The Shackled Continent

by Robert Guest

One cannot fault these aims. Other things being equal, dictators should not be propped up. Better working conditions are obviously a good thing. But there is a catch.

  Virtually any firm doing business in the Third World is vulnerable to ethical criticism. Poor, unstable countries tend to have lax or non-existent environmental or safety standards. Guinness’s trucks have seat belts, but no one wears them, and out in the middle of the rainforest it is hard to police this sort of thing.

  Doing business in Africa sometimes requires firms to deal with, pay taxes to, and form join ventures with vicious regimes. If a dictator shoots dissidents, the firm has a choice. It can denounce him, thus putting its investment at risk. Or it can remain silent and risk being accused of complicity.

  Damage to a reputation is hard to quantify. I asked Bobby Danchin, head of exploration and acquisitions at Anglo American, how seriously he took the threat. He said he spent 10–15 percent of his time worrying about environmental and human rights issues, up from about 1 percent a decade ago. He estimated that such concerns added about 5 percent to operating costs.10 This means that Anglo mines fewer marginal seams than it otherwise would and employs fewer people.

  De Beers, the South African diamond cartel, has worked especially hard to distance itself from odious regimes and rebel groups. During the 1990s, the firm was flogged by NGOs such as Global Witness for buying gems from countries where civil wars were being fought, thus allegedly providing rebels with the cash to buy arms and carry on fighting. De Beers responded by shutting down its business in Angola, withdrawing its buyers from Congo and Guinea, promising to shun “conflict diamonds,” and helping to set up a certification process to keep such stones out of Western jewelry shops.

  The situation for De Beers is tricky. The firm has prospered over the last century by controlling most of the world’s supply of diamonds and persuading consumers that glittering lumps of carbon are glamorous. A diamond has little intrinsic value, so to keep prices high De Beers restricts the supply and constantly polishes the stones’ image. The latter could prove hard if diamonds become associated in the public mind with deadly wars instead of undying romance.

  De Beers claims that only 2 percent of the world’s diamonds come from war zones and points out that the diamond industry feeds hundreds of thousands of miners and gem-cutters in peaceful poor nations such as Botswana, Namibia, and India. Will such arguments convince consumers? Perhaps, but fashion is fickle, and passionate campaigners can shift it. Remember how quickly animal rights activists turned fur coats from objects of envy to objects of scorn? Because poor countries rarely measure up to rich countries’ standards in anything much, companies doing business there do so at their peril. There is practically no limit to what they could be condemned for allegedly condoning. What if gay rights activists or feminists decided to boycott firms that invest in countries where gays or women are mistreated? (Of which there are, sadly, a lot.)

  Reputational risk is almost impossible to insure against. It is hard to put a value on a firm’s good name.11 The best way for any firm to avoid harmful publicity is to make sure that its environmental and human rights records are beyond reproach. Sometimes this is expensive, for instance when drug firms donate money to worthy causes in the hope of deflecting the criticism that they do too little to cure the poor. Sometimes, however, all it takes is common decency. Palabora, a South African subsidiary of mining giant Rio Tinto, managed to do business during apartheid without bad publicity simply by being nice to its workers. When an employee was arrested (as happened to many unionists), his manager would telephone the police and politely ask where and why he was being held. This was usually enough to prevent the detainee from being “disappeared.” The firm also continued to pay salaries to the families of miners who were not working because they were in police cells – not standard practice in those days. As a result, Palabora has unusually good labor relations to this day.

  But this did not protect its parent firm, Rio Tinto, from being sued for having allegedly propped up apartheid. In 2002, an American lawyer assembled a class action suit on behalf of some of apartheid’s victims. Their targets were not the security policemen who beat them up (who don’t have much money) but the big foreign firms that did business in the old South Africa. The new, black South African government pleaded with the plaintiffs to drop the suit because it was likely to deter foreigners from bringing their money and expertise to South Africa. The plaintiffs carried on regardless.

  Miners and oil firms will not abandon Africa, of course. They have to dig where the treasure is buried. But for most firms the possibility of attracting negative publicity is a grave deterrent to investing in poor countries. The fear of association with sweatshop labor has almost certainly led some multinationals to close factories in the developing world, thereby destroying jobs. For example, in 2002, Reebok, the sportswear firm, stopped doing business with a subcontractor in Thailand because of press reports that its staff were working more than seventy-two hours a week.12 These workers are now worse off.

  Even before the anti-globalizers started demonizing multinationals, Africa found it hard to attract investors. Companies are attracted to large markets (such as China) or rich ones (such as Ireland). Africa is divided into dozens of small, poor countries. Cracking these tiny markets can seem like a lot of effort for a modest reward. When a manager adds to this the likelihood that his teenage children will accuse him of running a sweatshop, he may decide that it is not worth the trouble.

  There is more than a whiff of racism in the assumption that workers in poor countries need to be prevented from working for Western firms. If working for a Reebok subcontractor were not better than the alternatives, Thais would not work there. Africans have even fewer choices, which is why every African government actively woos foreign investors. Even Zimbabwe offers incentives to platinum miners.

