ADVANCE AID MAKES SUBMISSION TO THE ASHDOWN COMMITTEE REVIEW
LONDON – March 16, 2011 – Earlier this month Advance Aid made a submission to the Humanitarian Emergency Response Review (HERR), chaired by Lord Paddy Ashdown. The committee is due to report at the end of March and Advance Aid is looking forward to seeing the committee’s recommendations.
Our full submission follows:
Submission by Advance Aid to The Humanitarian Emergency Response Review (HERR)
Increasing linkages between developmental and humanitarian programmes in Africa would improve the delivery of non-food emergency relief items and leverage existing expenditures so as to contribute to job creation and poverty alleviation in the continent.
Summary
Advance Aid’s focus is on Africa. Our mission is to change the model through which non-food humanitarian relief is delivered in Africa, so as to improve response times and value for money and to strengthen the connection between humanitarian expenditures and wider development objectives. Currently, due to flaws in the procurement and logistics models, the c. $240 million spent annually on buying non-food items for use by displaced African families is overwhelmingly spent outside the continent, chiefly in East and South Asia. If this market failure were to be resolved, without the need for additional expenditure, this spending could provide sustainable economic opportunities for African firms and generate over 60,000 jobs (to support 450,000 livelihoods). Africa is not short of low-tech manufacturing businesses, but one of the causes of the poverty that afflicts the continent is a lack of economic opportunities.
By compartmentalising activities and budgets, the UK Government (along with other development agencies) is missing the opportunity to bring together the development and humanitarian agendas and to make humanitarian spending part of the development effort. The key to making a change is to address the failures inherent in the current system. These include three factors:
• whilst a lot of money is spent on emergency supplies, this money is often in the wrong place at the wrong time – after emergencies have happened;
• many of the goods sent to Africa are procured inefficiently, in a rush and at a point where market forces are pushing up prices and pushing down quality;
• the procurement model used by most relief agencies effectively excludes African manufacturers from participating in tenders because they prefer to place the financial risk of storing items on to manufacturers and because they, seemingly, prefer to secure supplies on a global basis.
Advance Aid believes that the answer to these issues lies in pulling forward the money spent on emergencies and using this cash to support African procurement, stockpiling and pre-positioning. Emergencies are more predictable (at least in aggregate in Africa) than current wisdom maintains and so pre-positioned stockpiles are a viable way to address preparedness. Cash spent with local manufacturers builds resilience by supporting jobs – and people in work can have as many as eight to ten dependents, each of whom is helped by following this strategy.
Value for money
It is now widely recognised that money spent in advance of an emergency, whether on DRR or on pre-positioning, is more cost effective than money spent in a hurry in the wake of an emergency. The IFRC said, at the launch of its Zambezi River Basin Initiative (June 2009), “The IFRC estimates that public money buys about four times as much humanitarian ‘impact’ if spent on preparation before disaster strikes than on expensive relief operations”. Therefore, if a significant proportion of the $13bn spent on emergencies in 2009 had been put into DRR and the pre-positioning of key items, billions of dollars might have been saved.
The humanitarian supply chain
With the help of Cardiff Business School’s Logistics and Operations Management Section, Advance Aid has studied the supply chain for shipping tarpaulins into Africa – as a proxy for non-food items more generally. Using value chain analysis (derived from Toyota’s ‘lean’ approach to manufacturing), the Cardiff study showed that, when it came to servicing an African emergency:
• Manufacturing in Africa cuts all lead times significantly;
• The further that stocks need to travel, the higher the number of transport legs, ports and country borders that are involved. All of these have the potential to create delays, for accidents to occur or for there to be (potentially corrupt) bureaucratic interference;
• Using air transport increases the delivered cost of a tarpaulin from $13-16 to more than $38;
• Air transport generates over 100 tonnes of CO2 per 6,000 tarpaulins. Sea and land transportation of the same goods generate between 1.5 and 9 tonnes of CO2.
Local manufacture
Most of the non-food item goods (NFIs) used in emergencies require relatively low-tech manufacturing methods and the vast majority can be (or are being) made in Africa – and the manufacturers are cost-competitive. As well as cutting the length of the supply chain for African emergencies, thus saving time and lives, this approach:
• Creates or sustains jobs, develops wealth and builds resilience;
• Cuts down on the Aid Miles travelled by relief goods, saving carbon emissions;
• Speeds up re-supply once goods from any stockpile have been used; and
• Means that money spent in Africa will stay in the local economy, help development and reduce vulnerability.
Framework agreements
African manufacturers fail to enjoy access to supply chain opportunities for most humanitarian goods – or have withdrawn from it – as a result of the market imperfections mentioned above and as a result of the growing prevalence of framework agreements. These agreements:
• Transfer the cost and risk of pre-positioning from governments and NGOs to the manufacturers by forcing them to hold stock as a condition of getting an agreement;
• Exclude African manufacturers as they do not have strong enough balance sheets to hold these stock levels or cannot produce to volume fast enough at present to be viable global suppliers and so do not compete.
The effect, therefore, is to reduce market competition for these items and even to remove potential suppliers altogether. Since the holders of framework agreements are commercial enterprises, the cost of stockholding is also going to be reflected in the ultimate price of the goods. The reduction of the supplier base means that, when there is an emergency, supply bottlenecks rapidly develop.
Pre-positioning
Slow-onset disasters are easier to plan for. Sudden-onset disasters cause more problems, but even they are more predictable than many experts believe with, for example, frequent flooding of the Zambezi, cyclones in Madagascar, flooding in the Sahel all featuring prominently in the register of high-risk situations. Regional pre-positioning of supplies within Africa does therefore make sense and would allow for:
• A significant reduction in the response time to local emergencies;
• Responses by governments and NGOs to smaller-scale emergencies that currently get ignored;
• Procurement and quality checking of goods during quieter times when there is less pressure to ship goods to beneficiaries;
• A steady flow of orders for goods that would enable local manufacturers to compete.
Innovation
New thinking is required in this area if governments are to deliver both value for money to their own taxpayers and a high quality of service when responding to humanitarian emergencies.
We believe that this will involve addressing the following points:
• Developing a strategy to ensure that the money is in the right place at the right time, with sufficient quantities deployed in advance of emergencies happening;
• Developing a strategy to ensure that the right goods are in the right places at the right time;
• Pulling together the humanitarian and development agendas (especially in Africa) to ensure that all of the humanitarian expenditure also has a positive, local, development impact;
• Investing further in analysis and forecasting so that natural disaster patterns can be better understood and better predicted;
• Harnessing the creativity and problem-solving skills of the private sector with the financial clout of government and the humanitarian skills of the major aid and UN agencies to provide a better service to those who are hit by natural or man-made emergencies.
