#02 Business
Markus Demele

Corporate Social Responsibility and Labour Standards in Africa

An empirical and normative approach towards German Direct Investments and the ILO’s Decent Work Agenda

I. Introduction

Corporate Social Responsibility (CSR) is generally associated with investments from internationally operating Transnational Corporations (TNCs). There are, of course, CSR-initiatives arising from indigenous companies and other actors within Africa. As in other places, these initiatives currently have overlapping responsibilities and spheres of influence. These include, to name just a few: The Centre for Corporate Governance-Kenya, The African Leadership and Progress Network, Business Action for Africa, The Business Ethics Network of Africa, The African Institute of Corporate Citizenship, The Africa Corporate Sustainability Forum, The Private Enterprise Foundation Ghana, The Foundation for the Development of Africa and hundreds of regional initiatives all over the continent (Extending Service Delivery Project, 2006, pp. 6–9).

Clearly there is an arena of indigenous enterprises and other actors who start CSR initiatives. In South Africa and Nigeria in particular, companies that operate in different branches all over the continent have started smaller or larger projects to deal with HIV/AIDS or other issues involved in the development debate. But if we want to better understand the development and future of CSR in Africa on a large scale, we need to look at the big transnational or, even better, transcontinental companies (TNCs) operating in Africa. Their CSR initiatives, in so far as they exist, have a much bigger impact than the average projects of smaller companies in one country. While it is true that formal employment is of little importance compared to the huge informal sector accounting for up to 80% of Africa’s working population, in terms of absolute numbers TNCs still play a major role in African countries.

The London-based International Institute for Environment and Development states: “The international CSR agenda is dominated by OECD-based NGOs, investors, consumers, businesses and business associations. (2005, p. 4)” If one is willing to take this as a working hypothesis, it is reasonable to look at the extent of TNCs in Africa and their investment behaviour. There is no better way to do this than by analysing the Foreign Direct Investment (FDI) flowing towards African countries. Only the cumulative numbers of German investment for the whole continent are included in this analysis.

II. What is the significance?

Extent of German FDI to Africa To get the rating scale right, one should initially take a global perspective. After a decline in 2008 due to the global financial crisis, FDI worldwide is increasing again and totalled 17,743,408 billion US dollars last year.

Fig. 1: FDI in Africa (Demele, 2010)

This is close to ten times more than in 1989. FDI in Africa rose by about the same factor in this period to 514,759 billion US dollars (figure 1). But Africa’s share of global FDI has never exceeded the three percent line and remained at 2.9% in 2009 (figure 2).

 

Fig. 2: Africa’s share of global FDI (Demele, 2010)

The overall picture for German FDI is a little bit different. On the one hand, German investment in the rest of the world has also risen rapidly since 1989 – by a factor of 8.5 to 850,861 billion euros in 2008. But investment to Africa only increased by a factor of 2.8 to total 5,299 billion euros (figure 3).

 

Fig. 3: Investment to Africa (Demele, 2010)

This means that while absolute investment by German companies in Africa is increasing, African countries are growing less important compared to other regions of the world. The share of FDI from Germany going to Africa declined from 3.6 percent in 1989 to 1.9 percent in 2008 (figure 4)[1]. But looking at the absolute numbers, German FDI in Africa is still on the rise.

Fig. 4: FDI from Germany (Demele, 2010)

The data indicates that FDI is becoming increasingly important for African countries. If we examine the regional distribution, it is true that in sub-Saharan Africa the lion’s share goes to South Africa and only about ten countries receive noteworthy amounts at all (Demele, 2009, p. 28). But where TNCs do business in Africa, they are powerful actors with enormous influence on political decision making (cf. Johnson, 2007). Labour market policy is one of the most important policy fields relevant to economic development, return on investment and human development. For three reasons labour-related issues are a part of most voluntary codes and almost all CSR strategies formulated by companies that also invest in Africa:

  1. Labour standards are often disregarded in countries with a poor legislation and enforcement structures.
  2. On an international level, we have no broad, legally binding system of labour standards.
  3. Nevertheless it is common sense – at least as lip service - that all human beings are endowed with personal dignity. This entails certain standards concerning gainful employment involving the quality and quantity of work the employee has to deliver to the employer.

Before exploring the reality of global governance, one should ask for some normative ground rules on how FDI in Africa should work and the moral grounds underpinning these ethical demands.

III. Socio-ethical considerations of FDI in Africa

Even if generally not explicitly stated, every CSR concept has an underlying understanding of the human being and a certain world view. This is why they also define rights for humans who work in their sphere of influence. But what are these rights? Do they differ in different cultures or countries? Is a company from a developed nation required to apply the same rules and standards at their affiliate company in a developing country?[2]

In the context of a philosophy bound by the inheritance of the Enlightenment, the very core of ethics demands that people recognise one another as persons with equal dignity who must treat one another “always as an end and never merely as a means to an end” (Immanuel Kant). The moral rights of all individuals on the basis of their human dignity are spelled out in the different definitions of human rights. These include the right to liberty and security, political participation rights as well as economic, social and cultural rights.

