Support by Dutch NGOs for small-scale local entrepreneurship in fragile contexts in Sub-Saharan Africa during the period 2011-2016 : a search for patterns at different levels

(1)

1

Support by Dutch NGOs for

Small-Scale Local Entrepreneurship in Fragile Contexts

in Sub-Saharan Africa during the period 2011 – 2016

i

A search for patterns at different levels

Henk Konijnenbelt - Student Number 11257180

Extended version of thesis for interviewees: 24 September 2018. Original version handed in at UvA: 13 November 2017

Master Thesis Political Science, Master Conflict Resolution and Governance Graduate School of Social Sciences, University of Amsterdam

(2)

2

I wish to very much thank the time-pressed interviewees

for allowing an interview and sharing their rich experiences with me.

I also want to thank David Laws, my supervisor, for his heart-warming

support throughout the thesis process and

his detailed feedback at earlier versions of several chapters.

Note: Source for figure on front page is ICCO (2016) Annual Report 2015: 53.

The figure is an infographic concerning the Agribusiness Booster, a tool to support pre-growth agribusinesses in emerging markets by direct investments in the form of loans, equity shares and accompanying business development services.

(3)

3

Figure 5.5.: Direct and indirect impacts of employment creation on poverty and stability 138 Figure 5.6: Proto-typical map of currently used support-interventions of NGOs 151 Figure 5.7: Mapping the support-interventions of the NGOs studied, based on proto-typical map of fig. 5.6 153 Figure 5.8: Four scenario’s concerning possible future NGO interventionsas to support for entrepreneurship 159

Tables

Table 1.1: A first definition of the terms entrepreneurship, entrepreneur and private sector 11 Table 1.2: Definition of micro, small and medium enterprises based on UNIDO, based on nr. of employees 12

Table 1.3: Two definitions of pro-poor growth 15

Table 1.4: Two definitions of social inclusion 15

Table 2.1: Definition of the terms ‘fragile state’ and ‘fragile contexts’ 18 Table 2.2: Enabling factors for the private sector in developing countries as to pro-poor growth 24 Table 2.3: Disabling factors which may be more severe in fragile post-conflict contexts 25 Table 2.4: Disabling factors, which are specific to fragile post-conflict contexts 25 Table 3.1: Different sources using different criteria to define ‘the missing middle’/Small Growing Businesses 53

Table 3.2: Logic model 69

Table 4.1 : Overview of main Dutch NGOs approached for an interview and why 85 Table 4.2: List of interviewees and date plus duration interview 88 Table 4.3: Colour codes used to relate text fragments of full transcripts interviews to research questions, etc. 90 Table 5.1: List of interviewees and abbreviations used for names interviewees in quotes 94 Table 5.2: Comparison of main instruments used in the cases chosen by NGOs studied 103 Table 5.3: Did ‘an entrepreneurial turn’ of the Dutch NGOs occur, and if so, when? 109 Table 5.4: Establishment by NGOs of investment units, consultancies, funds and other financial facilities 112 Table 5.5: Prioritisation of entrepreneurial support to ‘poorests-of-the-poor’ vs. to those with ‘capital(s)+’ 121 Table 5.6 : Comparison theories of change of support programmes for local small-scale entrepreneurship 3 NGOs 132 Table 5.7: Direct jobs vs. indirect jobs as a result of NGO-support 136 Table 5.8: Experiences of NGOs studied when working with cooperatives/producer organisations 139 Table 5.9: Which concepts and theories used when answering the research questions 143

(8)

8

Boxes

Box 1.1: The main research question 11

Box 2.1: Addition of subquestion A 35

Box 3.1: Development viewed as a deliberate acceleration of modernisation 39 Box 3.2: Explanation of six levels depicted in fig. 3.14 and at same time of four similar levels in fig. 3.15 62

Box 3.3: Addition of subquestion B 65

Box 3.4: Addition of subquestion C 67

Box 3.5: Addition of subquestion D 77

Box 3.6: Overview of all subquestions 79

(9)

9

1 Introduction

.

1.1 Overview of the introductory chapter

This chapter presents the central theme of the thesis and argues why it is a very relevant subject to research (section 1.2). In section 1.3 through section 1.5 a few first key terms are defined and the aims of the thesis are described, to be followed by the formulation of the main research question. As the subject matter is quite extensive the choice has been made to specify the main research question in five ways (section 1.6). At the end of the

introduction a remark is made about the definition of terms and concepts throughout the thesis and the structure of the thesis as a whole is described.

1.2 The central theme of the thesis and its relevance

This thesis analyses the interest that Dutch NGOs expressed for small-scale pro-poor entrepreneurship in fragile contexts in Sub-Saharan Africa during the period from 2011 to 2016. Please note that terms will be defined later in this chapter. These activities of Dutch NGOs are interesting and relevant for the following reasons:

1. According to Cordaid (2015d: 1)2 in 2015 about 17% of the world population lived in

fragile and conflict affected situations (FCASs) and poverty is increasingly concentrated in FCASs: by 2030 two-thirds of all poor people could be living in fragile situations.

2. The private sector, which includes self-employment, provides about 90% of all jobs in developing countries (IFC 2013: 4) and moreover there are good reasons to believe that in fragile contexts this percentage is even higher as there tend to be few government jobs available in these often remote areas.

3. In fragile contexts in developing countries – especially after or even during conflict – economic recovery is generally seen as crucial both for its own sake and for its

contribution to addressing security issues. This last element includes the possible return to violence by groups that feel marginalised by processes of recovery. Especially after the most immediate humanitarian issues have been addressed entrepreneurship is

increasingly seen as a vital engine of growth and driver of recovery. Some authors claim that ‘the private sector tends to get back on its feet faster than government after conflict, and could implement programmes where there is no government capacity yet’ (De Vries & Specker 2009: 54). To varying degrees analysts have paid attention to possible conditions that should be applied to entrepreneurship and the private sector and the support for it, including conditions related to environmental, social and governmental criteria (Kleiterp & Wiersma 2017: 14, 45-60, 77; IFC 2013: 6; De Vries & Specker 2009: 43, 54; SER 1997: 33; World Bank 1995:1).

