Bread and Peace (and Honey): Social Entrepreneurship as Commercial Strategy

This is the first blog in a series inspired by the four take-away lessons from USAID’s primer on private-sector engagement in fragile and conflict-affected situations, and it focuses on adding social inclusion and conflict sensitivity as a third dimension to shared value. See the other entries in the series for more on managing private-sector actors who are invested in a conflict-dominated, humanitarian system; novel approaches for prospecting potential partners when typical business data don’t exist; and the importance of non-financial support to local businesses and new investors.

Fragile states and places suffering from conflict have great potential: the lower the starting point, the more room there is to grow. Their possible futures are also more novel: less elaborate social, political, and economic structures allow a greater variety of plausible pathways to development. However, fragile and conflict-affected environments pose special challenges, too. Rule of law is often weak, trust in institutions and between economic actors is low, and society can be fragmented along ethnic, religious, or political lines. The private sector can be a valuable development partner in these places, but chaotic systems change what kinds of businesses can succeed there, and efforts to create long-term change need to take this into account. In late 2021, USAID’s Market Systems and Partnerships activity produced a primer on working with the private sector in fragile and conflict-affected settings, and it articulates these four lessons:

• A third dimension—comprising paradigms like conflict sensitivity and principles like Do No Harm—must intersect with the more familiar shared values of development objectives and core business interests in private-sector partnerships.
• Not all companies are aligned with the objective of long-term growth and stability—some benefit from chaos and maintain status by perpetuating division and conflict.
• Private-sector engagement best practices—like upfront prospecting of potential partners—are more important than ever in fragile and conflict-affected settings.
• Alone, financial support to companies in the most challenging contexts is usually inadequate for catalyzing transformational change: the private sector also needs help to access human capital, data, information, infrastructure, and improved relationships.

This post is the beginning of a four-part series structured around these four lessons and drawing from the work of USAID’s Strengthening Livelihoods and Resilience (SLR) activity in the eastern Democratic Republic of Congo during 2021–2023. SLR works in Ituri Province, which borders South Sudan to the north, Uganda to the east, and North Kivu Province to the south. The western half of Ituri is occupied by the eponymous rainforest, itself part of the Congolian rainforest, second only to the Amazon in size and a critical priority for both biodiversity and the fight against climate change. Despite the excellent high-altitude equatorial climate, rich soil, unique flora and fauna, and extensive mineral wealth, Ituri has suffered from two decades of economic exploitation, intermittent war, and humanitarian dependence. SLR works with partners from the private sector, government, and civil society in areas like land tenure, conflict resolution, agriculture, livestock, fishing, nutrition, and social inclusion to prepare Ituri to relaunch its economy, rebound from natural and man-made disasters, and maintain stable cycles of growth in the face of shocks and stresses. To do this in such a fragile environment means that private-sector partnerships look very different for SLR in Ituri than they do for USAID projects in other parts of the world. This blog series will explore how and why SLR is doing private-sector engagement differently, starting with the new dimensions to shared value it includes in its partnerships.

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Conflict sensitivity: It’s just good business

Sensitivity to conflict is a cornerstone of all SLR activities. Since long-term changes in the economy must interact with conflict dynamics in the social and political systems, a maladroit business intervention could enflame latent conflicts in a community or be appropriated by one group to the detriment of another, resulting in social harm—and also commercial failure. SLR steers its business partners toward conflict-sensitivity through a shared and hyper-local understanding of the dynamics of a given geography or market segment. Conflicts can be unpredictable and dynamic, so SLR and its partners stay alert, trust their networks of community and government observers on the ground, expect that business innovations will sometimes provoke conflict, and remain nimble enough to respond to it when they do.

When SLR began a seed-credit pilot with a long-standing partner it had helped to expand an input-distribution network in Ituri, farmers who opted out of the pilot began to steal their neighbors’ bumper crop. Thanks to the upfront work to understand the community dynamics and build trust with local leaders, the SLR team was able to deescalate the nascent conflict from a safe distance and without distorting relationships in the market. If SLR had not built conflict sensitivity into its partnership design, spent time up front understanding community dynamics, and then maintained close contact with trusted local leaders, the seed-credit pilot would have backfired—in spite of being a win-win proposition on paper—and SLR would have led its private-sector partner down the wrong path, exacerbated community tensions, and then been forced to back out in defeat.

