Multinational Corporations and Economic Development in Africa
July 25, 2007
Is corporate social responsibility (CSR) in Africa a phrase that companies employ to suggest that they are doing good when in fact they are solely focused on doing very well indeed? Or have international companies initiated broad gauging CSR programs that have become a genuine part of the development process?
Since the transition to democracy in South Africa, there has been a proliferation of external codes of corporate conduct. The Global Sullivan Principles (GSP), which were launched at the UN in 1999, have been joined by the Global Compact of the UN, the Extractive Industry Transparency Initiative, the Voluntary Principles and others. While each of these codes has its own objectives and methods of implementation, there is no shared set of indicators which demonstrate how companies contribute to Africa’s development. Moreover, there are enduring perceptions that multinationals, especially in the extractive sectors, are doing little more than contributing to environmental degradation, as in the Niger Delta, or poor governance, as in Equatorial Guinea.
On the other hand, there is no question that companies in diverse sectors in Africa are making significant contributions in the countries where they are active. In some instances, these CSR programs are far from the company’s core commercial competence.
The HIV/AIDS crisis in South Africa, for example, has compelled many companies to adopt aggressive programs that offer treatment as well as prevention to employees, their family members and, in some instance, the communities where the employees live.
In Equatorial Guinea, oil companies have entered into partnerships with the government to train teachers and eradicate malaria. In West Africa, international cocoa producers have adopted programs to guard against child labor and ensure that children have access to education. In Angola, the international oil companies have become engaged in a range of development projects, from resettling ex-combatants to creating micro-finance institutions. The budget for these CSR projects in exceeds the Angola budget of the U.S. Agency for International Development (USAID).
The U.S. government has realized the value of public-private partnerships in the economic development process. According to its figures, USAID’s Global Development Alliance has leveraged $1.4 billion of taxpayer dollars into $4.6 billion through the creation of over 400 public-private partnerships in the developing world.
The most immediate question, however, is whether CSR projects are being done for public relations reasons, with little thought given to real economic needs, or are they genuinely integrated into a nation’s economic development and poverty reduction strategy? Companies that subscribe to an external code, such as the Global Sullivan Principles or the UN Global Compact, are already a step ahead when it comes to promoting development. The GSP, for example, encourages companies to support human rights and sustainable development, to work with governments and communities to improve the quality of life, and to neither pay nor accept bribes. In following such principles, corporations are committing themselves to looking beyond PR to genuine social and economic needs in host countries. The challenge for African governments and donor agencies, however, is to more clearly understand how CSR programs contribute to the development process. In particular, an effort should be made to quantify in a more systematic and transparent way how CSR programs promote growth and development. Companies also need to be more involved in the development dialogue that takes place among host governments, bilateral donors, and the international financial institutions (IFIs).
Some worry that as corporations become involved in education, community development, or environmental programs in host countries, they are taking on functions that African governments ought to be performing. In that way, corporations might be contributing to the phenomenon of “weak states” that are regarded as an impediment to development in Africa. The simple fact is, however, that many African governments do not have the capacity to implement broad-based development programs. If they did, the bilateral donors and the IFIs would not be involved either. Nevertheless, companies should ensure that their CSR programs become self-sustaining and that there is a significant capacity building component to what they do.
Given the current commodity boom, international companies will be making increasingly large investments in Africa, especially in the extractive sectors. Not only will this generate significant revenues for the companies and host governments, but it will raise expectations among host governments and civil society organizations that the companies will take a more active, and visible, role in giving back to the communities in which they are active.
With an estimated 800 Chinese companies active in Africa, they too need to be part of this dialogue. There are important environmental and health concerns surrounding Chinese corporate involvement in such areas as mining and hydroelectric dam construction in Africa, as well as worries over Chinese corporate conduct in dealing with African officials. Consequently, it is essential both for Africa and for China’s reputation as a responsible actor in world affairs that Chinese companies take steps to demonstrate that they are constructive corporate citizens.
There is some evidence that Chinese companies on the continent are becoming aware of this need. In January, when China’s President Hu Jintao was in Namibia, he convened a meeting of all Chinese companies and underscored the need for them to make responsible social investments along with their commercial investments.
There is no question that multinational companies investing in Africa have the resources, and the responsibility, to contribute to Africa’s development. At the same time, international companies need to enhance their understanding of the development process in order to integrate with national development strategies to maximize the results of their social investments. Some companies have already hired development specialists to oversee CSR programs and others will likely follow suit. It is an immediate challenge, as noted above, for companies to organize their input so that their CSR efforts are coordinated with other donor programs. USAID has served as an important organizing vehicle for American companies through its Global Development Alliance program, but this effort tends to leave non-American companies out of discussions.
The role of companies in the CSR and development process will continue to increase. As noted by USAID, in the 1970s, 70 percent of resource flows from the U.S. to the developing world were official development assistance (ODA) and 30 percent were private. Today, 85 percent of resource flows to the developing world are private and the balance is ODA. Given the increasing resources that companies are investing in Africa, the World Bank and donor agencies need to reach out on a more systematic basis to bring the companies into the development process to ensure that all parties coordinate the design and implementation of their development efforts.
Witney W. Schneidman, President of the Africa-focused consulting firm, Schneidman & associates International,is also a Senior Adviser to the Leon H. Sullivan Foundation. He served in the Clinton Administration as Deputy Assistant Secretary of State for African Affairs responsible for economic and commercial issues.
The Online Africa Policy Forum is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).