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 CHAPTER 7
FOREIGN DIRECT INVESTMENT

Text Chapter Outline

OPENING CASE: Foreign Retailers in India

LEARNING OBJECTIVES

INTRODUCTION

FORIGN DIRECT INVESTMENT IN THE WORLD ECONOMY

Trends in FDI
The Direction of FDI
The Source of FDI
The Form of FDI: Acquisitions versus Greenfield Investments

Canada’s Case

THEORIES OF FORIGN DIRECT INVESTMENT

Why Foreign Direct Investment?

Country Focus: Foreign Direct Investment in China
Management Focus: Four Seasons Hotels and Resorts
The Pattern of Foreign Direct Investment
The Eclectic Paradigm

POLITICAL IDEOLOGY AND FOREIGN DIRECT INVESTMENT

The Radical View

The Free Market View
Pragmatic Nationalism
Shifting Ideology

COSTS AND BENEFITS OF FDI TO THE NATION-STATE

Host Country Effects: Benefits

Host Country Effects: Costs
Home Country Effects: Benefits
Home Country Effects: Costs
International Trade Theory and Foreign Direct Investment

GOVERNMENT POLICY INSTRUMENTS AND FDI

Global Business Today, 4CE Instructors Manual Chapter 7

 Home Country Policies
Host Country Policies
International Institutions and the Liberalization of FDI

IMPLICATIONS FOR BUSINESS

The Theory of FDI

Government Policy

SUMMARY OF CHAPTER

LEARNING OBJECTIVES SUMMARY

CRITICAL THINKING AND DISCUSSION QUESTIONS

CLOSING CASE: Walmart in Japan

Global Business Today, 4CE Instructors Manual Chapter 7

 LEARNING OBJECTIVES
1. Recognize current trends regarding foreign direct investment (FDI) in the world economy.
2. Explain the different theories of FDI.
3. Understand how political ideology shapes a government’s attitudes toward FDI.
4. Describe the benefits and costs of FDI to home and host countries.
5. Explain the range of policy instruments that governments use to influence FDI.
6. Identify the implications for managers of the theory and government policies associated with FDI.

Chapter Summary

This chapter focuses on the topic of foreign direct investment (FDI). FDI occurs when a firm invests directly in
new facilities to produce and/or market a product in a foreign country. At the outset, the chapter discusses the
growth in FDI, particularly by medium-sized and small firms. The theoretical underpinnings of FDI are
discussed, which describe under what circumstances it is advantageous for a firm to invest in production
facilities in a foreign country. The chapter also addresses the different policies that governments have toward
foreign direct investment. Some governments are opposed to FDI and some governments encourage it. Three
specific ideologies of FDI are discussed, including the radical view, the free market view, and pragmatic
nationalism. The chapter also provides a discussion of the costs and benefits of FDI from the perspective of
both the home country and the host country involved. The chapter concludes with a review of the policy
instruments that governments use to regulate FDI activity by international firms.

OPENING CASE: Foreign Retailers in India

Summary

This case describes the historical realities of retailing in India with a view to the future. India’s current dearth of
distribution infra-structure is seen as an opportunity by numerous foreign retailers including Tesco and
Walmart. It is widely thought that if foreign “expert” retailers were to start up in India, then this would serve as
a positive force in in improving India’s infrastructure. However a bigger challenge to “motivating” foreign
retailers to open up businesses in India can be tied to the fact that once in business, they would be required by
law to source 30 percent of their products from within India.

Suggested Discussion Questions:

QUESTION 1: Why did Walmart walk away from doing business in India?

ANSWER 1: Walmart did not want to compromise its own practice of sourcing its material whereas India
requires foreign retailers to source at least thirty percent of the products they sell from small and medium sized
Indian businesses.

QUESTION 2: Why did Walmart change its expansion strategy in India? What role did control play in
Walmart’s decision to walk away?
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ANSWER 2: Walmart (and Tesco) objected to expansion into India based upon “investment conditions” as
cited in the above summary. Left-wing Indian activists are concerned that large chain stores will create
unemployment amongst its small businesses.

QUESTION 3: Do you think that Walmart will try again to enter India? If so, why? If not, why?

ANSWER 3: Most students will probably recognize that it is very difficult to do business in India. Whether
India streamlines its business requirements for foreign retailers remains to be seen. The potential clearly exists.
Students can discuss this idea from many different stances. – political, economic, social, technological, trade
barriers and so on.

Chapter Outline With Lecture Notes and Teaching Tips

INTRODUCTION

A) This chapter is concerned with the phenomenon of foreign direct investment (FDI). Foreign direct
investment occurs when a firm invests directly in new facilities to produce and/or market in a foreign country.
Once a firm undertakes FDI it becomes a multinational enterprise.

Teaching Tip: A website that provides an excellent discussion of the role of multinational corporations in the
world economy is available at
http://www.oecdobserver.org/news/archivestory.php/aid/446/The_trust_business.html.

B) FDI takes on two main forms; the first is a greenfield investment, which involves the establishment of a
wholly new operation in a foreign country. The second involves acquiring or merging with an existing firm in
the foreign country.

FOREIGN DIRECT INVESTMENT IN THE WORLD ECONOMY

A) When discussing foreign direct investment, it is important to distinguish between the flow and the stock of
foreign direct investment. The flow of FDI refers to the amount of FDI undertaken over a given time period
(normally a year). The stock of FDI refers to the total accumulated value of foreign-owned assets at a given
time. Outflows of FDI, meaning the flow of FDI out of a country, and inflows of FDI, meaning the flow of FDI
into a country are also discussed.

Trends in FDI

B) Over the past decades there has been a marked increase in both the flow and stock of FDI in the world
economy. The significant growth in FDI has both to do with the political economy of trade as outlined in the
previous chapter and the political and economic changes that have been taking place in developing countries.

C) FDI has grown more rapidly than world trade and world output for several reasons. Businesses view FDI as a
way to circumvent any future trade barriers. FDI has also been driven by the political and economic changes in
many of the world’s developing nations.

Global Business Today, 4CE Instructors Manual Chapter 7

The Direction of FDI

D) Historically, most FDI has been directed at developed nations, particularly the United States, though there
have recently been new players as shown in Figure 7.2

The Source of FDI

E) The United States has been largest source of FDI,but recently it has been overtaken by China (Figure 7.3)..

The Form of FDI: Acquisitions versus Greenfield Investments

F) The majority of cross-border investment is in the form of mergers and acquisitions rather than green-field
investments. Firms prefer to acquire existing assets rather than undertake green-field investments because: (1)
mergers and acquisitions are quicker to execute than green-field investments; (2) it is easier and perhaps less
risky for a firm to acquire desired assets than build them from the ground up; and (3) firms believe that they can
increase the efficiency of an acquired unit by transferring capital, technology, or management skills.

Canada’s Case

G) Canada’s flow of FDI mirrors those of other developed countries. Canada’s FDI flow is expected to remain
promising well into 2015. (See Figure 7.4) For the most part, Canada’s FDI outflow went to Canadian affiliates
and subsidiaries in the United States.

THEORIES OF FOREIGN DIRECT INVESTMENT

A) In this section of the text, several theories of foreign direct investments are discussed. These theories
attempt to explain the observed pattern of foreign direct investment flows.

Why Foreign Direct Investment?

B) Why do so many firms apparently prefer FDI to either exporting (producing goods at home and then
shipping them to the receiving country for sale) or licensing (granting a foreign entity the right to produce and
sell the firm’s product in return for a royalty fee on every unit that the foreign entity sells)? The answer lies in
the limitations of these methods for exploiting foreign market opportunities producing goods at home and then
shipping them to the receiving country for sale. Granting a foreign entity the right to produce and sell the firm’s
product in return for a royalty fee on every unit that the foreign entity sells.