4. As local governments in fragile contexts tend to be very weak, and sometimes almost absent, in many cases external donors have looked, in one way or another, to local entrepreneurs as (relatively) stable partner institutions in fragile contexts. According to

Avis (2016: 11)3 however ‘ … fragile states represent the world’s most challenging

business environments, often with the most bureaucratic hurdles and the fewest property protections for entrepreneurs’. In a similar vein Hoffmann & Lange (2016: 14)4 stated that

2

The Cordaid report quotes the World Bank 2015 and OECD 2015

3

(10)

10

‘Evidence suggests that the kind of support that does exist for SME development has yielded limited success both in terms of firm productivity and job creation’. And De Vries & Specker (2009: 57) add that ‘private sector development in fragile states has not been researched extensively’. Avis (2016: 1-2) notes that in this respect there is rather mixed evidence about how to go about reaching the intended goals and there is debate about what are core characteristics of ‘good practices’.

5. Over the last ten to twenty years a number of international and local NGOs started supporting local small-scale entrepreneurship in developing countries. The working

assumption – which will be addressed explicitly in a subsequent chapter - is that for many NGOs this support has constituted a major shift from approaches that used to

dominate their development efforts. Publications about typical roles of NGOs

stress activities like delivery of services, which are unavailable to the poor or are of poor quality (education, health, water, sanitation, etc.); innovation and providing alternative approaches; advocacy and lobbying to catalyse change; NGOs as watchdogs and as partners, etc. (Lewis & Kanji 2009: 91-116). In the past most NGOs did not seem to see it as their task to directly support small and medium enterprises. The widespread support for microfinance from the 1980s/1990s onwards, however, may be seen as a first step in this direction, albeit restricted to the segment of micro-entrepreneurs. Support for producer organisations has a long history, but the focus in the past was more on building resilience than supporting more dynamic forms of entrepreneurship and addressing companion activities like providing access to markets and bringing these initiatives to scale.

6. Within this domain, this thesis focuses on small-scale entrepreneurship that is both local and pro-poor. Whether profit-driven entrepreneurship is compatible with reaching social goals remains an open question that hinges on an inherent, but not necessarily unresolvable contradiction.

Entrepreneurship is also relevant in a more personal way, as the author has for a number of years been an entrepreneur himself, taught entrepreneurship and marketing courses over the last twenty years - be it on a rather elementary level for social workers - and over the past 40 years has traveled very extensively through remote parts of the so-called developing world, which included visits to many fragile contexts. The rationale for focusing analysis on Sub-Saharan Africa during the period from 2011 to 2016 and on Dutch NGOs will be

addressed in section 1.6.

1.3 Definition of key terms

In this section I define three core terms that are used in the thesis: entrepreneurship, entrepreneur and private sector. Please note that in section 3.3 a much more elaborate discussion will be given about entrepreneurship and entrepreneurs, which includes the addition of alternative definitions. In table 1.1 on the next page the definitions of the three core terms are given. In chapter 2 section 2.4 it will be argued that the expression

‘entrepreneurial turn’ (see also section 3.3) is in some cases analytically richer and therefore in this thesis is preferred to expressions like ‘more emphasis on the private sector’ or a similar expression. Note: the term ‘fragile contexts’ and related terms will be discussed in section 2.2 and 2.3.

4

(11)

11

Table 1.1: A first definition of the terms entrepreneurship, entrepreneur and private sector

term definition and source

entrepreneurship ‘entrepreneurship is the manifest ability and willingness of individuals, on their own, in

teams, within and outside existing organizations, to:

- perceive and create new economic opportunities (new products, new production methods, new organizational schemes and new product-market combinations;

- introduce their ideas in the market, in the face of uncertainty and other obstacles, by making decisions on location, form and the use of resources and institutions” (Wennekers & Thurik 1999: 46)

entrepreneurs ‘persons who are ingenious and creative in finding ways that add to their own wealth,

power and prestige’ (Baumol 1990: 987)

private sector ‘a basic organizing principle of economic activity where private ownership is an important factor, where markets and competition drive production and where initiative and risk taking set activities in motion’ (OECD 2004: 17-18)

Additional comment OECD: ‘In market economies it is risk taking to earn profits and

incomes that sets economic activity in motion. Such motivation is not just confined to businesses. It is also the motivation for individuals and households when they sell their labour, farm or produce other goods and service’ (OECD 2004: 17-18).

1.4 Aims of the thesis

This thesis has two main aims. The first is to map, as well as possible within the practical limitations of a thesis, how Dutch NGOs have supported entrepreneurship in fragile

contexts. This will be specified in the main research question. This more descriptive mapping exercise is seen as a precondition for the second aim, which involves an analysis of issues that have emerged from the study of development, entrepreneurship and related topics. These issues will be specified in a number of subquestions. The expectation is that this thesis will contribute to a better understanding of the variety of approaches chosen by the NGOs, of the reasons behind these choices and of a number of issues related to these approaches.

1.5 The main research question

The conclusion of this introduction is that a shift can be observed in the practices of NGOs that constitute a move to supporting entrepreneurship in fragile contexts. Their experience, the reasons behind it, and the factors shaping it all seem to be part of a subject that is both relevant and urgent. This shift also raises a number of questions, including the main research question, which can now be formulated as follows:

Box 1.1: The main research question

How have Dutch NGOs supported local small-scale pro-poor entrepreneurship in fragile contexts in Sub-Saharan Africa during the period from 2011 to 2016?

(12)

12

This main research question will guide the more descriptive parts of the thesis. At the conclusion of subsections of chapter 2 and 3, and after ample consultation of relevant literature, a number of analytic subquestions will be formulated to guide the empirical part of the thesis.

