by Robert Guest
No matter how hard Guinness tries, however, the bars that sell its brew sometimes run dry. I spoke to Jean Mière, a tall young bar-owner with slightly bloodshot eyes, in a small village called Kuelle. “I’m not going to open the bar this evening,” he said, “because I don’t have any beer to sell to my customers.” The local wholesaler’s driver, apparently, was in jail.
I had arrived in an empty pick-up truck with the local Guinness depot chief, Yves Ngassa. We had been given directions by the wholesaler who normally supplied Mière, but the wholesaler had not mentioned that Mière had no beer nor asked if he could load some into Ngassa’s empty pick-up. Ngassa was furious. “This is so stupid,” he spat. “I’m losing sales here.”
The famished road
The biggest losers from lousy infrastructure are ordinary Cameroonians. Many environmentalists argue that roads in rainforests are a bad thing because they facilitate illegal logging and destroy indigenous cultures by bringing them into contact with aggressive, disease-carrying, rum-swilling outsiders. But the absence of roads probably harms Africans far more.
I tried to measure that harm, crudely, by jotting down the price of each Coca-Cola I bought and seeing how much more expensive it became as we moved away from Yaoundé, where it was bottled. I don’t normally drink Coke when I’m in Europe; I prefer water. But in places like Cameroon even bottled water can be a bit iffy, whereas the Coke brand name conveys the reassuring message that “drinking this will not give you unpleasant bacterial diseases.” So I drink gallons of the horrible stuff.
Anyway, I found that a 60 cl bottle of Coke cost 300 CFA in Yaoundé but 315 CFA in the small town of Ayos, a mere 125 kilometers down the road. At a smaller village 100 kilometers further on, it was 350 CFA. Once you leave the main road, prices rise even more sharply. A Guinness that cost 350 CFA in Douala would set you back 450 CFA in an eastern village that can only be reached on foot.
What is true of bottled drinks is also true of more or less any other manufactured good. Soap, axe-heads, and kerosene are all much more costly in jungle hamlets than in the big cities. Even lighter goods, which do not cost so much to transport, such as matches and malaria pills, are significantly more expensive.
At the same time, the things that poor people sell – yams, cassava, mangoes – fetch less in the villages than they do in the towns. Yet, thanks to bad roads, it is hard and costly to get such perishable, heavy items to market. So peasant farmers are doubly squeezed by bad roads. They pay more for what they buy and receive less for what they sell. Small wonder that the African Development Bank finds “a strong link between poverty and remoteness.”
Where roads improve, incomes tend to rise in parallel. In Cameroon, where the soil is wondrously fertile, farmers start growing cash crops as soon as nearby roads are repaired. Big commercial farmers benefit too. Along the highway to Douala, I saw great plantations of sugar cane and banana trees whose fruit is wrapped in blue plastic bags to keep at bay the birds and bugs that might mar the visual perfection demanded by European consumers.
Better roads also ease the drudgery of rural life. According to the World Bank, a typical Ugandan woman carries the equivalent of a ten-liter jug of water for ten kilometers every day. (Her husband humps only a fifth as much.) With better roads, both men and women can, if nothing else, hitch rides on passing trucks, thereby sparing their feet and getting their goods more swiftly to market. And no country with good roads has ever suffered famine.
Africans often find ingenious ways around infrastructure bottlenecks. Buses designed for European roads do not last long in Nigeria, so Nigerians import the chassis of heavy European trucks and mount locally manufactured bus bodies on top. This is much cheaper than importing a whole truck, and the vehicle is more durable than an imported bus.
But there is no substitute for building and maintaining better infrastructure. Guinness’s Johnson told me that Cameroon’s bad infrastructure added about 15 percent to his firm’s costs. The reason Guinness can still make a profit in Cameroon is that its competitors all face the same problems. It also helps that labor costs are low and that Cameroonians drink a lot of beer. Johnson said that the firm’s annual return on capital was around 16 percent, which is not spectacular but it is pretty good. If the Cameroonian government were to lift those road blocks and put the police to work mending potholes, Guinness would do even better, as would everyone else.