Limitations of Exporting

C) The viability of an exporting strategy is often constrained by transportation costs and trade barriers. Much
foreign direct investment is undertaken as a response to actual or threatened trade barriers such as import tariffs
or quotas.
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Limitations of Licensing

D) There is a branch of economic theory known as internalization theory that seeks to explain why firms often
prefer foreign direct investment to licensing as a strategy for entering foreign markets. According to
internationalization theory, licensing has three major drawbacks as a strategy for exploiting foreign market
opportunities: (1) licensing may result in a firm’s giving away valuable technological know-how to a potential
foreign competitor; (2) licensing does not give a firm the tight control over manufacturing, marketing, and
strategy in a foreign country that may be required to maximize its profitability; and (3) a problem arises with
licensing when the firm’s competitive advantage is based not so much on its products as on the management,
marketing, and manufacturing capabilities that produce those products. Such capabilities are often not
amenable to licensing.

E) So, when one or more of the following conditions holds, markets fail as a mechanism for selling know-how
and FDI is more profitable than licensing: (1) when the firm has valuable know-how that cannot be adequately
protected by a licensing contract; (2) when the firm needs tight control over a foreign entity to maximize its
market share and earnings in that country; and (3) when a firm’s skills and know-how are not amenable to
licensing.

Advantages of Foreign Direct Investment

F) It follows from the above discussion that a firm will favour FDI over exporting as an entry strategy when
transportation costs or trade barriers make exporting unattractive. Furthermore, the firm will favour FDI over
licensing when it wishes to maintain control over its technological know-how, or over its operations and
business strategy, or when the firm’s capabilities are simply not amenable to licensing.

The Pattern of Foreign Direct Investment

G) Observation suggests that firms in the same industry often undertake foreign direct investment around the
same time and tend to direct their investment activities towards certain locations.

Strategic Behaviour

H) One theory used to explain foreign direct investment patterns is based on the idea that FDI flows are a
reflection of strategic rivalry between firms in the global marketplace. Knickerbocker looked at the relationship
between FDI and rivalry in oligopolistic industries (industries composed of a limited number of large firms). A
critical competitive feature of such industries is the interdependence of the major players: what one firm does
can have an immediate impact on the major competitors forcing a response in kind.

I) Knickerbocker’s theory can be extended to embrace the concept of multipoint competition (when two or
more enterprises encounter each other in different regional markets, national markets, or industries).

The Product Life Cycle

J) Vernon’s view is that firms undertake FDI at particular stages in the life cycle of a product they have
pioneered. They invest in other advanced countries when local demand in those countries grows large enough to
support local production. They subsequently shift production to developing countries when product
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standardization and market saturation give rise to price competition and cost pressures. Investment in
developing countries, where labour costs are lower, is seen as the best way to reduce costs.

K) What Vernon’s theory fails to explain, however, is why it is profitable for a firm to undertake FDI at such
times, rather than continuing to export from its home base, and rather than licensing a foreign firm to produce
its product.

The Eclectic Paradigm

L) The eclectic paradigm has been championed by the British economist John Dunning. Dunning argues that in
addition to the various factors discussed above, location-specific advantages (that arise from using resource
endowments, or assets, that are tied to a particular location and that a firm finds valuable to combine with its
own unique assets) and externalities (knowledge spillovers that occur when companies in the same industry
locate in the same area) are also of considerable importance in explaining both the rationale for and the
direction of foreign direct investment.

POLITICAL IDEOLOGY AND FOREIGN DIRECT INVESTMENT

A) Historically, ideology toward FDI has ranged from a radical stance that is hostile to all FDI to the non-
interventionist principle of free market economies. Between these two extremes is an approach that might be
called pragmatic nationalism.

The Radical View

B) The radical view traces its roots to Marxist political and economic theory. Radical writers argue that the
multinational enterprise is an instrument of imperialist domination. They see MNEs as a tool for exploiting host
countries to the exclusive benefit of their capitalist-imperialist home countries. By the end of the 1980s,
however, the radical position was in retreat almost everywhere. There seem to be three reasons for this. First
was the collapse of communism in Eastern Europe. Second, the generally abysmal economic performance of
those countries that embraced the radical position and a growing belief by many of these countries that, contrary
to the radical position, FDI can be an important source of technology and jobs and can stimulate economic
growth. And third, the strong economic performance of developing countries that embraced capitalism rather
than ideology.

The Free Market View

C) The free market view argues that international production should be distributed among countries according
to the theory of comparative advantage. The free market view has been embraced by a number of advanced and
developing nations, including Great Britain, the United States, and Canada, which are among the most open to
FDI, though these governments do intervene in the marketplace. In Canada there are restrictions on foreign
ownership of the Canadian airline industry, as well as extensive restrictions related to broadcasting licenses.

Pragmatic Nationalism

Global Business Today, 4CE Instructors Manual Chapter 7

D) The pragmatic nationalist view is that FDI has both benefits, such as inflows of capital, technology, skills
and jobs, and costs, such as repatriation of profits to the home country and a negative balance of payments
effect.

E) Recognizing this, countries adopting a pragmatic stance pursue policies designed to maximize the national
benefits and minimize the national costs. According to this view, FDI should be allowed only if the benefits
outweigh the costs.

Shifting Ideology

F) In recent years the centre of gravity on the ideological spectrum has shifted strongly toward the free market
stance.

COSTS AND BENEFITS OF FDI TO THE NATION-STATE

Host Country Effects: Benefits

A) There are three main benefits of inward FDI for a host country: the resource transfer effect, the employment
effect, and the balance of payments effect.

Resource-Transfer Effects

B) FDI can make a positive contribution to a host economy by supplying capital, technology, and management
resources that would otherwise not be available.

Employment Effects

C) The beneficial employment effect claimed for FDI is that FDI brings jobs to a host country that would
otherwise not be created there.

Balance-of-Payments Effects

D) The effect of FDI on a country’s balance-of-payments accounts is an important policy issue for most host
governments. A country’s balance-of-payments account is a record of a country’s payments to and receipts
from other countries. The current account is a record of a country’s export and import of goods and services.

E) Governments typically prefer to see a current account surplus than a deficit. There are two ways in which
FDI can help a country to achieve this goal. First, if the FDI is a substitute for imports of goods and services,
the effect can be to improve the current account of the host country’s balance of payments. A second potential
benefit arises when the MNE uses a foreign subsidiary to export goods and services to other countries.

Host Country Effects: Costs

F) Three main costs of inward FDI concern host countries: the possible adverse effects of FDI on competition
within the host nation, adverse effects on the balance of payments, and the perceived loss of national
sovereignty and autonomy.

Global Business Today, 4CE Instructors Manual Chapter 7

Adverse Effects on Competition

G) Host governments sometimes worry that the subsidiaries of foreign MNEs operating in their country may
have greater economic power than indigenous competitors because they may be part of a larger international
organization.

Adverse Effects on the Balance of Payments

H) The possible adverse effects of FDI on a host country’s balance-of-payments position are twofold. First, set
against the initial capital inflows that come with FDI must be the subsequent outflow of capital as the foreign
subsidiary repatriates earnings to its parent country. A second concern arises when a foreign subsidiary imports
a substantial number of its inputs from abroad, which results in a debit on the current account of the host
country’s balance of payments.

National Sovereignty and Autonomy

I) Many host governments worry that FDI is accompanied by some loss of economic independence. The
concern is that key decisions that can affect the host country’s economy will be made by a foreign parent that
has no real commitment to the host country, and over which the host country’s government has no real control.

Home Country Effects: Benefits

J) The benefits of FDI to the home country arise from three sources. First, the capital account of the home
country’s balance of payments benefits from the inward flow of foreign earnings. Second, benefits to the home
country from outward FDI arise from employment effects. Third, benefits arise when the home country MNE
learns valuable skills from its exposure to foreign markets that can subsequently be transferred back to the home
country.

Home Country Effects: Costs

K) The most important concerns centre on the balance-of-payments and employment effects of outward FDI.
With regard to employment effects, the most serious concerns arise when FDI is seen as a substitute for
domestic production.