1.6 Specifying the main research question

The scope and limits of the main research question is specified in seven ways. The main focus is on small-scale pro-poor entrepreneurship and support for it by external donors. The main research question has been subsequently narrowed down as follows:

- the research focuses on small-scale pro-poor entrepreneurship - the research focuses on local or domestic entrepreneurs/businesses; - the research focuses on Sub-Saharan Africa;

- the research focuses on support given by NGOs for programmes during the period from 2011 to 2016;

- the research focuses on support for programmes that aim at poverty alleviation; pro-poor is used below as short-hand umbrella term for such programmes; this point is a further specification of the first way of narrowing down the main research question;

- the research focuses on support given by Dutch development NGOs; - microfinance programmes fall outside the scope of the thesis.

The rationale for and implications of these seven ways of narrowing down the research question are described in more detail below.

a. Focus on small-scale pro-poor entrepreneurship

In this thesis the classification of the United Nations Industrial Development Organization

(UNIDO) will be used, based on number of employees, as detailed below5.

Table 1.2: Definition of micro, small and medium-sized enterprises based on UNIDO, based on number of employees

Type of enterprise Number of employees

Micro enterprise 1 - 4

Small enterprise 5 - 19

Medium enterprise 20 - 99

Large enterprise 100<

Source: SPARK 2013: 13-15. Based on classification of United Nations Industrial Development Organization (UNIDO).

Hence small-scale entrepreneurship will be used to refer to firms with between 1 – 99 employees. It should be noted, however, that in practice many NGOs focus on the lower tiers of this segment. These tiers involve household enterprises, which often engage in entrepreneurship on a part-time basis, and rural producer organisations. So the two

categories of enterprises listed above fall within the focus of the thesis. In section 3.3 these categories of entrepreneurs will be subject of further scrutiny.

5

According to a World Bank study (2014: 17) 250 employees is the upperbound threshold most used in SME studies. The next most commonly used upperbound for SMEs is 100 employees and this measure is mostly used in Africa, which is consistent with the UNIDO-categorisation used in this thesis.

(13)

13

The focus on small-scale entrepreneurs, as defined above, has been based on the following assumptions:

. Small-scale entrepreneurship – as defined above – represents a significant share of employment in developing countries and this sector also tends to be a major creator of new jobs (DCED 2013: 1).

. Small-scale entrepreneurs in developing countries tend to provide more opportunities for poor and marginalised people for a number of reasons, including an inclusive and pro-poor orientation (DCED 2013: 2-3):

. larger firms are often absent, especially in the poorer regions which the programmes under study address;

. small enterprises have lower entry barriers as to required skills, education and other qualities.

These assumptions refer to developing countries in general. The added assumption in the thesis is that in fragile contexts the role of small-scale entrepreneurs most likely will be even more pronounced. In fragile contexts many disabling factors apply, as listed in section 2.2. An exception in this respect might be to some extent fragile contexts where the economy is dominated by the extraction of natural resources (International Alert, 2006) and/or by big agribusinesses. It should be noted that many of these assumptions are being contested, with some authors advocating a size-blind approach to firms (World Bank 2014: 5) and others contending, that ‘while it is mainly small firms that currently employ or engage the poor it is the growing firms that can help them out of poverty by providing them with higher,

more stable wages’ (Aspen Network 2012: 4).These partly conflicting assumptions and

findings are part of the empirical research.

b. Focus on local or domestic entrepreneurs/businesses

Following the definition of International Alert (2006: 17) ‘local or domestic business’ is understood as ‘… that part of the economy originating from the country in question and not owned by the state. This encompasses individuals as well as entities and organisations engaged in profit-oriented activity: companies and members of staff within companies; individual business people; business associations such as chambers of commerce and other representative bodies; and organisations set up by business people to address issues of concern’. In the thesis businesses set up by returning migrants or by returning members of the diaspora will also be seen as ‘local’, but there will be no special emphasis on this group, important as it may be.

According to Avis (2016: 5)6 working with local – and usually small - private businesses offers

several advantages to external donors as compared to working with large firms. The three most important ones are:

- local businesses are usually more labour-intensive, have more connections with other local firms and are less dependent on imported goods;

- local firms often are not well connected internationally and tend to reinvest locally; - additionally, local businesses are often hit worse by conflict than large businesses, so their stakes in peacebuilding7 activities are higher.

6

Avis quotes Specker 2009: 3

7

‘Peacebuilding attempts to encourage the development of the structural conditions, attitudes and modes of political behaviour that may permit peaceful, stable and ultimately prosperous social and economic development. Peacebuilding

(14)

14

c. Focus on Sub-Saharan Africa

In this thesis the focus will be on Sub-Saharan Africa (SSA). The reason is that SSA is very strongly represented among the fragile contexts worldwide, as depicted in figure 1.1 and this is also an important factor why Dutch NGOs have a major focus on this region.

Figure 1.1: Number of fragile contexts in the world by region

Source: OECD, 2016, p. 77.

d. Focus on support given during the period from 2011 to 2016

Support for local entrepreneurship in developing countries by external donors has existed in one way or another for decades. In section 2.5 it will be argued that a ‘partial

entrepreneurial turn’ can be discerned in Dutch development policies and cooperation from around 1990-1995 onwards. This turn deepened after 2010. In the thesis the period during which support by Dutch NGOs for entrepreneurship in fragile contexts will be studied is limited to the years 2011-2016 for the following reasons:

- Most large Dutch NGOs – at least until very recently – were very dependent on support by the Dutch government. From 2007 onwards government support for Dutch NGOs was

streamlined in a so-called ‘Co-Financing System’ 8, which was stopped at the end of 2015.

. The period chosen for the thesis coincides with the MFS II 2011-2015 period, but the year 2016 has been added to allow for more recent evaluations and insights. It seems reasonable to expect that by now programmes financed under the MFS II regime have been evaluated.