Economic and social human rights also include rights relating to the quality of gainful employment. The rights of workers are elements of the moral call for decent work. In addition to these universal moral claims to decent work, there are also other legitimate ethical claims for how employment is organised. Firstly, minimum standards of fair work, which in each case entails obligations for all employers in a certain society that may not apply in other societies, and secondly good work targets, i.e. work that meets the vital needs of workers and their families.

Other than the ILO, which has a much broader understanding of the concept of decent work, the term “decent work” is used here to denote a group of minimum standards established within the framework of human rights that are seen to apply over and above all cultural differences. These are – to use the ILO definitions – principally labour rights as formulated in the ILO Core Labour Standards (cf. Senghaas-Knobloch, 2007, p. 20).

When exploring the obligations incumbent on investors and employers, one must bear in mind that we may make a distinction between a minimum standard founded on human rights requiring the omission of certain actions, and those that may impose a positive obligation to act. Obligations to omit build on various ILO agreements that require ratifying states to agree under international law not to take actions that would limit the freedom of association and the prohibition of forced labour, discrimination, starvation wages or health risks (International Labour Organization, 2009). Obligations to act for investors and employers include guaranteeing worker representation, the termination of exploitative child labour, equality of the sexes and of social minorities, providing a minimum income and sufficient health protection for all their workers.

On another level one can use the term "fair work" to describe minimum ethical standards that must to be adhered to or brought about for the employment of a specific society. These refer to standards that express the ideals of a good social order shared by the citizens of a country, or at least a majority thereof. They are therefore binding for all in this society. They can and may differ between different African countries, for example.

When it comes to the design of employment, ethics do not have to be restricted to determining and justifying universal and society-specific minimum standards, however. Here statements may also be made on how the working conditions in an enterprise can be improved even if they already meet the minimum requirements for fair work. Particularly significant is the mandate to design employment relationships so that they meet the vital needs and wishes of workers and their family members. Most CSR codes of conduct do not go that far and restrict themselves to the basic rights of the worker (decent work) at best. Over and above the minimum standards of fair work, these may include opportunities to personally develop through a job, along with family and partner-friendly working hours or the ability to take leave from work. Such goals can be summarised under the term “good work”.

IV. Decent work via legal labour standards or CSR

The ILO is the most important actor dealing with labour issues from a global perspective. It is the oldest specialized agency of the United Nations and sets up labour and social standards through declarations and recommendations (Jetzlsperger, 2000). The eight core labour standards have achieved the status of international human rights.

a. The ILO's Decent Work Agenda in Africa

Since 1999 the ILO has expressed its overall aim of creating opportunities for "decent work for all men and women worldwide" in the ideas contained in the "Decent Work Agenda" (International Labour Organization, 1999). Its four pillars are the creation of productive employment, the strengthening of social protection systems, the promotion of the core labour standards and social dialogue.

These main objectives of the agenda are broad in nature. The ILO has therefore narrowed the principles of decent work down to the regional level in "Decent Work Country Programmes" (cf. International Labour Office, 2006). In keeping with the "Poverty Reduction Strategy Papers" from the World Bank, the ILO and its partners try to highlight some areas that are especially important for achieving decent work opportunities in each respective country. This means the focus of decent work programs varies from country to country, reflecting different national priorities and conditions. By May 2010, eight countries in Africa had compiled such a program through the cooperation of governments, trade unions and employer associations (International labour Organisation, 2010). 28 are in the drafting stage and 16 are in the preparatory phase. Currently existing Decent Work Country Programmes focus on issues like youth empowerment, targeting youth employment and the elimination of child labour, particularly in its worst form, and the fight against HIV/AIDS in the work place as well as the expansion of social protection (e.g. Kenya International Labour Organization, 2007).

b. The ILO and voluntary standards

In the Decent Work Country Programmes and also in the Decent Work Agenda as a whole, there is a clear interaction between the demand for legally binding regulations for employment and desirable voluntary standards. Nonetheless the ILO's position is clear; It feels voluntary codes of conduct "can complement, but do not replace, enforcement of national legislation and international standards" (International Labour Organization, 1999). The ILO recognises the increase in the number of codes of conduct, but doubts that a thorough control mechanism is always in place.

There seems to be a structural incoherence inside the Decent Work Agenda and perhaps inside the ILO itself as well. The ILO aims at eradicating poverty, creating labour market institutions and promoting employment. It has therefore stipulated that as many countries as possible should ratify the international conventions negotiated and agreed upon inside the ILO. This implies that voluntary standards are not considered effective in fighting poverty and protecting the working poor. Yet the ILO also refers to the growing importance of CSR in the context of development issues.

The ILO tries to solve this dichotomy of binding standards on the one hand and voluntary action on the other in two ways: (1) Research on how voluntary mechanisms can support national laws and the ILO standards system and (2) by promoting the paradigm of the "sustainable enterprise". Here the ILO is trying to convince employers to live up to the ideal of corporate responsibility in different spheres of their firms and in politics and civil society (International Labour Office, 2007). The ILO argues that voluntary standards are financially advantageous to the companies involved. Some benefits include more and better innovation, lower credit costs, rising turnover and the prevention of "naming & shaming" costs. However, none of these arguments have been verified by any study whatsoever. The ILO should therefore keep pursuing the political fight for binding regulations instead of such soft-law approaches, since regulations would provide the needed foundation for the development architecture of Africa.

