TRUDI MAKHAYA: Cronyism has helped kill positive vision for multinationals in SA

The role of multinationals in developing countries is fraught. More than a decade ago former Economist correspondent Daniel Litvin wrote Empires of Profit, which detailed the shenanigans of western global corporations in the developing world. With roots in imperialism and remaining suspicion that multinationals are set to take advantage of poorer nations, the relationship has never been easy.

In the postcolonial period, multinationals can be seen as nothing more than one of the vehicles industrialised economies use to extract economic value from the periphery, to use the language of dependency theory.

The critique has evolved to argue that not only are these corporations extractive, they also fuel corruption, dodge taxes and are fickle investors.

In assessing the effects of multinationals in the developing world, it is important to keep the role of local enablers in mind.

Frantz Fanon presents an argument that suggests a certain inevitability to the toxic relationship between global and local business. In The Pitfalls of National Consciousness, he argued that the middle class in the newly free nation struggles to find a constructive role in the global value chain.

"From now on, it will insist that all the big foreign companies should pass through its hands, whether these companies wish to keep on their connexions with the country, or to open it up. The national middle class discovers its historic mission: that of intermediary," he wrote.

But the economic literature promises a different vision in which multinationals can play a constructive role in economic development. This vision is premised on technological transfer and the diffusion of skills. This is the quality of relationship SA has pursued in its quest for foreign direct investment.

Here, the expectations on multinationals are higher than in many other developing countries in that there is an imperative not only to grow the economy, but to transform its insular, racially exclusive past. A lot of effort has gone into explaining the need for the economic empowerment of the majority and to develop mechanisms for multinationals to participate in that. Time will reveal the extent to which these were distorted in the relationships between some local firms and multinationals in the Gupta orbit.

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As some correspondence in the Gupta leaks shows, local partners have been portrayed as intermediaries merely there for their cut of the fee, and not as meaningful economic partners. Multinationals often argue that they like to have local partners when they do business in developing countries as these partners bring technical and cultural insight about local conditions.

Unfortunately, this is a role that is easy for global companies to pay lip service to, especially if the local business class does not take itself seriously. This is another lost opportunity where the state could be using its state-owned corporations to insist on meaningful collaboration. That has been sacrificed at the altar of self-enrichment.

Thus, supplier development becomes a rent-seeking exercise and black talent goes to waste. The negative stereotypes that follow besmirch black business more than any other segment. It feeds into a system in which black business people are valued for their political connections and ability to sway contracts and not for "delivery". But let’s be clear — this is not the work of white monopoly capital, but a cynical web of cronies.

• Makhaya is CEO of Makhaya Advisory.