Examination of Witnesses (Questions 344
- 359)
TUESDAY 16 MAY 2006
MR ANDREW
HOLLAS
Q344 Joan Ruddock: Can I welcome
Andrew Hollas, who is the Head of Africa Markets for PricewaterhouseCoopers.
Thank you very much for your written submission[1],
Mr Hollas, and thank you for coming today to help us with our
inquiry into private sector development. I would like to begin
if I may by asking you if you can possibly justify why it is that
donor funds which are for private sector development should be
going to what are generally regarded as very expensive multi-national
consultancies.
Mr Hollas: Before I respond to
that prejudice can I just give you a few words as to who and what
I am because I think it might be relevant to your understanding?
Perhaps most of you here think that because I am Andrew Hollas,
Head of Markets in Africa for PricewaterhouseCoopers, I sit in
some great big office tower on the other side of the river.
Joan Ruddock: No, surely not.
Mr Hollas: In fact I do not at
all. I moved to Africa 26 years ago as a relatively young man,
needless to say, and I have spent all of my professional career
based in Africa. I have lived in Kenya for all those 26 years
and through that period of time I have worked in about 30 different
African countries, so the perspective I seek to bring to this
Committee is not that of a UK based partner of some great big
multinational but of a practising private sector businessman who
has lived and worked for most of his professional life in the
emerging markets where I believe I have played a part in building
a very successful business which I would be quite happy to debate
with you is probably one of the best examples of contribution
to sustainable development than anything that you are likely to
hear in this Committee. I am sorry—do I call you madam Chairman?
Joan Ruddock: Just Chairman. We are a
very informal Committee. I should perhaps point out that the Chairman
of the Committee is currently abroad on International Development
Committee business, so you have me instead.
Mr Hollas: I am sorry—having
temperamentally responded to your question I have lost the flavour
of it so if you were to repeat it to me I would be grateful.
Q345 Joan Ruddock: We have donor
funds available for private sector development. That is the subject
into which we are inquiring at the moment. We are wondering why
a proportion of those funds should be spent on organisations like
yours. What is it that you are doing with the donor agencies that
you can justify, in the way you clearly sought to justify in your
opening remarks?
Mr Hollas: If you accept that
the private sector is a legitimate provider of services anywhere
in the economy, if the British Government wants to spend money
on development assistance, maybe spending some of that money with
private sector institutions, characterised by excellence, quality,
efficiency, top quality people, value for money, accountability,
always delivering results, then spending some of that money with
consultants who are characterised by that kind of behaviour strikes
me as being a very good thing. Typically, many other institutions
that are involved in development do not necessarily have those
characteristics. Why not therefore spend it with the private sector?
Can I digress again because—
Q346 Joan Ruddock: Just let me be
certain that in the question I have asked you are certain what
I am trying to get at. Clearly you can be an exemplary company
doing all this work but what might be the added value to the development
process? Arguably, the Department itself, DFID, could provide
its own services for itself. It could be spending all of its money
more directly in encouraging the private sector to develop in
the countries that it is charged with donating funds to.
Mr Hollas: That latter point is
the key one. My proposition would be that the fundamental approach
to development should be a private sector-led approach to development.
Why does economic growth take place? Economic growth takes place
when you have a very active and vibrant private sector. Look at
the history of our own country here. Look at what is happening
in India, China, whatever. What is the characteristic typically
of Africa? It is that it does not have a particularly active private
sector. When it does have an active private sector the need for
donors and development assistance will probably increasingly diminish.
To my mind therefore the fundamental proposition of aid policy
should be about trying to develop the private sector. If you are
asking to try and develop the private sector it strikes me as
quite logical that you use the private sector, particularly the
private sector that is based in emerging market countries, as
an instrument of development assistance. My point of emphasis
is not so much the private sector as a service provider to a user
of donor funds but a development policy that is fundamentally
focused on the development of the private sector. If there is
one thing that I passionately believe, and, quite frankly, the
reason I have come from Nairobi and am sitting here today, it
is that development policy at the moment has simply not embraced
the fundamental mind shift that is necessary in order to support
the private sector as the principal agent of development.
Q347 Joan Ruddock: There may be some
sympathy in this Committee with that view you have just expressed,
but are you able to demonstrate how your company in its relationship
with DFID has improved outcomes with regard to the growth of the
private sector where DFID is involved in-country?
