Foreign Acquisitions of Africa`s Public Wealth Compromise Citizens` Economic Security
blurb:isstoday:041108africawealth
4 November 2008: Foreign Acquisitions of Africa’s Public Wealth Compromise Citizens’ Economic Security
Recently the South African Sunday Times newspaper raised false alarm when its front page headline screamed that Transnet, the freight transport and logistics parastatal, sold off an area of Table Bay stretching all the way to Robben Island, and 22km of prime Cape Town coastal land, to foreign investors. This was an ill-informed exposé of Transnet’s R7 billion sell-off of the V&A Waterfront in 2006, which the paper subsequently retracted.
The problem with this particular lapse was not so much the damage to Transnet’s reputation, or the Sunday Times’ loss of credibility, than its potential to diminish the significance of more legitimate concerns around the alienation of publicly owned assets by foreign private business interests. This is where foreign profit motive is increasingly threatening to overshadow local taxpayer interest, usually with assistance from the local elite. Nowhere is this more pronounced than in Africa’s sectors of strategic importance such as energy, transport and telecommunications.
The growing foreign interest in the continent’s main markets, such as Nigeria, Kenya, South Africa and Angola, places these countries in a vulnerable position. Some of these governments are seemingly finding the temptation to sell-off the ‘family jewels’ to foreigners irresistible, even if that involves compromising the economic security of citizens. The Kenyan government has just announced that foreign telecoms investors in Kenya will no longer require local partners to do business in the country. Prior to the announcement companies investing in the telecommunications sector were expected to reserve 30% of their shareholding for local partners.
The announcement by the Kenyan government also comes a few months after it had called in the World Bank Group’s International Finance Corporation (IFC) to open up and run a bidding process that saw France Telecom, in consortium with Dubai-based Alcazar Capital Limited, acquiring a majority stake in Telkom Kenya. France Telecom did not waste time in devising a ‘restructuring’ plan that sent home more than 17 000 workers. The company’s practice of staffing top management positions with its own workers also meant that even reasonably skilled local personnel were not safe from the lay-offs.
All this makes it difficult to be convinced by the IFC’s claim of having offered the Kenyan government an optimal solution that ‘balanced’ the interests of both private and public players. France Telecom’s past acquisitions in 12 other African countries, including Ivory Coast and Egypt, have followed a similar trend. Similar negative consequences of foreign acquisitions of locally owned public assets were also witnessed in Zambia when Anglo American closed down one of the vital mining sites it had acquired from the country’s copper fields. Thousands of Zambian mine workers were left stranded.
It is worrying that all this is allowed to happen at a juncture when it is becoming increasingly acknowledged that employment creation for the continent’s very young population is one of the main challenges facing Africa in the 21st century. Among the Millennium Development Goals (MDG’s) is the halving of unemployment in Africa by 2015.
Contrast Africa’s economic practices to that of China. Like in Africa, foreign companies in China have begun to acquire major state-owned enterprises. Amidst concerns about economic security, China passed a law to subject foreign acquisitions of Chinese companies to stringent checks. Thus while Africans are busy dispensing with laws and regulations in the name of foreign direct investment, the Chinese believe that a market protected by laws and regulations will enhance foreign investors’ confidence in their country’s development prospects. China’s cabinet has also identified a list of strategic sectors in which the state would retain control, including power production and grids, petroleum, gas and petrochemicals, as well as telecom manufacturing, amongst others. China’s regulatory laws and policies have actually failed to curb foreign investment.
Not surprisingly the business elite is quick to cry foul when the state undertakes measures to reassert its custodianship over public assets. A few days ago South African Minister of Minerals and Energy Buyelwa Sonjica got flak for exercising due authority to override some restrictions within the Mineral and Petroleum Resources Act. This was to allow the new State-owned African Exploration Mining and Finance Corporation unrestricted prospecting, mining and bulk sampling rights for the purposes of security of supply – a privilege to which private capital predictably did not take too kindly.
This served to remind that public resources such as minerals were the preserve of all citizens and that it is not enough for the state, as a custodian of these resources, to merely facilitate private sector access. However, without the effective engagement of civil society state ownership of public assets poses its own dangers, including serving as a conduit of the interests of the political elite. Unfortunately this is already too familiar a story in many African countries. This is unlikely to change until public participation in the ownership of public assets is increased, and understood as a basic democratic principle that governments are custodians rather than owners of public resources.
Andile Sokomani, Researcher, Corruption and Governance Programme, ISS Cape Town
