What Does Philanthropy Mean for Africa?
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What Does Philanthropy Mean for Africa?
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By Liviya David, Business Development and Research Analyst, Botho Emerging Markets Group
March 2, 2021
Key takeaways:
African governments face massive budget shortfalls and are borrowing at high rates to cover basic needs. Simultaneously, citizens’ trust in many African governments, their taxation systems, and their effectiveness in the distribution of public goods is low.
Africa is home to 177,000 high net-worth individuals with a collective net worth of 1.7 trillion. Although some philanthropists on the continent have created giving entities to engage in strategic philanthropy, uptake in the practice is low.
Where African governments may be unwilling or unable to solve complex socio-economic challenges, philanthropy by Africa’s wealthy can bridge the gap by investing in co-creating solutions with communities and pursuing “big bet” solutions that have a higher risk but also a higher reward.
Philanthropy as we know it is at a crossroads: rising critiques are nudging donors and beneficiaries to reconsider the role of the sector in modern society. Simultaneously, African governments face massive budget shortfalls amidst urgent development challenges and societal inequities, and they increasingly borrow at high rates to bridge the gap. With little funding to meet the basic needs of their citizens, most of the region’s governments have little bandwidth to invest in civic innovation or “big bets” on solutions to social problems. This convergence of issues presents a unique opportunity to consider the future of philanthropy on the continent led by high net-worth Africans. To solve complex socio-economic challenges requires the input of all sectors of society. Where governments lack the capacity or willingness to launch transformative interventions, philanthropy by Africa’s wealthy can bridge the gap.
Is philanthropy fit for purpose in today’s era? Perhaps not. Critics in the West argue on one hand that the sector is no more than thinly-veiled tax avoidance—and one with corrosive effects on democracy. According to this line of thinking, philanthropy shrinks tax revenue governments rely on to fund social projects. While this argument may hold in New York, its power wanes in Nairobi. In most major African economies, charitable giving is largely non-tax-deductible and not as readily tracked by public disclosures. Despite the fact that the number of high-net-worth Africans is on the rise (there are over 140,000 reported US dollar millionaires and 20 US dollar billionaires on the continent), foundations and family offices are scarce and high-profile commitments like the Giving Pledge, which has gained popularity in North America, Western and Northern Europe, and parts of East Asia, have failed to take off. To date, the initiative has only 3 African signatories out of more than 200. On the other hand, the Black Lives Matter movement has elevated and amplified pre-existing conversations around racial inequities in philanthropic giving from the West into Africa that tends to favor white, foreign founders of NGOs and social enterprises over Black founders who are doing similar work.
As modern society grapples with the ills of philanthropy, particularly in a Western context, developing a vision for African philanthropy with a lens towards equity and justice is critical. New approaches should focus on funding innovative solutions to common everyday challenges for the average African. Stanford Professor Rob Reich argues that to redeem the “corrupt philanthropic system,” the ultra-wealthy (and their private foundations) should fund long-term innovations that can eventually be adopted by the market as standard or voted upon to be incorporated into state policy. The 177,000 high net-worth individuals living on the continent with a growing collective net worth of $1.7 trillion could leverage their wealth, either on an individual/family-level or collectively, to invest in local, social innovation to solve societal problems.
According to some thinkers, the best thing the wealthy can do to solve protracted societal issues is to pay their fair share of, or just pay more, taxes. Between 2014 and 2019, Kenya experienced a 263% growth - the fastest in the world - in its number of dollar millionaires. Similarly, between 2018 and 2023, Nigeria is projected to be the top fastest-growing high net worth country in the world. However, in these environments, implementing a millionaire tax like that proposed by American politician Bernie Sanders is unlikely to be effective. After all, trust in government is low amongst many African countries. In Nigeria, for example, 66%% of citizens do not believe the government properly manages its sources of revenue or effectively distributes public goods, while nearly 50% of people who use public services reported paying a bribe between 2018 and 2019. The Kenya Revenue Authority reported record highs for taxes collected at 1.607 trillion KES (nearly 15 billion USD), but 60% of Kenyans believe the government is managing the economy poorly, two-thirds of people believe corruption has increased in recent years, and the government is in hot water for its growing public debt burden. Money from the wealthy can bridge public funding gaps and fund innovative solutions to solve some of society’s biggest problems.
Infrastructure needs to be in place to conduct philanthropy transparently. Family trusts and foundations are two ways to foster accountability, make space for co-creation, and efficiently manage grantmaking between the high net-worth individuals at the helm of these entities and recipient communities. A growing number of African philanthropists have created family foundations focused on themes like education and health, job creation and livelihoods, and entrepreneurship, among others. The establishment of these entities is a crucial first step, but founders and foundation staff will need to focus on developing strategies in coordination with communities to innovate around social challenges, while also publicly sharing impact metrics to facilitate transparency and nurture knowledge-sharing in Africa’s nascent, but growing philanthropic sector. Platforms like the African Philanthropy Forum could create country chapters akin to WEF’s Global Shapers to adapt its work to local contexts in partnership with rising stars in philanthropy in each country.
There are already examples - both within the continent and outside of it - of the wealthy co-creating innovative solutions for the world’s most complex, pressing problems, particularly where governments prefer to execute the simplest solutions rather than the most effective. The Gates Foundation made investments in gene-editing technology in hopes of wiping out malaria-carrying mosquitos, an investment they see as a long shot without guaranteed success but the potential for life-changing impact if it does work. In the entrepreneurship space, the Tony Elumelu Foundation combines private sector involvement, mentorship, and networking and ecosystem connections in its Entrepreneurship Program, creating a solution for African entrepreneurs. The Chandaria Foundation developed a scholarship programme in partnership with the Kenya Community Development Foundation that provides students from vulnerable backgrounds with partial scholarships to attend secondary school. Philanthropy is not and cannot be a cure-all, as governments ultimately have to improve their distribution of public goods so that people trust them with their taxes. Nevertheless, investments of high-net-worth Africans in societal issues can accelerate the development of homegrown solutions to local challenges.
Conversations around innovation in philanthropy typically center on the West and solutions to deep societal challenges rarely translate across borders. That begs the question: what can and should the future of philanthropy look like in Africa? What if an African philanthropist launched an intervention on the continent akin to the Spanx Foundation’s Red Backpack Fund, which is giving unconditional cash grants of $5,000 to 1,000 women-owned businesses? The top-earning CEOs in just 1 African country could devote 10% of their annual incomes to study the African genome (the most diverse in the world and also the least studied) to accelerate early detection of diseases like cancer, ultimately saving millions of dollars in healthcare costs. A group of African foundations can and should collaborate on innovative solutions, research, and distribution of new treatments for neglected tropical diseases (NTDs) like African sleeping sickness to eradicate them from the continent. Currently, most funding for interventions to target NTDs comes from the West, but the money to address these issues also exists on the continent. With the infrastructure in place and collaborations in motion, redistributing wealth through philanthropy to address Africans’ everyday problems can have a transformative impact on people’s lives - from their health and ability to run their businesses to their ability to succeed in school and feelings of having control and agency over their lives.