Graduate School of Development Studies
A Research Paper presented by:
Mugabe Moses
(Uganda)
In partial fulfilment of the requirements for obtaining the degree of
MASTERS OF ARTS IN DEVELOPMENT STUDIES
Specialisation:
Public Policy and Management
PPM
Members of the examining committee
Dr Nicholas Awortwi (supervisor)
Dr Des Gasper (reader)
The Hague, The Netherlands
November, 2009
Disclaimer:
This document represents part of the author’s study programme while at the Institute of Social Studies. The views stated therein are those of the author and not necessarily those of the Institute.
Research papers are not made available for circulation outside of the Institute.
Inquiries:
Postal address: Institute of Social Studies
P.O. Box 29776
2502 LT The Hague
The Netherlands
Location: Kortenaerkade 12
2518 AX The Hague
The Netherlands
Telephone: +31 70 426 0460
Fax: +31 70 426 0799
Dedication
To my parents John and Juliet, my brothers and sisters;
“Every day until my life withers”
Acknowledgement
I would like to thank the almighty God who has always been my guidance throughout and especially so during my research. Special thanks to the Principal, Nsamizi Institute of Social Development, Mr Charles Kanyesigye and the Deputy, Mr Duncan Kalule for having given me this golden chance of studying Masters at ISS. My sincere thanks also go to DR Nicholas Awortwi for his guidance throughout this work. Without his effort, my study would not have reached this far. My heart-felt gratitude goes to Dr. Des Gasper, who was not only my second reader but also my convener and lecturer. His opinion and encouragement have helped me in fielding this research.
I extend my sincere gratitude and love to my parents, my mother Juliet and my Dad John. Their dedication to see me succeed through education has been overwhelming. I would wish to take this moment to thank my elder sisters Edna, Enid, Harriet and Ella and their families for their moral support given to me during this study. I thank my young brothers Owen and Kennedy for their encouragement and prayers. I cannot forget to thank Dan, Simon and Albert who, despite their busy schedule accepted to proof read and give their in sighting inputs. Finally my thanks go to my friends Jackie and Mugisha for their moral support.
Contents
List of Tables 7
List of Figures 7
List of Acronyms 8
Abstract 10
Relevance to Development studies 11
Keywords 11
Chapter 1 12
1.0 Introduction 12
1.1 Background 12
1.2 Problem stateemnt 15
1.3 Relevance and Justification 17
1.4 Objectives and Research questions 17
1.5 Research Methods and Limitations 18
1.6 Organisation of the Research
Chapter 2 20
2.0 Theoretical Background 20
2.1 Introduction 20
2.2 Conceptualising CSR 20
2.3 Relevance of CSR to Stakeholders 25
2.3.1 Economic Investments 26
2.3.2 Employees 27
2.3.3 Community Partnership 28
2.3.4 Customers 29
2.3.5 Stakeholder expectations 30
2.3.6 Analytical Framework 30
2.4 Conclusion 31
Chapter 3 32
3.0 Development of Telecommunication 32
3.1 Introduction 32
3.2 Mobile Telephone Services in Uganda 32
3.3 National Regulatory Framework for MTS providers 33
3.4 Company profiles and CSR statements 33
3.4.1 ZAIN - UGANDA 33
3.4.2 MTN - UGANDA 34
3.4.3 Uganda Telecommunications Limited (UTL) 35
Chapter 4 37
4. O Stakeholders and CSR in Practice 37
4.1 Introduction 37
4.2 Key Stakeholders 37
4.3 CSR in Practice 38
4.3.1 Economic Responsibilities 38
4.3.2 Philanthropic Responsibilities 44
4.3.3 Legal Responsibilities 48
4.3.4 Ethical Responsibilities 50
Chapter 5 53
5.0 Conclusion and Recommendation 53
5.1 Key Issues raised in the Research 53
5.2 Research Findings 53
5.2.1 Company perception of CSR 53
5.2.2 Expectation fulfilment 54
5.4 Conclusion 58
List of Tables
Table 1 ZAIN Tax remittances to the Government 40
Table 2 MTN Tax remittances to the Government 41
Table 3 UTL Tax remittances to the Government 41
List of Figures
Figure 1 Africa's Corporate social Responsibility Pyramid 24
Figure 2 Analytical Framework 31
Appendices
A Questionnaire 63
List of Acronyms
ATU African Telecommunication union
CEO Chief Executive Officer
CSR Corporate Social Responsibility
CSRR Corporate Social Responsibility Rating
EU European Union
GoU Government of Uganda
ICT Information and Communication Technology
IDB International Development Bank
ILO International Labour Organisation
ITU International Telecommunication Union
MTN Mobile Telecommunication Network
MTS Mobile Telephone Network
PRO Public Relations Officer
UCC Uganda Communications Commission
UCRNN Uganda Child Rights NGO Network
UN United Nations
URA Uganda Revenue Authority
UTL Uganda Telecommunication Network
WBCSD World Business Council on Sustainable Development
MNE Multinational Enterprises
OECD Organisation for Economic Cooperation and Development
RCDF Rural Communication Development Fund
MCDT Micro Credit Development Trust
USAID United States Agency for International Development
CEO Chief Executive Officer
EU European Union
PERD Public Enterprise Reform and Divestiture
DRIC Divesture and Reform Implementation Committee
MTS Mobile Telephone Service
PRO Public Relations Officer
UTL Uganda Communications Limited
GoU Government of Uganda
ILO International Labour Organisation
UN United Nations
IDB International Development Bank
BCSR Business Council for Social Responsibility
UCC Uganda Communications Commission