International Trade Theory and Foreign Direct Investment

L) When assessing the costs and benefits of FDI to the home country, keep in mind the lessons of international
trade (Chapter 5). International trade theory tells us that home country concerns about the negative economic
effects of “offshore production” may be misplaced.

GOVERNMENT POLICY INSTRUMENTS AND FDI

A) We have now reviewed the costs and benefits of the FDI from the perspective of both home country and host
country. Before tackling the important issue of bargaining between the MNE and the host government, we need
to discuss the policy instruments that governments use to regulate FDI activity by MNEs. Both home countries
and host countries have a range of policy instruments that they can use to regulate FDI activity by MNEs. We
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will look at each in turn.

Home Country Policies

B) By their choice of policies, home countries can both encourage and restrict FDI by local firms.

Encouraging Outward FDI

C) Many investor nations now have government-backed insurance programs to cover major types of foreign
investment risk.

Restricting Outward FDI

D) Virtually all investor countries, including the United States, have exercised some control over outward FDI
from time to time.

Host Country Policies

E) Host countries adopt policies designed both to restrict and to encourage inward FDI.

Encouraging Inward FDI

F) It is increasingly common for governments to offer incentives to foreign firms to invest in their countries.

G) Incentives are motivated by a desire to gain from the resource-transfer and employment effects of FDI. They
are also motivated by a desire to capture FDI away from other potential host countries.

Restricting Inward FDI

H) Host governments use a wide range of controls to restrict FDI. The two most common, however, are
ownership restraints and performance requirements.

I) The rationale underlying ownership restraints seems to be twofold. First, foreign firms are often excluded
from certain sectors on the grounds of national security or competition. Second, ownership restraints seem to be
based on a belief that local owners can help to maximize the resource transfer and employment benefits of FDI
for the host country.

International Institutions and the Liberalization of FDI

J) Until recently there has been no consistent involvement by multinational institutions in the governing of FDI.
With the formation of the World Trade Organization in 1995, this is now changing rapidly.

IMPLICATIONS FOR BUSINESS

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The Theory of FDI

A) The implications of the theories of FDI for business practice are straightforward. First, the location-specific
advantages argument associated with John Dunning helps explain the direction of FDI. However, the location-
specific advantages argument does not explain why firms prefer FDI to licensing or to exporting. In this regard,
from both an explanatory and a business perspective, perhaps the most useful theories are those that focus on
the limitations of exporting and licensing.

Government Policy

B) A host government’s attitude toward FDI should be an important variable in decisions about where to locate
foreign production facilities and where to make a foreign direct investment.

LEARNING OBJECTIVES SUMMARY

This chapter reviewed theories that attempt to explain the pattern of FDI between countries and to examine the
influence of governments on firms’ decisions to invest in foreign countries. The chapter made the following
points:
1. The past few decades have seen a large increase in both the flow and stock of FDI in the world economy.
Any theory seeking to explain FDI must explain why firms go to the trouble of acquiring or establishing
operations abroad when the alternatives of exporting and licensing are available to them.
2. High transportation costs or tariffs imposed on imports help explain why many firms prefer FDI or
licensing over exporting. Firms often prefer FDI to licensing when: (a) a firm has valuable know-how that
cannot be adequately protected by a licensing contract, (b) a firm needs tight control over a foreign entity in
order to maximize its market share and earnings in that country, and (c) a firm’s skills and capabilities are
not amenable to licensing. Knickerbocker’s theory suggests that much FDI is explained by imitative
behaviour by rival firms in an oligopolistic industry. Dunning has argued that location-specific advantages
are of considerable importance in explaining the nature and direction of FDI. According to Dunning, firms
undertake FDI to exploit resource endowments or assets that are location specific.
3. Political ideology is an important determinant of government policy toward FDI. Ideology ranges from a
radical stance that is hostile to FDI to a noninterventionist, free market stance. Between the two extremes is
an approach best described as pragmatic nationalism.
4. Benefits of FDI to a host country arise from resource transfer effects, employment effects, and balance-of-
payments effects. The costs of FDI to a host country include adverse effects on competition and balance of
payments and a perceived loss of national sovereignty. The benefits of FDI to the home (source) country
include improvement in the balance of payments as a result of the inward flow of foreign earnings, positive
employment effects when the foreign subsidiary creates demand for home-country exports, and benefits
from a reverse resource-transfer effect. A reverse resource-transfer effect arises when the foreign subsidiary
learns valuable skills abroad that can be transferred back to the home country. The costs of FDI to the home
country include adverse balance-of-payments effects that arise from the initial capital outflow and from the
export substitution effects of FDI. Costs also arise when FDI exports jobs abroad.
5. Home countries can adopt policies designed to both encourage and restrict FDI. Host countries try to attract
FDI by offering incentives and try to restrict FDI by dictating ownership restraints and requiring that
foreign MNEs meet specific performance requirements.

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 6. Internalization theories identify the profitability of FDI, exporting, and licensing. A host government's
attitude to FDI is an important variable to consider in making the "go global" decision.

Critical Thinking and Discussion Questions

1. In the 1980s, Japanese FDI in the United States grew far more rapidly than US FDI in Japan. Why do you
think this is the case? What are the implications of this trend?

Answer: There are two primary explanations for the inequity in the growth of FDI between the US and Japan.
Firstly, there has been a significant decrease in the US dollar relative to the Japanese Yen. This makes
investment in the US more attractive to Japanese investors and Japanese investments less attractive to US
investors. Secondly, the nature of business in Japan, where long-term business relationships are important and
investments can take a significant period of time to pay off, makes Japan a less attractive place to invest than
the more open US economy. To the extent that the trend is simply a result of exchange rate changes, the trend
will follow changes in exchange rates, and could reverse if the exchange rate change reverses direction. The
implication of this is simply that the value of international investing between the US and Japan will be
determined by the relative value of the currencies. To the extent that the trend is a result of structural
differences in the economies of the US and Japan, it suggests that there will continue to be a disparity in the
flows of FDI between the US and Japan. Hence Japanese companies will find it easier to compete in the US
market against US competitors than US companies will be able to compete in Japan against Japanese
competitors.

2. Compare these explanations of FDI: internalization theory, Vernon’s product life cycle theory, and
Knickerbocker’s theory of FDI. Which theory do you think offers the best explanation of the historical pattern
of FDI? Why?

Answer: Internalization theory seeks to explain why firms often prefer foreign direct investment to licensing as
a strategy for entering foreign markets. According to internationalization theory, licensing has three major
drawbacks as a strategy for exploiting foreign market opportunities: licensing may result in a firm giving away
proprietary technology, licensing does not permit a firm to maintain tight control over its activities, and
licensing is not appropriate when a firm’s competitive advantage is based not so much on its products as on the
management, marketing, and manufacturing capabilities that produce those products.
Vernon’s product life cycle theory argues that firms undertake FDI at particular stages in the life cycle of a
product they have pioneered. They invest in other advanced countries when local demand in those countries
grows large enough to support local production. They subsequently shift production to developing countries
when product standardization and market saturation give rise to price competition and cost pressures.
Investment in developing countries, where labour costs are lower, is seen as the best way to reduce costs.
Finally, Knickerbocker’s theory of FDI suggests that firms follow their domestic competitors overseas. This
theory had been developed with regard to oligopolistic industries. Imitative behaviour can take many forms in
an oligopoly, including FDI.
The second part of this question is designed to stimulate classroom discussion and/or force students to think
through these theories and select the one that they feel provides the best explanation for the historic pattern of
FDI.

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3. Read the opening case on Foreign Retailers in India. Using the market imperfections approach to FDI,
explain what you feel to be successful approaches to doing business in India.

Answer: The student would focus on India’s overly regulated markets and the red tape involved when doing
business in India. Existing distribution systems would be inadequate for western style supply chain
management. Control was also an issue in Walmart walking away from a deal with the India’s Bharti group .