- The chosen period seems to coincide with a deepening of ‘the partial entrepreneurial turn’ in Dutch development cooperation. Section 2.5 gives more details about this turn. e. Focus on pro-poor support and label ‘pro-poor’ being used as short-hand umbrella term The term ‘pro-poor growth’ is defined in different ways. Table 1.2 gives both a relative and an absolute definition as utilised by the OECD (2004: 12).

activities are designed to contribute to ending or avoiding armed conflict, and may be carried out during armed conflict, in its wake, or as an attempt to prevent an anticipated armed conflict from starting’ (Smith 2004 as quoted by

International Alert 2006: 28).

8

In Dutch this co-financing system is called ‘Medefinancieringssysteem/MFS’. Two budget periods have been completed under this system: MFS I covering 2007-2010 and MFS II the period 2011-2015 (Schulpen & Klem 2005: 90-92; Ministry of Foreign Affairs of the Netherlands 2013: 59-61).

(15)

15

Table 1.3: Two definitions of pro-poor growth Definition

Relative definition ‘when the incomes of the poor are rising more than average incomes, thus showing that the poor are benefitting disproportionally from growth and that inequality between the poor and the non-poor is falling’

Absolute definition ‘the rate at which the incomes of the poor are rising’.

Source: OECD 2004: 12.

A poor person is defined as having an income of US 1,90 per person per day or lower (United Nations 2017: 16). In the thesis the distinction between the two definitions will not be implemented strictly, as sources often are not clear about which definition is being used. Throughout the thesis the term ‘pro-poor’ in fact is used as an short-hand umbrella term that covers not only the income aspect of poverty, but also aspects like vulnerability to shocks, environmental and governance issues and the aspect of social inclusion/exclusion. The World Bank (2013: 3-5) defines social inclusion in two ways, as listed in table 1.4. Table 1.4: Two definitions of social inclusion9

A very general definition ‘the process of improving the terms for individuals and groups to take part in society’ A more articulated definition

incl. the ‘how’ and ‘for whom’

‘the process of improving the ability, opportunity, and dignity of people, disadvantaged on the basis of their identity, to take part in society’

Common group identities leading to social exclusion are: gender, ethnicity, race, religion, cast and status of disability.

Source: World Bank (2013: 3-5).

The justification for using ‘pro-poor’ as an umbrella term is that for the analyses made in the thesis the fine grained details do not matter so much, but the overall characteristics of a particular NGO intervention or approach do.

f. Focus on pro-poor support given by Dutch development NGOs

The vision and mission statements of development NGOs stress, almost without exception, their focus on poor and excluded people in developing countries and fragile contexts. Given the emphasis in the thesis on pro-poor entrepreneurship it is logical to focus on NGOs. Moreover, this focus is workable witin the practical constraints and time available for the empirical research. Practical considerations with respect to accessability of both documents and persons have played a decisive role in limiting the support given to Dutch NGOs.

9

Please note that ‘inclusive entrepreneurship’ and ‘pro-poor entrepreneurship’ have much in common, as excluded individuals and groups often are also overrepresented in groups showing high rates of (extreme) poverty, but this certainly is not always the case. Example: a person in Uganda with - amongst other identities - a homosexual identity is not necessarily poor and might even be relatively well off.

(16)

16

g. Microfinance is not a focus of the thesis

In par. 2.5.4 support for micro-entrepreneurs by providing microfinance is shortly discussed, including an argumentation as to why microfinance is not a focus of the thesis.

1.7 A note about definitions of terms and concepts

In the paragraphs above a number of terms and concepts have been defined. In the

chapters that follow additional definitions will be given as far as necessary. Regularly a table or a box is used to make it easy to trace these definitions. The total number of definitions given is quite large and a full list of terms and concepts and their definitions is presented in alphabetical order in appendix A.

1.8 Structure of the thesis

The thesis is organised as follows. Chapter 2 qualifies the chosen approach in the thesis as actor-centric and provides a framework for post-conflict employment generation. Also two key contextual aspects are presented. First the choice for the use of the term ‘fragile contexts’ is justified and a description is given of enabling and disabling factors as to entrepreneurship in fragile contexts. Next the partial entrepreneurial turn in development policies in the Netherlands, referred to above, is described, beginning with first steps around 1990-1995 and a deepening of the turn around 2010. This overview leads to the first

subquestion. Chapter 3 reviews theories of development and entrepreneurship. It also presents the result of a mapping exercise in the form of a proto-typical model of support for entrepreneurship by NGOs. This model provides the platform for the answer to the main research question. Additionally, chapter 3 discusses the role of entrepreneurial capital in the prioritisation of target groups in NGO-support and the phenomena of risk and impact

investing. The latter is presented by NGOs like Cordaid as ‘the next stage’ in development aid (Cordaid 2016: 1). This chapter results in some additional subquestions. Chapter 4 describes the research design and explains the rationale for the choice of methods: document analysis and the use of semi-structured interviews with professionals working in relevant Dutch NGOs. Chapter 5 summarises the empirical findings and connects these to the theories employed to provide a first provisional answer to the main research question and to the subquestions. The subtitle of the thesis is ‘a search for patterens at different levels’10. This subtitle hints at the inductive approach of the thesis, which has resulted in a number of mapping exercises to uncover possible patterns. A summarizing model has been constructed to visualise the outcomes. In order to trigger discussion among NGOs about possible future directions of NGO interventions concerning support for small-scale local entrepreneurship in fragile contexts four scenario’s have been developed to structure such a discussion. Chapter

6 summarises the whole thesis and ends with afinal remark about NGOs having to act under

conditions of scientific uncertainty.

Please note that the author has taken the liberty to produce many tables and some figures throughout the thesis as he considers these forms of visualisation as powerful relational tools, which can serve as ‘the stepping stones of the story’ of the thesis11.

10_{See par. 3.4.2 and 3.4.3 for details.} 11

(17)

17

2 Context: notes about fragility and a ‘partial entrepreneurial turn’

in Dutch development cooperation

2.1 Introduction: an actor-centric approach under conditions of fragility

This introduction starts with an observation of how support by Dutch NGOs for local small-scale entrepreneurship can be framed, which is instructive for the remainder of the chapter. Next an overview is given of the structure of the chapter.