UCT Uganda Communications Tribunal
UPTC Uganda Posts and Telecommunications Corporations
GSM Global Systems for Mobile Communications
PDA Personal Digital Assistant
SMS Short messaging system
ICT Information Communication Technology
NSSF National Social Security Fund
BON Build Our Nation
ZAC ZAIN African Challenge
TTC Text for Change
HFH Habitat For Humanity
URCS Uganda Red Cross society
URA Uganda Revenue Authority
PWHC PriceWaterhouseCoopers
Abstract
The economy of Uganda has increasingly been taken over by the private sector. In turn the private sector is expected to fulfil the corporate social responsibilities to the stakeholders. In a bid to understand whether companies do fulfil their CSR, the research was carrying out in the MTS companies. The research used the CSR pyramid produced by that was designed by Visser (2005) to explore economic, philanthropic, legal and ethical responsibilities. The methodology that was employed during the study was through semi-structured interviews and questionnaires. The analytical framework focussed on four stakeholder categories which included government, employees, community and customers or clients. The MTS companies in questions are the three dominant ones; Mobile Telecommunication Network (MTN), ZAIN and Uganda Telecommunications Limited (UTL).
After analysing both the findings and the literature, this paper points out some areas where MTS companies have done well in fulfilling CSR agenda, notably in philanthropy and also in abiding to legal regulations but also reveals that some companies do not fulfil their economic responsibilities owed to government.
Relevance to Development Studies
As private sector marks a substantial reduction in the state administration of economic sector, stakeholders’ rights are placed at stake. In a “voluntary” manner that the corporations deal with their stakeholders they may directly or indirectly misuse their might to turn away from their obligations. As the research aims at exploring whether the CSR obligations are being fulfilled, this work becomes relevant especially to policy practitioners.
Keywords
Corporate Social Responsibility, Mobile Telephone Service providers, Sustainable Development, Stakeholder expectations, Corporate minimum legal requirements, Telecommunication.
CHAPTER 1
1.0 INTRODUCTION
1.1 Background
Corporate Social responsibility is a development concept that has come about as a result of zealous search for development alternative. The shift of economic power between different development agents, notably from the state to the private operators as development custodians has changed the focus of how development is currently perceived.
In the first half of 20th century, the state was the major conventional development actor and an apparatus for economic growth and development. In 1980s, the state was seen as a failure in directing and steering economic development (Vickers 2007). Discretionary state measures were seen to be extremely costly and therefore stagnating development. Sally (1998:29,194) noted; Interventions in the market process, property rights and resource allocation by the state were no longer efficient (Sally, 1998:29, 194). International financial institutions based on this state failure to advocate for Trade liberalisation with free trade paradigm, having rich political, economic and moral tomes gearing to unfettered system of free imports and exports (Irwin 1996, Bhagwati 2002). This led to globalisation prominence that attracted more and more of foreign direct investments especially to the developing world and therefore the Multinational companies or business companies. The rights, powers and special privileges awarded to these companies therefore call for CSR (Dahl, 1973:11)
However, designing strategies for trade and investment and policies aimed at alleviating poverty for CSR remains the responsibility of the state (Newell 2006). But due to anti-state bias, the norm of voluntarism and the unprecedented power enjoyed by these business companies, weaker governments fail to regulate them as they locate their CSR in areas of weak or non-existent societal or environmental fields and exploit the poor communities. Therefore, government needs support from donor communities and working both with civil societies and researchers to a meaningful CSR agenda (Newell P and A. Muro, 2006).
Simon Caulkin, (2005) noted that, “Business is the key to beating global poverty, but we are talking much more than handouts”, (The observer, 13 March, 2005). In 2006, it was reported in The Economist Newspaper that, “…Philanthropy will have to shed amateurism that still pervades much of it and become a modern, efficient and global industry”, (The economist, 25 February- Survey of wealth and philanthropy). All these authors seek the intervention of business companies as a development alternative especially in developing countries which are still trapped in the massive poverty where the majority of the population continues to survive on less than a dollar per day. In 1950, the Sear’s CEO considered that profit was “a by-product of success in satisfying responsibly the legitimate needs and expectations of the corporation’s primary stakeholder group” Hopkins (2007:114). He mentioned this group in order of importance as Customers, employees, community and stockholders.
