Presentation slides

Good evening, Ladies and Gentlemen.

 I would first like to thank Dr Julius for those words of introduction; and for the opportunity to address the members of the Royal Society for International Affairs.

Secondly, I would like to thank all of you for coming to renew our focus on social and economic development in Africa, to ask what has changed since March, 2005, when the Commission on Africa released its report, and to discuss how business can best contribute to progress in Africa.

I don't expect to have definitive answers to these questions today. But I do expect us to share our thoughts on the matter. After all, Chatham House is an institution that is synonymous with a free and frank exchange of views.

It's now over 18 months since the UK Government-led Commission for Africa first published its report in March 2005; an event that heralded the beginning of increased focus on Africa and its issues for much of the rest of the year.

I certainly can't remember a year when Africa was so high up the international agenda, even if that agenda was enthusiastically initiated from these shores without, some may say, an appropriately resonant worldwide echo.

As we approach the end of 2006, it's a fitting moment to look at what was really achieved in 2005.

I'm going to start by being somewhat contentious.
Slide 2:  We in the Northern Hemisphere didn't really achieve so much in respect of sustainable development in Africa during 2005. In fact, what was achieved in 2005 was a matter of perspective; depending on which hemisphere you were looking from.

The real achievement of 2005 in respect of sustainable African development was the same story as the one from 2004, that - however much attention Africa and its development attract outside the continent – quietly and diligently, every day, Africans are going about creating economic growth for themselves that far outstrips that of many OECD countries.

Slide 3: African vs European growth In 2006, average Euro-zone GDP growth will be 2.4%. In the UK it will be 2.7%. Taken across the whole of Africa the figure will be 5.4%. And that's not a fluke. 2005 saw an African growth figure of 5.4%, 2004 5.5% and IMF forecasts for 2007 predict growth as high as 5.9%. In short the most sustained period of economic growth in Africa since the 1970s.

Slide 4: Importance of entrepreneurs. What's the cause of this? Aid or trade support from the North? Debt relief? Maybe they're playing a part. But nowhere near as important as that played by the millions of African micro entrepreneurs; around a third of them female in key economies like South Africa, in creating and sustaining the trend.

I mention female entrepreneurs in particular because several studies contend that women entrepreneurs create disproportionate growth benefits for the economies they are operating in. Kofi Annan said in 2003 at the International Women's Day Celebration in New York that:

"Study after study has shown that there is no development strategy in which women do not play a central role. When women are fully involved, the benefits can be seen immediately: families are healthier and better fed; their income, savings and reinvestment go up. And what is true of families is also true of communities and, in the long term, of whole countries".

So for me, the first and most important achievement of sustainable African development in "the year of Africa" didn't happen in London or Washington: it happened in Johannesburg, Cairo, Nairobi, Lagos; and in much of rural Africa too; and it was brought about by African entrepreneurs.

What we in the North can do is help draw attention to the emerging African success story; and to help create the conditions for it to continue and accelerate, thereby helping Africans sustain the growth that they have begun.

Did we do that in 2005?

Slide 5: It's easy to be cynical. When the Commission for Africa report was published, there were parallels to the Brandt report of the 1970s and gloomy warnings that, just like its predecessor, the Commission's report would be little more than a dismal taking stock of a bad situation.

It's also easy to be unrealistic about what a "Year of Africa" and a Commission report could realistically achieve; to believe that since the UK sat as president of the G8 and EU in 2005; and since Africa was at the top of the UK development agenda, that enthusiasm would motivate genuine commitment elsewhere.

Realistically the truth is, as so often the case when discussing such complex subjects, somewhere between the two extremes.

Unfortunately, we didn't draw enough attention to the successes and opportunities of Africa in 2005; and we fell a long way short of "solving Africa" through trade or other means. Just taking the Millennium Development Goals, Africa is still the continent where most remains to be achieved; and where many of the targets look increasingly daunting as 2015 draws closer.