If there’s one thing worse than being exploited, it’s not being exploited
In letting me watch Martin and Hippolyte delivering their beer, Guinness took a risk. I could have been planning an exposé of the dire conditions under which African truckers work as the first step toward organizing a boycott of Guinness’s products. Plenty of Western journalists are convinced that Western companies exploit their Third-World employees and feel a duty to protest. Naomi Klein, a siren of the anti-globalization movement, asserts rather dramatically: “Our corporations are stealing their lives.”1
My report could have started like this:
Weary and wincing with malaria, Hippolyte siphons diesel from a spare drum and pours it, jerry can by jerry can, into the juggernaut’s fuel tank. Eighteen hours a day, lashed by rainstorms or wiping the sweat from his brow, he toils to keep a Guinness delivery truck roadworthy. Lunch is a bag of peanuts; supper, a fatty slice of goat eaten in pitch darkness at a roadside food stall; his bed, a mat on the bumpy ground. He hasn’t seen his family for a week, but he has to keep on working. And for what? While his multinational employer reaps billions, Hippolyte barely earns enough each day to buy a pint of Guinness in a Dublin pub.
All of which is true but misleading. Hippolyte was indeed suffering from a mild bout of malaria when I met him, and it is no fun working with a fever even if you can afford anti-malarial drugs, which Hippolyte can. If he had been working in the fields, which is how most Cameroonians survive, he would have fallen ill just as often, but he would have found it harder to buy pills. His lunch was indeed a bag of peanuts, but they were the freshest, juiciest peanuts I’ve ever tasted, and he snacked all afternoon on fresh tangerines and bananas. He ate supper in pitch darkness, but that is because none of the roadside food stalls in the village where we stopped had lights. The goat was the best dish on offer, and believe me I looked. I’m fond of my food and had a thick roll of notes in my pocket.
Hippolyte’s wages would not go far in Dublin, but he does not live in Dublin. His job is nowhere near as cushy as that of, say, a Western journalist, but as far as he is concerned it is not bad. He dresses smartly, feeds his family, and aspires one day (he is in his early twenties) to be promoted to driver, which, he told me, is a really good job. Often, when we were delayed, Martin would let him stop, start, and park the truck, for practice.
Given Cameroon’s lower productivity and poorer consumers, a company that paid Irish wages there would soon go bust. Guinness and other multinationals pay much less but are still popular employers because they pay better than local firms and much better than subsistence farming.
One study found that the average wages paid by affiliates of American multinationals to their non-American employees in middle-income countries were three times GDP per head. In low-income countries, local employees of American multinationals had to get by on only eight and half times the average income in their country.2 The average income (i.e., the total national income divided by the total population) is not the same as the average wage, particularly in countries where most people do not draw regular salaries. But still the comparison is suggestive.
Foreign firms also bring ideas and technology. Even a humble clothing factory probably contains sewing machines, computers loaded with accounting software, and an opportunity for workers to learn new skills. For poor countries, mastering low-tech manufacturing is a crucial first step up the ladder to prosperity. As one writer recently reminded us, “In the 1960s, Westerners used to bemoan the conditions in Japanese sweat-shops.”3
For most African countries, the problem is not that their
people are being exploited by rapacious multinationals but that those rapacious multinationals shun them. Foreign direct investment (FDI) in sub-Saharan Africa – long-term projects such as building shopping centers and digging mines, rather than buying shares or bonds – was $11.8 billion in 2001. This was much better than the average of less than $3 billion between 1987 and 1995, but foreigners invested nine times more in Asia.4
Multinationals hesitate to do business in Africa because it seems too difficult and risky. After years of chatting with people who actually do business in Africa, I’m inclined to think their fears are overblown. Sure, there are hideous obstacles. The head of Cadbury Nigeria, Bunmi Oni, once told me that, because there was no reliable water supply in Lagos, his firm had had to drill 2,500 feet into the ground for the 70,000 gallons of water it needed each hour for its food-processing plant. The water spurted out at 80 degrees Celsius, so it had to be cooled before it could be used. And Nigeria’s bureaucrats are as bad as Cameroon’s. It can take six months just to get permission to make a new type of boiled sweet.5 In much of Africa reliable services are so hard to come by that firms barter contacts: we’ll let you share the electricity from our generator if you can help us find spare parts for it.
