While Africa has unanimously been pegged the new frontier, with foreigners from various parts of the world looking to see how they can cash in, they better keep their sights on African entrepreneurs, such as 27-year-old Fabienne Dervain (pictured), who is looking to compete head to head with outside competition.
With several top-tier American businesses, such as Uber and Facebook, expanding in to Africa, Starbucks announced that it would be joining the expansion last July.
And while coffee isn’t currently the beverage of choice for most Africans — even though it was discovered in Ethiopia during the 9th century — Starbucks is hoping to change that preference around.
However, before Starbucks can become the coffee of choice in Africa, Dervain, based in Abidjan, Ivory Coast, hopes she can beat them to it with her own homegrown coffee shops.
As the owner of Couleur Cafe (pictured), Dervain has seen her entrepreneurship dream turn into a reality.
“I have always wanted to be an entrepreneur, but I didn’t know I would have been one so early.”
Dervain started her business with $60,500 of her personal savings and some family support.
In addition to opening the store, the funds helped her to purchase the heavy equipment needed for her enterprise as well as refurbishing.
And she is making headway.
While she initially began Couleur Cafe with one employee, now her business, which she says she invests 100 percent of her profits in to, has been able to add six more employees.
But as with any endeavor, establishing her business hasn’t been easy.
“Being a woman, young entrepreneur in this country is very difficult. People tend not to respect you, and people tend not to take you seriously.
“They think you are like an amateur or just joking and having fun.”
Still, Dervain refuses to allow gender and age discrimination to hold her back. In fact, she hopes her presence will inspire other females to get in to business.
“I definitely think I can be a role model to women, because I dared to start my business, and I’m here, I’m staying, and I’m going to develop my business.”
As for her future plans, Dervain is looking to expand her dream by giving her international competition a run for their money.
“I actually want to become the Starbucks of Africa. I have a big vision for the next five years.”
There is no décor. The only art on the pumpkin colored walls are vintage posters of bare shouldered black women with elaborate hairstyles. Two women, one from Senegal, the other from the Ivory Coast, split 7 feet of black synthetic hair into sections before they begin to braid.
Behind them is a restless elementary school girl; she swings her legs so vigorously her timberlands thump on the floor. Her hairdresser, Tenin, has tightly wrapped the ends of each braid with string until they resemble sooty bees nests. She dips the ends of the braids in boiling water; acutely aware of the risk involved, the child is finally still. The final step of the three-hour process is simple — Tenin lathers the girl’s head with white mousse.
Aicha Hair Braiding Salon is one of a number of African braiding shops that are clustered around 125th street in Harlem. Much like the Apollo Theatre and Abyssinian Baptist Church, the braiding shops and braiders that work in them are a Harlem landmark.
Hair braiding is a tradition that has been practiced in various African societies for centuries. Across the United States, women from countries such as Senegal, Ivory Coast and Togo, have used braiding as a bridge to a better life. In the 1990’s and 2000’s, entrepreneurial instinct and the ability of braiders to amalgamate traditional braiding styles with hair trends within African-American culture, meant braiding was a secure source of income.
According to Professor Cheikh Anta Babou, an expert in African history and the Africa diaspora, although it was generally confined to the informal economy, braiding was once such a lucrative profession, in the peak season braiders could earn $200-$300 a day. Babou estimates 70% of Senegalese immigrant women in the United States are hair braiders. Braiding is so pervasive it has reshaped and transformed Senegalese life in the United States. For instance, the economic independence women gained from braiding meant patriarchal norms were resisted; consequently divorce has become more frequent within the Senegalese community.
In recent years, however, a combination of demographic shifts in neighborhoods, rising rents and technological disruption, has meant braiding is no longer a trade immigrants can rely on.
“This country’s not like before. You don’t get money like before,” said Tenin, the hairdresser who hails from the Ivory Coast. “It was more busy than this. When tax season comes you’re very happy. But now?” she shakes her head in dismay and returns to her work. Two months ago, Tenin gave birth to her fourth child. The uneven nature of her job meant she had to come back to work. On some days she has no clients, while on other days she has eight. Staying at home was far too risky.
Today, it’s not uncommon to see braiders hustling for potential clients at the busiest intersections in Harlem. Some even wait at subway turnstiles, hoping to find a customer. According to Aicha, Tenin’s mother and the owner of the braiding salon where they both work, the spread of braiders onto the streets hunting for clients is a relatively new development. Aicha has worked as a braider in Harlem for over 20 years. She believes the demographic shifts in the neighborhood and rising rents, has meant they have a smaller customer base and have to fight harder for what’s left. “I don’t like to beg on the street for customers. I used to, but not any more. But I understand why women do” she said.