As the state’s loss of economic power became obvious and recognised, different scholars, institutions and organisations were busy constructing what CSR entails: “CSR is concerned with treating the stakeholders of the firm ethically or
in a responsible manner. Ethically or responsible means treating stakeholders
in a manner deemed acceptable in civilized societies. Social includes economic
and environmental responsibility. Stakeholders exist both within a firm and
outside. The wider aim of social responsibility is to create a higher standard of
living, while preserving the profitability of the corporation, for peoples both
within and outside the corporation” Hopkins (2003:16, 2009:)
According to European Commission (EU), CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (EC Green Paper, 2001). World Business Council for Sustainable Development defines it as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”( WBSCD, 1999)
For UK government, CSR is “the voluntary actions that business can take over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of the wider society”
Whereas some scholars argue; CSR is for business profits (Friedman 1970, Bowman 1973, Braybrooke 1976:224), all the above definitions address the social, ethical, environmental and the legal (economic) concerns of all the stakeholders. Therefore, if the Business is for profit, why should companies engage in these other social responsibilities? If business companies were absent, who is responsible for the above concerns and why not now?
In Uganda, like any African country the concept of corporate social responsibility has not taken shape the way it has done in other developed countries like those in Europe and North America. Moreover, little or no effort has been made to assess the impact of philanthropic activities and other CSR initiatives on the dimensions of development. However some companies have contributed much in times of need and this portray the rate or level of contribution to development. When Washington was attacked by terrorists, General Electric, Microsoft, Pfizer and Daimler Chrysler paid 10 Million US dollars each to help in the rescue mission (David, Nikolai and Thomas, 2008). United Parcel Service has become an importance actor in humanitarian assistance. The company helped the Red Cross in providing food to Kosovo refugee camps in Albania and Macedonia. In Uganda, the CSR agenda emerged in 1990s when the economy was re-structured. In 1993, the Public Enterprise Reform and Divestiture (PERD) was enacted and Divesture and Reform Implementation Committee (DRIC) established. The reason for the reforms was the economic policies that prevailed then; the Structure adjustment programmes (SAPS) but also the economic breakdown that had been brought about by the political turmoil of the previous regimes (Kibikyo 2008). Not only did the former national enterprises comprise the private sector but the market registered new entrants also, Mobile Telephone service providers inclusive. After taking over government custodianship, the companies enrolled CSR as part of their business and this is the reason why the study was undertaken to see if corporate social responsibilities undertaken by companies in Uganda similarly have an impact on the society as the ones mentioned above
In the related diverse scholarly work, many attempts have been made to assess CSR performance and Visser (2005) is one of those with a mark in the field. He developed a CSR Pyramid in the African context that is comprised of Economic, Philanthropic, Legal and ethical Responsibilities. The Pyramid is discussed in chapter 2 of this paper. Using this Pyramid, I focus on the corporate social responsibilities undertaken by the Mobile telephone service providers in Uganda with special attention on the three companies which include Mobile Telecommunication Network (MTN), ZAIN-UGANDA and UGANDA TELECOM LIMITED. These are three most powerful mobile telephone companies that are operating in Uganda and have been in business for over a decade.
1.2 Problem Statement
CSR is an area that holds responsible the corporations to invest in communities in which they are operating. The question that is likely to come up here is; Is CSR a phenomenon that Uganda should be advocating for as a development alternative? Why is the state not responsible for such investment?
Until mid 1980s, Uganda’s economy was purely in hands of the state. Like many sub-Saharan Africa, there was a slow economic growth and the country’s budget almost entirely relied on external borrowing and the country particular had faced both economic and political turmoil due to ravaging wars. It was very hard for the state to single handedly, transform the state into a positive economic performance. In 1988, the first move to privatise state-owned companies was made and the subsequent sell of government Parastatal in 1989. This was of course intended to reduce government costs and avoid hyper inflation of that time. Currently the economic power is controlled by foreign investments and growing at a fastest speed. There has been a double increase in domestic foreign investment from 2001 to 2008 where the figures short from US $ 150 million to US $ 368millions. While Uganda remains with is chance of foreign capital inflow, it remains embroiled in a string of challenges that are most likely to put it on halt as far as development is concerned. Weak infrastructure hinders proper allocation of resources by the potential investors, uneducated workforce is likely to be taken advantage of and be exploited and political interference that is marred with corruption. Yet, private sector ( Corporations) as an approach to development, are expected to be profitable and pay taxes, provide employment, obey the laws, contribute to community development and address other social concerns that may come as a result of their operations. Surprisingly this private sector seems not to be paying attention to the CSR agenda. according to World Bank (2006) Report on poverty and Vulnerability assessment in sub-Saharan Africa, income inequality in Uganda remains high and the Health indicators are high with little progress for the last 10 years. Rural areas, where the majority live, still remain poverty-stricken and infrastructure is in the worst state.
In CSR agenda, it is common that corporations try to project a suitable outlook or image in order to capture the approval of all the stakeholders. By using their voluntary character, they try to magnify small changes into huge ones. Hamann and Cutt (2003:225) explain that corporations implement small changes and try to have influence over popular and policy discourses so that questions likely to be asked by the stakeholders are put on hold by making imaginary answers feasible.