Multinational companies were a driving force in Eastern Europe’s postcommunist transition, bringing new skills, technology, training, and better working conditions. They saved the banking systems, modernized telecommunications networks, rebuilt ailing industries, raised the quality of goods, and undermined the cozy vested interests that had robbed ordinary citizens for decades.
But is Eastern Europe an exception? Can multinational companies bring similar benefits to other needy regions, such as sub-Saharan Africa, where a legacy of colonialism, apartheid, and economic mismanagement create a fundamentally different business environment?
According to one view, Eastern Europe was uniquely positioned to benefit from multinational companies: its workforce was well educated, especially in engineering and sciences, and was thus able to avoid the classic “low-skills, low-wage” trap. What communism failed to provide – modern management, new technologies, and marketing know-how – was what multinationals could offer.
But in countries like South Africa, Namibia, and Zimbabwe, multinational companies may look very different. Western governments were typically indifferent, if not hostile, to African liberation movements. Their big corporations helped entrench racist regimes with notorious contract-labor systems that amounted to little more than slavery.
Moreover, multinational companies that invest in the Czech Republic, Slovakia, Hungary, and Estonia produce cars, high-end electronics, and industrial machinery both for the domestic market and for export. Ensuring high-quality output and local consumers’ loyalty requires keeping their workforces happy and maintaining a positive public image.
By contrast, African countries often see the worst sides of multinationals: energy, mineral, and precious metal companies go where resources are, not where it’s pleasant to work. As one former mining manager in the region told me, “The aim was always simple: get the assets out of the ground and out of the country as cheaply and with as little fuss as possible.” Because the customer is abroad, and there is little processing to be done in country, why should companies upgrade local skills or otherwise help the host economy?
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But sub-Saharan Africa’s potential relationship with global corporations need not be so limited. Sensible macroeconomic policies, coupled with non-violent resolution of political or racial conflicts, as in, say, Namibia, Botswana, or South Africa, can set the groundwork for highly constructive partnerships.
Namibia’s government, for example, while recognizing that the country will never build a strong industrial base, takes a clear, balanced, and determined approach to attracting, and getting the most out of, multinational corporations. The Ministry of Trade and Industry established a sensible incentive scheme for export-oriented investment and a black empowerment program that encourages investors to help the previously neglected workforce. It relies on competition, rather than bureaucratic heavy-handedness, to achieve its goals.
Consider diamond mining, Namibia’s biggest industry and export. The NamDeb mining corporation, a joint venture between the government and De Beers, dominates the industry. But while the government wants to move beyond low-skilled mining into higher-value processing, De Beers has balked, because it already has well established, cost-effective cutting operations abroad.
Enter Smicor, a subsidiary of Israel’s Leviev group that currently produces only a small proportion of the country’s diamond output but wants more exploration licenses. In 2004, Smicor promised to establish the higher-value diamond-cutting business that the government craves, and has since recruited and trained 400 workers in a new plant in the capital, Windhoek. Similarly, at the government’s nudging, the mining conglomerate Anglo-American developed a zinc-processing operation at its new Skorpion mine in the Namib desert, creating more skilled jobs for locals.
Drawing benefits from global companies doesn’t always require high-level government negotiations. Consider Katatura, a shantytown on the outskirts of Windhoek into which the former apartheid regime forced tens of thousands of blacks in the 1950’s and 1960’s. The district is poor by any reckoning, with 100,000 people crammed into shabby corrugated iron and tarpaulin-covered huts along miles of dirt pathways and hillsides.
Yet every year, new brick houses, some quite substantial, emerge among the hovels. One young mother, Rosalia, who lives in a small shack with seven children by different fathers, may look destitute to Western eyes, but she has a small business selling dried meat. Last year, she managed to get electricity connected to her shack, and she invested her savings in a refrigerator to store food and drinks for resale. Next year, she will expand the hut, and will eventually apply for land and begin to build a brick house.
Her stall is far from ideal; with every gust of wind, sand and dirt blow over the meat. Poor traders like Rosalia want real shops, and for some, Namibia Beverages, the local bottling operation of Coca-Cola, is answering the call with sturdy iron cabins that are spacious, portable, and easily secured.
Coca-Cola supplies the cabins to traders who sell its products, just as it might provide promotional umbrellas to outdoor cafés in Paris. Even in the remotest villages on the Angolan border, where Ovambo people live in stick huts, electricity is in short supply, and villagers trek miles each day to fetch firewood and water, a bottle of Coke or Fanta is easy to find.
With their distribution power and detailed knowledge of the market, multinational companies’ influence could surely be leveraged to address many development problems, regardless of a country’s political or economic legacy. Development groups, governments, consumers, and small entrepreneurs need only work out initiatives that embody their common interests with global firms.
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Many countries’ recent experiences show that boosting manufacturing employment is like chasing a fast-receding target. Automation and skill-biased technology have made it extremely unlikely that manufacturing can be the labor-absorbing activity it once was, which means that the future of “good jobs” must be created in services.
shows why policies to boost employment in the twenty-first century ultimately must focus on services.
Minxin Pei
doubts China’s government is willing to do what is needed to restore growth, describes the low-tech approaches taken by the country’s vast security apparatus, considers the Chinese social-credit system’s repressive potential, and more.