Aicha is correct in her observation about rising rents and dwindling black customers. A report by the Community Service Society, showed between 2002 and 2014 average rents in Central Harlem rose by 90%. Recent census data showed that Harlem’s black population is the smallest it’s been since the 1920’s and they are now only 40% of its residents. The ramifications of this on the informal braiding market are palpable. A number of braiding stores have been forced to close, and some braiders even left New York in search for work elsewhere. However, there’s another force working against women like Aicha and Tenin — technology. In particular, the proliferation of social networking sites, which have created virtual communities centred on sharing information about black women’s hair and an increase in women finding their hairdressers using the Internet. In an unexpected twist, it seems that immigrants aren’t taking jobs from Americans, instead technology is taking jobs from immigrants.
In 2008, a shift occurred in the black cultural zeitgeist that reshaped how black women decided to style their own hair. According to “Hair Story: Untangling the Roots of Black Hair in America” by Ayanna Byrd and Lori Tharps, the natural hair movement caused a critical mass of black women to stop chemically straightening their hair and wear their hair in its natural state. Historically, there have been other waves where black women have favored natural styles however this was the first in the era of online social networking.
Conversations about black women’s hair are constantly happening on the Internet. They occur in YouTube comments, hair forums and an amorphous subculture within Twitter called “Black Twitter”. The #naturalhair hashtag on Instagram has 7.4 million photos. In theory, this movement should have meant African hair braiders were perfectly positioned to exploit a new and hungry customer base. According to Mintel Black Consumers and Hair care 2015 report, the black hair care market is worth an estimated $2.7 billion — there’s more than enough money to go around. But a cornerstone of the natural hair movement and the digital conversation surrounding it is an emphasis on autonomy and agency. An important expression of this agency is the ability to understand and do your own natural hair.
The emergence of social networking and the fact that the web significantly influences black women’s hair choices, places braiders at an acute disadvantage. The informal and underground nature of the braiding industry has meant there’s a natural and almost instinctive aversion to social media. Despite their presence on the streets of Harlem and Brooklyn, most braiders prefer to be or remain inconspicuous. Some braiders are undocumented or in regular contact with people who are undocumented and this creates a reluctance to create a visible online presence. Very few of the braiding shops have Facebook or Instagram pages, websites are rare and most salon owners don’t respond to reviews on Yelp. Furthermore, in West African culture, privacy is viewed as virtue and openness is a vice. All these things are diametrically opposed to the relentless self-promotion and hyper-exposure the digital age requires. In the meantime, the savviest natural hairdressers are exploiting technology for their benefit and gaining customers.
“I did it in college just for fun, just one video — and it went viral” said Sadora Paris, a popular natural hair blogger. Since Sadora posted her first video tutorial two years ago, her audience has grown to 120 thousand YouTube subscribers and almost 25 thousand Instagram followers. She has leveraged her fan base to become a fulltime brand ambassador for natural hair care lines such as Carol’s Daughter and Shea Moisture. Sadora also earns additional income as a hair coach and beauty consultant.
Sadora views the relationship between the African braiders and their customer base as a complex one that is fractured by generational differences as much as cultural ones. African braiders aren’t the only segment within the black hair industry that struggled to keep up with how technology has transformed it. Many older African-American salon owners who catered exclusively to black women with chemically straightened hair failed to keep up with the times and are also struggling. Additionally, the women she coaches who no longer go to African braiders cite three main factors — saving money, time and their hair. Traditional braiding methods favor tight, neat styles and an aesthetic is valued over the health of the hair. However many black women have concerns about their hair, particularly the perimeter of the hairline referred to colloquially as their “edges”. For Sadora and her clients, the choice to do their own hair is less about the African braiders and more about how they prefer to do their hair.
Dr. Shartriya Collier is an expert in immigrant women entrepreneurs, who has done extensive research on the braiding industry in the United States. While she agrees that technology and other variables have contributed to the difficulties the braiders currently face, she cautions against overstating their significance. In her view, there were no real glory years in the braiding industry– it’s always been a difficult trade. “There was always a tension between African shop owners and their African-American clients,” she said. The intersection of language and cultural barriers meant exchanges between African braiders and their African-American clients have always been characterized by difficulties.
