What happens when corporate ownership shifts to China? A case study on rubber

production in CameroonSamuel Assembe–Mvondo, Paolo O Cerutti, Louis Putzel & Richard

Eba’a Atyi

Outline

BackgroundMethodsResults DiscussionConclusion

Background:

Background

China’s investment in Africa’s agricultural sector have increased over the past 10 years, and one the modalities of investment is the acquisition of pre-existing corporate holdings:

It is in this framework that one Chinese transnational Company has became the main shareholder of the Singaporean based transnational company in 2008;

Then, a subsidiary main rubber company in Cameroon has also become a part of Chinese Company;

The Cameroonian subsidiary share: 87% to Chinese; 3% to employees (last year agreement); 10% to State;

State (1975-1997); Singaporean ownership (1997-2008);Chinese (2008- today).

Research QUESTION

Can the geographic origin of investment affect the Performance and the Corporate Social Responsibility (CSR) of the Company?

Theoretical framework

This study draws on the concept of Corporate Social Responsibility (CSR), in which companies go beyond compliance and undertake actions that seem to provide for social and environmental well-being over and above the interests of and its legal obligations (see McWilliams & Siegel 2001; Logsdon & Wood 2002);

CSR requires to the company to respect: human rights; labour rights and environmental conditions.

MethodsThe following Social sciences

Methods have been used: Literature review; Interview with 7 managers, 5

administrative authorities, 2 NGOs leaders;

Interview with 35 lower –ranking employees;

Focus group discussion in 7 adjacent villages;

Participatory observation

Results

THINKING beyond the canopy

Summary of main events in the life of the rubber company

 

Types of investments

State of Cameroon: public capital, 1975-1997

Singapore capital1997- 2008 Chinese capital

2008-today

Industrial investments

41,339 ha 18 000 ha of rubber

plantation 1 24-ton capacity industrial

rubber transformation facility

5000 employees

Increase in transformation capacity to 50,000 tons

4500 employees

Renovation of plantations: 2000 ha

Creation of a research laboratory and nurseries

Plan extension of plantations 5500 employees Adoption of a sanitation-

security-environment policy

Social investments Construction of 17 camps and 3 villages

2 nursery schools 1 primary school 1 secondary school 1 hospital with140-beds 1 cultural centre Sports and recreational

areas, a swimming pool

Increase in enrolment capacity in schools

Increase in technical capacity of the hospital

First step in electricity installation in camps

Improvement of hospital capacity

New insurance policies for employees

Safety equipment and means of transport for workers

Salary readjustments in 2012 Payment of bonus to

employees, following the strike

Transfer 3% of the capital to the employees, following the strike and negotiation

Opening of discussions with local communities on establishing rubber plantations

THINKING beyond the canopy

Summary of management evolution of a rubber company

State of Cameroon ownership (1975- 1997 )

Singaporean (1997- 2008)

Chinese (2008- today)

CSR No CSR, especially land conflict with local communities;Claims of local communities on their land and financial compensationSalaries were acceptable ; No internal environmental strategy

No CSR, conflicts with local communities on customary land;Worse work conditions for employees; Salaries conditions were bad;Reduction of employeesNo internal environmental strategy

Yes, existence of CSR;Improved salaries , security and health conditions of employees; adopted the internal security and environmental policy;Dialogue with local communitiesISO 9001 certificate

Performance 10 000 tons of latex production in 1992

26 000 tons of latex production in 2002 no plantation extension

30. 000 tons of latex (2010);49% of the global profits in 2010

THINKING beyond the canopy

Towards Chinese investment Management New Strategy

Cameroonian subsidiary has just started the expansion rubber Plantations, areas will be increased to 18 300 ha, with creation of 3 000 jobs;

Chinese Transnational company has just created another subsidiary in Cameroon (SUD- Cameroun HEVEA), with 45 000 ha land concession for planting rubber, with 9 500 jobs;

Discussion

In general, this study shows that employment conditions and relations between local communities and a Cameroonian subsidiary have oftentimes been conflictual. The causes and intensity of conflicts and their degree of violent manifestation varied with time. But overall they were and still are, based on a sense of perceived injustice, inequity and unfair treatment by the local communities and the workers. Such feelings and the suboptimal remuneration and employment conditions can be traced first of all to the heritage bequeathed by the former owner (state of Cameroon), to the Singaporean group at the time of privatization. However, this subsidiary company under Chinese investor management seems determined to adopt, implement and improve social strategy.

ConclusionIn summary, the case of two –phased privatization of rubber company in Cameroon, challenges a number of prevailing assumptions: First, it challenges the notion upon which the privatization was based i.e. Would bring new employment to sector and improve working conditions;Second, it challenges the common perception in the Western media that investment of China will result less satisfactory corporate social practices than non-Asian companies.Finally, the origin of company’s capital does not really have impact for this case study.

Thank You for your AttentionChina’s Trade and Investment in Africa Project is funded by BMZ