Liberia: The Dilemma of African Economics
We have been watching the goings-on in Liberia and the influx of foreign companies into the country. This does not come as a surprise foreign companies captialize on any opportunity that avails itself. Liberia has witnessed relative peace and is looking very ripe and tempting to would-be investors.
However we think the economic stituation of Liberia is for the most part very similar to that of many African nations. Natural resources are still available and the people are willing to work. Yet these nations do not have the financial capital to kick start their economies.
Without any other source of financing large corporations are usually the first to to take a chance with these economies once they achieve a decrease in political risk. The compromise by these nations is allowing the corporations to repatriate very high percentages of the profits made from operations. This is at times the greatest source of conflict between the corporations and the African leaders. However faced with high unemployment rates and a disenchanted population the African governments are usually eager to accept most investors.
SMEs are a good starting point to have the local people participating in economic activity but the reality of African SMEs is that despite being able to provide good products and service they are poorly resourced in terms of material and management skills. This results in limited paricipation of these SMEs which end up providing non -core goods and services.
Depending on foreign investment is one of those neccessary evils that has to be done; like asking your boss for a soft loan when your child falls sick. The downside of cause is that if a large company makes a decision to stop investing in a poor country, like Liberia it means a significant number of people will be left unemployed which will have devasting ripple effects on the economy.
The mindset of most unskilled African workers is- let me look for a job in a big company I may be employed for a while but thats better than never at all. At least I will have constant income to feed my family its definitely better than to trade wares. That I-want-a-job syndrome will mean Africa will only create a few indegenious companies.
If the corporations are genuine about their intentions then they need to have more partnerships with local businesses which means involving SMEs in core business activities. The facts on the ground are that most foreign companies operate with their bags packed and placed at the door for a ready quick exit if the need arises.
In an ideal African world there would be no need for foreign multinational corporations in Africa.