Slide 6: Africa is still home to more conflict than many other regions of the world. Darfur and Sudan are still in a state of crisis and mass death of civilians; the Democratic Republic of Congo may be showing encouraging signs following a relatively successful first round of elections, but much remains to be done before we can truly say that this - the most costly conflict since World War 2 in terms of civilian lives lost - is truly resolved. And in Côte d'Ivoire, there is no lasting end in sight to the conflict that reignited in 2004, despite significant attempts at mediation.

And in my view one of the most disappointing failures of 2005-6 by the Northern Hemisphere in respect of Africa has been the inability up to now to find an ambitious but realistic solution to trade liberalisation as part of the Doha round.

Slide 7: The Doha failure may be one of the huge missed opportunities in 2005. Incidentally, it's doubtful that the impetus for creating lasting change in Africa could be realistically carried by the will of one national government. And that anyone else in the Northern Hemisphere would really want to pick up the baton during 2006 and beyond.

But for me the other big missed opportunity was that we didn't get anywhere near replacing the images of African despair with those of African success and hope. And let's remember, ladies and gentlemen, that Africans are achieving this growth irrespective of whether there's a level global playing field.

Slide 8: That said, 2005 did in part rekindle some sense of potential in Africa. I was priveleged to speak at the BBC Africa 2015 conference here in London last March at the launch of the Africa Commission Report. A theme that was repeated by not only business executives such as myself, but also by such voices as Bob Geldof and the chairman of the BBC - was the importance of telling the many positive stories about Africa. Of showing the developed world the realities that so many people working and living in Africa already know: that it's a continent with many problems, but also of significant opportunity.

I have to say I was glad to hear of that optimism, because for decades we have been investing in Africa because of our belief in the potential of its economy. The challenges may be there, but the opportunities make them worthwhile. A business message that despite all the obstacles, here is a continent of opportunity and potential, which has so much more to offer the world than images of desperation.

 Another source of encouragement for me in 2005 was that finally, civil society began to appreciate the potential of business to be a positive engine for the continent's development. No longer were we told that it's just the preserve of governments, intergovernmental agencies and NGOs to solve Africa's problems. For the first time, international business was not presented as the villain of the piece, but as a positive contributor to resolving Africa's issues.

Slide 9: I think this is illustrated by the tone of much of the civil society activism related to Africa during 2005. The messages had, for the first time, trade at their core. Alongside the more established calls for aid and debt relief was a sense that neither of these could be sustainable in Africa without building vibrant economic activity to support the momentum they might generate.

One of the most striking examples of this phenomenon in 2005 was Live 8 – an event aimed at mobilising and harnessing public concern over the issues facing Africa - that produced concerts in 9 countries and pulled in global audiences of 3 billion. It must surely be significant that such a popularist event should acknowledge the importance of trade in addressing Africa's issues, even within its title.

So this, for me, was the biggest shift in attitudes towards Africa during 2005; the recognition across the spectrum of those committed to making a difference on that continent, of the vital importance of trade and commerce in the process.

And Doha or no Doha, there have been some positive developments in the sphere of inward investment in Africa; some of them challenging more established notions that it's only the Western economies that can or should be showing faith in Africa's potential and investing in its future growth.

Slide 10: Last year the biggest exporter to Nigeria was not the US or the UK. It was China. And in April this year, they secured in return for their investment of Four billion US dollars, drilling rights in the rich Niger Delta fields of the world's 8th largest oil exporter. As a cameo of the local effects of this development, just go to any Nigerian city other than Lagos and you will see the preferred method of transport is the motorcycle taxi.

For the operators of these taxis, the vehicle of choice is Jincheng – a Chinese brand. With models at less than Two hundred and fifty pounds in local currency, it is considerably more affordable than its European or Japanese counterparts; and therefore provides a more realistic entry level to entrepreneurs wanting to run small taxi businesses.

