Economic Growth in Africa Through an Ethical Lens.

Author:Wolf, Ruth
Position::Report
 
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Economic Development in Africa

Africa has promising potential for investments that will yield high returns. However, many investors still avoid business development in Africa. The avoidance of investors warrants more critical examination and research of responsible investing throughout the African continent due to problems of poverty, rampant corruption, and crime that are influenced by Africa's development process and the "reciprocal relationship between Africa and the African diaspora" (Bolaji 2015, 92). Former Aon CEO of Anton Roux divides the African continent into scales based on their degrees of safety and danger. Countries with poor economic conditions are more dangerous, politically unstable, and have fewer investor-friendly laws due to fears of food shortages. For instance, Congo, Zimbabwe, and Sudan are classified as having the highest risk (Conference, Africa--A Continent of Business Opportunities 2010). Investors should explore socially responsible investing principles and practices throughout the African contingent to better address social and economic spatial disparities within inter-regional and intra-regional levels (Konadu-Agyemang and Shabaya 2005).

One way to facilitate a business relationship in Africa is to create a good relationship with local agents, especially those who are close to the government. Unethical business conduct in Africa, such as broken agreements, lack of trust in local agents, cultural and behavioral differences, and a very different perception of time, hinder productive business negotiations and disrupt economic empowerment. There are emerging African Corporate Social Responsibility (CSR) and sustainability practices through economic, political, and socio-cultural (Ockwell and Byrne 2016) dimensions and partnerships in Africa that are attractive to some investors. However, Western investors still must take unethical business conduct into account. Companies that invest in Africa have contributed to the local development of education, health, and the environment. As a result, inflation dropped from 22 percent in the 1990s to 8 percent in 2000, and the external debt and budgetary deficits declined as well (Games 2010; Diao and McMillan 2017). One of the potential factors that can benefit from the growth of the African economy is 40% of the population is under 17 years old. Thus, there is a potential source of readily available cheap labor. Today there has been a massive wave of urbanization in the continent, which requires the construction of highways, hospitals, and other necessary facilities for the sake of the overall welfare for the populace. Africa is a place where everything grows more and more. Researchers and practitioners, both in developed and developing countries, are more aware of the normative and instrumental reasons for businesses to conduct more socially responsible activities and to make more positive contributions to the environment and society as a whole (Jamali and Carroll 2017).

The encouragement of markets and business transactions in Africa depends on strengthening the legal systems and the provision of social and physical infrastructure. For instance, Nigeria, one of Africa's largest countries and a huge supplier of oil, privatized more than 116 companies between 1999 and 2006 (Aylward et al. 2016).

It is important to note that the economy of Nigeria has seen prominent fluctuations of growth between 2010 to 2017. Since 2011, the economy has consistently decreased, and in 2016 growth was at a mere 1.1 percent (Nigeria Economic Growth & Poverty, EPAR Technical Report #327). Africa's accelerated growth has caused urbanization, increasing migration from villages to cities, and a larger workforce, that is driving consumption by a growing middle class (Games 2010; Diao, McMillan 2017). For Western Investors, Africa's greatest asset is its cheap workforce. Its economic processes and development have created new local consumers. The rapid growth in the number of households and rising consumption has created a demand for local products. However, the poor infrastructure is still a deterrent to many potential investors. Some parts of the continent still lack electricity and are dependent on generators. Companies that invest in Africa face high insurance costs. There is also a concern about abductions. In large portions of Africa south of the Sahara, kidnapping has practically become an industry that pulls in a huge profit. For example, in the story titled "Chimamanda Ngozi Adichie: My Father's Kidnapping," (New York Times, May 30, 2015), the eponymous author relayed the story of her 83 year old father's kidnapping and ransom. As she explained, "kidnappings are not uncommon in southeastern Nigeria and unlike similar incidents in the Niger Delta, where foreigners are targeted, here it is wealthy and prominent residents." (Adichie, 2015). The story underlines the reason for the lucrative efficiency of kidnapping, even against the elderly. Rather, it is purely based upon an economic business. The kidnappers usually demand a million or half a million dollars. The industry of kidnapping has slowed down the economic progress of Africa south of the Sahara because big organizations must have insurance for people being sent to the areas where kidnappers operate. Private individuals cannot come because they cannot afford the insurance. According to the publications of ASI Global, a majority of kidnappings occur in Somalia (Globes 2015). Somalia still suffers from a severe lack of food, and violence between terrorist groups such as Al-Shabab (an Al-Qaeda affiliate) occurs regularly. Furthermore, the country suffers from severe droughts. These compounding factors contribute to the lack of control the Somalian government has on the country.