The subject of this thesis is support by Dutch NGOs for local small-scale entrepreneurship in fragile contexts in SSA. This theme in fact can be interpreted as being guided primarily by an actor-centric approach under conditions of structural fragility. Actor-centric approaches emphasise the space actors – individuals, organisations, etc. - have for action. Structure-centric approaches emphasise the context-bounded character of human practices (Van der

Poel 1999: 143-14912). Concerning the subject of the thesis an actor-centric approach refers

to NGOs, which try to create and enlarge space for local entrepreneurial actors under conditions, which are rather adverse to entrepreneurship. These adverse conditions are usually labeled in the literature ‘disabling conditions’ for entrepreneurship. According to Van der Poel (idem: 144) one weakness of actor-centric approaches is that they tend to

underestimate the context-bounded character of human practices. As will be seen in chapter 5, the empirical chapter, in practice NGOs often have a double approach. Usually their main focus is on the space where they think they can have most impact as outside interveners, that is by support to local entrepreneurial actors. But often there are some parallel - albeit usually much more moderate - initiatives trying to address disabling conditions for

entrepreneurship; for instance by advocacy and lobbying activities directed at the national and local governments and related institutions (for example Stewart Redqueen 2016: 10; Oxfam Novib 2016a: 6)13.

The thesis takes primarily an actor-centric approach. As contexts for entrepreneurship in developing countries vary enormously a more structure-centric approach would require the mapping of structural conditions in a particular context, for instance by using a case-study approach. Such an approach however is outside the scope of the thesis. What can – and will be - done in this chapter though is to look in more general terms at what is meant by the term ‘fragile contexts’ and to explore two types of structural conditions: first those

confronting local entrepreneurs in terms of enabling and disabling conditions and second the conditions set by Dutch government policies in the past and present concerning support for local entrepreneurship. These governmental policies are of great relevance for Dutch NGOs, as especially in the past they tended to be quite dependent on government financing. Nonetheless also NGOs have space for initiatives of their own, but that will be part of the empirical research.

12

The distinction between actor-centric and structure-centric approaches is based on the structuration theory of Anthony Giddens (1979, 1984) as quoted by Van der Poel 1999: 146).

13

A publication which very much emphasizes the importance of the context is: Hilhorst, D.J.M, van der Haar, G, & Weijs, B. (2017) Facing Fragilities : the socially embedded nature of socio-economic recovery.

(18)

18

The structure of this chapter is as follows. First attention is given to the evolution of the term ‘fragile’ as used in connection with ‘states’, ‘contexts’, etc. The choice is made to use the term ‘fragile contexts’ as the preferred one in the thesis. And a framework is given for post-conflict employment creation and income generation. Next an overview is given of so-called enabling and disabling factors as to entrepreneurship in fragile contexts and it is argued that a partial entrepreneurial turn has taken place in Dutch development cooperation – but also abroad - starting around 1995 with a deepening of the turn around 2010. A concept like a ‘partial entrepreneurial turn among Dutch development NGOs’ does not seem to exist in the literature. So for this thesis a working definition has been constructed by the author using a simple input - throughput – output model as a frame with Dutch development NGOs as object of analysis. The chapter ends with the addition of a subquestion to the main research question in order to connect this partial entrepreneurial turn with the NGOs to be

researched.

2.2. Fragile contexts: what’s in a name

Over the last years many terms have been used for what in this thesis will be labeled ‘fragile contexts’. In table 2.1 below the terms ‘fragile state’ and ‘fragile contexts’ are defined. Both definitions originate from the Organisation for Economic Cooperation and Development (OECD) and represent an evolution in thinking about fragility.

Table 2.1: Definition of the terms ‘fragile state and ‘fragile contexts’ Year Author Main term used Definition

2007 OECD fragile state ‘Failure of the state to perform functions necessary to meet citizens’ basic needs and expectations. Fragile states are commonly described as incapable of assuring basic security, maintaining rule of law and justice, or providing basic services and economic opportunities for their citizens’

2016 OECD fragile contexts

note: contexts refer to states, systems and/or communities

Fragility is defined as ‘the combination of exposure to risk and insufficient coping capacity of the state, system and/or communities to manage, absorb or mitigate those risks. Fragility can lead to negative outcomes including violence, the breakdown of institutions, displacement, humanitarian crises or other emergencies’. The new multidimensional OECD fragility framework has five interrelated dimensions: economic, environmental, political, societal and security and each dimension is measured on a seven point scale between ‘moderately fragile’ and ‘extremely fragile’ (OECD 2016: 73).

Sources: OECD 2007, OECD 2016

Other terms used for similar phenomena are:

- post-conflict countries as defined by UNDP (2008: 4-5) and USAID (2009: 4) - conflict-affected environment as defined by DCED (2010: 7)

Looking at the terms it becomes clear that around 2007-2009 states and countries were seen as the main entities, whereas after 2010 the discourse changed to more abstract formulated terms like ‘conflict-affected environments’ and ‘fragile contexts’. The formulation ‘fragile contexts’ has a number of advantages compared to the other terms used:

(19)

19

- the fixation on countries and nation-states is circumvented; often in a particular period a fragile context concerns only a specific part of a country, like Northern Uganda, not Uganda as a whole; and sometimes the fragility concerns parts of two or more

neighbouring countries with strongly related drivers and consequences of conflict in the region as a whole; an example of this is the Great Lakes Region in Central-Africa; in other cases, like the Palestinian Territories, the status of the area is a contested one;

- fragility may also concern certain communities or systems, which is a more subtle way of thinking about fragility;

- the term ‘fragile state’ was often especially used for so-called developing countries; in the present OECD fragility framework the term fragile uses five interrelated dimensions, is measured on a seven point scale and is applied to a much wider variety of contexts. Object thesis: from ‘post-conflict’ states to ‘fragile contexts’