Mr Hollas: That kind of request
for quantitative proof of something is very difficult to achieve.
Typically, DFID will work through programmes or projects and will
hire PricewaterhouseCoopers or whatever to help in that project.
We will have our contract, our terms of reference. We will satisfy
that we have met those terms of reference. I am not entirely sure
that I am the person here who is qualified to say whether or not
that DFID programme then achieved its objective or not.
Q348 Joan Ruddock: I thought you
were arguing that you have something special to bring to this
arrangement, that you would improve the outcomes.
Mr Hollas: I do. You were asking
me a question specifically about DFID programmes. If I may broaden
the question and answer what is the contribution that my organisation
has made to development in Africa by working with DFID and other
development partners, then I am more comfortable answering that
question because I do not feel comfortable in commenting very
specifically on any DFID project. I have not researched for that
but, looking at the more general situation, I will happily respond.
Where a donor needs a service, and often that service with our
kind of organisation is associated with assurance over the use
of funds, the management of funds, the financial management systems
that go with those funds, I am extremely confident that where
my organisation has been involved in that kind of thing the control
of the disbursement of funds has been very effectively undertaken.
In our submission one of the things we talked about was the Global
Fund on HIV/AIDS, Tuberculosis and Malaria, which is a very interesting
and innovative example of how vast sums of money have been moved
very effectively with a very low administrative cost by using
a non-bureaucratic, essentially private sector model to manage
the disbursement and control of funds.
Joan Ruddock: We will want to talk to
you about that.
Q349 John Bercow: I understand that
you feel a little tentative and diffident about over-claiming.
On the other hand, business people on the whole are not given
to under-claiming and if they are in competitive situations they
are usually inclined to say, "What we offer is bigger than
what everybody else does, better than what everybody else does,
cheaper than what everybody else does", or, "We can
deliver more than anybody else does", or whatever, so I do
not think it is unreasonable to put it to you very simply like
this. Based on your very extensive experience, both in terms of
duration and geographical scope, can you identify for us, Mr Hollas,
three projects with which you and your business have been involved
that have been beneficial to one or more developing countries
in Africa, emulation of which you have not seen by any other company
in Africa?
Mr Hollas: The last bit worries
me because I would not claim a huge great uniqueness. Bear in
mind that we are a provider of consulting/advisory services. We
do not run our own projects. We do not create factories or businesses.
We do not build dams, roads, whatever. We are a service to projects
that are undertaking that kind of thing. A unique project—and
we are going to talk about it later but let us flag it up—is
the Global Fund. We are currently doing some work in Kenya for
DFID which is a similar kind of thing. It is multi-donor. It is
effectively basket support funds going into the education sector
where an awful lot of money is going, not through a series of
projects but is going into the government financial system and
DFID wants assurance as to what happens to that money and accountability
for that money, and I think that is a very good model where PricewaterhouseCoopers
as a Kenyan company is playing a very important role. The specificity
of your question is what causes me some difficulty because I suppose
the nature of my evidence is not what that is about. I was not
necessarily here to talk about individual projects. I was here
to talk more about our whole approach to development and working
with the private sector.
Q350 John Bercow: If you were to
be asked, which is what I am in fact asking you, to summarise
that approach to a group of people who have just descended from
Mars and are completely unfamiliar with the existence, let alone
the work, of the Department for International Development, or
indeed the work of PricewaterhouseCoopers, how would you summarise
that approach?
Mr Hollas: PricewaterhouseCoopers'
core skills typically tend to be in financial management and assurance,
and if a donor or a private sector organisation wishes to use
those services then the most efficient and effective means of
finding those services will come from a private sector organisation
such as ours. That is applicable not just to our kinds of services,
which goes back to my opening point: it is not just applicable
to assurance and financial management and the kinds of consulting
services we provide; it would also be applicable to many other
services that are needed by the donor community in order to be
effective.
Q351 John Barrett: I wonder if you
could let the Committee know just where PwC stand in relation
to their competition. Who else is in the market for similar work?
What are your unique selling points and what gives you a competitive
edge? You mentioned early on that you yourself have long experience
in a number of African countries and that also there was a lot
of local involvement by PwC, but could you give us a general flavour
of what makes PwC different and who else is in that market?
Mr Hollas: Obviously, I think
PwC is the best at this, having worked for them for 32 years and
nobody else, having been a partner in the firm for 20 years and
so having a very high level commitment to my own organisation.