The observation that conflict sensitivity is a crucial part of economic growth programming is not a new one, and in retrospect it is a self-evident part of any shared value proposition, just like the mutual productivity and competitiveness benefits inherent to business cases like these more familiar in traditional market systems development (MSD). It is not as easy as it seems, though: uncontroversial in theory, concepts like conflict mitigation and Do No Harm do not always come naturally to development projects, their donor managers, and their staff. One way to help them layer these considerations into their work is through the humanitarian–development–peace nexus: seeking to work with and learn from government and humanitarian partners who have more practice with these principles in their day-to-day work (this policy note from the DCED contains concise suggestions for how market-oriented projects can adjust their outlook and practices to better work across the nexus, and the bibliography to this guide on results management is a useful compendium of resources on conflict-sensitivity in MSD projects). And indeed, collaboration with humanitarian efforts in Ituri has been a valuable strategy for SLR, but it takes time. Another way is to build on what savvy private-sector actors are already doing. The input distributor with the seed-credit system has maintained a base in the centre of an intensely insecure Djugu territory because it devotes attention to conflict dynamics and its image as a benevolent business.

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This is a job for the social enterprise

SLR noticed that some of Ituri’s most resilient businesses maintain an image of quiet benevolence, and they remain scrupulously neutral but well-connected to the community they operate in. This pattern is consistent with the rationale for some social enterprises. The USAID primer defines these as “companies with a business product or service that is driven by a social mission,” but in Ituri’s humanitarian-saturated climate, SLR has more often found the reverse case: non-profit organizations with social missions reluctantly exploring business products or services as a coping strategy. Decades of concentrated donor assistance have bred a jungle of small organizations that exist to receive easy grant money. Though some of these local NGOs are phantom ‘briefcase operations’, many consist of dedicated people who are serious about improving their communities but suffer from unpredictable ebbs and flows in donor financing. 

During its inception visits, SLR noticed that a few of the NGOs that pitched it traditional donor-funded projects were keeping their organizations alive through an idiosyncratic portfolio of quasi-commercial activities. Faced with few true private-sector partners, and on the hypothesis that conflict sensitivity and social inclusion could be a profitable business strategy, SLR decided to partner with a few of these NGO-turned-social-entrepreneurs.

One youth-led organization working in Mambasa territory stood out in SLR’s outreach as an example of one such budding social enterprise. It had gone for a few years with little financial support since an increase in ADF militia violence had driven its traditional donors away. In response, the organization worked to make some of its donor-financed activities self-sustaining and identify other ways to leverage its connections and reputation in the community to turn a small profit. Its reputation for being fair and socially minded emerged during SLR’s semi-public co-creation events (these usually included the whole community as a way to identify and deal with embedded conflicts early in the process—more in part two of this blog series), at which time the social enterprise was employing young people to build simple shelters for the displaced, collecting and bottling honey from indigenous people to sell through Mambasa city retailers, and experimenting with women-led production of sticks of chalk for sale to local schools via networks of former pupils. Despite lacking a clear business plan or commercial vision for any of these product lines (more on the challenges of working with social enterprises that aren’t very entrepreneurial in part four), a “co-creation road trip” to the villages where the social-enterprise partner wanted to buy honey helped them articulate a pilot activity with SLR.

To a land of milk and (wild) honey

For the indigenous Mbuti (also called ‘pygmies’) of the Ituri rainforest, the traditional way to harvest a beehive is to cut off the branch it rests on (or fell the entire tree), then smoke out the bees and collect the honey once the hive is abandoned. This drives away the queen to found a new colony, reducing hive productivity by up to two-thirds. Systematically cutting down trees and starting fires, even in low numbers, is also a sensitive subject in the Okapi Reserve. Unfortunately, though, more efficient and eco-friendly practices depend on equipment that is out of reach for Mbuti in remote parts of the rainforest. Even if they did have access to a market to buy modern beekeeping equipment, most couldn’t afford it: the prevailing behaviors in Mambasa’s honey supply chain are based on exploitative relationships between Bantu spot traders and Mbuti honey collectors. Paying for honey with low-value goods instead of cash and using alcohol and marijuana during negotiations are both common practices.