Therefore, in this thesis the term ‘fragile contexts’ will be used as the core term. At the beginning of working on the thesis the author had a post-conflict setting in mind when thinking about fragile contexts. However, this focus was broadened, when it became clear how hard it was to find professionals within NGOs willing to allow an interview. Nonetheless at several occasions post-conflict settings are emphasised as in these areas the problems tend to be the biggest. Inevitably in quotes sometimes the other terms mentioned above will be used, usually with a meaning which is reasonably close to the OECD (2016) definition of fragile contexts. Sometimes there are opportunistic reasons to use the older terms, like the availability of a good map, as in figure 2.1 below; and for ease of compact communication, as in the cases of appendix C. It seems that the term ‘post-conflict states/countries’ is being used less and less. One reason could be that between 25 and 50 % of post-conflict states relapse into conflict within 10 years after a peace agreement (World Bank 2011, USAID 2009). Figure 2.1 below shows the approximate rating of all countries in Africa on the Fragile States Index 2017 constructed by the Fund for Peace on a scale between 0 (dark blue: sustainable) and 120 (dark brown: ‘extremely fragile’). It demonstrates that almost all states in Sub-Saharan Africa excluding Southern Africa and a few countries in West-Africa have a high degree of fragility.

Figure 2.1: Fragile States Index 2017

Source: Fund for Peace (2017) Fragile States Index 2017 (base: twelve economic, social and political indicators)

(20)

20 2.3 A framework for post-conflict employment creation and income generation

2.3.1 Introduction

In this section 2.3 a policy framework will be introduced concerning post-conflict employment creation, income generation and reintegration published in 2009 by two organisations of the United Nations: the International Labor Organisation (ILO) and the United Nations Development Programme (UNDP). As was described in section 2.2 the focus of the thesis has been broadened from post-conflict settings to fragile contexts. Nonetheless it seems useful to shortly discuss this framework for two reasons. The first reason is that many fragile contexts do have a post-conflict history; this history refers to the security dimension of the definition of fragile contexts as discussed in section 2.2. The second reason is that even in cases where the main cause of present fragility may not be a recent conflict, the assumption is that there are many similarities between a post-conflict and a non-post-conflict context with regards to the other four dimensions of the definition of fragile

contexts: economic, environmental, political and social. So is seems that it is still instructive to introduce the UN policy framework, as it makes it possible for every NGO-intervention to clarify in which particular niche it operates and how its intervention is related to other interventions of local governments, donors, etc. The aim of the framework is ‘to help scale-up and to maximize the impact, coherence, efficiency of sscale-upport provided to post-conflict countries by UN programmes, funds and specilized agencies’ (ILO/UNDP 2009: 9). Guiding principles and programming guidelines at country level form a core element of the report. In the next section figure 2.2 - representing phases of (early) recovery - will be used to

characterise the UN-framework.

2.3.2 A UN policy framework for post-conflict employment creation and income generation Introduction

As mentioned above in 2009 two organisations of the United Nations - the International Labor Organisation (ILO) and the United Nations Development Programme (UNDP) – introduced a policy framework concerning post-conflict employment creation, income generation and reintegration. Two aspects of that report will be highlighted here. Firstly the report stresses that is important to understand the issue of employment in a particular post-conflict setting. Secondly the report distinguishes between three overlapping tracks – three phases - during post-conflict recovery.

Understanding employment in fragile settings

According tot he report (ILO/UNDP 2009: 9) the first task is to understand the issue of employment in a particular post-conflict setting – or setting that is fragile for other reasons - looking both at the main challenges and opportunities. The intervening organisation should acquire a thorough understanding of the local economy and market, which often have been severy disrupted by the conflict or by other sources of fragility. Specific characteristics of post-conflict target groups, like ex-combatants including former child combatants, internally displaced persons (IDPs) and refugees will get limited attention here because the focus in the thesis is not specifically on post-conflict settings. In the report much attention isgiven to

(21)

21

unemployed women and youth, looking both at their needs and capacities, for reasons listed below14.

- Youth: The report (ILO/UNDP 2009: 9) notes that ‘youth often find themselves trapped in a vicious cycle of violence, poverty, illiteracy and social exclusion’, which makes it quite a challenge to address them emphasising their positive energies, talents and skills.

- Women: In many cases women are quite disadvantaged as to access to assets, finance, education and skills required to start or expand a business. Women are often also

characterised by their ‘time poverty’ given their prime responsibility to raise children and run the household, besides trying to raise an income. On the other hand women often spend a higher part of whatever they earn on health care and education, which improves the capacities and well-being of their families (Green 2012: 112). And in the case of microfinance women demonstrate high repayment rates (Bateman 2010: 27). Phases of (early) recovery and niche for NGO-support for entrepreneurship

The ILO/UNDP-report (2009: 21-22) distinguishes between three overlapping tracks – three phases - during post-conflict recovery. The three tracks run parallel to each other but the typically peak successively. Figure 2.2 below gives a graphical depiction of how these tracks may evolve in a proto-typical case. The three tracks will be shortly discussed below by first looking at a typical post-conflict setting to be followed (or parallel) by a short discussion of possible non-post-conflict settings. It will become clear that the niche of NGO-support for local entrepreneurship in fragile contexts must be situated under track B.

Figure 2.2: Phase of (early) recovery

Source: ILO/UNDP 2009: 12. Note: curves measure intensity of programmes.

14

(22)

22

Track A: Stabilising income generation and emergency employment for high-risk and high- needs groups

A peace agreement usually provides a window of opportunity for recovery of local

economies. After conflict the first priority usually is to target risk, needs and high-opportunity groups like ex-combatants, returning internally displaced persons (IDPs), refugees and unemployed youth. Small programmes focussing on livelihood support and short-term income generating activities may provide quick benefits. These programmes are complementary to humanitarion programmes focusing on food, health care, water and sanitation, shelter, etc. Typical and often temporary programmes are: small-scale

infrastructure rehabilitation (especially repair and building of roads) on a cash-for-work basis and support for subsistence farming (tools, seeds, food provision until next harvest, etc.). These programmes are typically fully subsidised by external donors. Similar programmes might be provided in non-post-conflict contexts, for instance after an environmental shock, periods of socio-economic down-turn or after political unrest. However, during this phase there may be few local entrepreneurs or NGOs around to organise these programmes (ILO/UNDP 2009: 19-22, 35; De Vries & Specker 2009: 32-37).

