Corporate Social Responsibility is good for Somali businesses

by Liban Obsiye
Tuesday, May 10, 2011

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The news around town is that Corporate Social Responsibility (CSR) has finally reached the Somali business community in the form of the new $45,000 science lab that has just been opened at the University of Hargeisa. Nation Link, one of the oldest and most successful telecommunication companies in Somalia decided to provide the University with this gift as part of its community regeneration and capacity building initiatives. The fact that such initiatives exists itself is wonderful news and the amount spent on the university, although pittance in the eyes of critics, is an indication that some businesses in Somalia are waking up to the importance of their role in society. However, the fact is that the majority of Somali businesses do not have a CSR policy and those that do only engage with it irregularly as part of their marketing campaigns.

Doing business in Somali without doubt has been heavenly for most of the risk taking Somali entrepreneurs who continue to make astounding returns on their investments. Without a functioning government for more than 20 years, Somalia is a haven with no rules, regulations or legislations. It is a place where orthodox Liberal free market economist would refer to as their utopia as it is a place where the invisible hand of the market determines everything. The self declared independent break away state of Somaliland is no better as its democratically elected and functioning government has no ability to implement any economic policies as is evident by the pleas of the finance minister to the large corporations to pay their taxes earlier this year. While from the outside it appears as though there is some order brought about by government intervention, businesses in Somaliland reign supreme. Businesses are the engines of a nation’s growth but in Somalia the concept of nation and community is missing from the business community's vocublary.

Everywhere in the world successful businesses create automatic benefits such as employment, revenue stream for government through payment of taxation (when they pay it) and they also enhance the reputation of wherever they are based. However, Milton Friedman, the late neo Liberal New York Times writer and author, would have been proud of most Somali business leaders today as they, like him, appear to genuinely believe that the only social responsibility of a business is to increase their profits for themselves and their direct financial shareholders.

What appears to trouble Somali business leaders is the definition of CSR. One told me over lunch that, “it means different things to different people." Another said, " I give to my extended family surely this is CSR" and whilst both are right in their observations, CSR is about the discretionary actions businesses take to contribute to society and to advance the welfare of their employees and members of wider society.

CSR takes many forms and among the most common globally are charitable donations, community engagement through programmes like mentoring, fair trade agreements and training for the unemployed or less privileged in society. CSR also can involve and does involve to a large extent, good relations between corporations and employees and this is currently evidenced in the UK through initiatives like health and safety provisions at work, gender and ethnic diversity drives within corporation’s board rooms and flexible working for parents and employees who are studying. By no means is Somalia like England but no matter where businesses operate it is important for them to be profitable and businesses that engage in CSR generally do far better than those that do not.

In the age of globalization and 24/7 media, there is a very strong business case to be made for CSR. The IBM report which interviewed 224 senior business executives concluded that 60% of these executives understood the importance of CSR and have made it a boardroom issue in their organizations. This is because the report discovered that the use new media like the internet has created greater consumer awareness of how major companies operate and businesses have been forced to react to this. The IBM report also argues that the key drivers of profit in organizations are its employees and many young new employees who would be vital to the businesses of major corporations want to work for firms with ethical business practices which are in line with their own. These findings are consistent with and advanced by the report by Business in the Community in 2003, a business lead charity with over 850 business members in the UK, which found that CSR, as well as leading to greater employee satisfaction also allows for innovation and learning, better environmental risk management, better financial performance and a better business reputation which contributes to the creation of a strong brand. A strong brand is very important from the evidence in this research as it also argues that a lack of CSR could drive away potential investors who would bring capital to businesses as they do not want to be associated with socially underperforming corporations. The best evidence of CSR becoming mainstream and been adopted as part of the overall business plan by global companies is the rise in its popularity in global business schools which now offers it as part of all executive business education. The global business and current affairs magazine, The Economists global online survey in 2007 found that more and more business leaders are waking up to the importance of CSR and 53.5% of them agreed that it is a necessary cost of doing business whilst 53.3% said that it gave them a distinctive advantage within the market. Only 3.8% of the business leaders in the survey thought CSR was a waste of time and money. These findings are consistent with most of the major businesses practices as more and more of them are directly engaging with CSR activities and annual CSR reporting. A good example of this is Unilever which is one of the world’s largest companies producing all manner of consumer goods and they won the Business in the Community Company of the year award in 2010 for their CSR activities all over the globe which were centred on sustainable development. Richard Branson, owner of the Virgin businesses and brands which includes aviation, telecommunication and publishing stated in his interview with Newsweek Magazine in the same year, that he was going as far as offering $25 million prize to anyone who can develop technology which removes carbon dioxide from the atmosphere.

