Make or break : reputational risks facing Chinese companies operating in Africa’s extractive industries

Parker, Talya (2020-03)

Thesis (MA)--Stellenbosch University, 2020.

Thesis

ENGLISH ABSTRACT: Multinational Companies operate in the political sphere where political risks are created. Political risk is an ever-evolving field with new risks emerging and old risks changing as the world continues to become more interconnected. Reputational risk has emerged as a field of study in recent years, commonly seen as a risk of risks, or realised political risk. Reputation has increasingly been ranked as the number one strategic risk facing multinationals, with threats to reputation stemming from several sources. Events such as the British Petroleum oil rig explosion in the Gulf of Mexico in 2014 catapult the study of reputation and its risks. Although much of the literature and research on reputational risk has been conducted in the commerce field, the links to politics are evident. The ungracious political characteristics of many African countries present a political sphere that contains multiple risks. Despite possible risks, China continues to invest vast amounts into Africa, focusing on extractive industries. Reputation is reliant on stakeholder perceptions; Chinese companies’ main stakeholder is their government, whose influence creates prime case studies for reputational risk. Chinese National Petroleum Company (CNPC) and Chinese Non-Ferrous Metals Company (CNMC) are the two companies focused on in this study, regarding potential reputational risks posed to the Chinese government as the main stakeholder. CNPC has invested major resources in South Sudan, with CNMC focusing their investment in Zambia. Dissecting the reputational risks presented by these countries and their political spheres to the Chinese companies operating in them was the goal of this study. The analysis of reputational risk in this study has taken place using a qualitative model that measures four factors: who, where, what and how. Each factor is accompanied by a certain number of indicators that help achieve an overall risk ranking. This study found that there are more significant reputational risks facing CNPC operating in South Sudan. However, CNMC is not immune to the reputational risks presented in Zambia. Reputational risk forms part of a full political risk analysis. From the reputational risk perspective, South Sudan is seen as a high-risk investment opportunity and Zambia a medium-risk investment opportunity.

AFRIKAANSE OPSOMMING: Multinasionale maatskappye is werksaam in’n politiese sfeer waar politiese risikos ontstaan. Die studie van politiese risiko is ‘n ontwikkelende gebied waar nuwe risikos voortdurend ontstaan en ou risikos voortdurend verander as gevolg van die wêreld wat al meer gekonnekteerd raak. In meer onlangse tye het reputasierisiko al hoe meer na vore getreë – dit word beskou as ‘n risiko van risikos of gerealiseerde politiese risiko. Reputasie word al hoe meer beskou as die grootste strategiese risiko wat deur multinasionale maatskappye in die gesig gestaar word. Verskeie bronne kan die moontlike oorsaak van reputasierisiko en bedreiging wees. Gebeure soos die Britse Petroleum olietuig ontploffing in die Golf van Meksiko in 2014 het die studie van reputasie en die gepaardgaande risikos in die kollig geplaas. Die meeste navorsing en literatuurstudies ten opsigte van reputasierisiko vind plaas in die kommersiële veld, alhoewel die skakeling met politiek duidelik is. Die onverbiddelike politiese karaktertrekke van baie Afrika-lande bied ‘n konteks wat vele risikos inhou. Ten spyte van hierdie moontlike risikos belê China groot bedrae geld in Afrika –veral in die ontrekkingsbedryf. Reputasie is afhanklik van die persepsies van die beleggers.Die belangrikste belanghebbende in Chinese maatskappye is die Chinese regering en dit bring mee dat gevallestudies vir reputasierisiko belangrik is. Die twee maatskappye waarop hierdie studie fokus, is eerstens die ‘Chinese National Petroleum Company’ (CNPC) en tweedens die ‘Chinese Non-Ferrous Metals Company’ (CNMC). Die fokus is die potensiële reputasierisikos wat dit vir die Chinese regering inhou. Die CNPC het groot beleggings in Suid Soedan gemaak, terwyl die CNMC hulle beleggings in Zambië geïnvesteer het. Die doel van hierdie studie was om hierdie twee lande en hul onderskeie politieke omgewings te ondersoek en die reputasierisikos wat dit vir die onderskeie Chinese maatskappye inhou te identifiseer. Die analise van reputasierisiko in hierdie studie is deur middel van ‘n kwalitatiewe model ondersoek. Die model meet vier faktore, naamlik: wie, waar, wat en hoe. ‘n Algehele risiko rangorde is verkry deur elke faktor met ‘n aantal indikators te verbind. Die studie het bevind dat daar meer betekenisvolle reputasierisikos is vir die CNPC wat in Suid Soedan gebaseer is. Die CNMC wat in Zambië gebaseer is ook blootgestel aan reputasierisiko faktore. As deel van ‘n volle politiese risiko analise moet daar ook ‘n reputasierisiko ontleding gedoen word. Vanuit ‘n reputasierisiko oogpunt is Suid-Soedan die hoë-risiko beleggingsgeleentheid, terwyl Zambië ‘n medium-risiko beleggingsgeleentheid is.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/107933
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