Track B: Local economic recovery for employment opportunities (and reintegration) This phase starts when instability has been reduced, but uncertainties and insecurity still abound. The assumption in the thesis is that, although post-conflict contexts will have several distinct characteristics, there will be also many similarities between fragile post-conflict and non-post-post-conflict contexts. The main purpose of this phase is that local

communities become relativily self-reliant and build coping mechanisms. Improved stability wil make it possible for more actors to participate. NGOs supporting entrepreneurship often enter during this phase, so this phase will get the most attention here. This is not the right time yet to introduce major changes: local people most likely want to engage with income generating activities they are familiar with, like agriculture or a specific craft. But most likely there are opportunities to improve productivity and for up-scaling (ILO/UNDP 2009: 21-22, 35; De Vries & Specker 2009: 43-44).

Priority areas during local economic recovery

De Vries & Specker (2009: 44) mention three priority areas during this phase. Two priorities will be shortly discussed here, the third one – microfinance – falls outside the scope of the thesis.

a. Income generating activities and livelihood support: infrastructure and agriculture

Labour-intensive infrastructure projects are an important way to create short-term jobs and

demonstrate a peace dividend15. During this phase local communities should be targeted as

a whole, so without a strong if not exclusive focus on the high-risk and high-need groups mentioned under track A. Local communities should be actively involved and there is more

15

Peace dividend: ‘The notion of peace dividend denotes the set of positive socio-economic outcomes that result from greater physical security, political stability, government engagement and international support in the post-conflict environment. Such dividends can include jobs, training and rehabilitation opportunities, livelihood rehabilitation, re- opening of businesses, the possibility for displaced people to reclaim their lands, improving public transportation as well as the resumption of basic social services provision. Peace dividends are expected to increase the opportunity cost of conflict recurrence for likely combatants and provide a sense of normalcy that will, in turn, help consolidate peace and foster recovery in a cumulative manner’ (ILO/UNDP 2009: 50).

(23)

23

time available for the design of support programmes with a more structural character. Examples are: construction or repair of irrigation systems, building of bridges, health clinics, schools, etc. (De Vries & Specker 2009: 46-48)

In rural areas – on which the thesis does focus; see also chapter 3, section 3.4 – agriculture is the central sector for local livelihoods and often has clear potential for growth. Improvement of agriculture in fragile contexts serves different functions: creation of jobs, improvement of food security and prevention of migration on a large scale to cities. Support for agriculture

by external donors aften involves value chain promotion16 (De Vries & Specker 2009: 45-49).

The authors (2009: 45) emphasise that support for value chains may have important political implications for at least two reasons. First, large landowners or others with vested interests in the existing situation may put up strong resistance to smaller entrepreneurs – often getting organised into cooperatives or producer organisations - trying to get a larger part of the pie. A second more political aspect is : ‘Value chains may become more exclusive over time as small producers fail to meet the rising number of requirements and higher standards stipulated by those who ‘control’ the chains (such as multinational traders and food

processors), leaving only those larger or innovative actors who can upgrade their businesses accordingly’ (De Vries & Specker 2009: 45).

Engaging with agriculture in fragile contexts by external donors tends to be quite challenging for several reasons: ‘The effectiveness of the agricultural system is dependent on many external variables such as droughts, erosion and soil degradation, and factors that are highly conflict prone, ones like access to land or water’ (De Vries & Specker 2009: 49).

b. Private sector development

Support for local entrepreneurship and private sector development is the priority area which is the very subject of this thesis, so there is no need to comment on this priority area here. Track C: Creating an enabling (national) environment

This track falls outside the scope of the thesis and will therefore not be discussed. 2.3.3 Conclusion of section 2.3

In 2009 two organisations of the United Nations - the International Labor Organisation (ILO) and the United Nations Development Programme (UNDP) – introduced a policy framework concerning post-conflict employment creation, income generation and reintegration. The ILO/UNDP-report distinguishes between three overlapping tracks – three phases - during post-conflict recovery (ILO/ UNDP 2009: 21-22). From the discussion above it is quite clear that the niche of NGO-support for local entrepreneurship in fragile contexts must be situated under track B: local economic recovery for employment opportunities and

reintegration (ILO/UNDP 2009: 21-22; De Vries & Specker 2009: 54-62). In rural areas – on which the thesis does focus; see also chapter 3, section 3.4 – agriculture is the central sector for local livelihoods and often has clear potential for growth. Several reasons – not to be repeated here – were mentioned why engaging with agriculture in fragile contexts by external donors tends to be quite challenging. The focus in the thesis is on the priority area of ‘private sector development’. In our view opinion a better formulation is support for local small-scale ‘entrepreneurship’ in fragile contexts. As will be explained hereafter in this

16

Support for value chains: ‘Support with an emphasis on business-to-business relationships and on gaining access to

markets with higher values’. The focus often is on only one or a few products and actors (Sahan & Fosher-Mackey

(24)

24

chapter in par. 2.5.1 in the thesis this formulation is the preferred way of labeling this approach (see also chapter 3, par. 3.3.7 and especially figures 3.11 and 3.12).

