The role of foreign direct investment by multinational corporations in Africa An exploratory discussion
Main Article Content
Keywords
Africa;, conflict affected areas;, FDI;, human rights, multinational enterprises.
Abstract
Foreign direct investment in conflict-affected areas is a contentious issue in the study of economic development and international human rights. Some analysts are enthusiastic about foreign direct investment (FDI) in conflict-affected areas, claiming that it supports economic growth and play a constructive role in peace-building efforts. On the other hand, a substantial body of literature suggests that FDI in conflict-torn areas may exacerbate instability and negatively undermine economic growth.
This article focuses on two multinational enterprises from Sweden and China that have been operating in South Sudan and Democratic Republic of Congo, respectively, to determine whether there is a link between their investment and the security crises in both countries. Findings shows that the corporations have been accused by both local and international rights groups of being extractive, involved in human rights violations, and building informal networks with local officials.
To avoid resource exploitation and human rights violations, as well as to allow companies to play a constructive role in the economic development in Africa, the article suggest that stringent laws and fiscal transparency in investment operations must be put in place.
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References
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Chuhan-Pole, P., Dabalen, A., Land, B. C., Lewin, M., Sanoh, A., Smith, G., & Tolonen, A. (2017). Mining in Africa are local communities better off? World Bank. https://doi.org/10.1596/978-1-4648-0819-7
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Dunning, J. H., & Lundan, S. M. (2008). Multinational Enterprises and the global economy. Edward Elgar. Multinational Enterprises in Africa: Resources, Security issues and foreign investment
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Kalia, R. (1982). Multinational Corporations and the Third World. India Quarterly, 38(3-4), 357-365. https://doi.org/10.1177/097492848203800307
Kolk, A., & Lenfant, F. (2012). Multinationals, CSR and partnerships in Central African conflict countries. Corporate Social Responsibility and Environmental Management, 20(1), 43–54. https://doi.org/10.1002/csr.1277
Lundin Energy Inc. (2021). Fuelling the energy transition. Retrieved from https://www.lundin-energy.com/
Lundin Energy Inc. (2021, November 11). Swedish Prosecution Authority brings charges in relation to Company’s past operations in Sudan. [Press Release]. Retrieved from https://www.lundinsudanlegalcase.com/swedish-prosecution-authority-brings-charges-in-relation-to-companys-past-operations-in-sudan/
Mate, K. (2002). Communities, Civil Society Organisations and the management of mineral wealth. London: International Institute for Environment and Development (IIED) No, 16.
Nelson, J. (2000). The Business of Peace: The private sector as a partner in conflict prevention and Resolution. Prince of Wales Business Leaders Forum.
OECD (2014, November). Baseline study two: Mukungwe artisanal mine, South Kivu, Democratic Republic of Congo. Retrieved from https://www.oecd.org/daf/inv/mne/Gold-Baseline-Study-2.pdf
Paine, J. (2016). Rethinking the conflict “resource curse”: How oil wealth prevents center-seeking civil wars. International Organization, 70(4), 727–761. https://doi.org/10.1017/S0020818316000205
Park, B. I., & Roh, T. (2019). Chinese multinationals’ FDI motivations: suggestion for a new theory. International Journal of Emerging Markets, 14(1), 70-90. https://doi.org/10.1108/IJoEM-03-2017-0104
Patey , L. A. (2006, April). Understanding Multinational Corporations in War-torn Societies: Sudan in Focus. [Policy Brief]. Danish Institute for International Studies. Retrieved from https://www.diis.dk/en/research/understanding-multinational-corporations-in-war-torn-societies
Patey, L. A. (2010). Crude days ahead? oil and the resource curse in Sudan. African Affairs, 109(437), 617–636. https://doi.org/10.1093/afraf/adq043
Project Management Institute. (2017). A guide to the Project Management Body of Knowledge: Pmbok guide. Multinational Enterprises in Africa: Resources, security issues and foreign investment
Reiter, S. L., & Steensma, H. K. (2010). Human development and foreign direct investment in developing countries: the influence of FDI policy and corruption. World development, 38(12), 1678-1691. https://doi.org/10.1016/j.worlddev.2010.04.005
Root, F. R. (1990). The Nature and Scope of Multinational Enterprise. In International Trade and Investment. essay, South-Western Publishing.