V. Conclusions

As we noted when exploring FDI in Africa, TNCs have huge economic power, giving them enormous influence on labour standards in the formal economy. A look at the normative roots of human rights showed that certain standards are universally viewed as necessary to preserve human dignity and are inalienable. Beyond that we have standards of fair work and of good work. CSR has not proved effective in guaranteeing any of these standards, not even the fundamental standards of decent work. Voluntary standards have not and cannot deliver on the effective implementation of labour standards, and they are even less effective when it comes to standards of fair and good work. In fact there is no empirical evidence, besides a few case studies, that they have any effect at all. CSR is therefore often not an intermediate step, but a complete sidestep to avoid the necessary binding regulations. It is does not work as a trailblazer nor a bridgehead in preparing the ground for national legislation (Dombois, 2010, p. 47). Instead CSR tends to suggest that labour laws won't be necessary in the near future because companies already appear to live up to higher standards today. Standards of decent, and even of fair and good work should not depend on the voluntarily generosity of employers. They are the rights of working people. This is why binding regulations for international investments and their influence on labour conditions are needed. The ILO is the international institution with the best expertise for finding and enforcing these regulations in the long run.

Reference List

  • Asiedu, E. (2002). On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different? World Development, 30(1), 107–119.
  • Demele, M. (2009). Deutsche Unternehmensinvestitionen in afrikanischen Ländern: Ausmaß und Relevanz für die Beschäftigten. Frankfurter Arbeitspapiere zur gesellschaftsethischen und sozialwissenschaftlichen Forschung: Vol. 56. Frankfurt M.: Oswald-von-Nell-Breuning-Inst. für Wirtschafts- und Gesellschaftsethik.
  • Dombois, R. (2010). "Decent Work" durch Selbstverpflichtungen Transnationaler Unternehmen. In G. Becke, P. Bleses, W. Ritter, & S. Schmidt (eds.), "Decent work". Arbeitspolitische Gestaltungsperspektive für eine globalisierte und flexibilisierte Arbeitswelt ; Festschrift zur Emeritierung von Eva Senghaas-Knobloch (1st ed., pp. 37–52). Wiesbaden: VS Verl.
  • Extending Service Delivery Project (2006). CSR in Africa: Internet Research Study. Washington D.C.
  • International Labour Office (2006). From pilot to Decent Work Country Program: Lessons from the Decent Work Pilot Program. Geneva: ILO.
  • International Labour Office (2007). Conclusions concerning the promotion of sustainable enterprises: International Labour Conference, June 2007. Geneva: Internat. Labour Office.
  • International Labour Organization (1999). Decent work: Report of the Director-General. Geneva.
  • International Labour Organization (Ed.) (2007). Decent Work Country Programme Kenya: 2007-2011. ILO's Country Programme for the Republic of Kenya. Nairobi.
  • International Labour Organization (2009). ILO Kernarbeitsnormen. Retrieved September 08, 2009, from www.ilo.org/public/german/region/eurpro/bonn/kernarbeitsnormen/index.htm.
  • International Labour Organisation (2010). Status of Decent Work Country Programme Development in AFRICA. Geneva, from www.ilo.org/dwcp.
  • Jetzlsperger, C. (2000). ILO - Internationale Arbeitsorganisation. In H. Volger & K. A. Annan (Eds.), Lexikon der Vereinten Nationen (pp. 270–272). München: Oldenbourg.
  • Johnson, D. (2007). Von der Gewalt- zur Friedensökonomie: Deutsche Unternehmen in der Demokratischen Republik Kongo.
  • Kivuitu, M., Yambayamba, K., & Fox, T. (2005). How can Corporate Social Responsibility Deliver in Africa?: Insights from Kenya and Zambia. London: International Institute for Environment and Development.
  • Senghaas-Knobloch, E. (2007). "Si vis pacem cole justitiam" – Die programmatischen Herausforderungen des IAO-Konzepts für weltweit menschenwürdige Arbeit (artec-paper No. 139). Bremen: artec - Forschungszentrum Nachhaltigkeit, Universität Bremen.
  • Wissenschaftliche Arbeitsgruppe für weltkirchliche Aufgaben der Deutschen Bischofskonferenz (ed.) (2008). Verlagerung von Arbeitsplätzen: Entwicklungschancen und Menschenwürde. Sozialethische Überlegungen. Bonn.

Footnote

[1] Regarding the reasons behind investment in Africa: Elisabeth Asiedu (2002) has verified how investment decisions are made in the Western world when it comes to Africa – that is to say generally not based on reason and focused on a mere media perception of insecurity and poverty. German companies are probably even more afraid to do business in Africa than other countries.

[2]The normative reasoning presented here generally follows that of the Wissenschaftliche Arbeitsgruppe für weltkirchliche Aufgaben der Deutschen Bischofskonferenz, 2008, pp. 41–50, a study conducted by the Nell Breuning Institute.

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