Statement by Ambassador Dumisani S. Kumalo, Permanent Representative of South Africa to the United Nations, in his capacity as Chairman of the ECOSOC Ad-Hoc Advisory Groups on Guinea-Bissau and Burundi, to the Security Council on The Role of Business in Conflict Prevention, Peacekeeping and Post Conflict Peacebuilding - 15 April 2004

Mr President,

Allow me to congratulate you on the assumption of the Presidency of the Security Council. Thank you for the opportunity to address the Security Council on the role of business in conflict prevention, peacekeeping and post conflict peace-building.

Mr President,

The debate on the role of business in conflict prevention, peacekeeping and post-conflict peace-building is long overdue. As you are aware, my own country South Africa is celebrating ten years of freedom this month. Among the many significant contributions made to our freedom struggle was the role businesses, both local and international, played in practising Corporate and Social Responsibility.

Some businesses began hiring black and white people to work together performing the same functions thereby acting as bridge-builders across the racial, social, ethnic, political, economic and regional divides in our country. Others provided resources to community organisations that helped create social conditions where people could live and work together as neighbours. By the time the political negotiating process led to a political solution, the people of South Africa had learned about the possibility of living together in peace and some of the businesses were ready to engage in a reconstruction and development programme aimed at creating a democratic society.

Mr President,

It has is now become generally accepted that there is an inescapable linkage between peace and development, particularly economic development. Without peace there can be no sustainable development, an important antidote against conflict. There is further agreement that the role of the private sector is critical in economic development.

However, in a conflict situation, or even in the post conflict reconstruction phase, the private sector is reduced to a minor player while the international community and the donors have the main responsibility to prevent conflict and peace-building. Only once there is peace can the private sector come in and make its contribution towards creating economic growth and prosperity.

The challenge has always been in trying to define a role for the private sector in these processes. This is complicated by the fact that the private sector is not only limited to the vast majority of businesses that play a positive role in contributing to peace and development. The businesses that trade in conflict diamonds in Sierra Leone and the Democratic Republic of the Congo are a part of the private sector as well, albeit a negative one. The individuals who participates in the informal sector selling light goods and fruits is also part of the private sector, even though they do not contribute to the tax base.

But for the purposes of this debate, we are limiting ourselves to what may be called "the regular businesses". It is thus clear that the private sector cannot on its own substitute for the role of the international community and the development partners in addressing the issues of conflict prevention, peacekeeping and post conflict reconstruction. However, business has a decisive role to play if it is well articulated and understood.

Allow me to share some of the experiences I gathered in Guinea-Bissau and Burundi as a member of the ECOSOC Ad Hoc Advisory Committee for African Countries emerging from conflict.

In both countries, the eruption of conflict drove the international private sector away. The local businesses did not have the option of quitting and were forced to find ways of continuing operating under difficult conditions. The local business owners faced a collapsing economic infrastructure, limited access to credit, deteriorating transport systems, communication deficiencies, evaporating energy supplies and other disruptions to production that result from conflict. Eventually, many of these businesses were forced to close while others barely survived.

Meanwhile, the rising conflict did not prevent governments from demanding contracts for the supply of products and services from local businesses during the conflict. These governments were in no position to meet their commitments under these contracts and this resulted in the build-up of substantial arrears carried by the local private sector.

As these countries start emerging from conflict, it has become one of the high priorities for the incoming governments to be assisted in settling debts to the local businesses. The international community has to find a way to assist the new governments in fulfilling these obligations in order to avert widespread bankruptcies, with its resultant job losses and shrinking business bases in the countries.

Settling the outstanding government debts to local businesses also provides a much-expected injection of money back into the economy. It allows the local private sector to gain access to the desperately needed capital, which would enable it to expand and take advantage of the new opportunities offered by the return to peace and stability. Often times, its is the local businesses that offer employment opportunities to demobilised fighters who are forced to disarm as part of the post-conflict resolution.

Furthermore, a healthy local private sector is an attraction and prerequisite for the involvement of the international private sector in a country emerging from conflict. To put it more bluntly, foreign businesses are reluctant to move into countries where local business is not investing its own money into its own country. The partnership between the local and international businesses is a critical confidence building step for a country emerging from conflict and contributes to the success in post conflict reconstruction and development by becoming an engine of economic growth.

Mr President,

The paper prepared for this debate poses a number of interesting questions. However, I would wish to comment briefly on one or two of them. On the question as to what would be the main reasons for the private sector to engage in post conflict reconstruction, it would seem that there could be differing motives for the domestic private sector and the external private sector. The domestic private sector will be taking advantage of the new opportunities opening up due to the growing calm and return to normality. With their intimate knowledge of the local situation they will be well situated to take advantage of the opportunities that arise. A vibrant local private sector is needed to stimulate international interest and to act as local partner to international entrants.

The international private sector will not be following the situation in the conflict-affected country that closely and would not have the advantage of local knowledge. They will therefore, have to be informed and encouraged to look at the opportunities available. The international community may have to play a role in encouraging their engagement in the post-conflict opportunities. An important sign to the private sectors of development partner countries would be how involved and supportive that government has been of the resolution of the conflict, the peacekeeping efforts and the post conflict reconstruction.

The international community is the most important player in creating the political environment in which the private sector could do business. As business is driven by the profit margin, it needs peace and stability for it to do business. This can best be achieved by a concerted effort by the international community through a clear commitment to peacekeeping and the deployment of peacekeepers in situations of conflict.

Bilateral and multilateral incentives like investment guaranties and lending policies could play a role in spurring economic activity. However, these actions and instruments have to relate to the challenges in the specific situation. In the case of Guinea-Bissau and Burundi, the clear priority as stated by the private sectors in both those countries is for the international community to provide budget support to the two governments so that the state institutions could pay their arrears to private companies contracted by them.

There is definitely a role for regional and sub-regional economic cooperation in providing framework conditions for private sector development, however, peace is a prerequisite for such initiatives to have an effect. And the United Nations is key to the international conflict prevention and peacekeeping responsibilities.

It is difficult to provide a short answer to the question on what is needed to ensure effective cooperation and interaction between the main international political and economies stakeholders. What is however clear, is that their effort would not be effective without the full participation of the authorities and the private sector in recipient countries. Without a true partnership approach towards the recipient country, the efforts of the international stakeholders would be extremely difficult to achieve and have little, if any, chance to be sustainable.

I thank you Mr President.