In Africa the other big three accounting firms, Deloittes, EY,
KPMG, are all present. PwC is probably the biggest and probably
the most active in the donor sector.
Q352 John Barrett: Do each of the
other three have sections that are into the same work?
Mr Hollas: Yes, but the model
has changed, Mr Barrett. In years gone by typically we had those
firms, Price Waterhouse and Coopers and Lybrand, as we were in
those days, which tended to have teams of people predominantly
based in London or in Washington if you were working for USAID.
Those teams of people would typically pick up a contract and fly
into a country, do the job and go away again. They hoped the job
was successful, sometimes it was, sometimes it was not. The model
has changed significantly and, certainly in PricewaterhouseCoopers'
case,—and, to be honest, I do not feel entirely competent
to comment on the model of our competitor firms—the focus
was very deliberately about eight years ago to shift from what
we called essentially an export model of resources based in the
UK or the US to building reasonably large teams of people based
in centres in Africa, particularly in Nairobi where I am, and
there is a big team in India, and those are teams of Indians and
Africans. Yes, I am of European origin but I represent about one
per cent out of 100% of my organisation. Ninety-nine per cent
of my firm are effectively indigenous Africans of African or Asian
descent and they are the people who are actually working on most
of these contracts. That is our unique selling point. That is
our competitive advantage. The same is true of India. We are bringing
in local expertise with local capability which can interface with
other stakeholders because they understand those culturally, that
gives us our effectiveness, and we are sustainable. We do not
finish a contract and go away. We are there on the ground. We
want to sustain the business because we want to build our own
practice. Yes, we want to do more work for donors but it is about
doing it with those people on the ground, and, of course, we are
highly motivated to see the economies of our African region grow
ourselves because that is going to produce more business for us.
We have a real stakeholder commitment to this. Again, without
sounding too much like a cracked record, recognising the motivation
of the private sector to see the development of these emerging
markets is a very fundamental issue. Our success is in the success
of those market places. That is why I am there.
Q353 Mr Hunt: I just have a slight
warning bell ringing from what you are saying. I wholeheartedly
agree with you about the importance of the private sector to development
but it seems to me that what we are really talking about in the
private sector is what is helping Africans, Kenyans in your case,
to develop their own small businesses, get their own businesses
off the ground and support themselves. To me there is a mismatch
between policies that do that and spending money on large international
consultancies. When you look at the countries that have been successful
in developing the private sector, the Chinas, the Taiwans, the
Koreas, going back, I do not think that anyone would say that
the key to the success of their model was spending lots of money
with consultancies like PwC. Of course, you have a business to
run and I have no doubt that you have a lot of highly experienced
consultants and I welcome the fact that a lot of them are locally
recruited now, but what I really want to ask is how are you helping
the type of private sector development that eliminates development
policy in a small village in a remote part of Kenya rather than
just being a big contract for a government department or an infrastructure
project?
Mr Hollas: You demonstrate a healthy
degree of cynicism there. The rural areas in Kenya will develop,
yes, by smaller businesses starting there, but perhaps the biggest
driver to development in those rural areas will be if the economy
as a whole grows. I think you have to take a holistic approach
to this and I think there is a great danger that you focus on
saying, "All we have to do is get small business to grow
and that solves all the problems of employment and poverty alleviation
in rural areas". Small business will grow when the bigger
economy grows. I think it is challengeable how much all the focus
that donors have—and this is purely opinion, by the way;
I am not an academic, I am not a researcher—on small scale
enterprise development, achieves. When you get broader economic
development it is characterised by a lot of small businesses developing,
but trying to create the small businesses does not necessarily
create economic development. You keep coming back to spending
all this money on international consultancies. PricewaterhouseCoopers
is not an international consultancy. PricewaterhouseCoopers is
a local organisation. What contribution do we make in the countries
we operate in? We are the biggest single trainer of professional
accountants. We train more than are trained in any other organisation.
Those accountants then go out and work for donors, they work for
corporations, they work for government, they work wherever. Accountants,
whether you like them or not, are fairly essential to an effective
economic process and the biggest single trainer of those accountants
in the emerging world is probably PricewaterhouseCoopers and that
is a contribution that we can be pretty proud of. You talked about
India and China. Development took place in India and China because
it was led by the private sector and then the private sector bought
services from PricewaterhouseCoopers. Our fastest growing business
in the world in PricewaterhouseCoopers is in China. It is a recognition
that as you get private sector development you need our kinds
of services and you need them to be provided locally. There is
a contradiction in your question that I do not fully understand,
that we somehow focus on this little bit and that other little
bit is not so good.
