Best Practice: Jeremy Lefroy MP
15 Dec 2014
Welcome to Best Practice, our occasional series of Q&As with leaders in the field of international development. In this, our first instalment, we speak to Equity for Africa (EFA) Co-Founder and Conservative MP Jeremy Lefroy.
Lefroy co-founded EFA in 2003 after spending 11 years in Tanzania – where he worked with the local coffee industry – to provide lease finance to agricultural enterprises too small for banks and too big for micro-lenders. He joined parliament’s International Development Committee in 2010, having been elected to represent Stafford that same year, and has helped manage the policy, expenditure and administration of the Department for International Development (DFID) ever since.
What are the biggest challenges in development right now?
That’s a very big question – I’ll give you a few. One is increasing income inequality, alongside the fact that we still have over a billion unbelievably poor people. The World Bank has two main objectives: to abolish extreme poverty by 2030, which I welcome, and to concentrate on the bottom 40 percent of the income spectrum in order to try and reduce extreme inequalities of income. The idea is to lift everybody while at the same time trying to reduce the gap. That’s fundamental, because it’s not only extreme poverty but extreme inequality that drives potential social instability, along with many other things.
Next I would say education. There’s been a great improvement in access to primary education over the last 20 years, but there hasn’t been such an improvement in access to secondary, and certainly not to tertiary education, where people acquire the skills that are going to enable them to improve their life chances. At the same time, there are concerns about the quality of education, even at the primary level. In quantity it has increased, but in quality there are question marks.
That brings me to the third point: in almost every professional area, particularly in healthcare and education, we’re very, very lacking in skills. Just take the UK, where we’re going to run short of GPs in the next few years. What’s going to happen? Inevitably, we’ll simply buy them from overseas, which will reduce the available pool there. There’s a massive looming skills shortage in everything from health and education to engineering and other technical subjects.
Then, of course, there’s the challenge of resources. The impact of climate change – the need to adapt and mitigate – will be particularly felt around water and consequentially food. We also need resources in terms of power generation, especially in the context of a rising population. I’ve never been a person who believes a rising population is inherently problematic, but there comes a point where if it doesn’t flatten out at about 9 billion we’re going to have some serious problems.
Your not-for-profit, Equity for Africa, helps grow small- and medium-sized agricultural enterprises in Tanzania by providing lease finance for equipment, among other things. It’s a model that’s not too far from Hand in Hand’s, and certainly one that’s informed by the same ethos of ‘help to self-help’.
It tends to be that 90 percent of jobs in developing countries are created by the private sector. Beyond that, becoming an entrepreneur by its very nature improves your education: you have to learn about other things, you have to be literate and, usually, you have to be numerate. You have to learn these skills to survive in business that you might not have learnt in the education system.
One of the main inequalities, of course, is gender inequality. And helping the private sector, helping people through mentoring and finance, has a disproportionately beneficial effect on women, who tend to be better entrepreneurs and better at managing their finances.
And of course there’s the connection between jobs and security.
Definitely. Jobs, for me, are essential. When my friends and I set up Equity for Africa, it was all around jobs – that was the focus. We wanted to see as many jobs created as possible for as low an investment as possible, but they had to be sustainable, and I think we’ve made a reasonable start. By their very nature, jobs improve your household income. They give you an investment for the future. They give you dignity and self-respect, assuming you’re being treated in a reasonable way by your employer. They generally have a positive impact on your health. And they help bring stability. If you’re desperate and the only money on the table is from, say, the Taliban, it takes a very strong and very principled person to turn that down when the alternative is not having any way to feed your family.
What compelled you to start Equity for Africa?
Complete failure. I’d started a program with some friends in the mid-’90s called Training for Life, which was there to help Tanzanian school leavers, who were entering a very poor job market, learn life skills that weren’t taught in school. We wanted to give them hope. That program is still running nearly 20 years on – we’ve had hundreds of young people go through with it, many now working in senior positions. But what didn’t work so well was a loan scheme I’d set up, and funded, to give trainees an opportunity to obtain capital they couldn’t get through a bank. I was probably naïve in the way I approached it, and very few of the loans were repaid – not because of mismanagement and fraud but because we simply hadn’t put enough effort into going through the business plans.
I’d obviously approached it in totally the wrong way, but I still felt it was very important to finance businesses that were too big for microfinance and too small for banks, so a few years later I had another go. This time I went in with a friend of mine, Michael Timmerman, who’s an expert and he was able to guide us in the right direction: a more rigorous approach that combined, if you like, my entrepreneurial enthusiasm with Michael’s ability to look at business plans to say “this will work and this won’t work”, adjust them and occasionally turn them down. We’ve since managed to get a (US) $5 million fund together and increase the amount of money available for each investments. We approved about 45 investments under the new, larger funds over the course of about a year, and that’s increasing all the time.