Effects of Multi-National Corporations on African Economies

Written by David Charles, February 10, 2021

A Multinational Company is a business organization whose exercises are situated in more than two nations and is the hierarchical structure that characterizes unfamiliar direct speculation. This structure comprises a country area where the firm is consolidated and of the foundation of branches or auxiliaries in unfamiliar nations. Worldwide organizations can shift in the degree of their worldwide exercises in terms of the number of nations in which they work. An enormous global company can work in 100 nations, with countless representatives situated external its nation of origin.

Multinational Companies are said to be products of Foreign Direct Investment. Foreign Direct Investment implies the effective and efficient control of business operations in a country by foreign owners. For instance, Julius Berger, Unilever (close up), SHELL, Coca-Cola, etc. are concrete examples of Multinational Companies of the world. The companies have business tentacles in other countries known as host countries which are especially third world countries as their headquarters are located in Europe.

There are both positive and negative effects of Multinational Companies on African economies. As a matter of fact, it has been argued over the years that, the business activities of Multinational Companies in the host countries have caused more damages than the improvements that are said to be brought by them. This article seeks to discuss these effects.

To begin with, Multinational Companies are said to be sources of improvement in the host countries as they transfer technological capacities and knowledge. Technological proficiencies that are obtained in the advanced countries of the world are taken down to the host communities where their business operations are surviving. For instance, Julius Berger construction company makes use of sophisticated machines in carrying out a road, bridge and other construction works in host countries. However, that s transfer of technology has negative implications on the economies of host countries. At first, it has been argued that little or no technological capacities are transferred as business owners will not want the duplicate of their equipment in third world countries. Also, the technologies that are said to have been transferred kill the crawling technological capacities obtained in the host countries.

Furthermore, the provision of employment to the jobless fraction of the population of the host countries is a positive effect. Third-world countries in general, Africa in particular is said to be home to a huge labor force. Therefore, the establishment of business tentacles in these areas provides a watered ground for the “jobless" labor force to be employed. Conversely, the reverse is the case as “seasonal" employment opportunities are provided. The employment is seasonal in the sense that the majority of the employed labors are released of their duties after completion of the project. For example, mesons are employed from the public when construction Companies carry out their activities. In addition, top echelon positions and other administrative posts are manned by the business owners. Therefore, the argument that Multinational Companies bring employment opportunities does not hold water.

It has been argued that Multinational Companies give room for capital flow in host countries. The generated profits are used to develop the host countries with a view to ending the vicious cycle of underdevelopment and low capital flow in host countries. This positive effect has been regarded as false in its actual sense. Little or no capital flow is experienced. Owners of Multinational Companies at a higher rate, repatriate the generated profits back to their headquarters in order to develop their countries.

Conclusively, Multinational Corporations do not exist to develop African economies in its real sense. They have done more harm than good to the crawling economies of Africa. As a result of strict and heavy competitions faced in the host communities by the indigenous companies, many of the indigenous companies have crumbled as their goals are brought to an abrupt end. Although, in the business world, competition is needed, but in the guise of developing a lower economy, profitable competition should be entrenched.