Dilemmas about FDI and employee compensations

About ten years ago, Africa was the laughing stock of the world. It was sneered at as a failed continent where standards of living had declined because corrupt regimes and dictators had robbed their own people.

Nowadays, newspapers and magazines of the world are painting a dazzling picture of Africa. It is seems as a continent where economic growth rates are higher than anywhere in the world, Africa is said to be a continent where a foreign investor earns highest returns on their capital.

Africa is huge. Most of the investment that is taking place, is in such natural resources such as ,oil and minerals. The main contributors to exports among the nations of Africa are Angola, Nigeria, Botswana, Ghana, Zambia and soon to equal or surpass these will be Mozambique the East African countries of Kenya, Tanzania and Uganda.

Where does Malawi come in? Will Malawi be included in the middle income group of African countries that is predicted to emerge in the next decade or so? A good deal will depend on whether our country can successfully entice Foreign Direct Investment (FDI).

FDI takes two forms, portfolio and equity. When foreigners buy shares or stocks in a foreign company, this is portfolio investment. When an investor builds or buys a factory in a foreign country this is equity FDI. What Malawi needs most is equity FDI like the Kayerekera type in Karonga.

FDI minimises a country’s problem of foreign reserves. The foreign investor brings with him capital goods bought in his own country with his own currency.

FDI is a conduit for technological transfer. It is generally agreed these days that technology is one of the major factors of development.

Malawi has plentiful natural resources. We face two problems with regard to development. First, we do not have the capital and technology to develop these resources. For nearly a century governments in Malawi have known that there is bauxite on Mount Mulanje but it is in a very inaccessible region. At the beginning of our independence a French Company was invited to have a look at the Mulanje bauxite and it went back preferring the more accessible resources of Guinea (Conakry).

The other problem is that we do not know much about what is embedded in the subterranean. For a long time we used to regret that unlike Zambia, Malawi had no copper and unlike Tanzania or Botswana had no diamonds let alone the oil that Nigeria and Angola had. We did not know that any other type of mineral was of any value. Then we heard of uranium deposits in Karonga and niobium in south Mzimba. Perhaps foreign direct investors if enticed here could discover more in the underground of our land deposits that can benefit us in the same way that oil and diamonds benefit other countries.

But how do we attract investors? Small hinges make big doors swing while small holes sink big boats. Certain small things we do can boast foreign investment or deter it. We must be careful what we do or say.

We must adopt the right attitude towards investors, tourists or those who just pass through. How we treat investors who are already in the country is a major factor in enticing foreign investors. Not long ago in The Nation newspaper, someone registered a caveat about certain criticisms people make against the Australian company that is operating the Kayerekera uranium mine. I share the same sentiments.

The dilemma lies in this, that during colonial days, foreign companies exploited the minerals of Africa solely to enrich their countries of origin. These days, African people insist that most of the wealth made out of their natural resources must remain in the countries where they are exploited.

Foreign companies tell us that either their shareholders will not risk their capital in an enterprise unless some of the wealth they create is repatriated to the shareholders countries.

We need all the skill we can muster to find a solution that could appeal both to national self-interest and the shareholders financial interest.

Foreign direct investors compare one country’s laws about labour, taxes political ad other conditions with those of other countries. Countries are in competition with each other for investment tourism and trade.

They will succeed best those who will strike bargains that are safe factory all round. It is a matter of trial and error.