We in Europe and North America would do well to take note of the lessons provided by Chinese investment in West Africa. I said before that it's not just the role of one government or one section of society to take the lead on creating sustainable development in Africa. China seems to be rather advanced in this line of thought already.... They are showing that it's not just Western governments or transnationals who can address Africa's challenges or benefit from its opportunities.

Slide 11: As I mentioned, Nestlé has been experiencing those challenges and opportunities for decades; when we published our Commitment to Africa report in 2005, we stressed that African economic growth is outstripping that of Europe. Likewise Nestlé sales were showing encouraging trends on the continent, bearing out the message of optimism.

Some said at the time I was saying that with my fingers crossed; that the upward trend could not persist. But one year on, I'm happy to say that what we know about Africa; its vibrancy and its potential, continues to bear out – in 2005 Nestlé recorded sales in Africa of just over 2.4 billion Swiss Francs; up more than 5% on the previous year; which was in turn up 5% on the year before that. Africa remains for Nestlé an important generator of growth and opportunity.

Is there a secret; a magic formula?

Slide 12: Regrettably, I have to tell you there isn't. We have had a manufacturing presence in Africa since the 1920s. We have grown that presence gradually to 27 factories serving all 54 nations. But the important thing to note is that we have remained in Africa however circumstances and conditions may have changed; or keep on changing. I talked about Côte d'Ivoire earlier; despite the very real issues the conflict there presents, we still keep one of our main West African industrial facilities working there – I might add that at times we have been concerned for the safety of our workers and managers there, but we have kept operations going as much as we can.

The same is true of our Southerton factory in Zimbabwe. Many international businesses have reduced their presence in that inhospitable environment; we have kept going, kept applying international manufacturing standards to the quality of our products and environmental stewardship standards to our operations. Just as we do wherever we operate in the world, whatever the prevailing framework conditions.

The truth is, ladies and gentlemen, that in the face of these very real and present difficulties, you have to be in it for the long term in Africa if you want to generate a return with which your shareholders will be satisfied.

That's been our experience, so we're demonstrating our continued faith in Africa by opening a representative office in Ethiopia this year; and by creating a Nestlé company in Angola. In total, we will invest more than 70 million Swiss Francs in Africa during 2007. We will also have to make our African business more competitive in some areas, but we are still investing and building to continue the encouraging trends of the past few years.

And if you're prepared as a business to make that sort of commitment year in, year out, it's not just your shareholders who benefit.

Slide 13: Not so long ago, we got into a discussion with Harvard Professors Michael Porter and Mark Kramer. They had a theory that a business doesn't necessarily thrive at the expense of the environment or its suppliers. If it wants to provide sustainable growth it needs to build into its business strategy the notion that it must also create value for the societies in which it operates.

That struck a chord with us; because the very first edition of The Nestlé Management and Leadership Principles – the guide to managerial behaviour in our organisation – stated that "investments must be good for the business and for the country of operation."

Slide 14: With this evident parallel in mind we asked Professors Porter and Kramer to look at our company; and in studying our business in Latin America right across the value chain, they found that Nestlé, better than most organisations they had looked at, proved their concept that a company has an opportunity to create value for society at the same time as it creates value for its shareholders; that the two areas of value creation are in fact interdependent; and there don't necessarily have to be losers on one side or the other. In fact, if a company only practices philanthropy at the expense of its bottom line, this is less likely to be sustained in hard times.

If however the business process itself recognises that the societies in which you operate must thrive in order to contribute to your business growth, then, ladies and gentlemen, you have something very exciting: a genuinely sustainable, win-win situation that touches lives positively at every stage of the business value chain over decades.

And speaking for Nestlé, this can and does take place at every stage of our value chain. Not only in Latin America, where our current report is focused; but everywhere else we operate, including Africa, the focus of our report last year.

Slide 15: For example, a company like ours, although it owns no farmland, is a significant purchaser of agricultural commodities; principally milk, coffee and cocoa. We need reliable, quality supplies of these in order to be able to meet the demand from our consumers for consistently top quality products. So it makes business sense to motivate the farmers who supply us, with initiatives like free agricultural extension expertise, so that for example the cattle farmers close to our El Jadida factory in Morocco can increase their yields and make more money.

