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Clifford Shambare
“The African has largely remained a child type, with a child psychology and outlook”. Jan Christian Smuts; former South African president was quoted as saying in “Citizen and subject”, a book written by Mahmood Mamdani, a Ugandan author.
“Even if the racism in the language is blinding, we should be wary of dismissing Smuts as some African oddity ( . . . ) Smuts spoke from an honourable Western tradition,” Mahmood Mamdani said, referring to the same statement in the same book.
These quotes are some of many that have been expressed by famous – or shall we say – notorious individuals, most of them in leadership positions, in the Western world, regarding what they perceive as “the inferiority of the African race”.
That said, in real life, if we look closely at the psyche of the black African, we cannot help observing that he believes in the automatic – almost natural – Caucasian custodianship in the general aspects of his life.
The source of this belief is the African’s inferiority complex to the Caucasian. Some writers refer to it as a “colonial mentality” or “colonial hangover”. Personally, I have come across many situations where the African prefers white to black leadership. In some cases, I have heard older generation Zimbabweans say that they can tolerate white to black oppression!
When it comes to economic matters, I believe this is the major reason why the African – even in this day and age – believes that an economy can only function if it has a strong, if not one hundred percent FDI input, in it. Interestingly, in this case, they mean Western, and not Eastern, FDI.
However, China today has set up its own investments in foreign lands, including the OECD countries. In that case it is the FDI in those countries. This is an indication of how far that economy has developed and grown to date.
Sadly, when it comes to the matter of FDI, even relatively young and educated black Africans harbour the said thinking. As a result, today in Zimbabwe, it is an anathema to even express an attitude that may be interpreted as (being) anti-FDI.
Before proceeding further with our discourse, I want to make one pertinent point; FDI is a collective term for individual firms. On considering the matter from this perspective, it becomes easier to appreciate that its goal is to make profit for its investor and not to enrich the host country. Nor is it to provide employment for the locals, as some of us would want to believe.
Under such circumstances, anything can happen in the host country and FDI may not care a hoot! Be that as it may, there are smart FDI that nearly always opt for a win-win situation whenever they are given the option to choose between the two – that is, blatant exploitation or giving something to the host country in the process.
In my article of February 21, 2020, on African industrialisation in this paper, I explained the difference between FDI and portfolio investment. As far as this matter is concerned, my own experience so far, is that in most African situations, locals prefer FDI to the local investor.
This attitude stems from this continent’s history where the Africans depended entirely on industries that were owned by the colonials. This is a condition where the former remained largely on the periphery of the economy. Sadly, today, this condition has hardly changed throughout the continent.
At this juncture, let us consider the pros and cons of FDI, for like any similar system, it has both its own positive and negative sides. This fact has been well documented by experts who are mostly Western economic analysts. Matthew Picketty the French economist who wrote Capital in the Twenty First Century, is one of these.
In fact in one interview recorded in one of the Economist magazines (I cannot recall which one offhand) Picketty describes FDI as “a slow poison” on account of the way it subtly and slowly kills local industries.
The following are the pros of FDI: It brings capital and jobs into the host country. During carrying out its operations, it inadvertently, but not necessarily deliberately – gets involved in the infrastructural development of the host country.
This mostly happens in the extractive industries where the goal is to extract and transfer materials – usually in the form of raw materials – for running the factories back home.
Consequently, in most cases, FDI has the potential to raise the quality of life of the citizens of the host country. That said, this outcome cannot always be guaranteed.
On the negative side, there is always the possibility of political interference by the owners of FDI. Then there is the destruction of natural resources and environmental pollution; then there is the destruction of local cultures. Under certain circumstances, FDI can also crowd out local investment. And last but not least, there is the repatriation of profits back home.
And although there are general universally agreed parameters to be applied in the latter case, this is a situation that calls for the host country government to negotiate with FDI as to the actual percentage of profits to be repatriated at any given time and situation.
And moreover, in most cases, developed economies have devised ways that subtly compel FDI to use a decent part of their profits in the host country. Corporate social responsibility obligations are some of these.
Then there is the issue of taxes, which also involves negotiations between the two parties.