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By Ituri standards, the first season of honey-buying efforts was a commercial, social, and environmental success. Inspired by supplier club tactics like this one based on principles of long-term investment in a community network, SLR’s social-enterprise partner listened to the indigenous Mbuti communities in Mambasa about their priorities for technical support and payment terms. They came to an agreement: the Mbuti respected honey quality and environmental standards and collected minimum quantities on time, and the social enterprise provided improved equipment, training, and a pre-negotiated fair price. SLR paid for new beekeeping clothing—specially tailored to the Mbuti’s small stature—and the social-enterprise partner invested in the transportation and manpower needed to train the Mbuti in collecting wild honey sustainably.

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The social enterprise’s inclusive business approach paid off, and in the pilot season with SLR, its retail sales grew from 700L to 1,800L. The most successful Mbuti sold $250 of honey, more cash than some had seen in their lifetime. Most of all, the social enterprise and four pilot partner communities developed relationships based on trust and cooperation, thereby giving the Mbuti a link into Mambasa’s economic system. In the ongoing second phase of the partnership, the social enterprise is expanding its operation to source from more communities and introduce modern hives, at the same time contending with the challenges of becoming a market player in honey wholesaling. SLR is now helping them to bring some of the commercial lessons they learned from the honey-collection pilot to their other ambition of manufacturing writing chalk for schools­. The young people they employ to make the sticks of chalk can produce and sell it for 10% less than the imports that dominate the market, and they are proactively reaching out to schools to create long-term supply partnerships in the same spirit as they did with wild honey.

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Increasing your (social) credit score

This pilot activity left the SLR team wondering whether, for a private-sector partnership in this kind of socioeconomic system, values like productivity and competitiveness might come in second place to conflict sensitivity, social inclusion, and environmental stewardship. Did this business idea succeed in Mambasa, where most business and donor initiatives fail, because the social enterprise had a smart financial analysis in its business plan? or because it was perceived as a socially and environmentally responsible player? Economic projects working in thin and fragile markets rightly bemoan the lack of capital available to invest in new ventures, especially for small and medium-sized enterprises, and they are right: when financial credit is injected into a value chain, it can create new opportunities for small businesses and the poor alike. However, in extremely fragile environments suffering from ongoing conflict, there is sometimes an even greater deficit in trust and goodwill—and this social credit is often a prerequisite for the financial kind.

One reason this honey pilot succeeded was that the Mbuti collectors and the retail-shop buyers both trusted the social enterprise to source it responsibly, in spite of the absence of any supply-chain governance mechanisms to enforce it. The fact that their techniques were environmentally friendly was also important: in this part of the DRC where the central government has little reach, the conservation apparatus managing the Okapi Reserve steps in as a de facto zoning regulator and police force. It was vital that the social enterprise be seen as promoting something that would benefit everyone in the local power structure.

Trust-based partnerships can often involve a chicken-and-egg paradox: does a verbal or written promise catalyze the change, or does trust begin with an act of faith?  Actions speak louder than words, after all… especially in places with weak contract enforcement. In the messy day to day of business dealings in Ituri, it is some of both, of course: ongoing actions work in tandem with progressive commitments to build trust. However, these Mbuti honey collectors offer a case where a desperately fragile economic system may be more adaptive than a thin but more developed one. The Mbuti communities and the social enterprise were willing to offer each other trust on credit for a few reasons. Although it had not offered them equipment or negotiated pre-determined buying arrangements before, the social enterprise was known to the communities and had behaved acceptably during prior, more ad hoc transactions. The USAID imprimatur of SLR serving as neutral broker behind the scenes also helped. But the bleak reality facing both social enterprise and supplier communities was that absent any better economic options, it was worth the risk of working together in a radically different way to escape a very bad status quo. One of SLR’s most consistent experiences in Ituri has been the profound hunger for systemic change and the willingness of market actors to invest their social capital to achieve it.

A market-based development program in a place like Ituri needs to act responsibly with the trust offered so readily by partner businesses and communities. Incorporating this third dimension of social inclusion and conflict sensitivity into the shared values of its partnerships is a good start. However, a program like SLR also needs tactics to avoid or mitigate market actors who do not share these values and would violate the trust so important to inclusive economic growth, and the next entry in this series will explore SLR’s experience with that theme.

Dan Langfitt is a Principal Specialist in DAI’s Resilience & Stability practice. He was the Director of Partnerships and Operations for the DRC SLR Activity until April 2023. SLR’s Clarisse Mageza and Léon Zabiti made major contributions to this piece.