When a continent as forest rich as Africa becomes the target of direct foreign investment – no matter what the origin – what are the risks and negative impacts on communities, agriculture and forestry?
This question is considered at the micro-level in a new study, from the Center for International Forestry Research (CIFOR).
The study examines the evolution of corporate social responsibility through the changes of ownership of Hevecam, a rubber company located on Cameroon’s Atlantic coast near the southern town of Kribi.
Through studying just one company – which evolved from state owned, to foreign owned, to majority Chinese owned – the study’s authors evaluated whether Chinese companies have a lower sense of social and environmental accountability than other investors.
“Our research shows the situation is much more nuanced and complex than the sometimes untested, negative views about Chinese foreign direct investment in Africa would indicate,” says Samuel Assembe-Mvondo a CIFOR scientist based in Cameroon, and lead author of the study.
One company, several problems
Hevecam was created in 1975 as a state-owned Cameroonian company, with funding from the World Bank and technical assistance from the French Rivaud Group.
Two decades later it was sold to Singapore’s Golden Millennium Group (GMG).
Then in 2008 the Chinese state-owned company Sinochem bought 90 per cent of GMG’s shares, with the Cameroonian state holding the remainder.
So was there a marked difference in attitude between state-owned and private, Chinese and non-Chinese management of the same company?
“Sinochem is a newcomer to Cameroon and its record of corporate social responsibility is relatively unknown,” says CIFOR’s Louis Putzel, another author of the study.
“But one thing that is sure is that the current owners have inherited a number of unresolved problems that go back many years. The degree to which they are able to resolve those problems will be a real test of their ability to implement policies to satisfy the needs of their workers and local communities while protecting the natural environment.”
One issue dates back to the early days of the national rubber industry, long before there was any involvement from Chinese companies in the region.
To make way for company operations, the Cameroonian government declassified 41,339 hectares of forest land and reclassified it as a public estate to be used for state investment.
That didn’t contravene any laws, but it did undermine historically well-documented land entitlements of two ethnic minorities – the Bulu and the Bagyeli people.
Except for one village that was given food and about US$9000 compensation the rest of the displaced, dispossessed population received no reparation for the traditional lands that they lost to the rubber company.
Increase productivity, maximise profit
From 1998 the Singaporean owner’s strategy was to increase productivity of cultivation areas and maximize profits.
Annual latex production rose dramatically and rubber plantations expanded.
Ten years later, Sinochem focused on expanding the plantations, improving production with new research facilities and nurseries, and bringing in a new policy on sanitation, security and environment.
But there was a downside to all of that activity.
The report states that GMG (both Singapore and Chinese owned) seems to have respected only a few of the provisions of the privatization agreement.
“There were issues like higher wages not being given, and the expansion of plantations to create new jobs, to name just a few,” says Putzel. “And smaller issues as well – like improved worker’s living quarters.”
In 2011 the employees went on strike.
They hoped to pressure Sinochem (by then the majority shareholder) to change the company’s management strategy, inherited from the Singaporean owners.
It took mediation from the Cameroonian Minister of Labor and the signing of a Memorandum of Understanding to end the strike the following year, which, Putzel says “indicates the continued importance of State involvement, to negotiate the balance of interests between companies and the people. Even the best corporate social responsibility policy is not necessarily sufficient to break the log jam between community expectations and corporate agendas.”
Does people power work?
Sinochem is now making “positive efforts” to improve its corporate social responsibility efforts, the reports states, including a one off bonus of $400 to each of its workers, plus free health insurance. Added equipment and medicines have been bought for the company hospital.
“Under Chinese ownership, there are some indications that a higher standard of corporate social responsibility is now being applied than previously,” says Louis Putzel. “But there’s still long way to go to improve social relations with local communities, who have suffered from many decades of unfulfilled claims regarding land ownership and rights”.
There’s also recently been strained relations between village planters and both the company and the state, when “to their dismay, the planters realized that the company was heavily under-pricing their products” and so started selling to a latex production competitor.
GMG increased the price it paid but then asked “the government authorities and the local police to prevent trucks from the competitor’s company from entering the site, thus preventing the rival company from buying from the local villages” the report states.
“While from the company’s target of maximum profit is understandable, if it occurs at the expense of employees and local communities, that’s not good for the company in the end,” says Samuel Assembe-Mvondo.
The company management – pushed by local officials and community leaders – have started negotiations to earmark 7,000 ha of 14,000 ha of forest land for rubber production, that the State had declassified. Of this, local communities would be able to manage 2,000 ha as a common property resource.
“This is a key outcome”, says Putzel.
“While the conversion of natural forest, in whatever condition, is always matter of great concern, the involvement of local communities in managing at least a share of the resource is an important step towards ensuring benefits are also shared.”
Samuel Assembe-Mvondo says that Sinochem’s new corporate social responsibility efforts are, to some extent, beginning to improve their relations with local communities.
“We shall have to wait to see if this new culture will bring better management of internal conflicts,” he says.
“And if that really improves local communities livelihoods and environmental outcomes.”