  I have been a couple of times to the Niger delta, where the big bad Shell pumps oil. What struck me most, after interviewing local politicians, journalists, community activists, and people in the street, was that I did not meet a single person who wanted the firm to leave. One time, not long after I left, a group of armed youths broke into a Shell office, took hostages, and issued a list of demands. What did they want? Jobs.

  Enterprise and trust

  They cannot all have jobs, of course. Nigeria’s oil industry only employs about 100,000 people out of a population of over 100 million. Most Africans will never be paid a regular salary of any kind, let alone taste the superior wages offered by multinationals. To live more comfortably than peasants, they must usually start their own businesses.

  This is getting easier. Until the 1980s, small traders were aggressively persecuted in many African countries. The smallest of all, peasants with a few extra bags of millet to sell, were crushed with price controls that allowed governments effectively to confiscate most of their produce. Those who dodged such controls were harshly punished. In a typical case in 1980, a Ghanaian peasant woman was sentenced to five years’ imprisonment with hard labor for trying to smuggle $4.36 worth of cocoa into neighboring Togo to buy some soap. In Zambia in 1988, when market traders refused to sell goods at government-dictated prices, the authorities arrested hundreds of them, pocketed their money, seized their stock, and smashed their stalls.13

  These days, the main problems facing entrepreneurs are the ones I have described in this chapter: poor infrastructure, poor customers, and obstructive officials. In most African countries there seems to be a healthy entrepreneurial spirit. Some ethnic groups have a stronger commercial tradition than others, but few have none. I recall talking to Pakmogda Zarata, an energetic restaurateur from Burkina Faso. Her restaurant, in a marketplace outside Ouagadougou, was unpretentious. Rough-hewn logs propped up a ceiling of thatch and old trash bags; there were no walls to speak of. The menu matched the decor. “We only serve rice,” Zarata told me, “but we do cook it.”

  Her business plan was simple. She borrowed a small sum from a microlender, which enabl
ed her to buy rice wholesale rather than retail. Her profits rose. She now employed seven people and swanked around town on a second-hand motorcycle.

  Entrepreneurial flair can only take you so far, however. Many individual African businessmen have built empires, typically in fields such as trading, trucking, or retailing, but too often these firms rely on the founder’s drive and vision and fall apart when he dies.

  I asked a couple of Cameroonians why this was. Paul Fokam, who founded a private bank in Cameroon in 1987, when private banks were illegal, thought it had something to do with African traditions of inheritance. “A rich man will have three or four wives, and perhaps a hundred children, if you include the ones with his mistresses. Often, there’s no clear succession, so when the old man who held it all together dies, his business unravels.”

  His colleague, an economist called Alamine Ousmane Mey, agreed and added: “The first generation of entrepreneurs learned by doing. They are often illiterate. When they make money, they send their children to school, but they don’t necessarily get them involved in the business, so the kids end up not even knowing what assets their father has, let alone how to run the firm.”

  If Africa is ever to succeed in more technologically advanced industries, the continent will need more than a few gung-ho entrepreneurs. A man can make a fortune buying and selling real estate with little more than an eye for location and the back of an envelope to scribble numbers on. But the real estate will probably only be worth a fortune if other, more complex businesses want to operate in the same city. And lone entrepreneurs cannot easily manufacture cars or run large insurance firms. Such businesses need legions of skilled employees: engineers, accountants, designers, salespeople, and so on. In the rich world, these people tend to work together in impersonal, professionally managed companies, often with widely dispersed ownership, in the form of shares.

  Africa does not yet boast many indigenous institutions like this. One reason is that so many African professionals have emigrated. Another is that complex institutions cannot operate without a measure of trust, a belief that most people will perform their jobs honestly and as well as they can. And Africans often do not trust each other. Two European academics claim that “outside [an African’s] own community … where rules of civic behaviour apply, there is an assumption that graft presides over all forms of exchange.”14

  This is probably an exaggeration, but I have seen plenty of evidence that a lack of trust makes it harder to get things done in Africa. In Nigeria, guests at five-star hotels must pay cash, in advance, not only for their rooms but also for the meals the manager thinks they might eat and the telephone calls he thinks they might make. When paying in dollars at the Hilton in Abuja I have had to wait while the cashier scanned each bill to make sure it was not a forgery and recorded each individual serial number in triplicate to make sure that none of his colleagues could steal any.

  Nigerians, being entrepreneurial types, find ways to profit from this sorry state of affairs. I once visited a firm in Lagos called Smartcard, whose business depended on the fact that no one accepts checks in Nigeria and banks do not generally entrust customers with credit cards. This means that Nigerians have to carry around uncomfortably large wads of banknotes, which attract thieves and are not terribly hygienic: according to researchers at the University of Lagos, 86 percent of the country’s notes are infested with the sorts of microbes that cause diarrhea.15 The solution? An “electronic purse”: a card that can be loaded with “e-cash” and used at hundreds of stores. It’s clean, it fits in your shirt pocket, and if it’s stolen, you can cancel it.

  8. WIRING THE WILDERNESS

  How Africa can embrace technology

  Genetically modified (GM) food is “poison.” That was the reason Zambia’s president, Levy Mwanawasa, gave for rejecting American food aid during a famine. It was in 2002, when all the badly governed countries of southern Africa were seriously short of food.

