Africa, Globalisation and Property Rights

(Photo by CIAT)

Joel Kibirige examines Africa’s dependency upon foreign investment.

Earlier this week, I read articles in both The Guardian and The Daily Telegraph which argued that Britain was increasingly owned by foreigners.  Since Margaret Thatcher’s privatisation policies in the 1980s, there has been a substantial increase in foreign ownership of British businesses: especially in the energy industry. According to the Office for National Statistics, foreign ownership of British firms stands at 53% in 2013. For the first time, Britain PLC is largely owned by foreigners. This news was greeted with anger and uneasiness from readers asking why it has happened.

For the first time, Britain PLC is largely owned by foreigners.

Teachers nowadays normally inform us that globalisation is the key to nation’s success in commerce, acting as a force for economic development. This indeed is the case, but one has to wonder what future lies in store for the nation state in the wake of their future economic success becoming increasingly dependent upon foreign entities.

But how do Africa’s experiences of globalisation compare to ours? Various countries all over the African continent are experiencing impressive economic growth figures; in fact, over the past five years, African countries will have grown at an average rate of 6% (according to IMF data). In this year alone, seven of the world’s fastest growing economies will be from Africa. For example, this year Sierra Leone is projected to be growing at 20%, Mozambique at 8%, Uganda at 6%, Gambia at 8%, and Nigeria at 7.7%. Yet behind these impressive growth figures lies the issue that some of the wealth created in these particular countries is being syphoned off by foreigners and foreign companies, leaving little benefit for native populations. The fact is that local populations often fail to experience the full benefits of globalisation.

In Kenya (East Africa’s leading economy), the majority of wealth remains owned by British and American firms. Tourism is big business in Kenya, but you will hardly find a native Kenyan owning one of the fancy hotels. In fact, the most noted hotels in Kenya such as the Norfolk, Mount Kenya Safari Club and the Fairview group are all foreign owned. This not only applies to the tourism and hotel markets, but also to agriculture too. Kenya produces a fair amount of tea and coffee; the industry is dominated by companies such as Kakuzi which is 70% owned by foreign investors. Tea and coffee are Kenya’s biggest export earners and coming closely behind is a horticulture industry that earns Kenya billions. Many of the roses sold on streets of the UK are from Kenya. The country is home to about 5000 flower farms, but most of the biggest flower are foreign-owned. Nigeria has also seen an invasion of foreign firms buying up stakes in oil fields and the energy sector. Of all the oil fields in Nigeria, foreign firms account for 48% the oil produced (according to Nigeria’s Department of Petroleum Resources). Meanwhile, in the case of South Africa, foreign investors now own a record number of shares on the Johannesburg stock exchange: 37 percent of the JSE’s top 40 companies are owned by foreigners.

In Kenya (East Africa’s leading economy), the majority of wealth remains owned by British and American firms.

Why such high levels of foreign ownership? The answer could be a lack of enforced property rights. In the past five years, we have witnessed 21st century land grabs in Sudan, Ethiopia, Kenya, Tanzania, Mozambique and the Democratic Republic of Congo. People have been expelled from their land to make way for investors from developed countries. In Tanzania, 160,000 people will be removed from their land as a result of US “green energy” investors. The investors claim they want to help the East African country, but protesters claim its land grab. The company in question is Agrisol – an energy company owned by Iowa-based businessman Bruce Rasster. Small-scale African farmers have inadequate property rights; government can just turn up one day and claim land in most cases. More generally, inadequate provision of property rights is a major reason for the failure of many Africans to experience the benefits of globalisation. This has to change.

Joel graduated from Essex University this year with a degree in Economics and Politics. He is now an intern at the Awaiting Eyes Foundation, working as a Business Development Assistant.



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