African choices

Many western companies have irreversibly damaged their reputations in Africa through a tragic disregard for local communities. Chinese corporations can avoid making the same mistakes, says Godwin Nnanna.

The April 22 attack on a Chinese-run oil field in Ethiopia has brought to the fore a rising threat that confronts China in its hunt for oil and other natural resources in Africa: rebel insurgency. 

There are militant groups pursuing a number of different agendas in virtually every oil-producing region of the continent, and the barbaric attack by the Ogaden National Liberation Front (ONLF) is not the first that Chinese oil workers in Africa have experienced in recent times. In Nigeria’s Niger Delta, where China National Offshore Oil Corporation (CNOOC) last April procured a major oil bloc, attacks on oil workers have become an increasingly regular occurrence.

For China, the attacks represent not only a threat to the lives of its citizens working in these troubled areas, but also a big challenge to its economic projections. China may know what it wants in terms of economic development, but it does appear to be at loss over how to handle the threat militant groups pose to its operations in Africa.

Tough choices

China’s rise in the continent’s energy sector has been astronomical in scale. In the last five years, the Chinese presence in Africa has gone from insignificant outpost to a spread that covers nearly half the continent. 

However, in Angola, Sudan and Nigeria – three major centres of China’s investment in Africa – Chinese oil corporations face tough choices over whether to retreat or remain.  And it seems that Beijing has ruled out retreat as an option. 

Sinopec, the Chinese oil company that owns the targeted Ogaden oil field, has announced it is not pulling out of the disputed region of Ethiopia. The country’s proven reserves of oil and gas are minimal, but analysts believe there is potential – particularly on the gas front – in the Ogaden region. This is the attraction for Sinopec.

ONLF has warned foreign oil companies that “oil investments in Ogaden will result in a similar loss for any firm that believes assurances of security it receives from the Ethiopian government”. China looks to be in a dilemma: in order to keep pace with its fast growing economy and ever-increasing energy demands, China has found itself in risky parts of the world that others might consider too dangerous. 

The present situation is compounded by China’s diplomatic strategy of non-interference, a quiet approach that has endeared the country to many African leaders. The recent Ethiopian attack has shown that China’s success in Africa may come at a price well above the figures agreed in contracts with African governments.

Chinese Foreign Ministry spokesman Liu Jianchao said that Beijing will look for ways to improve the safety of its workers in Africa.  "In response to these recent incidents concerning the safety of Chinese personnel,” said Liu, “the relevant departments are carrying out an assessment of safety abroad to help Chinese businesses smoothly develop economic and trade cooperation abroad and ensure the safety of Chinese personnel.”

But Liu did not elaborate on what options his government would explore to enhance security for Chinese workers, and Beijing insists the incident will not alter its policy of encouraging Chinese businesses to operate in Africa.

Merely increasing security around oil installations – as a Chinese official from Sinopec reportedly put forward last week – does not look to be a strategy that can quell rebel onslaughts on these installations. Certainly it has not proven to be a workable solution in the Niger Delta, where it has only served to toughen the militants.

Corporate citizenship

A closer look at the situation in some of the places where China currently operates shows that companies like Sinopec are following a traditional pattern. Western companies, such as Shell, have long operated with little regard for environmental standards and the welfare of host communities. And while some may argue that social welfare should be the responsibility of government rather than corporations, oil companies can do a lot to ensure that these governments – most of which are joint partners – do more for their people.

By supporting humanitarian activities, business can affirm its long-term commitment to host communities. This support helps companies to build relationships and strengthen their reputations. Chinese corporations can achieve a strategic business benefit through genuinely humanitarian activities, but not through smokescreen PR gimmicks. This is the rationale behind corporate social responsibility or corporate citizenship.

In most parts of Africa, agriculture remains a lifeline for communities – the land and water represent the entire livelihood of the people. Any attempt to destroy Africa’s natural heritage will attract resistance from the people. Today, Shell Corporation has damaged its reputation in most Niger Delta communities due to its poor environmental record.

Shell is the largest field operator in Nigeria, and accounts for about half of the country’s oil operations. It claims to adhere to the highest standards of practice in cleaning oil spills and reducing gas flares, but as even a cursory visit to the Delta shows, these standards are in fact far lower than in other countries. While it is by no means the only culprit, Shell’s record of environmental recklessness in Nigeria may be the worst in the world.

However, in Gabon, Sinopec has almost turned the once beautiful Loango National Park to an environmental eyesore, and there is a risk the Chinese corporation may damage its reputation as Shell already has.  Today, oil workers in the Niger Delta suffer immense intimidation because of the way that greedy and corrupt governments have collaborated with selfish corporations.

Chinese operators can check rebel insurgency among local communities, particularly in countries where they have only recently established themselves, such as Liberia, Niger, Ethiopia, and Gabon, by ensuring that they strike a reasonable balance between economic interests and the long-term wellbeing of host communities. After all, the oil wells will dry up, but the land and the people will remain.

Chinese corporations must prove their commitment to transparency, high environmental standards and fair working conditions for host communities, not through their words, but through their actions. Many host governments may ignore these issues to protect their own interests. Existing laws may also overlook corporations’ activities – such was the case in Loango National Park, where Sinopec entered on a legal loophole – but corporations must be discerning and responsible enough to care about local communities and ensure that they do not make themselves targets of the people’s wrath.

Godwin Nnanna is the Accra Bureau chief of BusinessDay Nigeria. He was a gold medallist in the 2006 UN Foundations Prize for excellence in reporting development and humanitarian issues.

Homepage photo by Ferdinand Reus