FDI and responsible business in Tanzania: What difference does it make for employment and working conditions?

Abstract

In recent years, support for traditional development cooperation declined. There is little con-fidence in its effectiveness and therefore, a new way of development cooperation emerged. International organizations like the World Bank (WB), the United Nations (UN) and the In-ternational Monetary Fund (IMF) have emphasized the potential contribution of business to development, as well as national governments all around the world. In the current globalizing world, the private sector is increasingly interested in developing countries. Foreign investors are looking for emerging markets and cheaper production methods, while they are expected to bring certain business values with them to these countries, to increase sustainability and to contribute to the development of these economies. The umbrella term for such values is Cor-porate Social Responsibility (CSR). Since this is a Western concept, it is therefore debated what role CSR has to play in developing countries. Inherent to responsible business are work-ing conditions. Many companies moved their business activities to developing countries, mainly to benefit from cheap labour. This has led to altered working conditions in these coun-tries. For the case of Tanzania, responsible business and working conditions are specifically interesting, given its socialistic background. It is culturally and historically expected that companies are highly philanthropic and socially involved, while companies initially exist to make profit. Since the abolition of the socialist economy, the national government works to increase the role of the private sector in agriculture and attract FDI to the country. However, there is a lack of research on how responsible foreign companies in developing countries are, what their working conditions are and in what way they impact local economic development. Therefore, these issues are investigated during a field research carried out in northeast Tanza-nia, in which 20 foreign agricultural companies, 32 of their employees and 15 other relevant actors and institutions are interviewed. The research results show there are two different types of companies to distin-guish concerning responsible business practices in Tanzania. The first type is mainly focused on making profit and complying with legal requirements, without having specific responsible business policies implemented. The second type of company does have these policies and is more involved in social aspects, especially regarding the wellbeing of their employees and their relations with surrounding communities. Good relationships with surrounding communi-ties are essential for doing business, since foreign companies in Tanzania often have a bad image, especially when it comes to their impact on the environment and land acquisition. However, some of the interviewed experts argue the community investments are low com-pared to the profit these companies make. The importance of investing in the wellbeing of employees is reflected in the provision of sufficient working conditions, to increase the educational level of their employees, together with their loyalty and reliability towards the company. Working conditions in the companies are mainly driven by following legal requirements. Health and safety issues and terms of em-ployment are laid down in the law, while welfare is on a more voluntary basis. If voluntarily social services are offered, they are diverse, varying from loan schemes to housing allowances. Though working conditions are generally good and complying with the law, wages are often too low for people to provide for themselves and their families. This is especially the case for employees who work in greenhouses or do other low-skilled work. The impact of the companies on local economic development is both positive and neg-ative. Positive outcomes are employment generation with corresponding incomes for thou-sands of people and more tax revenues for the government on different levels, which can be invested in providing public services. Negative impacts include the lack of collaborations with local suppliers, excluding them from taking part in the different value chains, and the fact that the companies mainly produce for international markets. This leads to a decrease of food se-curity and access to land for local communities. In that sense, the employment generated is not always as responsible as it could be. In conclusion, it appears market-let economic development on its own is not the an-swer to development problems. The way foreign companies function now, poverty will not disappear. However, poverty alleviation is of course not the goal of these companies, it is something other people and institutions want them to do. To be able to help people get out of poverty in a sustainable way, collaboration between companies, government agencies and development organizations is necessary. Even though the social aspect of companies is getting more attention worldwide, this should be regulated and monitored by national governments and development organizations, to assure social standards are met.