Much has been written over the past half century about overdependence in Africa on natural resource extraction, and for good reason. Much of the continent is forced, by virtue of a number of internal and external factors, to ride the boom-bust cycle of the global commodity market to exhaustion. And even as economies on the continent seek to diversify, some companies are following the well-established path of African extraction.
According to The Economist, Africa is home to “a third of the planet’s mineral reserves, a tenth of the oil and it produces two-thirds of the diamonds.” Yet mining of these riches tends to force unemployment to rise, not fall, all while wealth accrues at the top of the socioeconomic spectrum. This is all dependent on bullish markets for commodities. When these markets turn, as they did in 2014, the fragility of this structure is exposed, and regular citizens suffer.
Chinese companies have been investing heavily in recent years in natural resource extraction on the continent, filling a vacuum left by others, including firms in the United States and Europe. As the world’s most populous country has climbed the latter of economic development, however, Chinese investment could well shift from natural resources to other sectors and provide capital for the economic diversification so desperately needed among African nations. Fewer workers are available in China thanks to, among other things, that country’s now-defunct one-child policy, and it’s likely that Chinese investment in labor-intensive industries will move overseas. Foreign direct investment from other international companies, including those headquartered in the Western world, will hopefully follow.
As it does, African development in the true sense -- policies and business practices that foster growth of family-supporting jobs -- should be pursued. This could be a moment of opportunity for the many African nations with large working-age populations and, in turn, a shift away from overdependence on natural resource extraction. But it must be accompanied by appropriate investments in education and workforce development and a rejection of extractive policies, even in non-natural resource sectors.
Child labor problems have plagued African nations for years, and Nestlé has been criticized extensively for sourcing from farms which employ children younger than 15 years old. A new report by the Fair Labor Association (FLA), commissioned by Nestlé, saw researchers visit 260 farms used by the company in Ivory Coast from September to December 2014. The researchers found 56 workers under the age of 18, of which 27 were under 15. While the company is making strides to address this problem, the pattern exists because for too many years it looked the other way and remained content with an extractive business structure that benefited developed-nation profits, not developing-nation growth.
Unfortunately, Unilever also falls into this pattern of extractive behavior. The food and consumer goods behemoth’s footprint on the continent is huge, with operations in Zimbabwe, South Africa, Ghana, Nigeria, and Kenya ranging from tea plantations to soap manufacturing plants. The company has engaged in the numerous public relations efforts on the continent, including the planting of more than 100,000 trees in South Africa. However, they’ve also turned to policies which harm local development. In India, local Unilever partners saw the royalty fees, franchising costs paid to the British-Dutch headquartered corporation, double overnight, and profits there fell dramatically. Unilever is now seeking to apply the India model in South Africa, tripling royalty payments at a time when South Africa’s economy is struggling. This is unsustainable and extractive, and couldn’t come at a worse time for the local economy.
Long-term economic development is a fickle beast, particularly in Africa, where a legacy of colonialism and an overdependence on natural resource extraction has retarded growth over the past 60 years. A shift in foreign direct investment has the potential to lay the groundwork for real, sustainable development across Africa. It just needs to be done the right way.