What few outsiders realize, however, is that investing in Africa can be extremely profitable. Between 1991 and 1997, the average return on FDI in the continent was higher than in any other region, according to the UN Conference on Trade and Development.6 This is partly because the perceived risk of doing business in Africa is so great that firms only usually put money into projects that promise a quick profit. But it also suggests that there are greater opportunities there than most businessfolk imagine.
Because Africa lacks so much, firms selling more or less anything of a reasonable quality at a reasonable price can do well. In countries where local banks often fail, many people feel safer putting their savings into big foreign banks such as Citibank or Barclays. Mobile telephones are wildly popular in countries so wild that landlines are stolen for scrap. In February 2000 I spoke to Microsoft’s top man in Johannesburg, who told me that the firm’s African business was growing by about 30 percent a year. Even poor countries have a laptop-tapping middle class, and Microsoft’s only serious rivals are software pirates, who charge less but offer little after-sales service.7
The risks in Africa are changing. In the 1960s and 70s, investors feared nationalization. Nowadays this is rare, but several African countries still lack clear laws impartially upheld by an honest and independent judiciary. In such places contracts are hard to enforce.
Some firms deal with this problem by forging an alliance with a well-connected local partner. But if that partner defrauds them, there is often little recourse. Another trouble with relying too heavily on political connections is that governments change, sometimes suddenly. Many firms that won state contracts in the last months of military rule in Nigeria saw them canceled when a civilian government took over in 1999. Companies that prospered from links with Mobutu Sese Seko in the former Zaire, or the apartheid regime in South Africa, lost out when their patrons lost power.
In some parts of Africa keeping employees safe can be a problem. In Algeria, for instance, where Islamic terrorists trade atrocities with pro-government militias, oil firms typically spend about 8 or 9 percent of their budgets on security. Much of the money is spent on crude precautions: fences, guards, alarm systems. For a hefty fee, security firms staffed by ex-soldiers provide protection for offices, mines, or pipelines. Managers’ houses in high-crime cities are often equipped with a bewildering array of defenses. My home in Johannesburg had high walls, razor wire, and panic buttons in every room to summon pistol-brandishing guards. (I never used the panic buttons, and they did nothing to protect my predecessor as the Economist’s correspondent in Jo’burg, who was robbed at gunpoint in the same house.) One tobacco executive I knew had steel blinds and electric portcullises to seal off rooms that burglars had broken into.
Softer precautions are at least as useful. Teaching employees how to drive defensively (check who is outside your front gate before stopping, beware at traffic lights) can reduce the risk of carjacking. Explaining what to do when faced with an armed robber or kidnapper (cooperate, don’t make sudden moves or eye contact) can make the difference between a scary experience and a fatal one. Some foreign firms in South Africa even offer “pre-rape counseling” to female expatriates and their daughters.
Countries that are actually at war are beyond the pale for most Western firms. Mining multinationals may drool over the opportunities in Congo or Liberia, but they cannot send salaried employees to prospect for minerals in minefields. Small, free-booting entrepreneurs, however, may be prepared to take greater risks in the hope of becoming seriously rich. If they find buried treasure, they will usually need the help of a larger firm to extract it. What often happens is that the larger firm buys the “junior” that has gotten lucky. Since it is easier to defend a copper mine than it is to guarantee the safety of geologists wandering around a wide area, extraction is less hazardous than prospecting. Most mining majors subcontract the bulk of their exploration to juniors, thus reducing the chances that their own staff will be shot at.
