If a country’s economic growth is not broad and inclusive, it can create societal disparities that increase investment risks for business. In order to succeed, companies are expected to contribute to broader economic and social development. If these expectations are not met, there can be significant disruptions and delays to projects. From an investor perspective, this is not about corporate social responsibility (CSR), or even about simply generating goodwill – as laudable as these objectives are. It is about creating an environment that is conducive to long-term, sustainable business that creates value for shareholders and all other stakeholders.
Example – the extractive industries
The oil and gas and mining industries can have significant, positive transformative impact on countries. Responsible companies with long-term perspectives engage with governments and other stakeholders, including impacted local communities and local businesses, as early as possible on entry into a country.
The largest direct contribution they make to host countries is through royalties, taxes and, where applicable, equity participation in projects. However, over the life cycle of projects, companies can also contribute to broader and more inclusive economic growth by employing citizens, purchasing goods and services from local companies or even partnering with them on specific projects. If local capability does not immediately exist, companies can invest in the education and capacity building of local employees and suppliers. Where infrastructure is lacking, companies can invest as partners with governments and other businesses to develop the necessary infrastructure that can then have broader economic and social uses.
Companies need to work with governments and other relevant stakeholders as part of core business negotiations to determine which aspects of national development priorities they can legitimately contribute to in a meaningful way. Once there is agreement, the responsibility for delivering on those projects should be integrated into the company’s operational processes rather than delegated to CSR.
At the end of it all, companies can only be of value to their stakeholders if they are successful and profitable. The vast majority of shareholders invest in companies because they believe their core businesses will provide them with a decent return. But companies investing in Africa will not be able to provide such returns unless they understand, take into account and address the socio-economic development challenges that countries are facing and which directly or indirectly impact their bottom line. Well thought-through, negotiated and agreed partnerships between companies and local stakeholders go a long way in creating outcomes that benefit all.
Rosalind Kainyah, MBE, Founder and Managing Director
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