Foreign Direct Investment Undermines African Economic Independence and Fuels Foreign Intervention

Stop Foreign Intervention in Africa

In the current world situation, neo-liberal economic doctrine, which upholds the interests of the monopolies, prevails. According to this theory,   foreign direct investment (FDI) is the only means available for countries to achieve economic development and address the challenge of raising the people’s standard of living. The World Bank estimated that in 2010 48.5% of Africa’s population south of the Sahara were living on no more than $1.25 per day and so were classified as living in extreme poverty. The followers of neo-liberal economics argue that the solution to this problem lies in the flow of FDI into the continent.
Data for foreign direct investment into Africa during 2014 from UNCTAD

In fact, today, The World Bank states that Africa has become second most attractive destination for FDI in the world, second only to North America. The World Investment Report for 2015 published by the United Nations Conference on Trade and Development (UNCTAD) notes that FDI into Africa reached $54bn in 2014 up from only $6bn in 1996. Although the 2014 figures for FDI into Africa represent only 4.4 % of the global 2014 FDI, which UNCTAD estimates at just over US $ 1 trillion, it does demonstrate the significant and increasing interest that international finance capital is now taking in Africa. The Financial Times stated that in 2014 Africa saw a 65% increase in FDI as compared to the previous year.  It should also be noted that in the current global economic conditions, investment into Africa offers the highest rate of return on capital currently available to investors.

As a consequence, numerous monopolies are descending on Africa and seizing various sectors of the economies of different African countries. Although, historically, foreign monopolies have concentrated their attention on the primary sector of African economies including, agriculture and mining, the current wave of FDI is spread across all sectors of the economy. According to UNCTAD, by 2012, 48% of FDI in Africa was focused on the services sector, 31% on the primary sector and 21% on manufacturing.  The UK, France and the USA remain the principal owners of FDI in Africa which UNCTAD estimates now stands at $709bn. Ernst & Young data on FDI projects in Africa in 2013 identified the UK as the principal source of FDI investment into Africa in that year with investments worth some $4.6 bn, more even than the USA whose investments amounted to $2.6bn. Ernst & Young report that the UK investments were focused primarily on business services (20%), financial services (15%), and technology, media and telecoms (TMT) (15%). UNCTAD notes that of the $88bn in announced new FDI projects for Africa in 2014, $47bn came from the European Union of which $19 bn came from France and $8bn from the USA. It is also interesting to note that a further $10bn emanated from within Africa primarily South Africa and Nigeria and $15 bn from Asia of which $6 bn originated in China and just over $1bn in India.

“IHS Holding Limited, partially owned by a Goldman Sachs–led consortium, is now Africa’s largest mobile telecommunications infrastructure provider.”

A further interesting aspect of FDI flows into Africa is how various multi-national corporations seize control of entire sectors of the economies of African countries. For example, UNCTAD reports on the case of IHS Holding Limited. This company is partially owned by a Goldman Sachs–led consortium and is now Africa’s largest mobile telecommunications infrastructure provider. As a result of its acquisition of mobile towers in numerous African countries including Rwanda, Zambia, Cameroon and Côte d’Ivoire, IHS now manages over 21,000 towers in Africa. African Arguments reports that in 2014, Danone, the world’s biggest yoghurt company, bought a 40% stake in East Africa’s largest milk producer, Brookside Dairy Limited, giving it access to 140,000 milk farms across the region. Danone also plans to raise its stake in Morocco’s Centrale Laitiere, which commands a 60% share of that country’s dairy market. In Ethiopia, the Huajian Group is a Chinese footwear manufacturer that opened a factory in Ethiopia.  It is now Ethiopia’s largest footwear producer and accounts for over half the country’s footwear exports. This situation is replicated across the continent in every sector of the economy. Not surprisingly, all the major monopolies are stepping up their activities in Africa. These include the likes of Wallmart, General Electric (GE), IBM and many more. Following President Obama’s launch of his ‘Power Africa’ investment initiative in 2013, two of the largest private equity firms in the US, The Blackstone Group and The Carlyle Group have entered into the field to invest in Africa. The objectives of these investors are best summed up by Jeffrey Immelt the CEO of General Electric who declared in 2014, “We kind of gave Africa to the Europeans first and to the Chinese later, but today it’s wide open for us”.
Danone – seizing greater sections of the dairy market in Africa

FDI poses a significant threat both to African economic and political independence. First, with the control of entire sectors of African economies falling into the hands of foreign monopolies, the governments and people in these countries lose power and are at the mercy of the monopolies which make decisions based on their narrow drive for profits without any regard for the impact on the general society. Secondly these decisions are made by the owners of the FDI who are usually located outside of the African continent and who make these decisions based on what best serves the monopoly in its global competition and its drive to increase its profits. In addition, with the various sectors of the economies of African countries in the hands of different monopolies, each pursuing its own interests, it becomes impossible for African governments to develop and implement a coherent policy for the all-round economic development of the country and the improvement of the people’s well-being. These huge foreign investments in the continent fuel other types of intervention. From corrupting private and public officials, through interfering in the political decision making in the country all the way to wars of aggression, the monopolies and the imperial states they control are driven to act in order to defend their investments in Africa. Far from representing a solution to the many problems Africa currently faces, FDI adds to these by undermining African economic independence and fueling other forms of intervention.