In some places, businesses face the hostility of local communities. The people of the Niger delta, for example, were for decades brutalized by the Nigerian army and denied any benefit from the oil that gushed from their ancestral lands. Angrily, they turned on the firms that pumped the oil and provided the military regime with most of its taxes.
This made sense: protests directed at the government would have resulted in the protesters being beaten up, jailed, or worse. An oil firm is a softer adversary. That said, the policemen guarding Nigerian oil installations did sometimes arrest and beat up demonstrators. Since foreign oil firms were obliged, by law, to pay those policemen’s salaries, the firms were often blamed for their actions.
Nigeria is a democracy now, but the delta’s inhabitants continue to sabotage pipelines and kidnap oil executives. Shell, the biggest investor in the region, is belatedly spending tens of millions of dollars on mending ties with locals. But old grievances die slowly. And lawlessness, once provoked, is hard to dispel.8
Relations between big companies and impoverished locals are always tricky, but there are ways of reducing the risk that they will turn bloody. Managers at Anglo American, a South African mining firm with operations in several African countries, take pains to explain to local communities what they are doing from the outset, to learn about local taboos, and to hire as many locals as is practical. In poor countries, local means very local: AngloGold discourages traders from neighboring districts from setting up stalls outside its mines in Mali, favoring those from nearer by. So far, the firm has suffered little sabotage.
In some countries investors will be asked for bribes in return for the swift issue of necessary permits. Until recently such expenses were tax-deductible for firms from many European countries. These days bribery can lead to bad publicity and even prosecution at home, so firms increasingly refuse to grease the palms held out to them. Guinness, for example, has a policy of never paying bribes. This can be tedious if you are stuck at a road block, but it is the only way since paying up encourages more demands.
Locally hired managers sometimes find it harder to stay clean. Faced with American-style sales targets, the temptation to clinch deals through baksheesh may be irresistible. They are also more vulnerable to threats than expatriates; they cannot fly home to France or Canada. So firms should teach them how to refuse demands for bribes without getting hurt. Techniques include insisting that someone else is responsible for the decision in question and never going alone to meetings with people who may demand bribes.
He that filches from me my good name …
Companies care about their reputations. An accounting firm that acquires a name for dishonesty, for example, will probably lose its clients and fold, as happened to Arthur Andersen in the wake of the Enron scandal in 2002. Similarl
y, a firm widely believed to be unethical will have trouble recruiting good staff. Who wants to work for a company that pollutes the planet or drives Third-World peasants off their land?
In the 1990s, a number of pressure groups started demanding that companies should practice “corporate social responsibility.” Campaigners argued that businesses should not focus solely on maximizing profits; they should also do their bit for the environment and for the communities in which they work.
In the age of the Internet, companies that fail to live up to these standards are sometimes swiftly punished. When Belgian king Leopold II turned Congo into a vast slave-tended rubber plantation in the nineteenth century, it was years before anyone in Europe noticed. Nowadays, if a Western firm transgresses abroad, a local NGO may email details to an NGO in the firm’s home country, and within days there may be pickets outside the firm’s headquarters, a boycott of its products, and vituperative editorials in the press.
Shell was pilloried for polluting the Niger delta and for failing to prevent the execution of Ken Saro-Wiwa in 1995. It is far from clear that the company could have saved him. The governments of most of the world’s rich countries appealed to Sani Abacha, the Nigerian dictator, to show clemency. So did many of his African brothers. He ignored them all. Nonetheless, because Shell was the biggest company in Nigeria and because Saro-Wiwa had criticized the firm’s environmental record, it was widely accused of complicity in his death.9
British Petroleum, another oil firm, was pummeled for working with Angola’s odious regime. Nestlé, the Swiss food giant, was roasted for selling milk powder to African mothers and so allegedly discouraging them from breastfeeding. Charities such as Oxfam have launched campaigns to improve the working conditions of Africans who pick coffee and cocoa for sale in the West.