4. You are the international manager of a Canadian business that has just invented a revolutionary new personal
computer that can perform the same functions as IBM and Apple computers and their clones, but costs only half
as much to manufacture. Your CEO has asked you to decide how to expand into the Western European. Your
options are to (i) export from Canada, (ii) licence a European firm to manufacture and market the computer in
Europe, or (iii) set up a wholly owned subsidiary in Europe. Evaluate the pros and cons of each alternative and
suggest a course of action to your CEO.

Answer: In considering expansion into Western Europe, three options will be considered: FDI, licensing, and
export. With export, assuming there are no trade barriers, the key considerations would likely be transport costs
and localization. While transport costs may be quite low for a relatively light and high value product like a
computer, localization can present some difficulties. Power requirements, keyboards, and preferences in model
all vary from country to country. It may be difficult to fully address these localization issues from Canada, but
not entirely infeasible. Since there are many computer manufacturers and distributors in Europe, there are
likely to be a number of potential licencees. But by signing up licencees, valuable technological information
may have to be disclosed, and the competitive advantage lost if the licencees use or disseminate this
information. FDI (setting up a wholly owned subsidiary) is clearly the most costly and time consuming
approach, but the one that best guarantees that critical knowledge will not be disseminated and that localization
can be done effectively. Given the fast pace of change in the personal computer industry, it is difficult to say
how long this revolutionary new computer will retain its competitive advantage. If the firm can protect its
advantage for a period of time, FDI may pay off and help assure that no technological know-how is lost. If,
however, other firms can copy or develop even superior products relatively easily, than licensing, while
speeding up knowledge dissemination, may also allow the firm to get the quickest large scale entry into Europe
and make as much as it can before the advantage is lost.

5. Explain how political ideology of a host government might influence the process of negotiating access
between the host government and a foreign MNE.

Answer: If a host country subscribes to pure free market principles, then there is little to negotiate about. It may
be possible, however, to negotiate with different regions of the country to obtain more favourable tax treatment
or access to local resources. If a host country subscribes to pure radical views, there is also little to negotiate
about since the government will likely prohibit any FDI. As a general rule, as the overall ideology of a country
moves from the left (radical) to the right (free market), the foreign MNE will need to spend less time
negotiating matters relating to access and control and more time on matters relating to incentives and most
favourable locations.

CLOSING CASE: Walmart in Japan

Summary
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Japan has been a tough market for foreign firms to enter. Many Japanese companies have resisted acquisitions
by foreign enterprises because of fears that new owners would restructure too harshly, cutting jobs and breaking
long-standing commitments with suppliers. Foreign investors also state that it is difficult to find talented
management in Japan. A recent OECD study cites that productivity in foreign firms operating within Japan is
oftentimes 60 percent higher than in Japanese firms. Walmart (yet again) tried to impose American style
management techniques and tactics on its Japanese corporation. This proved to be a public relations disaster and
alienated Walmart as a trustworthy retailer.

QUESTIONS

1. FDI has been low in Japan due to government restrictions and regulations, cultural factors, the difficulty of
finding managers willing to move to the new firm, and the overall sluggish economy of the country over the
past few decades, making it less attractive than it was.

2. FDI can bring aggressive competition to the Japanese marketplace, and can be a source of new technology,
ideas and business practices, all of which boost productivity.

3. Walmart's entry into the retail sector boosted productivity by transferring best practices to what was an
inefficient retailer (Seiyu). The major cost was the layoff of 1500 employees, and the resulting low morale of
the remaining workers.

4. It was difficult to make a profit because of bad initial publicity from the layoffs and the inclusion of lower
priced goods, the reluctance of Japanese suppliers to work with Walmart, and the eventual moves of other
retailers that copied Walmart's strategy. If Walmart had acted with greater sensitivity at the beginning (around
issues of firing employees), and had worked as closely with suppliers as it had in other areas around the world,
the results may have been different.

Country Focus: Foreign Direct Investment in China

Summary

This feature explores investment opportunities in China. In the late 1970s, China opened its doors to foreign
investors. By 2000, the country was the recipient of about $64 billion dollars in foreign direct investment.
China’s large population is a magnet for many companies and because high tariffs make it difficult to export to
the Chinese market, firms frequently turn to foreign direct investment. However, many companies have found it
difficult to conduct business in China, and in recent years investment rates have slowed. In response, the
Chinese government, hoping to continue to attract foreign companies has established a number of incentives for
would-be investors.

QUESTIONS:

1. As China continues to open its doors to business, such as the infrastructure commitments by 2020, tax breaks
in certain areas, and a steady macroeconomic environment, foreign investment should continue. However,
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changes in any of these policies, as well as macro political changes resulting in more of a return to China's
Communist past, would delay or change much of this investment.

2. A major indicator would be looking at "political stability", in regards to the country's continued push towards
capitalism. Beyond that would be tariffs and other government regulations, tax policy, economic and currency
polilies, availability of workers (cost of labour, availability of skilled labour), and availability and access (roads,
rail, shipping) to that space.

Management Focus: Four Seasons Hotels and Resorts

Summary

This feature explores the Four Seasons Hotel and Resource chain, which manages hotels and resorts around the
world. Four Seasons manages the hotels, on behalf of the property owners, that have the Four Seasons name.
The company blends a high level of standardized service, while also ensuring that each property is unique.

QUESTIONS:

1. Maintaining Four Season's image, brand and reputation is key to the company. This can be done through
some centralized functions (purchasing, the reservation system which is often the first point of contact with the
customer), all of which are noted in the text. By not expanding too quickly (which can over-extend a company)
as well as through creating individual hotels, yet within one similar brand, the company can balance local needs
and markets with the need to maintain its global image.

2. Like all companies, Four Seasons was hurt by the global economic slowdown. However, business has to
continue, people will continue to travel, and thus there is still a worldwide demand for the company's products.
It can be argued that firms in the "luxury" class, which would include the Four Seasons. Have customers who
are less likely to be materially affected by the economic slowdown, which would not be the case for budget
hotels appealing to price-conscious consumers.

Additional Readings and Sources of Information

Why do Human Rights Matter to Business:

https://www.amnesty.org/en/what-we-do/

The Java Joint that’s Swallowing France:

http://www.bloomberg.com/bw/stories/2002-09-10/the-java-joint-thats-swallowing-france

Will Europe Warm To Starbucks?

http://www.bloomberg.com/bw/stories/2005-01-23/will-europe-warm-to-starbucks

15

Global Business Today, 4CE Instructors Manual Chapter 7

 16

Global Business Today, 4CE Instructors Manual Chapter 7

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MATOLA’S COMPOUND
 CHAPTER VIII
AT MATOLA’S

Chingulungulu, middle of August, 1906.

