Corporate Social Repugnance: Examining the Impact of MNCs in Africa

Picture in your mind’s eye a developed country (any image works fine, but if you want the writer’s perspective it's more times square than Edmonton strip mall). Here is what I’m guessing your image looks like: bright, retina piercing fluorescent sign abundance, more storefronts than you can possibly process in one glance (McDonalds, Starbucks, Loro Piana for the luxury enthusiasts) and an overwhelmingly garish persistence of Multinational Corporations. There are signs from western giants that capture every square of this grid matrix, bearing testament to the economic victory of this nation (that is, the one you are imagining). Evidently, in the globalized free-trade capitalist abundance where we live, the omnipresence of behemoth multinationals is the metric of measuring economic development, the flashing star at the top of the scale. The more you own, the better, the more you consume, the higher your standard of living - the classic ‘ECON 101’ arguments that we intuitively adhere to.

Clearly, the existence of Multinational Corporations (hereon referred to more stylishly as MNCs) in the post-globalization climate is jarringly pervasive, so to speak. From Amazon to Shell, Coca Cola to Heineken, the economic map is stippled with their presence. With valuations greater than that of independent nation states they operate in and resources encompassing incredulous figures, these corporations are the basis of modern capitalism’s success.

According to neoclassical theorists, MNCs are price takers – organizations that are not bound by the new-found conscience of Corporate Social Responsibility (CSR) that finds today’s firms bound by a wire of righteous consequence (for better or worse), as long as they pay their required taxes to the countries they operate in. The income of these entities is theirs to keep, and because they are the yardstick for development, their existence in underdeveloped regions like Africa has become the answer to the “development without socialism” question.

In true fashion of laissez-faire, the conservative oligopolistic view posits that MNCs benefit developing countries in potential-growth hotspots like Africa by readily providing capital, employment, and infrastructure that the underdeveloped climate cannot endogenously foster. The free market narrative believes that the capital generated by MNCs is their CSR, their capability to develop their righteous contribution.

The theory has intuitive merit – MNCs possess the capacity to transform the regional economic climate. In the post-colonial debris of Africa, these corporations were invited by local governments to inject capital and foster local growth. The companies themselves see their involvement in the dire undevelopedness as a shiny present of successful capitalism, a home-run initiative of CSR in scale. The protectors of global free-trade seem to endorse this narrative – organizations like the WTO, MIGA, TRIP and TRIM have provided the infrastructure for MNCs to operate unhindered in the African continent. Through the Washington Consensus, the World Trade Organization permits all MNCs to take (almost) 100 per cent of their profits to their home-states instead of investing them back into the countries whose turf they play on. Contrary to the above posited neo-classicalism, these organizations are not liable (or motivated) to reinvest in African soil. This naturally leads us to the question at hand – is the pervasiveness of western MNCs in Africa a flagship commitment to Corporate Social Responsibility? Is their valuable investment injection the answer to development?

Unfortunately for the big-guys, there is little evidence to support that hypothesis. Investigative journalism, critical theory, qualitative analysis and secondary data collection all point to the resounding failure of MNCs in bringing CSR backed development to the African continent. In a total reversal of intentions, big-corporation involvement has created human rights violations, environmental degradation, capital flight, tax evasion and political instability. Clearly, the laser-focus has always been, and continues to be profit maximization at the cost of African resources. Marketing narratives around corporate goodness can only survive for so long under analytic scrutiny – beyond the lens, what develops is an image of corporate social repugnance.

Here are some facts:

South Africa alone mines 70% of the world’s platinum and 80% of its Rhodium. Ghana, Guinea, Mali and Tanzania produce 22% of the world’s gold. Ghana, Congo, Botswana and Angola produce 55% of the world's diamonds. Nigeria, Algeria and Gabon contribute to around 10% of the world’s annual oil output.

Also a fact:

Each country mentioned above has escaped the development that was expected to follow from their stated abundance. They have instead devolved into breeding grounds for human rights violations and environmental peril.