In their economic transactions, most braiders tend to occupy the grey space between legal and illegal activity. Cash is the preferred, and often the only form of payment. Most financial transactions aren’t documented in official records and braiders aren’t paid an hourly wage; instead they pay the shop owner a commission on every client they get. And while technology has had an adverse effect on their cash flow, it’s been advantageous for most parts of the informal economy. Professor Justin W. Webb, of The University of North Carolina at Charlotte, is an expert on entrepreneurship within the informal economy. In his research, he has observed how technological advances have created more opportunities for entrepreneurs who operate outside of the formal sphere. “Technology is presenting a larger market and in a way they’re able to skirt [legislation]. They’re less visible to those who are monitoring and enforcing them,” said Webb.
In his years of studying informal economies, Webb has frequently come across a phenomena he calls the “stepping stone effect” This occurs when a worker gradually formalizes and legitimizes their trade or they accumulate enough capital and knowledge to leave the informal sphere and work in another part of the formal economy. But braiders face a challenge that impedes this effect — language.
Most braiders come from French-speaking African countries, so if they do speak English, it is often their third language. French or Wolof tends to be the lingua franca inside the hair shop and English is only used while establishing price or in brief exchanges with clients. The lack of English fluency makes it difficult to leave the industry. On the other hand, braiders from English speaking African countries often use braiding as a job on the side, to support them while they attend night school or while they learn a more economically advantageous trade. As soon as these women achieve their goal they stop braiding.
In 2002, Mama (as she calls herself), made the trip from Nouakchott, Mauritania to the United States. At the time she was fluent in Wolof and French, and could speak only broken English. She found accommodation in the Bronx and was embraced by a network of African immigrants. They told her to go to Harlem and start braiding hair. Mama is middle aged and braiding has taken its toll on her body. Some days she works for 12 hours at a time at Barry’s Good Braiding, she has constant back pain but can’t afford the surgery. What was supposed to be an opportunity has become a trap and Mama wishes she picked another trade when she first moved to America. Braiding is so niche that her years of experience aren’t easily transferred to another industry. “It’s not a job I’m doing and love it. I don’t have a choice,” said Mama.
Walk into any braiding shop and you’ll notice the incredible speed at which braiders move their wrists and fingers. No matter how long you stare, this speed makes it difficult to decipher each step of the process. It’s wondrous to watch because the women maintain this speed for anything from 3 to 6 hours. And on a particularly busy day they may braid for a total of 10 hours.
Ask any woman who’s had her hair braided the worst thing about it and she’ll probably mention the pain. Most people don’t think about the pain the braiders endure. The physically taxing nature of the job and the mental strain of hoping for clients mean that braiders often end the day exhausted. Over the years this accumulates and has acute physical manifestations. Back pain, shoulder pain, it isn’t rare to come across braiders with ganglion cysts on their wrists — big bumps that are the evidence of years of strain.
For those that have the option to work in the formal economy, the decision to become an entrepreneur is often an expression of their independence and freedom. But for many of the braiders, with limited childcare options, low levels of education and significant language barriers, being an entrepreneur is the only option, rather than a romantic form of self-actualization. It is a beautiful struggle at best.
Baristas David Merrick (l.) and Nigel Armstrong (r.) predict the new Jamaica store will have a good effect on the community. Photo Credit: Michael Shain
Two Jamaica-raised baristas at the newly opened Starbucks in Jamaica, David Merrick and Nigel Armstrong, who met barely a month ago but have already branded themselves the “dynamic duo,” are excited the store will offer job training for youth in the community.
Starbucks held a preview opening for its new store at 89-02 Sutphin Blvd. Monday, the first of at least 15 stores that will open throughout the United States to hire and train youth in diverse and urban communities. The store officially opened Tuesday at 6 a.m.
The store includes an onsite classroom space available to local nonprofit organizations to provide job training and skills building programs for young people in the area.
It is part of the chain’s goal of hiring 10,000 opportunity youth, 16- to 24-year-old individuals who are not in school and not employed.
Merrick, 23, who volunteers for LIFE Camp founded by Erica Ford, said the initiative will give kids an alternative study spot to the library and keep them occupied.
“Honestly, I feel like it’s a good thing because as a kid, you kind of don’t learn what’s going on at a young age,” he said. “So this is definitely a way to get kids at 16 and 17 off the streets and actually introducing them into the workforce and the work environment.”
