Investment in Africa: Thinking Beyond Stereotypes

Commentary, 03 August 2014

By Motoko Aizawa, John Ruggie, Patron, IHRB

Iron Ore train in Liberia. | Photo: J-B Dodane

This week President Obama will host the US-Africa Leadership Summit, a gathering of 51 Heads of State from across Africa.

The meeting in Washington, DC should discuss the kind of investments that not only promote economic growth, but that also help recipient African nations address personal safety and security, enable legitimate land acquisition, promote basic services, food security and infrastructure, and build resilience against climate change. 

In effect, the kind of investment that will ultimately contribute to national security, and peace and stability in Africa – all expressed objectives of the Summit.

There are two contrary views on recent Africa-focused summits of this kind. One view suggests that emerging economies, China in particular, take pragmatic approaches to investment on the continent, while the West imposes conditions to suit its own domestic audiences, protectionist influences and geo-political priorities. An opposing outlook sees Chinese investment in Africa as exploitative and conditions imposed by Western nations as upholding international standards good for long-term sustainable development.

In recent years, Beijing has welcomed African leaders with lavish ceremonies, promising generous aid and significant investment, without lectures on ‘awkward’ topics like human rights or corruption. However, the Chinese position is itself shifting. Officials are placing increasing importance on issues such as ‘local content’ (the economic opportunities created for African nationals, businesses and communities in a project) and the needed ‘social license to operate’ (the overall acceptance by local communities of overseas-led investments). For example, the Chinese Ambassador to Tanzania delivered a recent frank assessment that some Chinese companies have brought “bad habits” with them to Africa, which hurt Sino-African relations. Indeed, a growing number of Chinese companies recognize the need for more guidance and an exchange of ideas and experiences on responsible business practices in Africa. To suggest these are only western preoccupations may no longer be accurate.

Yet in the lead up to this week’s Summit, some critics have upbraided the Obama administration for not emulating the so-called Chinese way of welcoming African leaders. For example, a recent article in Foreign Policy implied that planned Summit discussion topics like “Governing for the Next Generation” and a focus on issues such as education and human rights offer evidence that the administration cannot get out of the habit of lecturing Africa and providing old-fashioned charitable aid. For their part, many in the business community seem to feel massive Chinese subsidies that accompany investments in Africa make American investments irrelevant. They urge the administration to just get on with its support for business investing in Africa, as the Chinese do.

But those calling for a US model of engagement based on China’s recent experience in Africa should be aware not only of changing Chinese views, but also of how Africans themselves perceive the issues involved. Many African civil society organizations say this week’s Summit will miss a critical opportunity if it does not shine a light on important topics, such as responsible business and investment practices, including respect for human rights, particularly during the Business Leaders Forum set to take place on August 5. In an open letter to leaders taking part in the Summit, over 50 African civil society organizations have called for human rights and responsible business to be on the official agenda.

In fact, this historic Summit should be a moment for the US administration to underscore a particular brand of investment in Africa – not just any investment but responsible foreign direct investment. The US government and US business leaders should use this opportunity to reaffirm their commitment to the kind of investment that would demonstrate adherence to internationally accepted standards of state and corporate behaviour, like the UN Guiding Principles on Business and Human Rights and related Principles for Responsible Contracts, as well as multi-stakeholder standards like the Voluntary Principles on Security and Human Rights, among others.

The growing number of African civil society organizations that are increasingly advocating for more transparency, accountability and respect for human rights, especially within the extractive sector, expect no less of such investments. Many have worked in partnerships with their governments to sign and commit to major initiatives and frameworks such as the Extractive Industries Transparency Initiative (EITI). This signals a growing willingness on the part of some African countries to tackle responsible state and business conduct in the context of major investments.

To build stronger economic ties to Africa, there is no need to apologize for emphasizing the importance of respecting human rights and promoting good governance at home and abroad. Responsible investment should be a goal for each and every nation that promotes foreign direct investment, bound for Africa or elsewhere.

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