competitive in the free market.  They get creative and discover it has value because in theory in offsets carbon production.  Now they can get a rich western polluting client and pitch a "warm and fuzzy" good will story about saving Africa and the environment.   It all ends up with the same Africans now receiving the product for free when they have previously rejected to pay market price. 

On the other side MSABI and local business entrepreneurs through-out Africa are having great success selling water, sanitation and energy products in very poor communities.  African clients are like any consumer - they will pay for quality and select a product that matches their needs and local context.  There is the business acumen required to provide an affordable and wanted product for African consumers - the same in any free market country.  Certainly a big problem is affordability.  Another big problem is creating supply chains - matching suitable products from overseas manufacturers and getting them to rural African markets. 

In the "carbon credit" situation I believe we have manufacturers who have a product that is too expensive or has failed as a financially viable free market "profit making" product.  It is much easier and cost effective to cross-sell to a rich western company needing to offset their carbon pollution.  This is a sound business/company decision from their perspective - plus they get to "flog" the "goodwill - saving Africa" bullshit to naive western clients. 

In the water field there are two recent examples.  The first company is vestergaard-fransdon who produce the Life-straw.  The life-straw is a ultra filtration filter for treating water.  It was  unsuccessful in achieving market penetration as a "for profit" product through-out the developing world primarily due to its cost (around USD25).  Vestergaard-Fransden were the first company (I know) to obtain assistance from Mckinsey Consultants - who came up with the concept of selling their product in exchange for carbon credits.  Hence, Vestergaard-Fransden undertook a very successful roll-out of free life-straws in western Kenya - where apparently the majority of people were boiling water to make it safe before drinking.  Mckinsy is to audit the project to ensure people are using their life-straws and no longer boiling water.  My question is - how many were even boiling water in the first place?  My experience in Africa is that communities do not boil water unless there is a known diarheal/cholera disease outbreak or the local water source is known to be problematic.  Boiling is unpopular during normal times because of expense (wood), time (to boil and cool) and after-taste.  The second issue is how many people actually use their free filter?  Often free items are poorly valued and non/misused.  For example, many free bed nets in Africa end up as fishing nets or wedding dresses.  Vestergaard-Fransden actually recently asked MSABI if we would be interested to distribute their filters for free in our communities (and yes we would receive a fee).  The above questions were left unanswered by Vestergaard-Fransden and multiple requests to them and Mckinsey for a copy of their independent audit results were ignored.

Of course I am coming across very one-sided and cynical.  They may well be having great success and offsetting bucket loads of carbon - but I have not seen the evidence yet. 

The latest company to join this popular band-wagon is DelAgua.  DelAgua are even smarter than Vestergaard-Fransden.  They promise to replace their filters every 3 years and energy efficient stoves every 5 years.  The program represents USD20 million over 20 years!  Of note one local community benefit is that they will (in time begin to) manufacture their stoves in Rwanda and create jobs.  However, the Rwandan Government has now agreed to sign-off on 20-years of free DelAgua filters - thus killing-off any other form of filter and stove competition.  How many local jobs are in theory lost over this period in small business enterprise?  What if the filters are not suitable or disliked by the population?  How many Rwandan's were boiling water prior to the filters arriving?  What about the local people producing and selling clay stoves for a living?  The reality is that DelAgua is going to make USD20 million in Rwanda by selling filters and stoves (that can not compete in the local free market) to rich polluting companies and keeping proceeds for their overseas company.  All under the banner of good will and saving lives.

This calls to further question the whole carbon credit trading industry.

What such initiatives in effective are doing is under-cutting and under-mining free markets - destroying/limiting local African business potential in exchange for lining the pockets of rich multi-national companies.  Small business entrepreneurs who have established their own supply chains and products to reach their local markets are killed-off by "foreign aid kindness" or in this case blatant "sneaky" company profiteering.  Suddenly communities find they can receive a  product for free that they previously bought in the market.  This over time creates a viscous circle of dependency, failed/stagnant/dead local economies and general community largess. 

In my experiences it is easy to differentiate countries/communities that are used to "drip-aid" dependency.  Yes there is a lot of generalisation in what I am about to say, but here I go anyway.  Such communities are stuck in a time trap.  They sit back and wait for things to come to them.  Over time there is an attitude of "helplessness" and "we can't do anything unless you give to us".  There is no local economic stimulation - no businesses, limited job opportunities because the market economy is trodden by "free" or "over subsidised" items. 

My opinions here will certainly make some people who work in the development industry very angry - that by denying people free filters and stoves I would be responsible for the death of thousands of innocent children.  And there is a valid argument in that.  Filters do save lives and efficient stoves reduce smoke and fuel - people should have access to them.  My counter argument takes a longer-term community/societal view for Independence and self-reliance.  I say lets promote local business and improve product supply chains and build local capacity and empowerment - not endless helplessness and dependency because it makes us feel good. 

 And of course this also comes down to some broader left/right political argument that I don't have answers for.  In conclusion, I expect such carbon swap initiatives to "boom" in popularity over the coming years because they are easy to implement and generate multi-national profits.  It saddens me and I hope we have the fortitude and experiences from lessons learnt from the past to know this is another poor decision for poor people.

Regards,
Dale Young
Founding Director MSABI.

Disclaimer
  • MSABI is working with a local womens group to establish a local enterprise manufacturing clay filter pots.  Hence, we have an interest in ensuring the success of local businesses making filters sold on the local free market.
  • MSABI specialises in developing WASH service delivery businesses.  Hence we are vested in creating local jobs and stimulating local economies whilst creating longterm sustainable options for safe water and sanitation. 
  • The above is an opinion piece based on my experiences living and working in the WASH industry.  The statements are based on the information that I have received and is publically available.

Links to companies mentioned above.

Link to Lifestraw
http://www.vestergaard-frandsen.com/lifestraw

Link to DelAgua
http://www.delaguahealth.com/