African Journal of Business and Economic Research. vol. 7 No. 2-3
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ISSN : (Online) 1750-4562, 1750-4554 (Print)
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A lot has happened, both good and bad, in Africa in the last 12 months alone. On the sad note, four presidents/ heads of government have died whilst still holding office, Chinese investments in the continent have unravelled their dark side, Islamists have reared their ugly heads in both Mali and Nigeria, and protesters have been mowed down by police in South Africa. On a positive note however, the World Bank’s Doing Business report has identified one of the best reformers to be from the continent – i.e. Rwanda. What’s more? Ethiopia only recently made history by taking delivery of the coveted Boeing 787 “Dream liner” aircraft, well ahead of India and other global players – albeit only a few days before the country lost its leader.
On the death of presidents in office, it is worth mentioning that since 2008, this has happened only 13 times worldwide, but Africa holds a record of 10 out of these. The latest is the death, after a long illness, of Prime Minister Meles Zenawi of Ethiopia, on 21 August at the age of 57. Earlier in the month, Ghana’s President John Atta Mills, had died suddenly at the age of 68; Four months earlier, President Bingu wa Mutharika of Malawi died of cardiac arrest at the age of 78; and in January 2012, President Malam Bacai Sanha of Guinea Bissau, died in a military hospital in Paris after a long illness, at the age 64. From a political standpoint, one would have expected the deaths of presidents to bring about major disruptions for the countries concerned, as the jostle for filling the power vacuum in these Africa States, which has always been problematic as was the case in Nigeria in the aftermath of the death of President Umaru Musa Yar’Adua in 2010. However, the deaths in 2012 were followed by a constitutional succession with minimum violence and political/ civil unrest, which has been described as “very encouraging sign for Africa's development.”
Moving away from the deaths of presidents, but not unconnected with the “legacy” of the departed, the wave of foreign direct investment (FDI) has been phenomenal, with two BRIC countries at the forefront – China (construction, transport); and India (in telecommunications). These two countries have made major forays into sub-Saharan Africa (SSA) in a renewed “scramble for Africa” reminiscent of the “old guard” epitomized by the colonial misadventures of the metropolitan powers from Western Europe. Indeed recent reports have indicated that “tens of thousands of Chinese live in Angola, and Chinese state-run firms have large interests in the country.”
Indeed references to China and India provide some indication on the directions and magnitude of FDI in Africa especially by the former and its teeming population which have been known to export more than just investments (crime, corruption and prostitution) in oil-rich countries such as Nigeria and Angola. Interestingly, two papers in this issue, while not specifically tackling this “dark side” of FDI, nonetheless highlight some interesting dynamics at two levels – the macro or general SSA level; and the “meso” or country-specific (i.e. Rwanda) level.
Although mineral-rich Angola is China's biggest trading partner in Africa, with some $24.8bn (£15.7bn) in 2010 with commercial opportunities having attracted private businesses and state-run firms, even the Chinese media acknowledges that “crime had begun to seriously affect operations in the country.” Only recently, the country extradited 37 Chinese nationals (at the behest of Chinese benefactors), accused of extortion, kidnappings, armed robberies and mafia-style prostitution rings. Rather than being tried in the country of the perpetrated crime, the 37“suspects [were shipped to] Beijing in handcuffs [and] balaclavas covering their faces to be tried in China”. This disregard for the sanctity of the rule of law in Angola is further compounded by the fact that “Chinese business owners had moved away from the capital Luanda, while others had hired private security guards and bought bullet-proof cars.”
This takes us back to the colonial exploits of yesteryears where countries such as France have been at the forefront of maintaining their grip on the continent (from Cote D’Ivoire to Rwanda and the rest of francophone Africa). The United States has also ensured that its interests are not threatened any further (following the Clinton’s gavel on Sudan and Kenya in the aftermath of 9/11). Interestingly one of the papers in this issue explores and reports on the sustainability of the US security interests in Africa (see Reid and Brightman, in this issue).
Finally, in terms of the financial stability of Africa, the recent U-turn of the Central Bank of Nigeria over its initial plans of launching the highest currency bill in its half a decade – i.e. the N5 000 (equivalent of about US$34 going by an exchange rate of N153 to US$1) on the grounds of cash management, was catalyzed by strong resistance from, not only by the opposition government and diverse sections of the educated populace. Indeed there have been some persuasive arguments of more costs than benefits of such a bill launch – notable amongst which are an increase in inflation; adverse effects on the small business sector/ rural economy; and most importantly the perpetuation of corruption (see Ayadi; Deichman and Malgwi respectively in this issue). This, it must be said are just a few of the dangers lying in wait which includes a long list of monetary and fiscal policy hiccups for the ailing “giant of Africa.”