  People were dying. It was hard to say how many, because most of the victims did not actually starve to death; rather, lack of food left them weak and unable to fight off infections that might not otherwise have killed them. AIDS, of course, aggravated matters.

  According to the UN World Food Programme (WFP), 2.3 million Zambians – a quarter of the population – were dangerously hungry and in urgent need of aid. America, the largest donor, had sent a big shipment of corn and soybeans, some of which had been genetically modified. Two hundred fifty million Americans had been munching this sort of stuff for seven years without detectable harm, but President Mwanawasa decided it was too risky for his starving people.

  All new technology carries potential risks, as well as rewards. Some fears are fanciful. When coffee first arrived in Europe, doctors warned that it would cause sterility, stillbirths, and paralysis. When electric light bulbs were introduced, the New York Times warned that they might blind people. Occasionally, new inventions really are dangerous: thalidomide causes birth defects, and cars crash, especially when the driver has a mobile phone pressed to his ear. One can never prove with absolute certainty that anything is safe. But in the case of genetically modified foods, seven years of trouble-free consumption in the world’s largest rich country, a nation known for its health-consciousness, food fads, and tendency to sue at the first whiff of harm, comes pretty close.

  Farmers have been manipulating genomes since before they knew about genes. For thousands of years, they sought to transfer desirable traits from one plant to another by cross-breeding: this is how wild grasses were turned into wheat. They also selectively bred animals to make them fatter and tastier: this was how wild boars became pigs.

  GM technology aims to achieve similar, but faster, results. It typically takes eight to twelve years to produce a better plant by cross-breeding. But if scientists can isolate a gene in one species that is associated with, say, drought resistance, they can sometimes transfer it directly into the genetic code of another species without wasting years crossing and back-crossing successive generations.

  Genetic modification is more precise than cross-breeding, too. As any parent knows, sexual reproduction is unpredictable. The union of a brilliant woman and an athletic man does not always produce a brilliant and athletic child. In plants as in people, some traits are inherited, others are not. In theory, genetic modification solves this problem by transferring only the gene associated with the trait that the farmer wants.

  The final advantage of genetic modification is that it makes it possible to transfer traits between unrelated species. You cannot cross-breed cacti with corn, but you can take a cactus gene that promotes drought resistance and put it in a corn plant.

  So far, scientists have produced GM crops that are more resistant to viruses or insects and more tolerant of herbicides. In the future, genetic modification could fill the world’s larders with high-protein cereals, vegetables with extra vitamins, and all manner of cheaper, tastier, and more nutritious foods than we currently enjoy. Researchers at Cornell University have even created bananas that contain a vaccine for hepatitis B. A single banana chip inoculates a child for one fifteenth of the price of an injection, and with fewer tears.

  Against these actual and potential benefits must be set the potential dangers. Shifting genes between different species could create health risks. For example, soybeans given brazil nut genes have been found to express brazil nut proteins of the sort that might trigger allergic reactions. Soybeans are used in thousands of food products, so this could make life hazardous for people with nut allergies.

  Genetically modified crops may also cause environmental problems. Pollen from GM crops can blow into fields of ordinary crops and fertilize them, which might affect ecosystems in some unpredictable way. Also, crops genetically modified to repel pests might spur the evolution of super-pests or poison other species. Laboratory tests have found that butterfly larvae are harmed when fed the pollen of plants genetically modified to express a toxin called Bacillus thuringiensis (Bt), which protects corn and c
otton from boll worms. There is no evidence, however, that this has happened in the wild.

  All these dangers are rather speculative. It is essential to test genetically modified products carefully before releasing them and to keep monitoring them afterwards. But so far there is little or no evidence that GM crops hurt either humans or the environment. The available evidence suggests that GM crops actually help to protect the environment by reducing the need for chemical pesticides.

  China has embraced GM crops with gusto. The Chinese government sees the technology as one of the most powerful tools available for making farms more productive. This is a matter of immense importance: if millions of Chinese peasants can grow more rice and cotton, they will become more prosperous. Africa has been much more wary of the new technology partly, perhaps, because of the continent’s strong links to Europe.

  In Europe, although regulators have concluded that GM products are safe, an energetic campaign by NGOs such as Greenpeace has convinced consumers that they are not and prompted supermarkets to refuse to stock them.

  Africans heed these doubts. President Mwanawasa appears to accept the Greenpeace line in its entirety, although a Greenpeace spokesman told me he did not think him wise to reject food aid during a famine. Other Africans might like to experiment with planting GM crops but hesitate to do so for fear of wrecking their exports to Europe. This is not an unreasonable fear. If an African country were to plant GM crops which then fertilized (or “contaminated,” as the NGOs say) neighboring fields, European supermarkets might start refusing to buy any farm products from that country, as they could not with confidence label them “GM-free.”

  In Zimbabwe, Malawi, and other countries stricken with food shortages, the problem was solved by milling American grain before distributing it. Milled corn cannot be replanted, so it cannot pollinate non-GM crops.