Another (damning) fact:

Commercial natural resource extraction in Africa is largely controlled by Western Multinational Corporations.

Under the above glorified ruse of CSR, (largely American) corporations have been involved in rampantly unsustainable resource extraction in underdeveloped nations for decades. Initially, the natural resource base was posited as a Balance of Payments Solution – corporations would invest in infrastructure through Foreign Direct Investment, and the resource exports would fill African coffers, tipping the scales in the latter’s favor. In reality, this enterprise created the foundation of what we call the natural-resource curse – underdeveloped economies became burdened by foreign commercial involvement, devolving into economic sink-holes whose profits flowed back to the MNCs home countries instead.

When faced with criticism for unregulated resource extraction, ExxonMobil trumped up a series of campaigns in the early 2000s to underplay their involvement in oil pollution. BP’s famed “Beyond Petroleum” campaign was a white paper attempt to mask direct climate change allegations. With oligopolistic profit maximization in mind, companies like Shell introduced reckless fracking in South Africa that continues to contaminate local aquifers and contribute to climate crises. While oil is only a minor chapter of the story, it is a characteristic lead into how the ostentatious motive continues to be shareholder pacification through impressive line items instead of actual development.

Stick diplomacy is prevalent, and not just in oil – when South Africa refused ARV (Anti-Retroviral) exports from America in 2014, the US government contacted Tanzania and Rwanda to pressurize Pretoria into giving American manufacturers a supply monopoly in the country – establishing barriers to entry for native firms. In sectors like mining, low wages prevail at the cost of profit margins, creating dire human rights violations that fly under the radar of bulldozer influence.

But while climate change is still contentiously debated and denied, how is it that human rights are ignored in a post-WWII climate? For the West, statutorily speaking, human rights are limited to first generation political and civic rights (the right to vote, freedom to movement, speech and life). Under this narrow framework, MNCs ignore the broader set endorsed by African NGOs and ECOSOC (economic freedoms like housing, clothing and food). In the never ending bid to satisfy shareholders, these corporations go so far as to aid the establishment of military directors – they continue to operate (also read: thrive) most heavily under unstable governments, which give them infinite leeway for economic exploitation.

Photo by Allec Gomes on Unsplash

Dutch beer giant Heineken’s case study is perhaps the most meticulous piece of investigative journalism on this problem – from the 1960’s the company has supported the white-bloc and acted “in the spirit” of apartheid. Largely praised as a CSR success story in the West, Heineken often uses subcontractors, “beer-girls” and zero-hour workers to cut costs, tunneling profits into Switzerland that were rightfully African fiscal injections. As of today, the company’s goal appears to be the creation of a high-price African beer market with low-cost manufacturing in unstable bases to avoid persecution. When journalist Oliver Van Beemen published these findings in 2015, he faced severe legal action from the CEO himself – evidencing the billion-dollar stick that these entities wield. Despite recent reports (such as that of Heineken) gaining traction in recent media, the presence of MNCs in Africa has only increased.

The importance of MNCs and their landmark commercial achievements in modern day capitalism are well acknowledged, but their use as quasi-developmental agents in ravaged economies is emphatically not the answer. Development initiatives are not a Corporate Social Responsibility gimmick – what African economies need most is the chance to grow outside the shade of western corporate domination that creates issues of mal-development, deindustrialisation, unemployment, and environmental crises. MNC presence is notoriously called neo-colonialism in liberal circles, and the accusations seem to have a certain ring of truth to them. As American, British and even Chinese companies monopolize and dominate whole sectors in African countries purely on scale advantage, it is time to perhaps look back and curtail the sphere of corporate freedom and influence in unstable, poor nation states.

As far as development initiatives go, oligopolistic multinationals are not the answer. Aid that serves ulteriorly misguided social responsibility is far from being the engine that propels African growth and wellbeing.