Ross, M. L. (2004). What do we know about natural resources and civil war?. Journal of peace research, 41(3), 337-356. https://doi.org/10.1177/0022343304043773
Simons, P., & Macklin, A. [V. N. V. (2014). The governance gap: Extractive Industries, human rights, and the home state advantage. Routledge.
Swedish Prosecution Authority. (2021, November 11). Prosecution for complicity in Grave War Crimes in Sudan. Åklagarmyndigheten. Retrieved January 19, 2022, from https://www.aklagare.se/en/media/press-releases/2021/november/prosecution-for- complicity-in-grave-war-crimes-in-sudan/
Udofia, O. E. (1984). Imperialism in Africa: A Case of Multinational Corporations. Journal of Black Studies, 14(3), 353–368. https://doi.org/10.1177/002193478401400305
UN (2001, April 12). Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of DR Congo. Retried from https://reliefweb.int/report/democratic-republic-congo/report-panel-experts-illegal- exploitation-natural-resources-and
Vadlamannati, K. C., Janz, N., & de Soysa, I. (2020). U.S. multinationals and human rights: A theoretical and empirical assessment of extractive versus nonextractive sectors. Business & Society, 60(8), 2136–2174. https://doi.org/10.1177/0007650320928972
Wettstein, F. (2010). The duty to protect: Corporate complicity, political responsibility, and Human Rights Advocacy. Journal of Business Ethics, 96(1), 33–47. https://doi.org/10.1007/s10551-010-0447-8
Whetho, A. (2014). Natural Resources, profit and peace: Multinational corporations and conflict transformation in the Democratic Republic of Congo (dissertation). University of Kwazulu-Natal.
Yeboua, K. (2021). Foreign direct investment and economic growth in Africa: New empirical approach on the role of institutional development. Journal of African Business, 22(3), 361-378. https://doi.org/10.1080/15228916.2020.1770040
Agarwal, S., & Ramaswami, S. N. (1992). Choice of foreign market entry mode: Impact of ownership, location and internalization factors. Journal of International Business Studies, 23(1), 1–27. https://doi.org/10.1057/palgrave.jibs.8490257
Amusan, L. (2018). Multinational Corporations’ (MNCs) Engagement in Africa: Messiahs or Hypocrites? Journal of African Foreign Affairs, 5(1), 41–62. https://doi.org/10.31920/2056-5658/2018/v5n1a3
Arbetman-Rabinowitz, M., & Johnson, K. (2008). Power distribution and oil in the Sudan: Will the comprehensive peace agreement turn the oil curse into a blessing? International Interactions, 34(4), 382–401. https://doi.org/10.1080/03050620802574911
Banza Lubaba Nkulu, C., Casas, L., Haufroid, V., De Putter, T., Saenen, N. D., Kayembe-Kitenge, T., (2018). Sustainability of artisanal mining of cobalt in DR Congo. Nature Sustainability, 1(9), 495–504. https://doi.org/10.1038/s41893-018-0139-4
Basedau, M., & Wegenast, T. C. (2009). Oil and diamonds as causes of Civil War in Sub-Saharan Africa. Colombia Internacional, (70), 35–59. https://doi.org/10.7440/colombiaint70.2009.02
Campbell, A. (2015, August 27). Fuelling conflict or financing peace and development? Country Indicators for Foreign Policy (Carlton University). Retrieved from https://carleton.ca/cifp/wp-content/uploads/1050-1.pdf
Caves, R. E. (2015). Multinational Enterprise and economic analysis. Cambridge University Press.