We do the same with the coffee farmers in Ethiopia. For example we have a strong relationship with the Co operative Union which supplies coffee for our Fairtrade-certified Nescafé Partner's Blend brand. In addition to the fair-trade premium we are providing the farmers with technical assistance to install eco friendly washing equipment which uses vastly less water and we are about to start a water project with them to provide clean water for the community. We also work with another group of farmers to transfer our extensive coffee-growing know-how to them; through improving coffee tree management, harvest, post harvest treatment and quality. We support diversification; and encourage them to capture more of the sale price by selling directly or through a local representative. The community also benefits through investments in infrastructure such as clean water. This investment is helping us build a brand that speaks to the demand for Fairtrade certified products in the UK; and is now being extended to Ireland and Sweden.

Slide 16: At the manufacturing stage of our value chain, we have one global quality standard that includes best in class environmental management standards. This helps keep our costs down; it minimises our impact on the local environment and, because our standards are often applied well before local environmental legislation is enacted, local authorities regularly ask us to share our knowledge of water treatment, for example, with other local manufacturers. This is certainly the case in our water treatment plants in El Jadida, Morocco; Agbara, Nigeria - and the plant we are commissioning in 2007 at Tema, Ghana, where a training and operator support network will involve interaction and knowledge sharing by local technicians from Agbara (Nigeria) and Abidjan, Yopougon (Ivory Coast).

Slide 17: To achieve that kind of quality and to manage that level of environmental stewardship, you need to have well-trained, motivated employees. We have 11,500 of them across the African continent; and we pay them better than the local average, we train them and give them transferable skills throughout their careers. We also help increase the competitiveness of our 50,000 African suppliers by working with them to give them the skills and technical ability to meet our exacting global standards.

Slide 18: And the shared value approach applies to the consumer end of our value chain, too. Our annual GlobeScan reputation survey shows significant endorsement among African consumers that we fulfill our corporate responsibilities in their countries. Top of the reasons why they rate Nestlé so highly is that we provide safe, nutritious products of high quality. This is not a given in some African countries. By meeting the significant growth opportunity that low-income groups represent – the so-called "bottom of the pyramid" – we can provide access to our products to sections of society previously excluded.

In so doing, we need to pursue a very different distribution model than in more developed countries. The lion's share of retail in Africa is still via traditional markets or small stores. Since we published our report in 2005 we have strengthened our distribution in these sectors, often by training local people – many of them women – to become agents who sell our products in markets or even door to door, thereby generating an income.

Slide 19: Of course, they need products that are both appealing to and affordable by the sections of the community they serve. Our Milo brand has iconic status in West Africa as "The Sports Drink of Future Champions"; and participates in many initiatives to help encourage students to take part in physical activity. It's also a relatively premium brand. By changing the packaging and shelf life, we are now able to offer "Chocolim" to Ghanaians at half the price of Milo. Both products are growing at around 15% per year; and Chocolim in particular is enabling many thousands of small distributors in the more traditional distribution channels – most of them owner-operators - to earn new income.

So we would contend that one of the most significant roles business can play in Africa is to be successful; and to do so with a long-term perspective at each stage of its value chain. We can impact so many lives just through these common sense principles of enlightened self interest; so many more than by pure philanthropy alone.

Slide 20: That said, we believe strongly in integration with the communities where we operate in Africa. So we have over 40 local partnerships that address at least one of the eight Millennium Development Goals. Our partnership with the Red Cross, bringing HIV awareness programmes to 1.2 million young Nigerians has been extended to Kenya this year; and as an extension of this successful partnership, we announced a new initiative in March to support the Red Cross Water and Sanitation team to provide clean drinking water to African villages.