Tata Group, the diverse Indian global corporate powerhouse which operates in most global markets and sells services and physical products ranging from Steel to IT products and chemicals, has been commended in a recent Economist article as a company with a real commitment to CSR. This commitment, whilst in India only, has provided public services in the form of education and healthcare freely for poor citizens in many major cities and also direct financial and advisory support to community organisations working with them. This clearly can be seen as a genuine attempt at tackling poverty and empowering the less fortunate in society in order that they are able to seek a better, more stable and sustainable future for themselves and their families.
Of course, there are no companies as wealthy and globally powerful as Unilever or the Tata group in Somalia or Somaliland but there are some that can contribute a substantial amount in many forms which can alleviate poverty and create a better society. While Somalia remains war torn and still at war, Somaliland has been peaceful and a functioning non recognised state for 20 years this May 18th. However, while, Somalia has the obvious problem of instability and violence, most large and small and medium enterprise Somali led businesses operate in both regions. These include import and exporters, remittance and communication companies as well as international transport groups.

It is not very clear whether the above Somali businesses and their management understand CSR let alone engage in it. These companies operate in a region of East Africa where there is desperate poverty caused in part by lack of employment and training availability. Whilst they cannot be wholly blamed, it would prove difficult for any of them to produce any evidence of a genuine attempt to help their fellow citizens in a way that enhances their opportunities. Of course they do sponsor some meetings, conferences and local community presentations but these are nothing more than media advertising for them and the supposed long term benefits for the community ends when the camera stops recording. The profits these companies make in an unregulated market and in the case of Somalia, in a climate of absolutely no taxation as a result of a lack of functioning government, are not proportionate to their investment in the communities where they have made their profits.

Somali business men, because that is what they mainly are, dream of global expansion. They want their services and products to be like Tata’s and be sold in all the global markets but because of their relatively small size, intense global competition and their dependence on the Somali niche customer market they are unlikely to succeed on their own. Their only hope is to partner with established international companies and work within these partnership to expand and enter new markets. However, developed or developing global companies work hard to build a strong brand image and reputation through CSR and none of them would risk damaging their brand image and reputation by entering into agreements with Somali companies which have no idea about the whole concept or if they do prefer to ignore, CSR. In order to turn the dream of growth and geographical expansion from a dream into a reality, Somali companies need to urgently start taking CSR seriously otherwise they are nothing more than a liability to their potential business partners.
CSR may be a new concept in global business but it has always been an Islamic duty for individuals and businesses. The Holy Koran stresses through many of its glorious ayats the importance of sadaqa. It is one of the five important pillars of Islam and to forget it is selfish and undesirable for a Muslim and as all of these Somali companies are led by Muslims, they should really be looking at ways of improving on their patchy opportunistic records. “You see the business men during eid wearing Arabic clothing and pretending to be all holy and promising sadaqa and support for the community but all they want is to be seen and for their companies to be remembered,” said one former Hargeisa resident who now lives in the UK with his family. “At the doorsteps of the large companies in Hargeisa orphans sleep every night,” he added nodding his head slowly. In the eyes of this interviewee, this manifestation of poverty at the door of the Somali corporations is not only a shame but a real indication of their leaders attitudes towards CSR .

Globally, just like in Somali, there are no real regulations of the CSR activities of major corporations as most instruments of this nature like the UN Compact, are just mere guidelines with poorly defined and non deterring sanctions. In Somali where there is huge unemployment, poor governance, war in the South and severe poverty, corporations creating employment and providing vital services such as transport and education are needed. The limited employment they create and the even more limited tax revenue they bring to functioning parts like Somaliland are welcomed but CSR is something they have been able to and continue to engage with poorly at their own will when it fits their short term marketing goals. Unlike in the developed countries where there is a great amount of competition and as a result the consumer has greater choice and buying power, in Somaliland the consumer is almost completely powerless as a result of the poverty and limited competition and the near monopolies that exist in all product markets. Just like in most of the developing world, brand power and growth is usually linked to cost as affordability is the key issue when purchasing goods.
With poor consumers and a lack of effective competition laws the governments of both Somali and Somaliland can only encourage these companies to play a greater role in assisting them as they have both the resources and the expertise to do so and if these companies have global geographical expansion aspirations through partnerships, they should listen, roll up their sleeves and get stuck in.

Businesses in the developing world cannot sit on the edge and just focus on profit like Friedman suggested. They need to lead by example and help to formulate solutions to key problems facing the countries they operate in and its inhabitants such as unemployment and poverty. Through responsible business practices and partnership with government (s) they can help to tackle corruption and poor governance, alleviate poverty, create cohesion and long term social and political stability. These Somali companies, despite their smaller size when compared to their global counterparts, can help to create a better present and future for an entire nation.
CSR is a global businesses strategy today and it will be for the foreseeable future. International business leaders have acknowledged this and it is time Somali led businesses did too for if they do, they will be the greatest beneficiaries in the end.

Liban Obsiye
[email protected]

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