In Africa, some multinationals are too farsighted
Hyperopia or far-sightedness, is a defect of the eye that results in an inability to see near objects, even though distant objects can be seen clearly. Many executives appear to suffer from this condition when planning their expansions into Africa.
Specifically, they tend to focus on the potential long-term benefits of their presence and operations — for example, jobs and tax revenue — perhaps believing these will mitigate operational risks. They seem unable to see the potential for conflict and tension with local constituencies in difficult sociopolitical contexts right in front of their eyes.
Take the example of AngloGold Ashanti, the world’s third-biggest gold producer, currently embroiled in a nasty situation in Ghana over its Obuasi gold mine, where escalating conflict with local miners recently claimed the lives of nine people.
AngloGold Ashanti Ghana has asked the World Bank’s International Centre for Settlement of Investment Disputes for an urgent ruling to make authorities enforce law and order at the mine. This process is expected to take months, and the situation on the ground is unlikely to improve for years. Obuasi is partly responsible for the fact that the company posted a net loss of $85m in December 2015.
Such situations are hardly atypical. A study of direct costs to business of company-community conflicts found one nine-month construction delay resulted in $750m in additional project costs.
Platinum group metals producer Lonmin saw its share price drop 30% within a week of the 2012 massacre of workers at Marikana. The later five-month industry-wide strike — a result not only of labour-management conflict, but of a confluence of tensions between companies, competing unions, the government, traditional leaders, communities, criminal gangs and others — cost Lonmin, Anglo American Platinum and Impala Platinum a combined $2.25bn in lost revenues.
Across Africa, such conflicts will predictably increase due to factors such as population growth, poverty, unemployment, the ever-widening gap between rich and poor, perverse impacts of globalisation, climate change and unresolved issues from Africa’s colonial past.
Peter Maurer, president of the International Committee of the Red Cross, concluded in 2015, “we have entered a new era, and it is not a peaceful one”.
Indeed, a review of the lowest-ranking 100 countries on the Fragile States Index shows that virtually all have confronted significant, and often deadly, conflict in connection with large-scale business investments in the past five years.
This means that everywhere in Africa, companies will need to confront the real and immediate risk that their presence and operations will cause, exacerbate or become a magnet for conflict.
In Ghana, the tensions — arising when the government, in granting exclusive mining rights to multinational companies, abruptly declared the local people who had mined for countless generations “illegal” miners — had been known for years. But rather than face and manage the risks directly, gold companies largely decided to leave the government to deal with it, with unfortunately predictable results.
IN SA, the situation was not so different in the face of tensions between different constituencies in and around the platinum mines that were similarly well known but went largely unaddressed by companies.
Nancy Lindborg, president of the Institute for Peace in the US, reminds us that we live in “a world in which unpredictability and insecurity have become the new normal”.
This is particularly true for businesses when operating in places where governments lack capacity or, as in Ghana, their decisions are not seen as legitimate by local communities.
The wrong conclusion to draw from all this would be that Africa may not be the place to invest in after all. Many companies have succeeded in some of the most fragile environments on the continent. The right conclusion is that conflict risks must be acknowledged and managed as part of the business.
Take the example of oil company Chevron, which for many years was entangled in a militarised response to conflict in the Niger Delta that only exacerbated grievances and increased insecurity. Noting that its approach to community relations was utterly failing to manage operational disruptions, theft, extortion and increasingly high levels of violence against the company, Chevron took a new approach.
The company began to funnel its assistance through regional development councils — each of which includes a peace-building committee — that put clusters of communities in charge of their own development. It funded, with other international donors, the Partners for Peace network to map and address conflict risks, whether directly involving the company or between neighbouring communities and between communities and various levels of government. It became a founding member of the Voluntary Principles on Security and Human Rights, using its influence to moderate the Nigerian government’s militarised response to conflict.
Chevron’s multifaceted approach has had a demonstrable effect on development outcomes for communities in the Niger Delta. It has contributed to a dramatic reduction in violence, both among communities that had formerly seen themselves as pitted against one another, and against company operations and facilities.
A growing body of evidence demonstrates that the conflict risk mitigation strategies demonstrated by Chevron — including institutionalised networks for monitoring the local context; the rallying of diverse and sometimes conflicting local stakeholders around high-quality data and trustworthy analysis; dialogue that builds sufficient consensus for action; proactive conflict prevention and resolution interventions; and a backbone support organisation that facilitates expert and neutral assistance — work to prevent and manage conflicts in the context of large-scale business investments.
They are underpinned by reasonably well-understood principles and mechanisms of action and are well enough established in the realms of peace building, conflict prevention and violence reduction to be considered mainstream.
Admittedly, companies will find it challenging at first to implement such approaches. Businesses in Africa operate where legacies of the past, whether colonialism, disrespect for human rights or apartheid, cast long shadows, and where community mistrust is rampant.
“It’s a long journey,” said Lonmin CEO Ben Magara, brought in after the Marikana massacre, “to win trust from stakeholders and create shared value and purpose.”
THE business leader deciding to use the company’s influence and resources to advance local conflict prevention and violence reduction efforts must contemplate a new and substantial level of commitment.
But the bottom line is that even acute conflict is preventable and manageable when dealt with collaboratively, pragmatically and on its own terms.
One large-scale dairy processor in Africa even had its “best year ever” in the middle of a revolution. Its GM attributes this in part to its strategic choice to eschew simpler and perhaps less expensive commercial milk operations in favour of sourcing milk from small-scale farmers, who in turn had an interest in protecting the company.
Practical, implementable approaches are available to help companies achieve such positive outcomes for both business and society. Neither company shareholders, nor African governments, nor advocates for peaceful development need, or should, accept the current disconnect between company practice towards conflict in and around their operations, and tested, mainstream practice to prevent conflict and mitigate risks.
Businesses need to put on a new pair of glasses that help them recognise that determined efforts to reduce conflict and violence can work, even in the most fragile contexts. Furthermore, there are networks, resources and expertise that can bridge the gaps among disparate actors. Putting mainstream conflict management practice into focus can help create more profitable and sustainable businesses today, while helping to navigate the “new normal” of conflict and insecurity into the future.
BD Live