Papers in this issue
The first paper in this final issue of 2012, taps into a subject whose impact on the global business environment has been at the forefront of an equally global discourse– i.e. defence and security. In their reports on the Impact of US Military Aid and Engagement Policies in Africa,Sean F. Reid and Hank J. Brightman, draw upon the 2010 National Security Strategy (NSS) of the US, which emphasizes the rise of the former as an increasingly vital stage for the advancement of the latter’s strategic interests. The NSS especially under the current regime (even as they go to the polls in a few weeks from now), according to these authors, advocates peaceful democracies in their “universal aspiration for freedom and dignity” while advancing the equally important objectives of regional stability, security, and economic development. While their results showed a generally positive correlation between military engagement and measures of human rights, freedom, and democracy, however, the data showed very little correlation between levels military engagement and security measures.
As if to pick up on the earlier argument, Joel Deichmann and Charles Malgwi,in the second paper, reviewed theGeography of Foreign Direct Investment (FDI) in Africa at what they described as the ‘mid-point’ for the United Nations’ Millennium Development Goals (MDGs).Given FDI’s importance with regard to Goal Eight – i.e. “Global Partnership”, the authors examined FDI patterns using data up to 2007. They reported that Africa’s uneven FDI landscape was related to both the distribution of natural resource endowments and their associated trade patterns and market size. They also identified a “follow-the-leader” strategy, especially among British Commonwealth states where, contrary to their expectations that transparency encouraged FDI, they failed to find any evidence that inflows were facilitated by the adoption of International Accounting Standards.
In the third paper, Satwinder Singh, Viviane Mwitirehe, Charles Assey and Kenneth Egesa, take the argument further by moving away from the “macro” level discourse to the “meso” level reality especially in the profiling of FDI in Rwanda. In their critical assessment, these authors highlight the role of government institutions in attracting FDI into the land-locked East African country. They opined that while institutions in Rwanda had succeeded in kick-starting the FDI process with a series of positive measures, now may be time to pause and take a stock of these successes vis-à-vis the current state of economic development in the country.
Robert Hinson, Thomas Anning-Dorson, and Adelaide Kastner, continue the “meso” leveldiscussionin the fourth paper, where they investigate the Ghanaian retail sector to ascertain the key mall visitation motivation(s).The study reveals eight mall visitation motivations and five shop attributes that attract Ghanaian shoppers. While attributes such as Escapism, pleasure flow, safety, aesthetic and architectural leisure featured quite highly, ‘exploration’ did not seem to cut it.All said and done, these authors posit that the retailing environment of the mall can be best understood by studying the characteristics of the tri-components i.e. shoppers, shop, and mall, which they claimed were inextricably intertwined at the mall, based on the views of shoppers in Ghana.
In the fifth paper, Ernest Emeka Izogo, retained the focus on the SSA retail environment by exploring the challenges of online shopping in Nigeria. Using a sample of 120 respondents randomly drawn from students of the Ebonyi State University in eastern Nigeria,it was found that perceived risk of uncertainty and poor knowledge in respect of the operational modalities of the computer and internet are the root factors deterring online shopping acceptance in Nigeria. While none of these is particularly surprising, what may require further exploration is the argument that “the cost and convenience associated with virtual shopping might have been underplayed in that country because of the risk perception and poor knowledge of the consumers.”
Chinwuba Moguluwa and Princewell Achor, discuss the benefits of mega events on the corporate image and reputation of organizations, in the sixth paper.Although preliminary in nature, the study highlights the opportunities from three specific mega-events used by Nigerian organizations: Nigerian Breweries Plc (Star Trek – a musical show sponsored by); MTN Nigeria Ltd. (“Who Wants to be a Millionaire” – an audience-participation TV game show); Global Communications Limited (“Glo, Rule Your World”, a musical talent hunt show by the same company). According to them, crowd pulling effect, fun-fair or entertainment nature and broad-based target audience participation of mega-events can be effectively deployed to leverage on corporate image and reputation.
In the seventh and final paper, Felix Ayadi undertakes a re-orientation of Community Banks and Rural Development in Nigeria. He specifically attempted to revisit the role designed for community banks in the country’s economic development, arguing that there was a gap to be filled by community banks, as several rural communities throughout the country lacked microfinance banks (MFBs). He consequently sort to advance arguments for a re-emergence and/ or re-orientation of community financial institutions to be licensed and regulated by state and local governments to fill the gaps created by MFBs.