Chuhan-Pole, P., Dabalen, A., Land, B. C., Lewin, M., Sanoh, A., Smith, G., & Tolonen, A. (2017). Mining in Africa are local communities better off? World Bank. https://doi.org/10.1596/978-1-4648-0819-7
Coulibaly, S., & Doumbia, D., Izvorski , I. (2018). Reinvigorating Growth in Resource-Rich Sub-Saharan Africa. World Bank. Retrieved from https://documents.worldbank.org/curated/en/617451536237967588/pdf/5-9-2018-17-9-2-SSAGrowthforweb.pdf
DNV GL Business Assurance Korea (2018, May 23). Audit report on Congo Dongfang International Mining Sarl. (LG Chem). Retrieved January 21, 2022, from https://www.lgchem.com/asset/doc/Audit_Report_CDM_2018.pdf
Dunning, J. H., & Lundan, S. M. (2008). Multinational Enterprises and the global economy. Edward Elgar. Multinational Enterprises in Africa: Resources, Security issues and foreign investment
Egger, P., & Winner, H. (2006). How corruption influences foreign direct investment: A panel data study. Economic Development and Cultural Change, 54(2), 459-486. https://doi.org/10.1086/497010
Elman, C., Gerring, J., & Mahoney, J. (Eds.). (2020). The production of knowledge: Enhancing progress in social science. Cambridge University Press. https://doi.org/10.1017/9781108762519
European Coalition on Oil in Sudan (2010). Unpaid Debt: The Legacy of Lundin, Petronas and OMV in Block 5A, Sudan 1997 – 2003. Retrieved from https://www.ecosonline.org/reports/2010/UNPAID_DEBT_fullreportweb.pdf Felix Ayadi, O., Ajibolade, S., Williams, J., & M. Hyman, L. (2014). Transparency and foreign direct investment into Sub-Saharan Africa: An econometric investigation. African Journal of Economic and Management Studies, 5(2), 146-159. https://doi.org/10.1108/AJEMS-09-2012-0058
Fund for Peace (2021). Fragile States Index. Washington, D.C. The Fund for Peace. Accessed from https://fragilestatesindex.org/country-data/
Gissinger, R., & Gleditsch, N. P. (1999). Globalization and Conflict: Welfare, Distribution, and Political Unrest. Journal of World-Systems Research, 325–365. https://doi.org/10.5195/jwsr.1999.136
Huayou Cobalt (2021). About us: Create customer value, lead industrial development. Retrieved from http://en.huayou.com/about.html?introId=29
Human Rights Watch. (2003, November 24). Sudan, oil, and human rights. Retrieved January 19, 2022, from https://www.hrw.org/report/2003/11/24/sudan-oil-and-human-rights
Idemudia, U., Tuokuu, F. X. D., & Essah, M. (2022). The extractive industry and human rights in Africa: Lessons from the past and future directions. Resources Policy, 78, 102838. https://doi.org/10.1016/j.resourpol.2022.102838
Kalia, R. (1982). Multinational Corporations and the Third World. India Quarterly, 38(3-4), 357-365. https://doi.org/10.1177/097492848203800307
Kolk, A., & Lenfant, F. (2012). Multinationals, CSR and partnerships in Central African conflict countries. Corporate Social Responsibility and Environmental Management, 20(1), 43–54. https://doi.org/10.1002/csr.1277
Lundin Energy Inc. (2021). Fuelling the energy transition. Retrieved from https://www.lundin-energy.com/
Lundin Energy Inc. (2021, November 11). Swedish Prosecution Authority brings charges in relation to Company’s past operations in Sudan. [Press Release]. Retrieved from https://www.lundinsudanlegalcase.com/swedish-prosecution-authority-brings-charges-in-relation-to-companys-past-operations-in-sudan/
Mate, K. (2002). Communities, Civil Society Organisations and the management of mineral wealth. London: International Institute for Environment and Development (IIED) No, 16.
Nelson, J. (2000). The Business of Peace: The private sector as a partner in conflict prevention and Resolution. Prince of Wales Business Leaders Forum.
