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DAILY TELEGRAPH (UK): One Shell of a fight against poverty: ( 14 April 05


(Filed: 14/04/2005) 


The head of the oil giant's charitable foundation tells Robert Miller how enterprise is helping the Third World


The pictures in its London headquarters pretty much tell the story like it was. The clear country roads, the open top sports car and always the reassuring catch line: "You can be sure of Shell". Not any more you can't.


If ever a company has fallen from grace it is Shell. The Anglo-Dutch oil giant may have made record profits for a UK company of $17.6 billion (£9.3 billion) last year.


But it was also fined a record £17m by the Financial Services Authority (and many times more in the United States) for mis-calculating the amount of oil in its reserves and for failing to tell the stock market in a timely fashion.


In June shareholders - almost every UK pension scheme has a stake - will vote at the annual meeting on a radical new corporate structure. The proposal is to merge the British and Dutch entities into a unified Royal Dutch Shell plc with a single board. It will be listed on the London Stock Exchange but headquartered in Holland.


For Kurt Hoffman, however, the fines, corporate machinations and high profile attacks on Shell, the corporate oil giant, are only part of his problem.


As director of the charitable Shell Foundation he has to face people on the front line in countries such as Nigeria, where the oil group's activities have been condemned by aid agencies and non-governmental organisations, and convince them of his good intentions.


"I can't answer for these things individually, but obviously I am aware of them. I think issues of one sort or another will always be there," says Mr Hoffman who joined the foundation when it was established in 2000.


His background as a development economist at Sussex University and spells at the World Bank and United Nations made him an obvious candidate to head the "charitable" face of the global oil giant.


Mr Hoffman is quick to point out, however, that he asked himself, and the Shell board, all the obvious questions about their motives in setting up the charity. It's raison d'Ítre is to fight global poverty through backing local energy initiatives either solo or in conjunction with other agencies, banks or fellow business foundations.


"I looked very carefully first," says Mr Hoffman, "and once I had agreed we built in processes that are robust enough to deal with situations like possible conflicts of interest between us and Shell as a corporate entity. There haven't been any yet."


He adds: "We have three senior Shell executives on the board and this is balanced by independent non-executive directors all in line with the rules laid down by the Charity Commissioners."


Financially though the Shell Foundation is entirely dependent on the parent company. In 2000 Shell gave the foundation $250m (£133m) in cash. This money is being managed on the charity's behalf by independent advisers but cannot be touched until 2010.


In the meantime the group gives annual grants, which started at $4m (£2.1m) and rise to $20m (£10.6m) in 2010. This year it will receive around $15m (£7.9m).


Given that the trials and tribulations of its godfather will be in the headlines again next month when shareholders get the opportunity to tackle the board about Shell's shortcomings you might expect Mr Hoffman to be keeping a low profile.


Far from it. Last month, the foundation published a report: Enterprise solutions to poverty - Opportunities and Challenges for the International Development Community and Big Business.


It is noteworthy, if not controversial, because it challenges everyone involved in the international development community, but particularly the private sector. It asks them to think again about how they can play a more effective role in the fight against poverty by using their particular skills and sector knowledge.


The report also marks something of a personal conversion for Mr Hoffman in the way he thinks big commercial combines can contribute most in the campaign to reduce global poverty. This in turn has led to a transformation in the charity's own business strategy. "To be sure," says Mr Hoffman, "there are many other poverty priorities that need to be addressed. But what the poorest developing countries need in order to make poverty history is the growth of enterprise."


The core of his argument is that Shell, and other cash-rich multi-national groups, many with richly endowed charitable foundations of their own, know next to nothing about running hospitals and schools. "But they do know how to run a business successfully".


He continues: "When I started I came with a 'development' attitude to poverty reduction. We backed 60 relatively small projects, most of them one-offs, that were scattered all over the place in Africa and then we did the "academic" thing which was to study and research them."


The conclusion of these academic exercises was, he adds: "A bit of light bulb moment. I wondered what we had achieved of lasting and sustainable value and then I thought about all the aid given by the international community over the past 50 years and the fact that two billion people still live on less than $2 a day."


There is, he says, a lot of "academic" advice from commentators and expert committees such as the UN Millennium Commission and the United Kingdom Commission for Africa. But, he argues: "The basic issue is the same as it's been for years: how, when and where should the international development community intervene to best help developing countries create the conditions that facilitate sustainable and equitable economic growth?"


For the Shell Foundation that now means investing, or making finance available to small and medium-sized enterprises (SMEs) and projects, all involved in the energy sector, worth between $10,000 (£5,300) and $500,000 (£266,000).


He cites the examples of small farmers in eastern Uganda who were given money to buy solar-powered agricultural crop driers and a South African firm that uses the waste products from shelled peanuts to make cheaper and cleaner alternative briquettes to charcoal (see below).


The Shell charity, he adds, will look at any SME or project within its wide "energy'' remit, including those run by NGOs or other agencies, that stand a reasonable chance of success. The foundation generally insists that companies it invests in raise "match funding" from local banks.


"Having the Shell Foundation on board gives local banks the reassurance they need that they are spreading their risk," he says. "And from our perspective being able to call on the group's people on the ground for advice on all matters is invaluable, from due diligence to unparalleled local knowledge on enterprise-poverty issues."


Mr Hoffman describes the foundation's role as that of a social merchant bank. "If a company or project can put forward something that looks financially viable," he says, "then you seed it, scale it and spin it off. If it isn't working you shut it down."


The Shell enterprise solution to poverty is, as Mr Hoffman admits, "still young" and modest in financial scale. Nevertheless, he points to Uganda where out of 160 deals, non-performing investments are running at 2 per cent with no write-offs to date.


Mr Hoffman accepts that many fellow foundations funded by big business may take issue with his advocacy of the social merchant bank approach to poverty reduction.


He counters: "When business operates well in developing countries it is a huge source of social value via jobs created, taxes paid and technology transferred. What's wrong with that?"


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