Literature Review: MNCs and Poverty Reduction in African Nations

This literature review examines the influence of multinational corporations (MNCs) on poverty alleviation in Africa. The paper explores the economic conditions of Africa, highlighting its rich natural resources and the potential for MNCs to create employment opportunities and drive economic growth. The review discusses the benefits of MNCs, such as foreign direct investment, and their contributions to community development and industrial training. It also considers challenges like political instability and ethnic conflicts. The review highlights structural and regional policies, as well as public work programs, that can aid in poverty reduction. The conclusion emphasizes the significant impact MNCs have on economic conditions and the importance of ethical business practices.

Literature review for dissertation question
‘can multinational corporations help alleviate
poverty in Africa?’

Table of Contents
INTRODUCTION.........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
CONCLUSION..............................................................................................................................................5
REFERENCES............................................................................................................................................6

INTRODUCTION
Africa, a nation where most of people are affected by poverty. In other words, this is
being considered as a country which is lacking in provisions that are basically needed to satisfy
the elementary human needs. The economic size is continuously diminishing like income per
capita or GDP. Africa is only rich in one region and i.e. natural resources. On the other hand, in
the year of 2009, approximately 22 out of 24 countries consist with "Low Human Development"
in the index of human development and most of them were linked with Sub-Saharan Africa
(Amankwah‐Amoah, 2015). In order to improve the economic conditions, there are many factors
came in front which might help Africa in improving growth rate. In all of the factors, one of the
most influential element i.e. Multinational Corporations (MNCs) that could help in removing
conditions that creates poverty in Africa. But, it can be said that potential benefits to MNCs
basically stays really very low, because a country which is already facing economic crisis will
not be able to offer much benefits to these large corporations in terms of profit. Present report is
going to cover the influence of Multinational Corporation that would help alleviate poverty in
Africa, Along with this, it will also show both challenges and benefits that multinational
organisations faces at the time of expanding business in countries that do not contains good
growth rate.
MAIN BODY
In present time, every single organisation which is performing their operations at
international level has given ample number of opportunities to countries to develop
economically. On the other hand, it can also be said that a country which is having really very
low economic conditions, it will never going to be the first option for an organisation to expand
itself, but this can also be considered as an opportunity because they might find manpower and
resources at cheaper rates ultimately assisting in attaining competitive advantage (George and et.
al., 2016). Here, if it is talked about Africa, its economical conditions are not good enough but it
consists with rich natural resources. This makes agriculture sector strong enough to lure mega
corporation to venture in the nation. As mentioned by, as of 2012, approximately 1.3 billion
people were living around 50 African and due to these two factors, this countries economical
conditions are rapidly improving and by 2050, it can easily be said that combined GDP rate

might reach to approximately $29 trillion. That means, base of poverty line is somehow
decreasing and based on the analysis, it can easily be said that MNC's might offer employment to
people who are seeking jobs. Many of multinational companies are already performing well in
African countries and this made Africa world’s fastest-growing continent with a growth rate of
5.6% a year, and its GDP got raised with an average of over 6% a year between 2013 and 2023
(These are the seven biggest business opportunities in SA right now, 2019).
As mentioned in BUSINESSES ARE HELPING TO OVERCOME GLOBAL POVERTY,
(2018), MNC's are worldwide enterprises having its operations and production of products or
services in at-least one country except its home country. Main function of MNCs is to increase
foreign direct investment which helps in economic development of country. Poverty refers to that
situation when there is complete lack of means to fulfill basic requirements such as food,
clothing and shelter. Poverty occurs both in developed and developing countries. Poverty
eradication are referred to measures to lift people out of poverty. Multinational companies play a
very crucial role in poverty eradication of Africa. Around 88% of world's poor people exist in
Africa. Emergence of MNCs helps in poverty eradication by providing employment, contributing
towards community development projects, and providing industrial training to youngsters (Holt
and Littlewood, 2015). Companies can also contribute to social responsibility, payment of taxes
in fair means, and emergency assistance to survivors of disasters. MNCs have contributed to a
large extent in poverty alleviation in Africa. Creation of new multinational corporations can be
oriented towards eradication of poverty without undermining shareholders value. To eliminate
poverty in Africa requires many ways some of them are:-
Structural transformation- This includes changes in industrial policies of Africa.
These policies comprises of investment policy, effective incentives for restructuring, flexible
macroeconomic framework. This can drive towards poverty eradication and reduction of
inequalities as it will positively contribute to higher FDI in the county resulting in higher number
of MNC's. To reduce poverty Africa should focus on increasing productivity of agriculture sector
which helps in structural transformation (Kandachar and Halme, 2017).
Regional policies- This includes trade policies and regional integration which helps in
increasing trade and flow of FDI. Regional integration help in reducing inequalities and provide

various platforms for insurance like against food insecurity. Also, facilitate solutions for
challenges in frequent climate changes (Kolk, 2016).
Public work programmes- Various employment guarantee schemes are being
implemented. To overcome chronic poverty social protection and jobs can be provided. Also,
their are tax rebates and suspended custom duties on basic range of food commodities which
helps in reducing poverty, certain subsidies are also provided in form of electricity tariffs and
fuel at low prices (Is there a role for multinational corporations through CSR to alleviate
poverty in Africa?, 2018). In addition to this, MNCs also contribute for development of societies
by making investment and support government for in their social endeavours as a part of their
corporate social responsibility. The major causes which results in uplifting poverty in the African
region are political instability, ethnic conflicts, climate change and other man made causes.
Therefore, to make improvement in such system, international companies give support to NGOs
and public corporations to run programs for proper sanitation, education and well-being of
societies (Noe and et. al., 2017).
CONCLUSION
With the help of above mentioned report, it can be easily said that multinational
corporations carries high influence on economic conditions of any country operating at
developing or under-developed stage. It has also been summarised that, every single step that has
been taken by MNCs has helped in eradicating poverty with the help of high investments on
social grounds. On the other hand, lastly every single business organisation needs to work in
ethical manner through considering legal system of country like Africa in order to gain
competitive advantages and to earn heavy profit margins.

REFERENCES
Books and journals
Amankwah‐Amoah, J., 2015. Solar energy in sub‐Saharan Africa: The challenges and
opportunities of technological leapfrogging. Thunderbird International Business
Review. 57(1). pp.15-31.
George, G., and et. al., 2016. Bringing Africa in: Promising directions for management research.
Holt, D. and Littlewood, D., 2015. Identifying, mapping, and monitoring the impact of hybrid
firms. California Management Review. 57(3). pp.107-125.
Kandachar, P. and Halme, M., 2017. Introduction. Farewell to pyramids: how can business and
technology help to eradicate poverty?. In Sustainability Challenges and Solutions at the
Base of the Pyramid (pp. 13-40). Routledge.
Kolk, A., 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business. 51(1).
pp.23-34.
Noe, R.A., and et. al., 2017. Human resource management: Gaining a competitive advantage.
New York, NY: McGraw-Hill Education.
ONLINE
Is there a role for multinational corporations through CSR to alleviate poverty in Africa?. 2018.
[Online]. Available through: <https://brage.bibsys.no/xmlui/handle/11250/2567479>.
BUSINESSES ARE HELPING TO OVERCOME GLOBAL POVERTY. 2018. [Online]. Available
through: <https://iveybusinessjournal.com/publication/businesses-are-helping-to-
overcome-global-poverty/>.
These are the seven biggest business opportunities in SA right now. 2019. [Online]. Available
through: <https://www.thesouthafrican.com/these-are-the-seven-biggest-business-
opportunities-in-sa-right-now/>.