Ending the day on an African hilltop, watching the sun go down. It was just one of the many highlights of a study trip, undertaken by 20 students of the Erasmus School of Economics (ESE), to see what makes investors decide to opt for Zambia. Hoping to discover how these decisions impact sustainable development in its agro-processing industry, Miriam Belhaine and 19 fellow students packed their bags and took off.
When we speak, Miriam is about to pack for a well-deserved trip to see the Victoria Falls and enjoy a safari. That said, the 20 representants of the AEclipse student union did not just go to see the famous waterfalls or the Big Five. After four months of desk research, studying the effects of direct foreign investments in Zambia, they recently completed their project with two weeks of field work, interviewing production managers at foreign-owned companies.
Cows and chickens
Buffalos, leopards, rhinoceros, elephants and lions are all glorious creatures, but Belhaine’s group primarily came to check on cows and chickens. Having spent months researching the effects of climate change in Tanzania during an earlier study, Miriam felt the urge to return to Africa for her studies in International Economics. Fortunately, the continent was well-represented at the priority list set up by the European Center for Development Policy Management (ECDPM) in Maastricht. Partnering up with this organisation, as well as the faculty and a Dutch water company, her commission managed to organise this study trip, which is expected to produce a report that will inform future investors.
Having seen several meat processing plants, ranches, and a Zambian Breweries malting plant, Miriam believes direct foreign investments are actually doing a lot of good for the country. By training people to work with machines that are not available at local schools, foreign-owned companies provide skilled employment to thousands of workers. And although many of these jobs may not be the most interesting, Belhaine admits, the students saw no evidence of practices such as child labour. Instead, the chicken processing factory they visited was up to modern standards. Dressed in white boots, overalls and hair nets, the students got to see how each employee had one specific job, such as removing legs or guts. Tens of simple steps made up an effective production line.
Tax benefits
Most of the companies the students visited, enjoy several of the tax benefits the Zambian government offers to foreign investors in order to stimulate its economy. Nevertheless, serious risks to investments and a large national debt result in high interest rates and an unstable exchange rate, making it hard to borrow money locally, the students noted. And there are other issues. Despite registering as Zambian companies to avoid administrative hassle, political decisions may have a big impact on foreign investors. If the government would not allow for tax cuts, Miriam believes, most large multinationals in the agro-processing industry would not be here - Big Five or no Big Five.
Companies are driven by the object to earn money, and roughly the same applies to their sustainable behaviour. As part of their research, the students looked into the environmental impact of production. Out of economic considerations an enterprise like Kachema Meat Supplies aims to use water and energy as efficiently as possible, Belhaine noted, and companies also have the obligation to do so.
But unlike the really large multinationals, the students concluded, many of such self-proclaimed ‘proudly Zambian’ companies powered by foreign funding take these measures out of a love for the country as well. And driving on a ranch in a land rover, cruising towards an African sunset, could you blame them?