With all its evils, a downright good fever has one advantage,—when it
is over the convalescent has such an appetite that “eating” is far too
mild a term to apply to the process of gratifying it. In this state of
health a whole roast fowl is just about enough for a breakfast, that is
if it has been preceded by a large plate of tinned soup and is to be
followed by a still larger omelette with bananas. But when this stage
is reached the patient is well on the way to recovery, and soon begins
to enjoy his cigar, which, according to Wilhelm Busch,[24] is the
surest test of fitness. Only a certain feeling as if the brain did not
quite fill its allotted space and therefore broke in waves at the edges
every time you move your head, remains for some days as an
unpleasant reminder of the attack.
“Reality” versus “Dream,” or “Prose” versus “Poetry,” might be a
very good name for the famous Chingulungulu. One would need to
have lived for ten years in the bush, like Nils Knudsen, to look on this
emporium of mud, dirt, and dust as the paradise which he still
honestly believes it to be. Of course we have taken up our abode in
the famous baraza, which is, in fact, quite a handsome building.
True, it is nothing but a thatched roof supported on posts; but it is no
less than sixteen yards across, and the ridge of the roof is at least
twenty feet from the floor. It is no contemptible achievement as
regards architecture; the posts are arranged in three concentric
circles round the central pillar, and the floor is of beaten clay mixed
with ashes. To bring it to the proper degree of firmness and
smoothness they use a wooden beater, bent into an obtuse angle and
ending in a broad, flat surface. A raised ledge, about fifteen inches
high, and broken by three openings at angles of 120°, runs round the
building. This represents the seats of the “thingmen,” for the baraza
is in fact neither more nor less than the parliament-house of the
village elders. The chief sits in the middle of the spacious building,
and round him in a serried throng squat, sit, or stand his black
fellow-citizens. Every native village has such a baraza, but the
Chingulungulu one is the most famous of all. Matola is naturally not
a little proud of being able to lodge his guests in so distinguished a
building.
But even his private residence is a notable feat of architecture. It is
surrounded, like all other houses, by a verandah, the ground under
the wide eaves being raised a few inches out of the wet. Here Matola
holds his court every day and all day long, which is interesting, but
hardly agreeable, as far as I am concerned, since the auditorium is
hardly thirty yards from my seat, and native voices are little
accustomed to restraint. And when the women take part in the
general discussion, or conduct their own defence in a trial, the noise
becomes appalling.
The interior of Matola’s house is scarcely in keeping with its
spacious dimensions. The whole front is taken up by what Matola
calls his evening baraza, a long narrow apartment, into which the
inmates of the house and their friends withdraw on wet or stormy
evenings. The furniture consists of a single kitanda, or coast-fashion
bedstead. The rest of the house is occupied by three rooms of about
fifteen feet by fifteen each. The two lateral ones are intended for
sleeping-rooms, as shown by a couple of bedsteads and large heaps
of ashes, the remains of the fire which every native keeps up beside
his couch at night. These rooms are only accessible through doors
leading from the central one, windowless, and therefore pitch dark.
The central room serves as a kitchen, but how elementary and
primitive is Matola’s hearth compared with Zuza’s! The latter has a
substructure for the system of cooking-stones, pots and other
culinary appurtenances, which is quite correct in material and
workmanship, while at Matola’s there is nothing but a chaos of ashes,
in the midst of which two or three lumps, as big as a man’s head, of
earth from an ant-heap indicate where the royal meals are prepared.
At the same time this Yao chief has the reputation of being a wealthy
man, as wealth goes in Africa, and of having great hoards of bright
silver rupees hidden somewhere about his huts.
 BEER-DRINKING

Matola’s compound, however, is rather more interesting. On my

first visit to him, he was somewhat embarrassed, being obviously
ashamed of the shabbiness of his interior; but he took me over his
back premises with evident pride, for which indeed he had ample
justification. The back verandah is occupied by an unbroken row of
food-stores of the most diverse sizes and shapes. Here we find
beehive-shaped receptacles about six feet high for millet and maize,
and cylindrical ones, of nearly equal height for ground-nuts, beans
and peas; while in the dark spaces between them the eye after a while
makes out small bark boxes or earthen jars containing less important
vegetable products. All these receptacles are thickly plastered with
clay, to protect them from vermin and weather. If we turn to the back
of the large rectangular compound, where a high palisade keeps out
unauthorised intruders, we again find proof of a very far-seeing and
prudent economy, for here, too, everything is arranged in order to
make the crops of the current year last over till the next harvest.
Large and small food-stores are ranged round it, and in the centre is
a large granary, on whose ground floor, so to speak, some women are
busy at a fireplace, while the whole roof-space is filled with heads of
millet and cobs of maize. And if we step outside Matola’s compound
on the eastern side, there is a scaffolding some seven or eight feet
high and about as wide running along the whole length of the
palisade. On this, in spite of the lateness of the season, large
quantities of grain just harvested are drying in the sun. And, lastly,
walking round the estate to the west side of the house, we come face
to face with a granary of truly gigantic size, and without doubt of very
rational construction, which is shown in the illustration at the head
of this chapter. Like all the other food-stores, this granary is built on
piles; but, while in the usual form the scaffolding is only about two
feet high, and from three to five feet square, it is in this case between
ten and twelve feet high and at least ten feet across. On this platform
rests the granary itself, which in shape can best be compared to a
brewer’s mash-tub. Just now it is only half full of millet, and
therefore not yet closed, and the whole is covered in with the usual
wide-eaved, heavy, thatched roof. Access to this marvel of
architecture and economic science is gained by the same kind of
antediluvian ladder which excited my risible faculties at Masasi—two
strong gnarled logs, with a couple of wretched sticks tied across them
—not too firmly—a yard apart.
Matola, however, saved up the most striking feature of his whole
farm till the last. Grunts and squeaks expressive of the utmost well-
being were heard proceeding from the shadows about a gloomy
structure which was described to me as a prison. A prison in Africa?
Certainly; the native is not an angel, and when he is on the chain-
gang he must have some shelter at night. But for the present we were
more interested in the origin of the above sounds, which proved to
proceed from a sow with twelve piglings. This merry company, we
soon found, was all over the place, examining the baggage of the
askari, calling on Nils Knudsen in his tent, but most persistent of all
in visiting our kitchen after dinner and helping the cook and his boy
to clean up our dishes. Every facility is afforded them for this pursuit,
as, in the first place, our kitchen is only a sheltered corner under the
eaves of the prison, and in the second, when a native has eaten his fill
and is lying spread-eagled on the ground snoring through his siesta,
you might cut him to pieces at your leisure without waking him. Thus
every afternoon witnesses the remarkable spectacle of a khaki-clad
European, uttering frantic vituperations of the lazy black villains and
their whole continent, as he rushes across the square of
Chingulungulu brandishing a kiboko, to drive the affectionate
mother and her family away from his cooking-pots. Of course,
whenever this takes place, the careless kitchen-staff comes in for a
few blows in passing, but my beloved Omari cares very little for that.
Knudsen and I have vowed vengeance on the pigs, to the effect that
they shall indeed find their way into our cooking-pots one day,
whether they like it or not.
 How Matola obtained these pigs, so rare a sight in a Moslem
country (for as such we must count this district), I have not yet
heard, but I assume that he got them, like his herd of cattle, from the
English Mission. The cattle are sheltered in a kraal immediately
adjoining his dwelling-house—a mere enclosure of stakes into which
the animals are driven soon after sunset, to leave it the next morning
after the dew is off the grass. They are herded by several boys, and
number about twenty head, all of the humped breed, and most of
them evidently suffering from the tsetse disease. Only one young bull
and a couple of cows look healthy and vigorous, and are playful
enough to put some life into the whole mournful company. I am glad
to see some milch cows among them—in fact it is they who provide
the jar Matola sends me every morning.
This is Matola’s residence in the more immediate sense. The best
way to become acquainted with his whole territory is to mount and
ride over it, for Chingulungulu is a settlement of extraordinary
extent. Broad roads, as straight as a rule can make them, and planted
with rubber-trees, run north, east and west from the square
surrounding the baraza. To right and left of these roads lies a vast
expanse of fields, from which emerges here and there the greyish-
brown roof of a hut, larger or smaller as the case may be. During the
whole of my stay here at Matola’s, I have been doing my best to get
acquainted with all the details of this negro settlement, and I must
confess that the charms of this occupation have so far consoled me
for an evil which under other circumstances would long ago have
disgusted me with the place. By this I mean the difficulty of obtaining
information as to the more intimate customs, habits and opinions of
the people, and thus penetrating as deeply as I certainly wish to do,
into their intellectual and moral life. At Masasi the epidemic
conviviality of the whole male population was a totally unforeseen
impediment to this object, and here at Chingulungulu it seems either
that Matola has not sufficient influence to obtain wise men for me to
question, or that he does not care to reveal the wisdom of his people
to a stranger. It is true that he possesses a good deal of information
himself, and has already on more than one occasion sat with us and
talked about the history of his tribe, but whenever I particularly want
him, he is not to be found, and we are told that he is hunting on the
Rovuma.
 From an anthropological point of view the population here, in the
political centre of the great plain between the Masasi mountains and
the Rovuma, is as heterogeneous as at Masasi itself, only that down
here the Wayao are not merely at present numerically in the
majority, but politically supreme over their neighbours. These are, as
in the north, Makua, Wangindo, Wamatambwe and Makonde, and,
here as there, the various tribes live side by side according to no fixed
rule. The history of the Yaos, up to the time when they settled and
came to rest in this plain, is full enough of change and adventure. For
a long time—from the moment when they first became known to
Europeans, almost to the present day, they were unhesitatingly
reckoned as belonging to the Kafir family. As, like the Wangoni, and
almost simultaneously with them, they migrated from south to north
—that is to say, from the region east of the Shire and south end of
Nyasa to the Rovuma and Lujende, and as they at the same time
showed equal freshness and physical vigour with those warlike hosts
from the far south-east of the continent, it was natural that they
should be considered as immigrants from sub-tropical South Africa,
in other words, Kafirs. This view is now known to be erroneous; their
language obviously belongs to the group of Eastern Bantu idioms,
and it is quite clear that they have nothing to do with the southern
extremity of Africa.
If we get the history of this people related to us by men who are
either old enough to remember several of the many decades over
which the tribal wanderings extended, or else, like Zuza, Matola and
Nakaam, hold a position which makes them by right of birth
transmitters of the tribal tradition,—we always find the region east of
the south end of Nyasa mentioned as the starting point of all these
(mostly involuntary) migrations.
A couple of aged Yaos, whom we had summoned, independently of
Matola, through the agency of two or three sturdy askari, gave me
the following report:—“Once, long ago, the Yaos lived at Kwisale
Kuchechepungu. Kuchechepungu is the name of the chief under
whom they lived at peace in the hill country of Kwisale. Then there
befell a war in which the Yaos were beaten, and they went to the
country of the Makua chief Mtarika. But that is very long ago; I,
Akundonde (the spokesman of this historical commission) only know
it from men older than myself.
 “At Mtarika’s also the Yaos fared badly, for this powerful Makua
chief made war on them and drove them out. And they went to
Malambo, which lies behind Mkula. At Malambo the Yaos remained
for a long time, but at last they were driven thence by the same
Mtarika; then they settled near the Lumesule river in the Donde
country, and from thence they afterwards went on to Masasi.”
This took place when Akundonde was a big lad. As the old
gentleman must be some years over sixty, this march into the Masasi
plain must be dated towards the end of the fifties. At Masasi the Yaos
were attacked by the Wangoni, but defeated them and drove them
back in the direction of Kilwa Kivinja. In spite of this success, the
Yaos retired to the greater security of the Makonde plateau. Here
they were once more attacked by the Wangoni at Mahuta, but this
was in the time of the elder Matola. After that Bakiri came from
Zanzibar, and this was the beginning of an entirely new epoch.