Unsurprisingly, these three aspects are the ones in which weak governments – of which there are many in Africa – are often compelled to compromise, often to their disadvantage. In this case, do you still remember my article in this paper on ‘Negotiating skills for Africans’?
These facts and factors have several implications for the host country. One of them is the possibility for the FDI to come into a country and leave little or no tangible benefits to it and its citizens. In some cases, the result lies somewhere in between the two extremes – that is the positive and the negative outcomes.
In the African context, Zimbabwe included, the overall implication is that, since the host country is usually the underdog in the deals, it has to make an effort to extract as much as possible from the partnership. This reasoning is the origin of the concept of ‘smart partnerships’ – sometimes referred to as ‘win-win’ contractual outcomes.
In such circumstances, in quite a number of situations, the host country has to have some attributes with which to leverage itself in such partnerships.
Here we have countries that have done well in this respect. China is one, India is the other. They both have high populations that make up the consuming public there. For example, China makes use of its huge population of 1.486 billion (as of 2019) for this purpose.
They also have developed marketing systems as well as a high proportion of a discerning consumer public that can afford the goods produced by FDI. This enables the latter to profitably exploit the local market because of relatively low distribution costs.
They have high populations of skilled manpower – a situation that results in the production of products that easily meet international quality standards. This condition helps them to build effective and sustainable linkages to the international markets, working with that FDI.
Furthermore, the low local wage levels of the host country, result in low production costs that lead to low priced products that are price competitive on the same international markets. However, this is the condition that some human rights activists have lobbied tirelessly to be done away with, arguing that it violates the human right to fair wages.
At this juncture, let us compare and contrast these attributes with those of Africa, doing so by zeroing in on Zimbabwe. Although Zimbabwe has an educated workforce, she currently lacks critical skills, particularly those for artisans.
This situation creates peculiar challenges that relate to product quality, and a consequent failure to successfully make use of the country’s external markets, particularly international ones.
For example, some Western economists have argued that because of the relative underdevelopment of the host countries in the developing world, it is ultimately cheaper to import raw materials from a host country – usually a developing one — to do the manufacturing in the home country instead of the former.
They argue that in the latter case, FDI is not able to realise productivity gains because of a lack of the necessary skills in the host country.
In the case of Zimbabwe, there is an underlying irony here though. Some years before, and a few years after independence, the country had developed such a level of skilled manpower as to approach adequate capacity for same, but sadly they all left for greener pastures.
Interestingly though, in the same respect, China has suffered the same fate. But she has somehow, managed to ameliorate her plight through the ‘100 Talents’ programme that has been designed to attract back home, her skilled workforce.
On the other hand, similar efforts by the current ZANU PF administration, have so far, not yielded the desired results. There are several reasons for this state of affairs, not the least of which are the economic deterioration the country is currently going through, and the high level of corruption in high places. This corruption has the effect of corroding the effectiveness of the institutions that should be the custodians of the economy.
Some economic researchers on the subject have found that most FDI desire to operate in countries whose institutions are functional. This implies that a sizeable proportion of FDI that comes to operate in a country such as Zimbabwe will have exploitative and opportunistic tendencies.
That said, one hopes that this is not actually the case in the current circumstances.
On considering the aspect of economic deterioration in the country, we find it to lead to a state of dilemma – a chicken and egg quandary – since it is the same skilled workforce that should facilitate economic growth in the country.
So now, what you have is a country that only has its natural resources to leverage with to try and attract FDI. To me, this is quite a precarious state for a country to be in.
That said, the overall goal for any country playing host to FDI should be long term sustainability and prosperity for its citizens. This implies that the host country should develop strategies that are geared towards empowering the local investor whenever this is possible. There are many ways this can, and has, been done elsewhere. A good case in point is the cooperation between Germany and India that has been in existence for many years.
Here I propose three such systems. One of these is to somehow, integrate the production systems of FDI with those of local firms. The other is to attach locals into FDI firms through a well planned and agreed programme. The other is to send locals for training in the FDI country for a stipulated period.
From this discourse, it becomes clear that, just clamouring for FDI without any plan for one’s economy for the long term is a short-sighted attitude indeed!
Clifford Shambare is an agriculturist cum economist and is reachable on 0774960937.
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