Economic growth unsustainable if it excludes poor majority

There has been a discernible shift in global economic thinking towards a development model that fosters inclusive growth. This new paradigm argues that economic growth is unsustainable if it excludes the poor majority. And that business and other economic agents should embrace inclusive growth as a fundamental operating principle.

Building on this idea elicits yet another interesting dimension—that economic and business value chains can be a potentially powerful catalyst for achieving and sustaining inclusive economic growth. This envisions creating business models that not only target low-income communities as a distinct market segment but also integrate them into the business value chain.

The phrase “inclusive business” is often used to describe a business model that aspires to involve the low income population in all aspects of the value chain, including production, distribution and supply of goods and services.

The idea of inclusive business is premised on the notion that poverty reduction requires all groups in society, whether rich or poor, contributing and benefiting from economic growth.

This informed the deliberations at the just-concluded 14th session of the United Nations Conference on Trade and Development (Unctad 14) in Nairobi.

Coming against a backdrop of the adoption last year of sustainable development goals by the UN General Assembly, Unctad 14 was critical in addressing inclusive and equitable global economic environment.

Businesses have a role in creating an inclusive and equitable economy. This entails building business value chains that ensure access to goods and services by low income communities and creating livelihood opportunities for them.

SOCIAL RESPONSIBILITY

This constitutes good social responsibility practice and also contributes to poverty reduction in partnership with other stakeholders like government.

The concept of inclusive business is not alien to Kenya. Indeed, some local firms— among them East African Breweries Limited (EABL)—have embraced and implemented it as an operating model.

In 2004, EABL through its subsidiary, Kenya Breweries Limited (KBL), introduced the Senator keg beer in the local market. This was an innovative product targeting the low income population, many of whom had taken to illicit brews as they could not afford conventional alcoholic drinks.

KBL identified a huge opportunity in this market but more importantly, the company realised that sorghum was under-utilised in local beer manufacturing, yet it had significant advantages compared to conventional raw materials.

The idea behind Senator, therefore, was to use sorghum, a locally-available raw material to manufacture an affordable alternative to illicit alcoholic drinks. In launching Senator, KBL instantly created a huge demand for sorghum, a crop that is mostly grown in arid and semi-arid areas inhabited by many low income communities.

By 2015, KBL had contracted over 32,000 sorghum farmers, who were earning Sh1.5 billion annually.

By spotting a ready low-income market for affordable beer and roping in farmers in poor rural communities, KBL has been able to create an expansive value chain that did not exist before 2004.

Our experience with Senator revealed a huge, untapped opportunity in Kenya to create inclusive business value chains that deliver affordable, quality products to low income earning communities while also providing them with an opportunity to generate a livelihood.

To achieve sustainable economic growth, therefore, we need to promote inclusive business value chains geared towards enhancing market access to affordable, quality products while unleashing massive opportunities for value addition especially for low income communities, thus reducing poverty.

Jane Karuku is the managing director of Kenya Breweries; [email protected].