For Armstrong, 20, the store will be a “home away from home” for kids in the area.
“I know they’re going to have a lot of youth coming in and out of here, so to make that connection with them is going to be really big,” he said. “I feel like they’re going to be looking to us for guidance. I feel like it’s going to be really big for us and for the youth.”
Alisha Wrencher, the store manager, who has worked for Starbucks for 18 years and was born and raised in Jamaica, handpicked all 17 employees, who range in age from 16 to 36 and hail from Brooklyn, parts of Queens and Jamaica in the Caribbean.
“I know how much this store can do to create a brighter future for our opportunity youth and am honored that Starbucks chose me to lead this new store,” Wrencher said.
Borough President Katz, who has launched the Jamaica Now Action Plan to revitalize Jamaica, praised the selection of the borough as the beta site.
“We understand that this is a prototype for the rest of the nation, but just to be clear: It started in Queens,” Katz said, her words met with applause from the crowd.
Starbucks has partnered with the Queens Community House, Queens Connect’s lead agency, and YMCA’s Y Roads Centers, which will be utilizing a dedicated training space within the store specially created by the Starbucks design studio.
The Jamaica store is the first in a nationwide initiative Starbucks announced last year to deepen investments in at least 15 similar U.S. communities by 2018 by opening stores with the goal of creating new jobs and engaging local women and minority-owned vendors and suppliers. The next location will be in the West Florissant neighborhood of Ferguson, Mo.
“One of the things that we’ve learned over the time is that we can’t do it alone,” said Rodney Hines, director of community investments for Starbucks retail operations.
Candice Cadogan, a Brooklyn-born barista raised in Cambria Heights, and Jermaine Slater, a newly promoted shift superviser who was born in Jamaica in the Caribbean and raised in Jamaica, led a coffee tasting for Guatemala Finca Monte David, one of their small batch Reserve coffees.
The article was originally published in the TimesLedger Newspapers.
Senegalese military personnel are voting in a national referendum on March 13. The rest of Senegal votes in the same referendum on March 20. The military is voting early so that it can be alert during what is hoped will be a peaceful vote. Dakar, the capital of this country of fourteen million, is decked out in posters shouting “Oui”: vote “yes” for strengthening democracy and the rule of law. The referendum concerns reducing the term limit of the presidency and other initiatives. It is a reminder that this is a sub-Saharan African country that is a historically stable democracy, in a region that has seen coups, dictatorship and most recently, Islamist extremism.
A week in this West African state gives an idea of the security challenges it is facing. Dakar port, which is the second largest after Ivory Coast’s Abidjan, is an entree to West Africa and a gateway to Mali, where France intervened to prevent a takeover of the country by Islamist rebels and their allies in 2013. The security here is noticeable, with private security running checks on passengers, and a local police and gendarme detachment. The Senegalese navy is based here and the coast guard does regular patrols from the harbor.
Soldiers have been deployed in districts where there is nightlife in Dakar. Hotels in the capital have also upped security after the attacks on November 20 in Bamako which killed twenty, on Ouagadougou in Burkina Faso on January 15 which killed 30, and in Ivory Coast on March 13. Much of this security seems symbolic rather than necessarily reflecting deep experience or expertise. But there is no doubt that Senegal is taking it seriously and most of those we spoke with felt there was a terror threat and that leaders were cognizant of it.
Senegal’s capital may be 1,200 miles from Ouagadougou, but it feels much closer. If terrorists could slip into that country and attack a hotel, couldn’t they do it here, which is equidistant from Mali or Mauritania where the extremists operate. The U.S. Army’s Flintlock exercise which began on February 8 in the village of Theis an hour east of Dakar, is symbolic of the faith Western powers and regional powers put in Senegal’s influence and its desire to be vigilant against extremism. U.S. Army Brigadier General Donald C. Bolduc said of the thirty-nation exercise that “it is more than a military exercise, we are training together to increase our interoperability and collaboration to counter today’s threats.” Senegal led this year’s exercise.
Aminata Touré, a former prime minister and currently adviser to the president says that one of the great long term threats to security can be youth unemployment. “There is a relationship between instability and youth unemployment. That is the first threat to security and social stability. Of course, we are concerned by security issues, we are surrounded by countries with troubles.” Many Senegalese emphasize that the country was able to prevent Ebola from crossing the border after the outbreak in West Africa in 2014, which points to an ability to close a porous border if necessary.