MATAMBWE WOMAN DECORATED WITH NUMEROUS

KELOIDS

This Bakiri of Zanzibar and his appearance on the Rovuma show

unmistakably how little we know, at bottom, of the native and his
history. Herr Ewerbeck has resided in the country over ten years, and
has always taken a keen interest in the history of his district; but he
never heard anything more than vague rumours of an embassy from
the Sultan of Zanzibar. All the more vivid is the recollection of this
event among those concerned, in the country itself. In the case of
Akundonde and his contemporaries, who must have been grown-up
men at the time, this is not to be wondered at; but even Matola and
his generation, who were then mere children, or perhaps not even
born, at once become excited when the conversation turns on Bakiri
(already somewhat of a legendary character), and his memorable
march.
This expedition, which, according to information elicited by
Ewerbeck’s inquiries, had for its objective the coal measures of the
Lujende, the great southern tributary of the Rovuma, has in the
consciousness of the local tribes entirely lost its character as a
journey, and has assumed that of the shauri familiar to and
characteristic of all these tribes. But this shauri—this assembly of all
the local notables and their tribesmen—has fixed itself indelibly in
the people’s memory. It is the famous shauri of Nkunya, a place still
in existence at the south-western corner of the Makonde plateau.
Matola the Younger gives the following account of its causes, its
course, and its consequences:—
“The Yaos in old times lived much further away to the west and
south, but they were badly off there. The old Makua chief Mtarika of
Metho made war on them, and when he was gone the Mazitu came
from the other side and also made war on them. They killed or
enslaved the men of the Yaos and carried off the women and
children. This happened when old Matola was quite a young man.
Now he would be very old, if he were still living; but he died twelve
years ago, at a great age, but still quite strong.[25]
“In the end Matola had to fly; he went first to the Upper Bangala
and then down that river till he was three hours’ march from the
Rovuma, where his second brother died. At this place Matola was
only a small chief, for he had in all only five huts. But he was brave
and clever, he raided other tribes and was also a great hunter, who
killed much game and exchanged the meat for corn. From the Lower
Bangala, Matola moved to the Newala River and built his huts down
in the valley at the foot of the Makonde plateau. Here he lived a long
time; but the land belonged to Mawa, a Makua. Then a man came up
from Mikindani to Nkunya, by name Bakiri, to hold a shauri. He
called all the tribes together: Wayao, Wamakua, Wamatambwe and
Wangoni. They came, all of them, in troops, and Bakiri acted as
judge. The Wangoni and Wamatambwe grew frightened and ran
away; the Makua also ran away; there remained only Matola, Mawa,
and some of the Makua. The shauri lasted from morning till evening
and all night long till the next morning, and in the morning Bakiri
said to Matola: ‘I give you the whole country; it is true that till now I
have heard very little about you and your chieftainship, but all the
others have run away and you only remained; I see, therefore, that
you are trustworthy. So you shall rule over the whole country.’ Mawa,
too, agreed to this. He said: ‘I am old, and I shall soon die; do you
rule over the whole country.’ And so it came to pass. Matola I. ruled
wisely and justly, though severely. First he moved to Mikindani and
planted palms there, then he went back inland, halfway to Newala,
and from thence, at last, to Newala itself. There he lived at first on
the plateau, because of the attacks of the Mazitu; then he came down
into the valley, but in the end he had to go back to the heights again.
He died up there at Newala, and there he lies buried.”
It is in many respects highly interesting to watch these dusky
elders while engaged in recalling their memories of the past. They
usually speak well; it is well known that most African natives do; they
have a natural eloquence which avoids artificial phraseology but is
quick to find the simple, natural expression and fit it into the
structure of the sentence. Only now and then we find a man whose
faculties are blunted with old age and whose speech flows less
smoothly from his toothless mouth. The teeth of old natives are by
no means in the flourishing condition one might expect from the
dazzling white rows of ivory which characterise the youth of the black
race. The crowns of their teeth are rapidly worn down by the large
amount of grit which enters into their daily food. Millet, maize and
rice are alike ground on stones; the wear and tear to which these are
subject are shown by the deep hollow in the lower and the rapid
diminution in size of the upper, when they have been in use for any
length of time. The resulting minute particles of stone do not exactly
conduce to the benefit of the teeth, whose premature decay,
moreover, is assisted by the artificial deformations of which I shall
have much to say later on.
 The kind of intellectual activity which goes on is also worth notice.
The European investigator has, from the start, to take up a very
critical attitude towards the native and his statements on any subject
whatever, for our black brother’s standard of truthfulness is
notoriously not very exacting. But here, in the department of history,
the narrators check each other, whether consciously or
unconsciously I cannot decide. One begins—the stream of his
eloquence flows on peacefully for a time, and then another suddenly
interrupts him with “A! A!”—an inimitable, abruptly-uttered sound
twice repeated and accompanied by a still more inimitable gesture of
deprecation, as who should say, “Stop, my friend, you are talking
nonsense!” But the objection has hit its mark, the narrator breaks off,
consults his historical conscience, and then presents the fact under
discussion in a version which, on questioning the others, is found to
have their approval.
It is characteristic of life in these parts that each narrator can only
give the history of his own immediate tribal group. All these men,
whether Yao or Makua by nationality, have been whirled about the
country in numerically small sections, to which one may give the
name of horde, clan, or troop, as one pleases. In this way a definite,
historically-grounded tribal consciousness could not be formed, and,
if it was already in existence, had every chance of being lost. So, too,
they know nothing except about themselves and their own
immediate neighbourhood. It is the task of ethnology to collect as
many as possible of such individual accounts, in order ultimately to
build them up into the complete structure of a tribal history. As far as
I am concerned, there shall be no want of industry and perseverance
in the collection of such narratives.
Now, however, comes the last and most delightful touch—a most
characteristically African one. In the absence of writing, the native
has no means of arriving at a correct estimate of time. His
astonishment and perplexity when asked his own age are fully
expressed in the stare which meets the questioner; and one never
finds people able to give even the approximate ages of their own
children and grandchildren. Life flows along far too monotonously
and uneventfully, while at the same time it is too full of their small
cares and small pleasures, to leave them any time for special
exercises of memory, even if they had the smallest desire for such
unnecessary mental exertion. Finally—and this is probably the really
decisive cause—there is no such thing as compulsory, or other
registration; and so the small black citizen of the world grows up
untroubled by questions of space and time; he takes to himself a wife