2.4 Enabling and disabling factors as to entrepreneurship in fragile contexts

This section makes a distinction between enabling and disabling factors as to

entrepreneurship in fragile contexts and gives examples of both. Enabling factors support the development of local entrepreneurial activity and disabling factors have a detrimental effect on it. As has been clarified in chapter 2 section 2.1 the focus in the thesis is not much on the fragile context - even though in practice it is of critical importance - but on local entrepreneurs and external support for them. Nonetheless it is instructive to have an idea what enabling and disabling factors might entail. In this respect three aspects will be emphasised: (a) many problems affecting fragile contexts are also present in many

developing countries, but (b) some factors are more severe in fragile contexts and (c) some of these factors are specific to post-conflict contexts.

a. Enabling factors for the private sector in developing countries as to pro-poor growth. The OECD (2004: 21; see also USAID 2009: 51) has developed an analytical framework in this respect of five interlinked factors as shown in table 2.2.

Table 2.2: Enabling factors for the private sector in developing countries as to pro-poor growth

o providing incentives for entrepreneurship and investment o increasing productivity: competition and innovation o harnessing international economic linkages o improving market access and functioning

o reducing risk and vulnerability Source: OECD 2004: 21; see also USAID 2009: 51.

b. Disabling factors for the private sector in developing countries and fragile contexts Table 2.3 on the next page illustrates that some disabling factors may be more severe in fragile post-conflict contexts than in contexts, without conflict.

(25)

25

Table 2.3: Disabling factors which may be more severe in fragile post-conflict contexts than in contexts without conflict

o a lack of basic security and corresponding low levels of confidence among economic agents;

o low fiscal capacity due to administrative weaknesses and lack of political support, reducing the government’s revenue and tax base

o a weak administration and judiciary that is unable to check illegal economic activity

o a high level of criminal activity, which often surges in the post-conflict period, and much predatory behaviour among the elites, especially in resource-rich countries

o sudden massive movements of people

o deep macroeconomic challenges, often including large budget deficits, high inflation and a high debt burden Source: UNDP 2008: 41.

c. Some disabling factors or challenges are specific to fragile post-conflict contexts Table 2.4 lists a number of disabling factors or challenges which are specific to fragile post-conflict contexts.

Table 2.4: Disabling factors which are specific to fragile post-conflict contexts

o generalized insecurity and armed violence o high risk of armed conflict recurring o unexploded ordinance

o armed groups contesting the legitimacy of the new government o widespread inter-group violence

o massive destruction of infrastructure and institutions o war (or warlord) economies

o severe scarcity in human capacity (massive population displacement: IDPs17, refugees, diasporas) o collapsed labour markets

o militarized international intervention

Source: UNDP, 2008: 41. See also: USAID 2009: 5-8.

The subject of enabling and disabling factors as to entrepreneurship in fragile contexts, as specified in the three tables above, serves as a context for all aspects of entrepreneurship discussed in the thesis. As has been mentioned in section 2.1 the thesis takes an actor-centric approach. Nonetheless there will be many instances in the thesis where a reference is made to the listed enabling and disabling factors. Examples are: in chapter 3, par. 3.3.2 reference is made to the ‘reward structure’ in the economy’ and in that respect a distinction is made between three types of entrepreneurship: productive, unproductive and

17

(26)

26

destructive’; and in some cases an NGO develops specific instruments tailored to fragile contexts as is the case for instance with ‘Resilient Business Development Services’ as used by Cordaid Investment Managament B.V. (see chapter 5, table 5.2). And NGOs supporting entrepreneurship in fragile contexts have developed specific instruments used for assessing prospective participants in their programmes and monitoring and evaluating current

participants (see appendix D, table 5.5).

2.5 A ‘partial entrepreneurial turn’ in Dutch development cooperation

2.5.1 Introduction, what does a ‘partial entrepreneurial turn’ entail?

In this introduction first an explanation is given of what is meant in the thesis with the term ‘partial entrepreneurial turn’. Next an overview is given of the sections in this sub-chapter.

In this section it will be argued that especially during the last two decades slowly a ‘partial entrepreneurial turn’ has taken place in donor thinking and practice both in the Netherlands and abroad. The label ‘entrepreneurial turn’ as applied in the thesis refers to a number of changes. First it refers to the increasing emphasis in development policies that was placed on support of private sector development and entrepreneurship. Secondly the term refers to the tendency to increasingly emphasise the self-interests of the donor-countries in

development cooperation. One could say that a country like the Netherlands increasingly tends to conceptualise itself in development cooperation as a business unit. This happens in different ways. On a practical level there is for instance the trend to increasingly replace grant-based instruments by investments that have to be repaid with interest. Thirdly a results-based approach has become dominant introducing all kinds of tools from the world of finance and investment into the world of development cooperation. It will also be argued that the shift to support to SME-development – after an initial emphasis on

micro-entrepreneurs - represents a deepening of the entrepreneurial turn. The adjective ‘partial’ refers to the fact that none-the-less non-entrepreneurial interventions continue to play an important role. Please note that in the literature the more usual way to describe this trend is to talk about increased support for the role of the private sector. But in the thesis the use of the term ‘entrepreneurial turn’ is preferred as the author is of the opinion that this approach provides more room for a richer analysis in which all three levels of entrepreneurship – the level of individual entrepreneur, of the firm and of the economy as a whole – do get their deserved place including intermediate linkages between these three levels, as will be discussed in par. 3.3.7 (see especially fig. 3.11 and 3.12 in that paragraph).

Roughly two phases will be discerned, namely a first phase dominated by microfinance provided mainly to household enterprises and to micro-enterprises (roughly from the 1980s onwards) and a second phase, when – as an additional field - donor support for small- and medium enterprises took off on a clearly larger scale than had been the case before. Much of the thinking about entrepreneurship and its potential role in contributing to

economic growth in developing countries originates in the ‘west’. Therefore in par. 2.5.2 first a short summary will be given concerning reasons behind the renewed attention for

entrepreneurship in developed countries from the late 1980s onwards. Next attention is given to the so-called Washington Consensus of the early 1980s and the Post-Washington Consensus after 2000 in order to link the rise of the entrepreneurial economy in developed

Support by Dutch NGOs for small-scale local entrepreneurship in fragile contexts in Sub-Saharan Africa during the period 2011-2016 : a search for patterns at different levels