Slide 21: Ladies and Gentlemen, I'm happy to announce today that less than eight months after we formalised our agreement with the Red Cross, we are already well advanced with the first new or rehabilitated water supplies, sanitation and hygiene training and improvement of community management capacities. These will reach over 10,000 vulnerable people and will construct some 20 community water supplies. This is part of a wider water and sanitation project in Northern Mozambique financed by Nestlé, the EU and the British Red Cross.

Slide 22: We go further than the MDGs where we see the right opportunity, too. Our partnership with Search for Common Ground in Nigeria, announced at the Clinton Global Initiative in September 2005, brings positive role-modelling to young Nigerians through a reality TV show where participants learn to act out and resolve the situations that often lead to conflict in that ethnically and religiously complex society.

Slide 23: Beyond the effects of its value chain activities and its community partnerships, business can use its voice to influence issues where there is a convergence of interest with Africa and its people. We have argued for a very long time, for example, that there is little moral or genuine economic justification that African farmers or small businesses, many producing to high standards and low prices, should not have free access to European and North American markets.

As of now we can only hope that increased public awareness on the need for a freer global trading environment will make it difficult to ignore the need for real change; and for there to be renewed enthusiasm for a breakthrough to be achieved.

So much for advocating free trade. The other part of our advocacy role is to share our experience of building a sustainable business in Africa with civil society and other businesses. Through events like this evening's; and through our membership of the Global Compact, the International Business Leaders' Forum and other such bodies, we actively seek to share our knowledge so that it might benefit others; and indeed to learn from theirs.

In summary, then, business was encouraged to scrutinise how it makes a difference in Africa during 2005; and began to prioritise more effective ways of achieving momentum than it had previously.

But what was the broader outcome of the year of Africa or the CFA report; and did we learn anything about the role of business in creating sustainable development on that continent?

From my perspective, as I hinted earlier, the most valuable thing that 2005 achieved; and simultaneously its greatest failure; was on the one hand to further sensitise all of the issues that continue to face Africa in terms of its sustainable and sustained development; but missing the chance to build confidence in Africa by broadcasting its remarkable successes in at least equal measure. Even if there was recognition for the first time that business and trade can and should be a positive engine for growth in Africa.

Slide 24: And though the momentum in the Northern hemisphere for making a difference in Africa has not yet been evenly spread, there are signs that this may change. There is optimism, for example, that Germany will also make Africa the focus of its development agenda when it assumes the G8 presidency in 2007.

Specifically regarding businesses like Nestlé, I think 2005 saw many begin to examine their impact on Africa much more closely; and to look at it not just in terms of philanthropy; but also in terms of investment in a very significant business opportunity which - provided those who follow it have responsibility at their core; and they are prepared to take the long view - can deliver genuine shared value to the company and its shareholders; and to all the Africans with which it comes in to contact.

And as we have seen, Africans themselves are already creating impressive sustained economic growth of their own; there has to be an opportunity to build confidence and draw increased interest from beyond Africa if we can prioritise and share the remarkable success story of growth and opportunity rather than falling into the trap of just reporting the problems.

Slide 25: This, Ladies and Gentlemen, is for me the most heartening outcome of 2005; it points to a development model for Africa and beyond that, for the first time, can be genuinely said to be sustainable, because it no longer focuses on penalty or philanthropy. Instead, for the first time it recognises the potential for business to make a positive difference at every stage of its value chain, through its everyday activities. More importantly, it recognises that if businesses want to keep meeting their investors' demands for sustainable growth, they can help build the capacity of their customer or consumer base to participate in that growth; and therefore increase the disposable income they have available to spend.

I think I am safe in saying that this kind of motivation will be far more effective for the vast majority of businesses than trying to instill a sense of duty, creating a rulebook or talking in purely philanthropic terms.

To conclude, if we can encourage business to invest over the long term in Africa in a responsible manner because it makes good business sense; if we can keep on fostering a climate where Africans are already generating sustained economic growth rates that shame the developed world; if we can help them share the story of their success beyond the continent of Africa; then, ladies and gentlemen, we have a genuinely sustainable development model for the continent; and we can be optimistic that every year will be the Year of Africa.