According to local security analysts the Senegalese army is of a high quality compared to its neighbors. It does not play a role in politics, an issue that has harmed armies in other countries in this region because of suspicion between the presidential guard units and other units. Senegal’s army also has experience fighting in Mali and most recently in Yemen, where it sent 2,100 troops to join the Saudi-led coalition in May of 2015. SO far, more than a dozen Senegalese have joined ISIS and related groups. In December, for example, one medical student at Senegal’s largest university posted on Facebook that he had gone to join ISIS. Four local imams were arrested in November for supporting extremism. A Pew Research Center poll released the same month showed that while 60 percent found ISIS unfavorable there were 10 percent who found it more palatable.
Many local experts say that the tradition of large Sufi brotherhoods in Senegal means extremists have difficulty taking root. Professor Ibrahim Thioub, the rector of the University Cheikh Anta Diop, says that on the fringes of these brotherhoods are figures who are marginalized and punished if they promote extremism. “The brotherhood knows how to discipline these urban youth leaders. But the problem is the Salafists who exist in Senegal since the 1950s. The radicalization in the last years, it is slightly more, but not like in Mali, or Mauritania, because there is something else. The brotherhoods are able to organize and have a strong network.” He argues that even abroad, where Senegalese might be exposed to extremism—in France, for example—these brotherhoods have local chapters and encourage moderation and a very Senegalese version of Islam. Amsatou Sow Sidibé, a former presidential candidate, agrees that the people of Senegal are the strongest asset the country has against the regional developments:
“[Terrorism] is terrible. We must have solidarity both of the people here and of the countries. It’s not good. We haven’t had any acts of terror but we don’t know. It is a possibility. We don’t have eyes to see the future. We must be vigilante, and the public must be educated to be vigilante.”
Part of that vigilance is relying on these local brotherhoods and citizens to inform on any extremists who may be operating. The concept is to rely on human intelligence and the strong social solidarity in Senegal which is different than some of the region’s states whose instability led to the rise of groups like Boko Haram, Al Qaeda in the Islamic Maghreb (AQIM) and ISIS. In some cases these extremists preyed on tribal, ethnic or religious differences, or perceptions that the government was suppressing local people. Senegal, whose population is 95 percent Muslim, appears to have very strong feelings of social solidarity.
Nevertheless the fact is that Senegal has become a base for many regional embassies, due to the Ebola outbreak in neighboring states and to the country’s relative stability. That means Senegal has a strong foundation of international support but also is a target. Those foreign embassies, foreign nationals, hotels and NGOs can all present a target—like in Bamako and Ouagadougou—where Islamists seek to carry out spectacular attacks to harm the image of a country through mass murder.
So far, Senegal’s decision to send troops abroad has given its army experience, and its hosting of regional security exercises such as Flintlock are a welcome development. The key would be if the country could project its stability to neighboring states, and anchor the West African security system against the threats of extremists.
Seth J. Frantzman is a Jerusalem-based journalist who holds a PhD from The Hebrew University of Jerusalem.
The article was published in the National Interest Online.
We speak to young South African entrepreneur Shalton Mothwa about his project, the AEON Power Bag. Watch.
Mothwa took part in the Red Bull Amaphiko Academy, a workshop that hoped to inspire young South African entrepreneurs to collaborate, be creative and share their ideas for a bright South African future.
Mothwa’s AEON Power Bag is a laptop bag that will be able to charge mobile devices using WiFi and telecommunication signals. He says, “It’s about convenience and freedom. You’ll be able to do your thing on mobile devices without having to power your stuff.”
The 28-year-old nuclear physicist is from the North West Province. He tells us he is one month away from finalising the prototype but will still need R900,000 in funding before we see this product on the shelves.
The Arab Spring happened five years ago but this is not an anniversary to celebrate as Tunisia remains the one success story. But that hope for freedom has inspired some African countries.
On December 17, 2010, a young vegetable seller set himself on fire in the small city of Sidi Bouzid, Tunisia. This act sparked massive protests against the then president, Zine El Abidine Ben Ali, which eventually forced him from power. The movement, utilizing social media to organize mass protests, spread to neighboring countries and led to the overthrow of Muammar al-Gaddafi in Libya and Hosni Mubarak in Egypt.
In Sub-Saharan Africa, the events of the Arab Spring were observed with skepticism and uncertainty but also a lot of admiration. However little changed. But then in 2014 mass protests of young people drove Burkina Faso’s president, Blaise Compaore, from power.