Q354 Mr Hunt: I suppose I was asking
you to explain why you think we should focus on your little bit;
that is all.
Mr Hollas: My little bit is not
a little bit. My little bit is a fundamental statement that aid
policies, development policies, historically I think have been
quite wrong because they simply have not embraced the private
sector. If I dare say this within this hallowed hall, as it were,
if you look at Prime Minister Tony Blair's letter that was circulated
on where we are on the Commission for Africa, the Gleneagles Agreement
and what-have-you, a five or six page letter, it did not mention
the private sector once[2].
If you look at the Jeffrey Sachs report on meeting the Millennium
Development Goals it does not mention the private sector at all,
but it is the private sector that is going to be the engine of
economic growth[3].
It has been in this country, it has been everywhere in the world.
Q355 Ann McKechin: I have to say,
Mr Hollas, that I found the written submission from your colleague
very defensive, which I found surprising. I wonder if you could
take away the defensive attitude and perhaps answer some specific
questions. When you talk about economic growth, and you are saying
that development theory has been going in the wrong direction,
are you talking about sheer economic growth of GDP or are you
talking about that linked to employment on the development side
that affects the poorest people? When you talk about the fact
that you think we spend too much time down at one end of the economic
cycle, the small end, are you saying we should be spending more
time on most of your clients and the biggest client sector, which
will be the multinational companies, which the big six accountancy
firms are in business to service? Although I note your statement
about PwC being a local company, you are part of a very large
transnational network where profits are derived from some levels
of partnership which are not based in Africa.
Mr Hollas: Can I correct you as
a matter of fact on that last point?
Ann McKechin: Yes.
Mr Hollas: The profits of PricewaterhouseCoopers
Africa Central, which is the name of the business that I belong
to, stay wholly within that partnership. The profits of PricewaterhouseCoopers
in the UK stay wholly within the UK. We are not—
Q356 Ann McKechin: But the principal
reason why you set up in all these countries is to service firstly
large multinational companies, most of which are not based and
whose headquarters are not based in Africa. Is that right?
Mr Hollas: The client base of
my business in Africa can be segmented very broadly into three.
What we call the PwC 1,000 clients, the Unilevers, the Barclays
Banks, the oil companies, whatever, the ones that you think we
are exclusively working for, represent one third of our client
base.
Ann McKechin: But more of your profit
comes from there.
Mr Hollas: No. Why are you so
hostile to talking more—
Q357 Ann McKechin: Mr Hollas, I would
be grateful if you would just answer the questions rather than
that we have a study about our attitudes behind them. We are here
to find facts so it would be very helpful if you would just answer
the factual questions.
Mr Hollas: Okay. A third of our
revenue comes from those PwC 1,000 multinational companies. A
third of our revenue comes typically from very significant, important
local companies. Local companies might be power companies, utility
companies, Kenya Airways, those kinds of companies, big locally
owned companies which need a quality service that can be provided
from our kind of organisation. About a third of our revenue comes
from involvement with the public sector. The public sector may
be either funded by donors, and typically in Africa it very often
is funded by donors, or it may be funded by governments themselves,
a direct contract with the Government in Nigeria or something
like that. We are not there primarily to serve those big international
clients. I am in Africa because I want to be in Africa. I have
been there for nearly 30 years.
Q358 Ann McKechin: We are not here
to talk to you about your own personal role in Africa. We are
here to talk about PricewaterhouseCoopers and the firm that you
represent.
Mr Hollas: But I represent PricewaterhouseCoopers
in Africa.
Q359 Ann McKechin: What I am trying
to clarify is that clearly the experience of your company relates
to multinational companies, high income earning indigenous companies
and large scale consultancy contracts and that is where your area
of expertise lies. Is that correct?
Mr Hollas: Yes.
1 Ev 197 Back
2
Letter dated 09 March 2006, from the Prime Minister, Chancellor
of the Exchequer and the Secretary of State for International
Development Back
3
Witness correction: This statement is factually incorrect-I should
have said it makes very little reference to the private sector
primarily as a provider of altruistic/philanthropic assistance
not the principle level of economic development Back
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