An Analysis of Investment by Multinational Companies in Kenya and the Impact of Their Strategies on the Economy

Abstract

The forces making for direct investment abroad are many and varied. Basically, the investing firm is interested in the contribution which such a capital outlay will make to the prosperity of the whole organisation. Host government's objectives, however, do differ from the foreign investor's and may, in fact, be characterised by the government's strong faith in economic growth and progress, irrespective of whether or not it is inspired by the 'modernisation' or 'social transformation' paradigms. In presenting results of the analysis of investment by multinational companies in Kenya and the impact of their strategies on the economy, this study has shown that the features of direct foreign investment and capitalist accumulation in Kenya before 1945 were largely concentrated in the agricultural production, ancillary services and primary production. Because of colonial supremacy, all of these activities remained in the hands of white settler communities and other foreigners, while the role of the indigenous African was confined to that of cheap labour. , However, following the Second World War, several changes in the pattern of direct foreign investment and the nature of the Kenyan economy led to the inflow of predominantly industrial capital not only from Britain, but also from the U.S., West Germany, France and other countries. ... The consequence of these trends therefore implied that the MNC sector played a very important role in the manufacturing sector. It is argued in this analysis that the presence of the MNCs in Kenya, although necessary, is of strategic importance to them only, while of lesser beneficial impact to the Kenyan economy. Several reasons, in both Chapters Three and Four, show that this argument may have some ground. For example, it is the desire of these companies to expand horizontally or laterally, either to overcome import restrictions of one kind or another, or to open up new markets in Kenya. In the process, these companies have managed to negotiate and set up import substituting industries limited only to the production of particular products on which parent companies concentrate in developed countries. The conclusion here is that this type of transfer limits employment and linkage effects, and severely undercuts local entrepreneurs making simpler but basic product equivalents. Furthermore, protective barriers and internal market dominance by these firms not only hurts local consumers, but also results in considerable MNC surplus appropriation and repatriation of funds from Kenya. Also due to the fact that there is a connection between the present multinational companies and the colonial state, the study concludes that: Although colonialism induced a rapid expansion of the cash economy in Kenya, it has left behind an economy characterised by continuing and perhaps intensifying structural imbalances, massive growing inequalities, apparently irreducible dependence on external sources of capital and technological innovation, and a tendency towards political authoritarianism and instability. These problems make the position of the MNCs in Kenya more precarious. This study therefore suggests a change in strategy and attitude on the part of MNCs, particularly with regard to development objectives. Areas of concern should include industrial locations and social responsibility, which should extend beyond the urban areas into the rural sections, and in all regions of the country; and there should be a constructive commitment to Kenya's future development to allow for future stability and progress.