From TheConversation. Story by Kenneth Amaeshi, associate professor of strategy and international business, University of Edinburgh.
Two recent fines imposed on MTN Nigeria and Guinness in Nigeria – the biggest corporate fines in the country’s history – could prove to be symbolic if they are sustained.
As the biggest economy in Africa, it signals to the world that the continent is ready and open for responsible business. The era of anything goes may fast be ending.
It is often argued that some firms are attracted to Africa because of the opportunities presented by the continent’s weak capitalist institutions – that it has inefficient governments and weak civil society. In other words, bad government is good for business. In such an environment, it may be easy to exploit the weaknesses of poor regulation, cheap labor, raw materials and tax loopholes.
This is the classic case of firms taking advantage of price differentials in different countries of factor markets such as labor, capital and raw materials to enhance shareholder value. This strategy has been effectively used by many multinational corporations in their quest for global dominance. In such situations, responsible business practices become a luxury and an unaffordable burden. The Niger Delta region of Nigeria, with its oil deposits, is a victim of this exploitation.
However, business in Africa can also provide an opportunity to challenge this exploitative undertone, which has continued to trail contemporary capitalism and undermine the continent. In other words, responsible business practices are possible in Africa, despite the inherent challenges of weak institutions.
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This view is central to the tenets of Africapitalism — a new economic philosophy for Africa championed by Nigerian banker and entrepreneur Tony Elumelu. According to Elumelu, Africapitalism describes the process of transforming private investment into social wealth.
Africapitalism: a new way of doing business
Africa is rising. In addition, as it rises, its business environment will become more sophisticated.
The recent fines imposed on multinational companies are a sign of things to come. The telecom giant MTN Nigeria has been fined a record $5.2 billion US by Nigeria’s Communications Commission. The fine was imposed for non-compliance with a deadline set by the commission to disconnect all non-registered SIM cards. The fine had a negative impact on MTN’s share price and led to the resignation of the group’s CEO, Sifiso Dabengwa.
In addition, in November 2015 Nigeria’s National Agency for Food and Drug Administration and Control fined Guinness $5 million over expired raw materials.
The fines have one thing in common – the failure to comply with regulation and the seeming lackadaisical attitude to regulation and regulators.
Businesses on the continent will need to rethink their ways and grow with Africa. One possible way to successfully ride the wave of Africa’s economic renaissance is to imbibe the principles of Africapitalism as a new economic philosophy. This applies to both local and international businesses interested in Africa.
Read more at TheConversation.