Blending Objectives between Humanitarian Actors and the Private Sector in Refugee Hosting Areas

Over the last thirty years, Kakuma, which hosts one of Africa’s largest refugee camps has grown from a tiny settlement to a medium sized city. But the economy has not had a chance to develop normally. This is because the economy has developed under the umbrella of international aid while trying to satisfy an increasing labour force, growing consumer market and growing productivity. Humanitarian and development agencies have fuelled growth, but at the same time left the market unpredictable and inorganic.

The humanitarian community first came to Kakuma with the sole purpose of protecting the refugees. The mandate of UNHCR, the agency leading and co-ordinating majority of the humanitarian interventions in the region is still primarily considered a protection agency. It is important to note that Kakuma is still rightly considered to be an emergency context and in any such context, there are populations that require protection first before any other form of integrated development.

However, while Kakuma finds itself in an emergency context, it is also now a severely protracted displacement situation. A while ago humanitarian agencies began planning for the people who live in Kakuma to start living lives like everyone else around the world. That is, assuming that if Kakuma is a vibrant town, then the living standards should improve and grow in line with other urban settlements around the world.

In an open market, innovators try to make lives better for everyone through their interventions and investments and generate a range of rewards for themselves at the same time. In the last five years the humanitarian community has begun to sell the idea on a global level that with the right kind of investment, the private sector could improve the living conditions in Kakuma through commercially viable enterprises. The basis for this is that Kakuma and its environs are inhabited by around 300,000 people who are either directly or indirectly engaged in its local economy. Most of the inhabitants have a vested interest in the integrated development of the locality.

Recent studies on economic opportunities available in Kakuma and Kalobeyei say that predictable and organic economic growth in Kakuma will be based on the availability of natural resources in combination with the huge potential in the labour force. Agriculture and high labour intensity industries will leverage off these factors. Successful enterprises will include a combination of both, such as value-adding to agricultural products. Examples of this include tanneries using livestock hides and designing leather products, or tinning locally grown vegetables such as peas and tinned tomatoes. These enterprises will become opportunities for refugees to increase their incomes and eventually become self-reliant and contribute to the host country economy. There are already numerous examples of refugees breaking through economic barriers, supporting themselves and their families with home-grown businesses, and participating in the growth of the local economy.

According to UNHCR and the academic studies, the private sector should be ready and willing to invest in both the consumer market as well as productivity in Kakuma and Kalobeyei. However, so far, the private sector has not really taken up this call and almost no deeply researched investment-ready business plans have been outlined that take into account the distortions and challenges present within Kakuma’s economy as a result of the town and camp’s inorganic, aid-dependent growth.

Kakuma’s story is being played out around the region, such as in Uganda and Rwanda where refugees have freedom of movement, freedom to work and in most cases have been provided with land that offers more in the way of productivity than Kakuma’s. Yet private sector investors have been slow to invest in refugee hosting areas and site numerous barriers to doing business there. Firstly, distorted economies have led to complicated power dynamics, with examples of local actors monopolising services and setting up cartels. Local administrative leaders hold an unusual interest in business going on in refugee settlements because of the power they hold over physical access to the space, both of refugees and investors. Secondly, they site need for large scale investments that will improve ease of doing business in refugee hosting areas. Large scale irrigation schemes, access to power, and improved roads are examples of this. Refugee hosting areas are generally very remote and far from existing import/export hubs or major commercial centres. Connected to this third reason sited is that while refugee hosting areas might be commercially viable, the private sector looks at the most commercially viable location for any given project when making investment decisions. On that basis refugee hosting areas must put forth a comparative advantage over other locations in the region and this is often difficult. A fourth reason is connected with the workforce. After taking into account all of the above, the private sector fear that refugee population does not have the requisite skill levels to engage in business and more alarmingly, that after decades of a dependency culture they will lack the motivation needed for successful enterprise.

To address these barriers the humanitarian sector will continue to play a role, beyond that of providing protection. While the national governments take on more responsibility for refugee hosting areas, there is a need for streamlined lobbying for more transparent power dynamics within refugee hosting areas. The humanitarian community, using organic business growth success stories as examples, will be the key player advocating for these large scale investments. Moreover, the humanitarian community will still be relied on to educate and prepare the population with skills that respond to the demands of the emerging organic economy.

Most importantly, thorough business plans will have to be conducted taking into account these barriers not just focusing on the opportunities. We have found that deeply researched business plans bring out these barriers clearly without providing concrete answers to how to reduce the barriers in the short term. The barriers are complex and so instead these business plans must lay out a range of strategies that may or may not be successful, and an approach of design, iteration and analysis.

In this context any company, implementer or investor going into a refugee hosting area should have a long term view and an eye for blended outcomes between pure market-based opportunities while still learning and playing the role of protecting and building the capacity of the vulnerable population. We have found that investors who support this approach exist, but to bring them in the language has to change from diving straight in with the “commercial viability” narrative. A community of actors who can build the dialogue between the protection focused humanitarian sector and the commercially focused private sector has been the missing piece until now. There is an emerging group of agencies, companies and investors willing to play this role and I believe the time has come to bring them together so that they can greater understand the role they play and path to achieving success. This could possibly take the form of a network or working group, a series of conferences or meet-ups, and alliance of like-minded actors, or even a tightly-knit consortium. Any thoughts welcome.