OECD (2014, November). Baseline study two: Mukungwe artisanal mine, South Kivu, Democratic Republic of Congo. Retrieved from https://www.oecd.org/daf/inv/mne/Gold-Baseline-Study-2.pdf
Paine, J. (2016). Rethinking the conflict “resource curse”: How oil wealth prevents center-seeking civil wars. International Organization, 70(4), 727–761. https://doi.org/10.1017/S0020818316000205
Park, B. I., & Roh, T. (2019). Chinese multinationals’ FDI motivations: suggestion for a new theory. International Journal of Emerging Markets, 14(1), 70-90. https://doi.org/10.1108/IJoEM-03-2017-0104
Patey , L. A. (2006, April). Understanding Multinational Corporations in War-torn Societies: Sudan in Focus. [Policy Brief]. Danish Institute for International Studies. Retrieved from https://www.diis.dk/en/research/understanding-multinational-corporations-in-war-torn-societies
Patey, L. A. (2010). Crude days ahead? oil and the resource curse in Sudan. African Affairs, 109(437), 617–636. https://doi.org/10.1093/afraf/adq043
Project Management Institute. (2017). A guide to the Project Management Body of Knowledge: Pmbok guide. Multinational Enterprises in Africa: Resources, security issues and foreign investment
Reiter, S. L., & Steensma, H. K. (2010). Human development and foreign direct investment in developing countries: the influence of FDI policy and corruption. World development, 38(12), 1678-1691. https://doi.org/10.1016/j.worlddev.2010.04.005
Root, F. R. (1990). The Nature and Scope of Multinational Enterprise. In International Trade and Investment. essay, South-Western Publishing.
Ross, M. L. (2004). What do we know about natural resources and civil war?. Journal of peace research, 41(3), 337-356. https://doi.org/10.1177/0022343304043773
Simons, P., & Macklin, A. [V. N. V. (2014). The governance gap: Extractive Industries, human rights, and the home state advantage. Routledge.
Swedish Prosecution Authority. (2021, November 11). Prosecution for complicity in Grave War Crimes in Sudan. Åklagarmyndigheten. Retrieved January 19, 2022, from https://www.aklagare.se/en/media/press-releases/2021/november/prosecution-for- complicity-in-grave-war-crimes-in-sudan/
Udofia, O. E. (1984). Imperialism in Africa: A Case of Multinational Corporations. Journal of Black Studies, 14(3), 353–368. https://doi.org/10.1177/002193478401400305
UN (2001, April 12). Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of DR Congo. Retried from https://reliefweb.int/report/democratic-republic-congo/report-panel-experts-illegal- exploitation-natural-resources-and
Vadlamannati, K. C., Janz, N., & de Soysa, I. (2020). U.S. multinationals and human rights: A theoretical and empirical assessment of extractive versus nonextractive sectors. Business & Society, 60(8), 2136–2174. https://doi.org/10.1177/0007650320928972
Wettstein, F. (2010). The duty to protect: Corporate complicity, political responsibility, and Human Rights Advocacy. Journal of Business Ethics, 96(1), 33–47. https://doi.org/10.1007/s10551-010-0447-8
Whetho, A. (2014). Natural Resources, profit and peace: Multinational corporations and conflict transformation in the Democratic Republic of Congo (dissertation). University of Kwazulu-Natal.
Yeboua, K. (2021). Foreign direct investment and economic growth in Africa: New empirical approach on the role of institutional development. Journal of African Business, 22(3), 361-378. https://doi.org/10.1080/15228916.2020.1770040
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The role of foreign direct investment by multinational corporations in Africa: An exploratory discussion. (2024). Journal of BRICS Studies, 2(2), 1-18. https://doi.org/10.36615/5c18fz47
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The role of foreign direct investment by multinational corporations in Africa: An exploratory discussion. (2024). Journal of BRICS Studies, 2(2), 1-18. https://doi.org/10.36615/5c18fz47