In October 2010, British pensioners, Paul and Rachel Chandler were kidnapped by Somali pirates and subsequently freed after 13 months (Kidnapping Survivor Amanda Lindout Agrees Ottawa Shouldn't Pay Ransoms 2016). In Nigeria, 20 foreigners were also kidnapped, resulting in many businesses hiring armed bodyguards. Businesspersons are in danger in Africa, with people often being kidnapped and held for ransom. It was recently published that three Chinese business men were kidnapped in Cape Town (Report, Ana, IOL News 11 Sep. 2017). Countries with security problems are dangerous, and political instability and substandard infrastructure hinder the potential for economic development. The self-confidence of the African people is an important factor. Without such confidence, there will be fewer investments in their respective nations.

Global Business Activity in Africa

Africa is the second largest continent in the world with vast resources. Consequently, many countries are pursuing African resources to sustain development that generate global strategic dependencies which have implications for governance and sustainability (George et al. 2016). Africa requires innovative new markets to advance the continent's low merchandise trade, share of global FDI flow, little manufacturing of value-added products, declining food production, infrastructure deficiency, and lack of Millennium Development Goals (Davis Edinger Tay and Naidu 2008; Games 2010; Ewelukwa, 2011; Beckley 2011; Cisse 2012; Hinga and Yiguan 2013; Hanauer and Morris 2014; King 2014; Diao and McMillan 2017). It is important for international stakeholders such as China and the US to work with Africa in transparent and responsible governance and business practices to ensure that African, Chinese and American interests are given priority together (Huang 2008; Davies et al. 2008; Anderson et al. 2015; Cisse 2012). However, France and UK development cooperation in Africa is likely to remain limited (Cumming and Chafer 2011) due to both countries greater interest in and influence over European development cooperation policies that disfavour greater global oriented policies (Arts and Dickson 2010). Between 2006 to 2010, China put 14 percent of its entire international investment budget into Africa. The Calcalist published that investors from America and Europe see Africa as the most profitable potential investment. The fact that the content is rich in raw materials and cheap labor contributes heavily to the potential economic growth of Africa (Bindman The Calcalist 24 May 2012). However, in order to meet this potential, it is necessary for Africa to achieve political stability.

China's Influence in Africa

African economic development with Chinese characteristics include the principles of 'friendship, mutual trust, mutual respect, mutual support and benefit, common development, and win-win economic cooperation' (King 2014, 154) with a strong emphasis on non-interference and friendly relationships with Africa (Hanauer and Morris 2014). Yejoo (2013, 26) proposes 'The Chinese-led Special Economic Zones (SEZs) have been expected to contribute to host countries' economic growth, technology transfer and job creation'. However, 'Currently most of them are still under construction and have not yet started operations'. Thus, SEZs require African government and multilateral support from African citizens as well.

Social relations and interactions are closely linked to economic competition (Thiel, 2017). Chinese business engagement and partnerships in Africa support development projects to help build Chinese knowledge of African markets, secure sustainable energy and strategic investment approaches in the global oil market (Rotberg 2008; Mersham Skinner and Rensburg 2011; Mudida 2012; Navas-Aleman 2015).

Moreover, US and EU trade restrictions on Chinese manufacturers have incentivized China to establish businesses and change the origin of Chinese products (Gu, 2009). Some scholars define China's economic development in Africa as coalition engagements with criticism generating primarily from the Western part of the world (Davies et al. 2008) through 'ideological rivalry with China construed...

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