After 27 years in power, Compaore was seeking a constitutional amendment to allow him to run for another term. He was forced to flee to neighboring Ivory Coast. Now after the November 2015 elections, the people of Burkina Faso are also hoping for a long period of democratic and peaceful rule.
“African Spring?“
The upheaval in Burkina Faso was the first peaceful revolution in Sub-Saharan Africa. But was it the hesitant start of an “African Spring?”
“Civil society organizations were very involved in looking into how one could get people to rise up in a country with little democracy,” said the political scientist Robert Kappel from the GIGA Institute in Hamburg.
Mass protests in Burkina Faso forced the sitting president to flee
According to Kappel, social media also played a big role and these tools were used to organize small gatherings. These small actions eventually came together to bring young people on to the streets. As protestors from all over the world knew, censorship of social media can always be circumvented.
In 2011, the Arab Spring “let loose a euphoria for activists all over the continent,” said Na’eem Jeena, the director of the South African research institute Afro-Middle East Center. This was especially evident in Zimbabwe where President Robert Mugabe has ruled with an iron fist since independence. And while little has changed, Jeena thinks that it at least gave the opposition and activists in the southern African country the feeling that mass protests can achieve something.
Protests also broke out in Sudan in 2012 with massive demonstrations against poverty and lack of opportunity. The crowds resembled those in neighboring Egypt. President Omar al-Bashir ordered a tough crackdown sending in police with batons and teargas and arresting opposition leaders. The protests soon stopped.
A local Arab Spring
Jeena thinks that the emotions of the Arab Spring are also felt in South Africa, though most citizens are not looking for a revolution. The spirit of the protests against apartheid in the 1980s is still present, especially in the townships. There residents have been protesting for better housing, more access to electricity and for more jobs for decades.
“We speak often here of a South African spring,” said Jeena.
Recently tens of thousands of students hit the streets to protest higher university tuition under the hashtag #FeesMustFall. Protestors later joined together under #ZumaMustFall calling for the resignation of President Jacob Zuma.
“I think the feelings of confidence and protest that grew out of the protest in North Africa have spread to other parts of the African continent over the past five years,” said Jeena.
Days after announcing he would donate billions of dollars to charitable causes over his lifetime, Facebook CEO Mark Zuckerberg has drawn some backlash from critics who questioned how that money would be used.
On Tuesday, Zuckerberg and his wife, Priscilla Chan, announced the arrival of their baby daughter Max and pledged to donate 99 percent of their Facebook shares over the course of their lives to the Chan Zuckerberg Initiative.
Those shares are currently worth some $45 billion. The couple said they set up the initiative with the mission to “advance human potential and promote equality in areas such as health, education, scientific research, and energy,” according to its Facebook page.
But after Zuckerberg got a windfall of positive publicity, critics started to question his motives and where the money will go.
The controversy stems from the initiative’s status as an LLC, or limited liability company, rather than a nonprofit.
“Zuckerberg is not ‘giving away’ 99% of his FB wealth. He’s ‘donating’ his FB shares to an LLC that he controls, for minimizing taxes,” Twitter user @ollieblog wrote.
Zuckerberg is not “giving away” 99% of his FB wealth. He’s “donating” his FB shares to an LLC that he controls, for minimizing taxes.
“And b/c Zuckerberg’s thing is an LLC, he can give to political organizations, SuperPACs, all that stuff, w/money that was never taxed,” tweeted ProPublica reporter Jesse Eisinger.
And b/c Zuckerberg’s thing is an LLC, he can give to political organizations, SuperPACs, all that stuff, w/ money that was never taxed.
“A charitable foundation is subject to rules and oversight. It has to allocate a certain percentage of its assets every year. The new Zuckerberg LLC won’t be subject to those rules and won’t have any transparency requirements,” Eisinger explained in a piece published in the New York Times.
“The donation has been characterized a little too simplistically as an outright charitable donation of 99 percent of his wealth,” Robert Willens, one of the country’s foremost corporate tax experts, told CBS News.
“Certainly it could wind up being that if he directed all of the LLC’s funds to charity,” Willens added, noting that such charitable arrangements are becoming common among wealthy people. “But the jury is still out regarding what percentage of his wealth will be directed to charity.”
To try to address these concerns, Zuckerberg took to the the social media network he helped found.
