Feb 18, 2019 Last Updated 11:01 PM, Feb 17, 2019

The Lack of Transparency of European Companies in Africa

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AEFJN has begun the implementation of its new Action Plan for the period 2019-2022. A huge part of the work of the network has focused on the Trade Agreements between the European Union (EU) and Africa during the last decade. The work of civil society has slowed down the agreements and has created greater awareness among the African population about the danger of these agreements and the risks that it poses on the economic growth and welfare of the population in Africa. Given the stagnation of economic agreements and the crisis of trade multilateralism, AEFJN now focuses more attention on the behavior of European companies operating outside its borders and especially in Africa.

The EU and its Member States, through the bilateral investment agreements (BIT) and the economic partnership agreements (EPAs), have established a set of arrangements with African countries and regions that offer a legal security to the European companies when they operate in Africa. At the same time, the EU demands from the companies that operate in its territory a strict behavior in labor, fiscal and social matters; whether they are companies whose parent company is located in a Member State of the EU or in a third country. However, these same requirements become voluntary when it is the EU companies that operate in Africa.

Corporate social responsibility is a broad dossier that covers different aspects of the activity of companies and begins even before these companies start operating in a specific country. All types of companies must be subject to such responsibilities: extractive industries, agri-business as well as any economic activity that tries to settle in a developing country. The reasons for a private company to invest in a foreign country are due to different economic interests. Sometimes, these companies invest in developing countries in response to national and supranational policies and strategies (EU), as is the case of extractive companies that seek to ensure the scarce natural resources essential for technological development. Other times, companies (private but with public capital) invest in foreign countries to ensure the feeding of their population or the supply of certain agricultural products that are not produced in their territories as fruits or tropical products. Moreover, after the global financial crisis (2008) European companies have increased their exports to ensure the pace of economic growth and conquer other markets.

Regardless of the interests of each company, they have often taken advantage of the countries that host them and the population they claim to serve: low labor costs, less stringent quality standards, lack of social and labor protection for workers, a less controlled environmental regulation as well as a lower tax pressure where the facility to tax evasion is “negotiable” under the umbrella of corruption. In these cases, companies operate abroad with the sole mission of reducing production costs and reporting more benefits to investment companies.

Therefore, the responsibility of the companies begins not only with the commercial activity but with a reflection that takes into account all the actors of the commercial activity: the country where the company will develop its activity, the concrete location, the activity that it will carry out, the respect for the legislation of the host country, the consultation with the authorities and local population, the fair payment of the taxes, the respect for human rights, the defense mechanisms of people who may be violated in their fundamental rights and the compliance of national and international environmental regulations.

The social corporate responsibility in the European Union includes different Directives that seek transparency both at economic and at a non-financial level. The EU companies have to describe their behavior regarding social initiatives and the protection of fundamental rights. Also, companies operating in Europe are subjected to tax regulations under scrupulous control of mandatory compliance preventing money laundering of illicit activities and tax evasion. The same happens with environmental measures that even before the Paris agreement (COP 21) some countries had introduced in their national legislations.

While these regulations are increasingly demanding for European and foreign companies operating in the EU, I wonder why the EU is not so demanding with its own companies when they operate abroad? Why is it left to the discretion and will of EU companies to comply with international laws when they are operating in Africa? Why is there such a double way of measuring according to where these companies operate? Why is it that the EU does not make legally binding their own legislation to its companies when they operate outside of its borders such as the simple respect of international treaties on social and labor responsibilities (ILO)?

On one hand, companies try to avoid these responsibilities arguing the high administrative cost involved in these transparency exercises. On the other hand, the EU excuses itself pointing out the exclusive competence of African governments to implement such measures in their countries. Moreover, both companies and governments claim competitiveness issues with other foreign powers, such as China in Africa. For whatever reason, the EU cannot rely on different criteria and must be coherent in all its policies. This lack of coherence primarily harms African populations that are subject to the unscrupulous exploitation of their natural resources. But in the medium term it is the EU itself (and its citizens) that will be harmed by this double ethics.

It is difficult to understand how the EU protects the free implementation of transparency measures abroad that often slip into opacity of tax responsibilities. Or perhaps is it true that there are secret agreements and revolving doors between companies and EU policy makers that citizens and civil society ignore?

* AEFJN Policy Officer

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