It comes as no surprise, even to the naivest of readers, that Africa is and has been for centuries the worst performing continent for economic development and living conditions. Similarly unsurprising is the argument that very little of this backwardness is the fault of its inhabitants. Rather, it has been the centuries of exploitation, first as a commercial base for the trade of exotic goods, then quickly turning into an abundant source of slave labor, to be forcefully displaced to the New World’s plantations with the complacent help of local kings and leaders, and lastly to a full-on colonial empire for the insatiable European powers. Africa never really stood a chance. But even after colonialism has been defeated and the last independentist movements finally reclaimed the right to auto determination and self-governance in the 1980s, is the Black Continent really free?

Africa is one of the richest continents in terms of natural resources. The region is home to the world’s largest arable landmass, second largest and longest rivers (the Nile and the Congo), and the second largest tropical forest (for a total value added of its fisheries and aquaculture sector alone of about USD 24 billion), along with 30% of all global mineral reserves¹. The African continent has known steady growth rates up until the Covid crisis, has economic potential to exploit and constitutes an up-and-coming market, with a middle class in expansion and increasing purchasing power².

We clearly observe a resurging interest of the rest of the world in its regional economy and markets, and for good reasons: foreign direct investment has been increasing in Africa in the last decades, along with returns to investments, which tripled just between 2015 and 2016³.

Notably, the primary players in this rediscovery are multinational companies. It has been estimated that these economic giants single-handedly control roughly one third of output, two-thirds of trade and one fourth of employment at the global level⁴. On paper, there are large opportunities for gains on both sides from the delocalization of activities in underdeveloped countries. The economic literature has been extensively studying these benefits: it appears that multinational employment boosts domestic wages, increases domestic employment, fosters the transfer of technology between foreign and domestic firms and enhances the productivity of the labor force⁵. Many economists have been advocating, over the years, this as the solution to the backwardness of the African continent.

Despite this overwhelmingly positive evaluation, recent studies by Italian researcher Tommaso Sonno expose some of the shadows that the modernization process may have on Africa’s future development, in the form of some counterintuitive and certainly concerning aspects of the settlement of multinational companies in the continent. On a positive note, he finds that the localization of foreign firms in an area has positive effects on local employment, in that it increases both the number of jobs and their quality (favoring permanent jobs, rather than seasonal or temporary ones), as well as encouraging a transition outside the farming sector through the creation of labor supply in more advanced sectors⁶.

However, it seems that this “intrusion” in the local economy may also lead to negative consequences for what concerns local institutions and internal peacekeeping. In his 2020 paper “Globalization and conflicts: the good, the bad and the ugly of corporations in Africa”⁷, he investigates the role that foreign companies moving in a certain area have on the degree of violence and conflict in society.

The key determinant is here the type of activity that is carried out: where firms invest in local human capital, for instance in health or education, the extent of conflict is reduced; when instead we turn to sectors that are intensive in scarce resources, such as forestry or mining, the exploitative nature of the activity translates into a higher likelihood that new violence could arise. This is only the case when we look at foreign firms, rather than national ones.

One notable example that may help clarify why this could be the case is the trilateral cooperation program that Mozambique undertook in 2011, called the ProSavana project, to promote “sustainable and inclusive agricultural development” together with Japan and Brazil. In reality, things did not go as well as anticipated: there are reported instances of expropriation of villages, threats to food security and intensive use of water, depriving people in the surrounding areas of their means of subsistence. Little if any compensation was offered, and the project often violated people’s rights and produced conflict situations. The emergence of this type of situations seems to characterize also private projects, not only to public policies.

This conflict-related side effect of development is exacerbated when there are politically underrepresented ethnic groups. These marginalized people are typically excluded from the benefits of the foreign investment, while they bear its costs, since the central government can place the burden of land deals on the unrepresented. Supporting this view, Sonno finds that the only type of violent event that is positively affected by the presence of multinationals is riots, rather than violence against civilians or battles between politically organized armed groups.

Unfortunately, evidence seems to suggest that these more extractive sectors are “a major source of investment and revenue in many African countries”⁸, and the industry has accounted for more than half of FDI just in the past seven years⁹. With the rise of smartphone technology and electric cars, rare-earth metals and lithium overall are becoming highly coveted goods, and Africa has the potential to turn into an opencast mine. The investments of China, in the form of the One Belt One Road initiative, while bringing new infrastructures and projecting a path of potential resurgence for this forgotten continent, also cast a dark shadow of future dominance and dependence from foreign powers, something that fits gloomily well with its past of enslavement.

This study shows a great degree of coherence with a stream of literature which seems to belong more to political science than economics and offers a viewpoint that is opposite to the mainstream one: we are talking about the theory of the “resource curse”. There seems to be a negative relationship between endowment with natural resources and socio-economic development, with many historical precedents and only few, notable exceptions. Resource-rich countries are more often than not riddled with nefarious social, economic, and political problems. In this vein, it is interesting to hear a comment by Emeka Duruigbo on the discovery of oil in Nigeria in the 1980s: “The only losers seem to be the citizens of these countries, in particular, members of oil producing communities, who bear the brunt of the discovery and exploitation of oil while missing out on the benefits.¹⁰”

Why this could be the case is a highly debated topic. Among the many explanations, there are arguments that the resource curse of Africa is deeply connected with its weak governance, in the form of a lack of strong legal and political institutions, the presence of multiple power groups and dictatorial and repressive governments¹¹. This unstable environment is incapable of effectively managing resources and fails to keep the rent-extracting behavior of multinationals in check, so that the presence of highly sought-after raw materials, notably oil and precious gemstones, and more recently rare earth-metals, becomes an obstacle to growth, rather than a competitive advantage. Clearly, the increase in conflict resulting from the entrance of foreign multinationals in the continent does nothing but further weaken already struggling governments.

In conclusion, the previous research is just a preliminary analysis of a complex and multifaceted problem. The measurement of the effects of multinational companies on local economies is largely unexplored, despite the great debate that surrounds the theme. It would be important to begin quantifying, rather than merely speculating.

After the spectacular failure of the “catching up” narrative, seeing how Sub-Saharan Africa now accounts for two-thirds of the global extreme poor population¹², the words Kwame Nkrumah, former president of Ghana, wrote in 1965, ring truer than ever. “The result of neo-colonialism is that foreign capital is used for the exploitation rather than for the development of the less developed parts of the world. Investment, under neo-colonialism, increases, rather than decreases, the gap between the rich and the poor countries of the world.¹³” Perhaps, we should not uncritically rejoice the entering of many African countries in the global economy if the result is a new and more pervasive form of exploitation of the Black continent.