The cost of socio-political conflict for those doing business in Africa can no longer be denied. Yet many companies still operate under old-fashioned notions of conflict risk management with local communities, labour or government as factors over which they have little control.
Prof Brian Ganson, director of the Africa Centre for Dispute Settlement and professor extraordinaire at the University of Stellenbosch Business School (USB) says leaders who instead understand and proactively address conflict in their planning and operations reduce risks and open new business opportunities.
“Boards and senior management tend to focus on the level of support or opposition they face from a narrow group of elite political figures. They take a largely passive view of risk, asking what government might do to them or fail to do for them. They often engage in risk management as a spectator sport, driven by outside consultants and analysts producing voluminous reports. And if they assess socio-political risk at all, they may do so only as part of strategic decisions to start, expand, or close business operations, not as an integral part of ongoing business operations.”
He says costly confrontations between companies, communities, labour unions, and governments in Africa are growing in number and intensity. This is particularly true for the increasing number of investments in the extractives industries, commercial agriculture and infrastructural projects.
“Markets increasingly understand and account for these conflict risks. In the valuation, for instance, of the share price of a gold mine, good relationships with governments and communities may be worth more than twice the value of the gold in the ground itself.”
Ganson says that research across companies, countries and business sectors demonstrates that companies are much more the authors of their own conflict risk than they often care to acknowledge.
“When a company experiences a business failure in a complex environment, it is more than likely caused at least in part by the company’s own actions.”
He says a company may cause conflict directly, for example, through the way it plays politics to acquire land for mining or commercial agriculture. But a company may also exacerbate conflict indirectly, for example, when a large influx of people seeking opportunities creates competition for jobs.
“Often enough, a company’s operations force dormant conflicts to the surface. In Uganda, for example, land claims among neighbouring chiefdoms could remain contested for decades without fuelling acute conflict. As soon as a decision had to be made as to which political authority would manage the company payments earmarked for local development, however, violent conflict erupted as the land claim now had resource and power implications. When the company’s operations introduce new stress factors in already difficult places, the likelihood of destructive conflict increases.”
Ganson says at the same time there are also effective business leaders who proactively manage conflict risks in complex environments. “While formal government or community relations play important supporting roles, the primary locus for conflict management is in the core planning and operational functions of the company. Leaders build cultures of inquiry, looking beyond the company fence to the interplay of the company and its operations with the people and events around them.”
As one leader noted, “It is easy to lose sight of risks that we don’t have control over, such as the social dynamics around us. You need to constantly engage the organisation: how do these affect us? Where are they headed? How can we manage the risks or help fixing them?”
Proactive engagement is essential in the case of governments, community members, civil society organisations, and labour unions that may greet the company with indifference, suspicion or hostility. As another leader observed, “When there is trouble, it’s far too late to build a relationship. You better have been listening and talking all along.”
Ganson says common ground can be established and the interests, needs, and priorities of a broad range of actors more easily harmonised with a demonstrated willingness to listen, learn and act in concert with others. “We have found many examples of successful conflict management in even the most difficult places, from a company that avoided the terrorism plaguing its competitors on the basis of strong relations with its formerly combative union, to another that not only survived but thrived during a revolution in the Middle East by tying its success to the success of its smallholder farmer suppliers as an explicit strategy for conflict risk mitigation.”
As companies manage their own conflict risks, they may take a more active role in the resolution of broader social and political conflicts. “As noted by an executive of a company with operations in multiple difficult contexts, this shift is driven by hard-won understanding that the company cannot through its own actions alone protect its operational continuity or social license to operate: The mere scale of company operations amplifies problems around it. And there are also conflicts between groups in society, in which conflict with the company is simply collateral damage. This puts the company in the business of reconciliation.”
He notes that this broad and inclusive approach to conflict risk mitigation and management has contributed to a dramatic reduction in violence, both against company facilities, and among communities that had formerly seen themselves in opposition to one another.
“The social costs of business and conflict are enormous. More than a billion people live in the 50 or so most conflict-prone countries. A vigorous and inclusive private sector should play a role in providing broad-based hope and opportunity, helping reduce instability and spreading prosperity. But when business causes, exacerbates or is drawn into conflicts, peace building and development opportunities are lost, the dynamics of instability are reinforced, and there is little prospect for the poor to rise out of poverty, in Africa or elsewhere.”
Within its focal area of business, conflict and development, the Africa Centre for Dispute Settlement helps companies, communities, governments and labour organisations prevent, manage and resolve conflicts in ways that advance both business and social goals.