“The Chan Zuckerberg Initiaitve is structured as an LLC rather than a traditional foundation. This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates — in each case with the goal of generating a positive impact in areas of great need,” Zuckerberg wrote on his public Facebook. “Any net profits from investments will also be used to advance this mission.”
“We receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative,”Zuckerberg wrote. “And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.”
In fact, he noted that had they donated shares to a more traditional nonprofit foundation, they would have received “an immediate tax benefit.”
Zuckerberg said that by using this financial approach, “we gain flexibility to execute our mission more effectively.” For example, he said, “our education work has been funded through a non-profit organization, Startup:Education, the recently announced Breakthrough Energy Coalition will make private investments in clean energy, and we also fund public government efforts, like the CDC Ebola response and San Francisco General Hospital.”
Willens agreed that for Zuckerberg, the main benefit of shifting his shares to an LLC is control over how the funds are ultimately used.
“He wanted to have more flexibility to invest in profit-making operations,” Willens said. “He didn’t want to be constrained by rules that govern foundations and other tax-exempt entities, while having maximum control over the funds — and what’s wrong with that?”
As for the suggestion that Zuckerberg’s and his wife’s formation of an LLC means the money may not actually go to charity, Melissa Berman, CEO of Rockefeller Philanthropy Advisors, whose clients include wealthy families and corporations, downplayed the notion. “They are clearly fairly visible people. If no giving, or impact or social purpose investing ever came of this LLC, I think people would pay attention to that.”
In the Facebook post Tuesday first announcing his plans, Zuckerberg said the Initiative will focus on “promoting equality,” an objective that Gabriel Zucman, an economics professor at the University of California, Berkeley, found commendable — and ironic.
“Promoting equality starts with paying one’s taxes,” Zucman said in an email to CBS News, while noting that Facebook shifts billions of dollars of profits to zero-tax locales like the Cayman Islands. “If billionaires are free to choose how they contribute to society, why shouldn’t I? Why do I have to pay taxes?” asked Zucman, who criticized the stance taken by Zuckerberg and other Silicon Valley billionaires as harming the social contract and very goals he “pretends to pursue in his letter.”
Like other U.S. multinationals, Facebook has used a range of accounting techniques to minimize its taxes. Those include funneling profits to tax havens overseas, a practice critics say deprives the U.S. government of revenue.
Zuckerberg previously signed The Giving Pledge, joining an elite group of billionaires like Warren Buffett, Bill Gates and Richard Branson in declaring he would give away more than half his fortune over his lifetime.
But some of his past philanthropic efforts have missed the mark. In 2010, Zuckerberg made a splash by announcing on “Oprah” that he was donating $100 million to turn around the failing public school system of Newark, New Jersey.
Five years later, that plan is widely regarded as a failure. Tens of millions of dollars were spent on restructuring and shifting children to charter schools, but “those changes were really not transformational, as hoped,” Dale Russakoff, author of “The Prize: Who’s in Charge of America’s Schools,” told CBS News.
Read Zuckerberg’s complete Facebook post responding to critics below:
I want to thank you all for your heartwarming congratulations on Max’s birth and on starting the Chan Zuckerberg Initiative. This whole community has been so loving and supportive.
If you’re interested in following the philanthropy work we’re doing with the Chan Zuckerberg Initiative, I encourage you to like the page here:
Since we announced this a couple days ago, many people have asked about what we’re planning to focus on and how we’re structuring our work.
Our initial focus areas are personalized learning, curing disease, connecting people and building strong communities. We’ve already made many investments over the past five years in these areas — education, science, health, internet access and inclusion — and you can see a summary of our investments on the Chan Zuckerberg Initiative page timeline.
The Chan Zuckerberg Initiative is structured as an LLC rather than a traditional foundation. This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates — in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission.
By using an LLC instead of a traditional foundation, we receive no tax benefit from transferring our shares to the Chan Zuckerberg Initiative, but we gain flexibility to execute our mission more effectively. In fact, if we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.
What’s most important to us is the flexibility to give to the organizations that will do the best work — regardless of how they’re structured. For example, our education work has been funded through a non-profit organization,Startup:Education, the recently announced Breakthrough Energy Coalitionwill make private investments in clean energy, and we also fund public government efforts, like the CDC Ebola response and San Francisco General Hospital.
We’ll have more to share soon, and if you want more information I recommend liking the Chan Zuckerberg Initiative page.
Thanks again for all of your support and interest. This community has been amazing and we’re excited to get started on this work together when we’re back from parental leave!