—or wives—and raises a family, and no one thinks of inquiring
whether he and his age have been duly entered on the register.
The entire absence of a fixed chronology
makes itself felt more especially in tribal
history. Considering, on the one hand, the
sublime indifference to space and time already
referred to, and on the other the difficulty of
framing intelligible questions guaranteed not
to produce misleading answers, I was ready to
despair of any satisfactory result; but I soon
found that my informants possessed a
primitive yet tolerably trustworthy method of
dating occurrences.
“When was it that you lived on the
Lumesule?” I asked old Akundonde. Without a
word, he stretched his right arm out
horizontally, at a height about corresponding MANUAL
to that of a twelve-year-old boy, and bent his CHRONOLOGY. “THAT
hand gracefully upward, so that the elbow HAPPENED WHEN I
formed nearly a right angle. I watched this WAS SO HIGH”
manœuvre in silent astonishment, but
Knudsen immediately furnished the
explanation amid an approving murmur from all present. It seems
that this is the native way of indicating the height (and consequently
the age) of a human being; the height of an animal is always shown
by stretching the arm out straight without raising the hand. I must
confess that, among all the new and strange impressions which have
hitherto crowded in on my mind here in Africa, this delicate and yet
so significant distinction between man and beast is the most striking.
Nakaam at Mwiti made use of a somewhat different pantomime
when relating to me the history of the Yaos. Nakaam draws a
distinction between pure and mixed Yaos; reckoning among the
former the Chiwaula, the Katuli, and the Kalanje. This is a point not
hitherto recognised in the ethnological literature dealing with the
Yaos; and it must be reserved for later criticism to test the evidence
of my intelligent but perhaps somewhat slippery Chiwata informant.
According to Nakaam, the home of the true Yaos is Likopolwe, a hilly
district in the Chisi country, in Portuguese territory between
Mataka’s and Unangu Mountain. They were expelled thence by the
chief Mputa, when Nakaam’s mother was still a little child crawling
on all fours. Nakaam is, on his own testimony, the fourth child of his
mother, and may be any age from forty to forty-five. After Mputa
came others of the Makua, and broke up the Yao tribe still more.
Nakaam undoubtedly ranks as an intellectual giant, comparatively
speaking, but even he could give no exact chronological date. Some
compensation for this was to be found in the comical sight presented
when the portly chief—who was usually dignity personified—was so
carried away by his narrative as to forget what was due to his exalted
position and show us, in most realistic pantomime, how his mother
crawled about the ground when she was a baby.
Matola is in almost every point a contrast to Nakaam. The
difference is seen even in their costume: Nakaam dresses, like a coast
man, in the long, snow-white kanzu, while Matola is a European
above and a Yao below, wearing a coloured cotton waist-cloth, like all
his subjects, below a commonplace European jacket. The indications
of cunning, so characteristic of Nakaam, are here quite absent;
Matola impresses one as an honest man, and such, in fact, he is, if we
may judge by the evidence of all the Europeans at Lindi who have
ever come in contact with him. He is always occupied—either he is
holding a court under his baraza, that is to say talking to the dozen
or two dozen men who drop in and out there in the course of the day,
or he is engaged with us and the satisfaction of our wants. In
manners he differs little from his subjects. Smoking is all but
unknown here, but everyone takes snuff and chews tobacco. One
consequence of this habit is that the people are always expectorating,
and Matola is no exception. Another objectionable habit, which he
shares with his neighbours, is that of perpetually scratching himself.
In fact, when one is surrounded by a crowd of them, it is difficult, in
the midst of the universal scratching, to refrain from following the
agreeable example. I assume that it is a result of the prevailing want
of cleanliness; the water from the two or three holes in the nearest
stream-bed is only just enough for cooking and drinking; there is
none of the precious fluid left to wash one’s face, to say nothing of
one’s whole body.
Of all my senses the olfactory is the best developed, and daily
causes me acute suffering. When a party of natives honour me with a
visit, their coming is heralded from afar off by a smell whose
ingredients, including racial odour, perspiration, rancid oil, wood
smoke, and a hundred others, our language is too poor to specify in
full. What comes nearest to it is, perhaps, the exhalation from a large
flock of sheep.
And then the flies! Along with the smell, which, so to speak,
marches ahead of the main body, they come rushing in swarms on
the unlucky European. I thought myself a model of prudence and
foresight in bringing with me from Leipzig two pairs of spectacles
with smoked glasses. One of these has long had its abiding-place on
Moritz’s nose. The rascal appeared one fine day suffering from acute
conjunctivitis, which, thanks to my energetic treatment, is by this
time quite cured. But it has never entered the conceited fellow’s head
to restore the glasses, which, in an access of exaggerated
philanthropy, I had placed at his disposal. That he no longer really
requires them is sufficiently shown by the fact that he usually takes
them off in the bright sunlight, but wears them instead in the dusk of
the house and of course stumbles over everything that happens to be
standing about. The other pair serve me excellently well out of doors,
but under the dark baraza they absorb too much light, and thus I am
left without protection from the swarms of flies the natives bring
with them. These African insects and our European house-flies are
not to be mentioned in the same breath. Like a flash of lightning, a
creature the size of a small bee comes rushing at you—not hitting the
eye straight, but describing a tangent, and passing along inside the
whole eyelid, with such incredible swiftness that defence is
absolutely impossible. This is repeated over and over again, while the
victim, in mingled astonishment and horror, watches the little
wretches preparing for the attack by a short halt on the inflamed
eyelids of the natives. Instinctively one hits out wildly all round to no
purpose: the raid has already been successfully accomplished.
Knudsen suffers less from this plague than I, and apparently also
from the one previously mentioned; for, while I always feel more or
less ill after a shauri lasting several hours, the blonde Norwegian sits
all day long among the people unmoved.
There is not much to be seen of the women here. Matola has
repeatedly issued stringent orders that they are all to come and be
photographed, but so far only four or five have appeared. They no
sooner see me than they make their escape as quickly as their native
dignity and the peculiarities of the feminine mode of progression will
permit.
On the other hand, I am persistently besieged by the male youth of
the place. Our residence is surrounded by a perfect wall of small boys
squatting on the ground, their mouths wide open, staring stupid and
motionless at the white stranger. This open mouth is universal
among the children here—as is also the well-known pot-belly; hardly
a surprising phenomenon, if one sees the amount of indigestible
vegetable food which one of these boys will stuff into himself in the
course of the day. I am unable to judge how this unintentional
deformation of the body disappears afterwards, but that it must do
so is certain, the adults being without exception well-built men.