For the last several years, world leaders have made big promises and laid out bold plans to mitigate the climate crisis and help the neediest countries adapt. At this year's World Bank/IMF Spring Meetings, they must demonstrate that they can fulfill these promises, rather than simply touting new ones.
think policymakers need to get four things right to shore up the credibility of the international system.
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Multinational companies were a driving force in Eastern Europe’s postcommunist transition, bringing new skills, technology, training, and better working conditions. They saved the banking systems, modernized telecommunications networks, rebuilt ailing industries, raised the quality of goods, and undermined the cozy vested interests that had robbed ordinary citizens for decades.
But is Eastern Europe an exception? Can multinational companies bring similar benefits to other needy regions, such as sub-Saharan Africa, where a legacy of colonialism, apartheid, and economic mismanagement create a fundamentally different business environment?
According to one view, Eastern Europe was uniquely positioned to benefit from multinational companies: its workforce was well educated, especially in engineering and sciences, and was thus able to avoid the classic “low-skills, low-wage” trap. What communism failed to provide – modern management, new technologies, and marketing know-how – was what multinationals could offer.
But in countries like South Africa, Namibia, and Zimbabwe, multinational companies may look very different. Western governments were typically indifferent, if not hostile, to African liberation movements. Their big corporations helped entrench racist regimes with notorious contract-labor systems that amounted to little more than slavery.
Moreover, multinational companies that invest in the Czech Republic, Slovakia, Hungary, and Estonia produce cars, high-end electronics, and industrial machinery both for the domestic market and for export. Ensuring high-quality output and local consumers’ loyalty requires keeping their workforces happy and maintaining a positive public image.
By contrast, African countries often see the worst sides of multinationals: energy, mineral, and precious metal companies go where resources are, not where it’s pleasant to work. As one former mining manager in the region told me, “The aim was always simple: get the assets out of the ground and out of the country as cheaply and with as little fuss as possible.” Because the customer is abroad, and there is little processing to be done in country, why should companies upgrade local skills or otherwise help the host economy?
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Access every new PS commentary, our entire On Point suite of subscriber-exclusive content – including Longer Reads, Insider Interviews, Big Picture/Big Question, and Say More – and the full PS archive.
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But sub-Saharan Africa’s potential relationship with global corporations need not be so limited. Sensible macroeconomic policies, coupled with non-violent resolution of political or racial conflicts, as in, say, Namibia, Botswana, or South Africa, can set the groundwork for highly constructive partnerships.
Namibia’s government, for example, while recognizing that the country will never build a strong industrial base, takes a clear, balanced, and determined approach to attracting, and getting the most out of, multinational corporations. The Ministry of Trade and Industry established a sensible incentive scheme for export-oriented investment and a black empowerment program that encourages investors to help the previously neglected workforce. It relies on competition, rather than bureaucratic heavy-handedness, to achieve its goals.
Consider diamond mining, Namibia’s biggest industry and export. The NamDeb mining corporation, a joint venture between the government and De Beers, dominates the industry. But while the government wants to move beyond low-skilled mining into higher-value processing, De Beers has balked, because it already has well established, cost-effective cutting operations abroad.
Enter Smicor, a subsidiary of Israel’s Leviev group that currently produces only a small proportion of the country’s diamond output but wants more exploration licenses. In 2004, Smicor promised to establish the higher-value diamond-cutting business that the government craves, and has since recruited and trained 400 workers in a new plant in the capital, Windhoek. Similarly, at the government’s nudging, the mining conglomerate Anglo-American developed a zinc-processing operation at its new Skorpion mine in the Namib desert, creating more skilled jobs for locals.
Drawing benefits from global companies doesn’t always require high-level government negotiations. Consider Katatura, a shantytown on the outskirts of Windhoek into which the former apartheid regime forced tens of thousands of blacks in the 1950’s and 1960’s. The district is poor by any reckoning, with 100,000 people crammed into shabby corrugated iron and tarpaulin-covered huts along miles of dirt pathways and hillsides.
Yet every year, new brick houses, some quite substantial, emerge among the hovels. One young mother, Rosalia, who lives in a small shack with seven children by different fathers, may look destitute to Western eyes, but she has a small business selling dried meat. Last year, she managed to get electricity connected to her shack, and she invested her savings in a refrigerator to store food and drinks for resale. Next year, she will expand the hut, and will eventually apply for land and begin to build a brick house.
Her stall is far from ideal; with every gust of wind, sand and dirt blow over the meat. Poor traders like Rosalia want real shops, and for some, Namibia Beverages, the local bottling operation of Coca-Cola, is answering the call with sturdy iron cabins that are spacious, portable, and easily secured.
Coca-Cola supplies the cabins to traders who sell its products, just as it might provide promotional umbrellas to outdoor cafés in Paris. Even in the remotest villages on the Angolan border, where Ovambo people live in stick huts, electricity is in short supply, and villagers trek miles each day to fetch firewood and water, a bottle of Coke or Fanta is easy to find.
With their distribution power and detailed knowledge of the market, multinational companies’ influence could surely be leveraged to address many development problems, regardless of a country’s political or economic legacy. Development groups, governments, consumers, and small entrepreneurs need only work out initiatives that embody their common interests with global firms.