While on an inspection of the Shoprite complex in Onitsha, Anambra State, which is scheduled for commissioning on April 14, 2016, Governor Willie Obiano made a statement of tremendous significance which was apparently lost on most of the journalists who were covering the event and hence the little coverage it received. The governor said that the Onitsha complex of the South African retail chain would provide fun and entertainment to the people, provide quality services and products at competitive prices and, most of all, raise the standards of doing business in the environment.
There is an ongoing debate among researchers in international business over the impact of productivity spillovers by multinational companies on host country firms. Western scholars question the impact, often citing the establishment of a $147 million manufacturing plant in Kentucky in the late 1980s by Toyota Motor Corporation of Japan to employ some 3,000 persons and the building of plant in Alabama in the early 1990s by Mercedes of Germany following a $230m incentive package by the state government so that it could hire 1,500 individuals. But researchers from emerging economies hold a contrary view. When a multinational enterprise moves from a developed economy to another, the productive spillovers may not be significant because the two countries have about the same level of development. But the same thing may not be said when a western multinational co-locates in a developing market.
The restaurant business in Nigeria experienced a revolution only when the United African Country (UAC), a British multinational enterprise, started Mr Biggs business in 1986. In other words, Governor Obiano of Anambra State, an accountant and erstwhile banking executive, seems to share the view of such leading international business researchers from emerging markets as Aysa Ipek Erdogen of Okan University in Istanbul, Turkey, that inward foreign investment boosts the productivity of domestic firms. Mr Biggs’ phenomenal success spurred Nigerian entrepreneurs to start a new generation of fast food restaurants which meet international standards, hence the emergence of Sweet Sensation, Mega Chicken, Chicken Republic, Tasty Fried Chicken, etc.
Not only do the indigenous restaurants meet the standards set by McDonald’s of this world as regards hygiene, quick service and ambience, they have added an unmistakable Nigerian touch. For instance, they serve rice, which is not available in American fast food restaurants like McDonald’s and Kentucky Fried Chicken (KFC). In fact, they serve jollof rice, a popular rice delicacy peculiar to West Africa, in addition to yam and other local delicacies. Nigeria’s fast food restaurants are, therefore, a good example of what contemporary international management scholars call glocalism, which is a neologism derived from a combination of “globalism” and “localism”. Successful international businesses are those which marry the best international elements and the best in the local environment.
Nigerians in search of evidence of the enormous positive impact of foreign direct investment (FDI) productive spillovers on domestic firms should consider the spectacular growth in recent years of Chisco Motors following its partnership with the Nigerian Breweries plc, the local subsidiary of the Dutch multinational Heineken. For Chisco to meet the standards of businesses which partner with Heineken Group and its subsidiaries around the world, it practically reinvented itself, bringing into its fold such highly trained persons as Chika Mbonu, a former bank chief executive who holds a first class honours degree in engineering and now works as its operations director. The result is that Chisco Motors is today a modern business by any standard, a radical departure from the days when it was a typical local, one-man business. The transformation has been extended to the entire Chisco Group. And some other local businesses have been inspired by the Chisco Group example in their modernization efforts.
Obiano is encouraging Shoprite of South Africa to invest in Anambra State because of the obvious productivity spillovers on domestic firms, among other critical factors. The Onitsha Main Market, which was West Africa’s largest open market when it was built in the 1960s, was appropriate for that era. It is a market well known for the traditional form of buying and selling. But the world has come a long way from that era. We are now in an era of globalisation where there is hypercompetition, as Professor John Child, formerly of the University of Cambridge, put it in one of his magnificent books. The current hypercompetition is driven by a high speed of unprecedented changes unleashed by technology and the collapse of barriers to international trade.
Shoprite will receive a lot of supplies from local businesses in Anambra State and environs. And for them to do so, the local businesses will have to move at least a notch up in their operations. The enhanced business practices of suppliers and other Shoprite partners will go a long way to prepare the people and businesses in Anambra and environs for the challenges of contemporary commerce. Fortunately, the people of Anambra State are naturally business savvy. They are among the most successful groups of businesspeople in Africa whom, Amy Chua, the eminent law professor at Yale University, calls market dominant in her excellent book, World on Fire. They will learn easily and adjust in no time.
Obiano is one of the few people in government in the country who have convincingly demonstrated a deep understanding of the importance of foreign direct investment in national development. FDI is critical to technology transfer, innovation, superior marketing and managerial skills as well as capital importation, employment generation and creation of business opportunities, as domestic businesses learn from multinationals. This deep understanding accounts for the massive flow of direct investment worth some $2.4 billion into Anambra State in the last two years. It is not just foreigners who are now investing in Anambra State but also Nigerian business executives like Engineer Emeka Okwuosa, a leading name in African petroleum development, and Mr. Cosmas Maduka of Coscharis Group. They are investing massively in agriculture.
Governor Obiano’s comment on the productive spillovers of multinational enterprises on domestic organisations is founded on empirical evidence. Researchers of international management will find it illuminating.
Dr. Onukogu is executive director of a management consulting firm in Lagos.