OUR CAMP AT CHINGULUNGULU

The Dark Continent has no love for me; on the march it persecuted
me daily with its whirlwinds, and here at Chingulungulu it pursues a
systematic plan for expelling me from its interior. Knudsen and I
dine between twelve and one. Originally the hour had been fixed at
twelve precisely. With measured step Moritz and Knudsen’s Ali
approach from the direction of the kitchen with the inevitable plate
of tinned soup. We are ready to fall to cheerfully, each—as is
customary out here—at his own camp-table, when we hear the sound
of a rushing mighty wind coming nearer and nearer. Dust, grass, and
leaves are whirled into the air; one instinctively holds one’s hand or
one’s cap over the plate, but all in vain—a gyrating chaos of ashes,
dust, tufts of grass, and all the various kinds of dirt which can only be
studied in this country, overwhelms us from behind; the baraza
groans in all its beams; the boys fly out, unresisting and helpless into
the open space in front; and then all is over. When we can open our
eyes under the crust of foreign matter which covers our faces and
everything else, we are just in time to see the thatch of the huts
waltzing through the air before the whole phenomenon vanishes into
the pori. On the first day, of course, we were quite helpless; on the
second we were again overwhelmed while thinking no evil; on the
third I suggested that dinner should be postponed for a quarter of an
hour. It was no use, the whirlwind came just a quarter of an hour
later. We have gone on waging a regular war against this midday
whirlwind, and, so far, we have been beaten all along the line. It
always springs up the moment the soup is brought in. Moritz and Ali
have scarcely time to clap the lids of a couple of tins over our plates
when it is upon us. To protect ourselves against it, and also, it must
be said, against the troublesome curiosity of the children of the land,
small and great, we have built ourselves in under Matola’s baraza by
carrying a screen of millet stalks right across the hall high enough to
reach the roof, and erecting two other screens at the ends of the first
and converging on each other, so that we are now in a closed room.
But my intimate enemy, the chimbunga, penetrates even into this
carefully protected apartment.
The water-supply of this region forms a subject by itself. Of all the
charms of Chingulungulu this was what Knudsen had dwelt on most
lovingly—one might be ever so ill and wretched, but a draught from
this unrivalled spring would restore health to the most infirm. One of
our first walks after getting through the fever which marked our
arrival at this place, was to its principal wells. They are close to the
road from Zuza’s, and I should have seen them just before we arrived
had I not been at that time more dead than alive. With expectations
raised to the highest pitch, I walked along the path leading to the
spot in question—two hundred yards distant at most—followed by a
long train of boys and half-grown lads. “Here we are,” said my
companion suddenly, as we caught sight of a number of women and
several young girls squatting in three roomy pits about six feet deep.
“Well, how about the spring?” I asked, the Norwegian’s glowing
descriptions being still present to my mind’s eye.
“Why, down there—those holes—those are the springs; don’t you
see the women drawing water?” That I certainly did see, and my
illusions vanished in the twinkling of an eye. But their place was
taken with equal rapidity by the scientific interest attaching to the
hydrography of the country in general and Chingulungulu in
particular; and of this I was enabled to get a fairly clear notion after
walking round the three pits and scrambling down into each of them.

WATER-HOLES AT CHINGULUNGULU

The rivers and streams here on the inland slope of the Makonde
plateau are of the kind called wadi in North Africa or Omurambe in
the distant German territory of the south-west—that is to say, they
have water all the year round, but only in the subsoil; on the surface
the water does not flow except in the rainy season, and immediately
after it. The rains, which are extremely abundant, were over months
ago, so that it is no wonder if the people have to dig deeper every day
into the stream-beds to find water. Here they have in places
penetrated right through the superincumbent strata, and Moritz
cannot say enough in praise of this water which comes straight from
the living rock. It may indeed be comparatively poor in bacteria and
innocuous even for Europeans, but what I have seen of the way in
which it is obtained has induced me to keep up, from the moment of
my arrival, and insist on having scrupulously carried out, the
procedure customary with me ever since we left Lindi, of having all
the drinking-water treated with alum, filtered, and boiled.
In no department of daily life is the contrast between Europe and
Africa more sharply defined than in this matter of the water-supply.
Instead of the brass tap and clear, cool water in a clean glass, we find,
brooding over a muddy water-hole, an almost equally muddy
woman. Behind her, on the high bank, stands her portly earthen jar.
She sits gazing apathetically into the narrow opening, the usual ladle
(the half-cocoa-nutshell with a wooden handle stuck through it) in
her right hand. At last enough fluid has accumulated to make it
worth while to plunge the dipper under the turbid surface; not
ungracefully, with the rocking motion peculiar to the negress, she
reaches the top of the bank, and the water pours in a milky jet into
the large jar, the process being repeated as often as necessary till it is
full. Then she walks to the nearest bush and comes back with a
handful of fresh green twigs, which she carefully inserts into the neck
of the jar. This is no manifestation of a decorative instinct, or of any
feeling for the beauties of nature—neither man nor woman in this
country has advanced so far; in fact, highly as we Europeans think of
ourselves, this feeling for nature is even with us of comparatively
recent growth. The native is, in the first instance, practical—in fact,
he is nothing if not practical. Without this bunch of leaves, the water-
jar, filled to the brim, would slop over at every step, drenching the
bearer’s head and body; but, as it is, not a drop is spilt, the twigs and
leaves hindering all undulatory motion in the narrow space.
Probatum est.
 MAKONDE WOMEN FROM MAHUTA

The uses of a coffee machine are various. My cook, Omari, having

from the beginning refused to employ mine for its legitimate
purpose, it came in very handy for the construction of a filter.
Charcoal is always to be had; and it is easy to pound it into small
pieces and put a deep layer into the tin funnel, which with its two
fine strainers thus makes an excellent filter, simple, portable, and
easily repaired. It gives Moritz and Kibwana far more to do than the
lazy rascals like. Having formerly studied the problem of
sedimentary deposit in different kinds of water, I know that salts
hasten the precipitation of all solid matter. Alum is the clarifier
indicated for this expedition. A moderately large tin is easily
procured from any Indian trader, and the carriers have soon
deposited, in the shade of the baraza, a long row of jars and
calabashes hastily borrowed from the inhabitants. “Dawa ya Ulaya!”
I call out to Kibwana, meaning this time the alum-tin. Dawa is
anything producing an effect which the native fails to understand,
and Ulaya is every country outside his own—usually Europe, and
sometimes Germany in particular; but even American petroleum, for
him, comes from Ulaya. A pinch of the salt is dropped into every jar,
which, when stirred round, shows an alarming degree of thickness
and impurity. All the same, Moritz considers this broth “maji
mazuri” (“beautiful water”), a designation which only fits it, in my
opinion, after the lapse of several hours. Then, indeed, it is clear as
crystal. After carefully pouring it off, the boys strain it twice, thrice,
or even four times through the charcoal filter. Omari boils it for ten
minutes, under threats of the severest punishment in case of failure.
It is left to cool overnight, and in the morning it is a drink for the
gods—though only rendered so first by the water-cooler and then by
the addition of fruit-syrup from Lübeck. My Berlin outfit, of course,
included the usual large aluminium flask carried by expeditions, but
I never dream of using it. Instead, we carry an Indian water-cooler of
porous, unglazed earthenware, which I bought at Lindi, by Captain
Seyfried’s advice, for a rupee, and which is closely netted round with
cocoa-nut rope for protection on the journey, and carried by Kofia
tule with more dignity than grace on his woolly head. It amuses me,
by the bye, to find that Knudsen will not hear of treating his
drinking-water with alum. He is quite of the same mind as his native
friends and thinks there is something uncanny about the dawa ya
Ulaya, preferring the muddy brew as it comes from the well. Well—
habeat sibi! In our enthusiasm for seltzer—prepared on my sparklet
apparatus—with fruit-syrup in it, we are cordially agreed. It is better
than the finest quality of pombe produced at the celebrated
breweries of Chingulungulu.