Patrick Smith is the editor of Modern Africa, a political and economic journal of Africa and has contributed to the orthcoming book, Nigeria in the 1990s. He lived in West Africa for five years.

The Alternative Government, as the United Africa Company (UAC) is known in those parts of Africa where it holds sway, is in a state of transition.

UAC was initially a conglomeration of trading interests. Following its takeover by Unilever in 1929, however, it developed into a multinational within a multinational. It is an indication of the profitability of UAC's oil palm and timber concessions in West Africa that it was able--with Unilever guarantees--to develop substantial operations in what was then British West Africa, British East Africa, French Africa, later expanding to the Far East, the Arabian Gulf and even its own commercial operations in Britain and France.

Throughout its 60 year history, the backbone of UAC has been its operations in Nigeria, and it was the dramatic change in Nigeria's economic fortunes over the past decade that sparked the company's major reorganization. The UK-based holding company, UAC International, has been taken apart and served on a platter to its parent multinational, UAC Public Limited Company (PLC) and to Unilever of Britain and the Netherlands respectively. One former staffer who had been with UAC for 30 years argued that the disbanding of UAC indicated Unilever's lack of interest in Africa "...in the space of two to three years, they have dumped more than a century of African expertise."

A senior official in Unilever's Africa and Middle East division, Richard Greenhalgh (a relative of Harold Greenhalgh who together with William Lever helped to found UAC at the beginning of this century), argues that even after the corporate rationalizations Unilever maintains a very strong market position in Africa, "No one can accuse us of short termism," Greenhalgh argues; "we kept our operations going for 15 to 20 years in Ghana without any dividends remitted. The fact that Ghana is now on the upturn vindicates that decision."

Greenhalgh and his core of Africa experts in Unilever House believe they can fight off any Francophone or Far Eastern interlopers in the event of another African boom.

Unilever management views the corporation's future as split somewhere between Europe and North America, with the "rest of the world" (in which Africa represents an increasingly small percentage of profits) bringing up the rear. As Unilever gears up to take on Proctor & Gamble in the U.S. market, the African operations will continue to be marginalized.

Unilever's balance sheet bears this out. From its corporate turnover of £17.1 billion ($27.2 million) in 1988, Unilever's European and North American operations accounted for £10.3 billion and £3.42 billion respectively, while the "rest of the world" operations accounted for £3.3 billion. But back in 1976, in the middle of the African commodity boom, turnover outside Europe and North America accounted for almost a quarter of the years sales: total turnover was £8.7 billion, of which Europe accounted for £5.8 billion; North American accounted for just £873 million, while Central and South America, Africa, Asia, Australian and New Zealand accounted for £2 billion. African operations alone accounted for £1.1 billion in 1976.

Unilever's Third World operations have higher profit margins than its European and North American operations. In 1988 Unilever's operating profit was £886 million, or 8.5 percent of sales, in North America it was £281 million or 8.3 percent of sales, but in the rest of the world the operating profit was £349 million or 10.3 percent of sales.

The high rate of profit from Unilever's Africa operations has not gone unnoticed by independent African governments. The initial response from the African commercial class was divided between desire for a financial stake in UAC and a broad resentment toward UAC's monopolistic business position in the region. In Ghana and Nigeria, for example, UAC was easily the biggest employer in the private sector. In the 1970s, UAC's operation in Nigeria had a turnover greater than the gross domestic product in several of the smaller African states.

The rivalry between UAC and the indigenous African commercial class date back to the beginning of this century when Lever and Greenhalgh tried to get into oil palm plantations.

Lever and Greenhalgh made several unsuccessful attempts to obtain oil palm concessions in Africa. Perhaps surprisingly, Lever clashed several times with the British colonial government in West Africa. In one such altercation the British Governor of Nigeria, an early opponent of cash cropping, said he hoped the people of Nigeria would retain their commercial independence and "not fall into the temptation of producing any crop which is valueless to them unless they can dispose of it for export." Lever thought this opposition to plantation farming and cash cropping misguided.

Despite official opposition, by 1910 Lever managed oil palm concessions and had established several large oil milling facilities which he planned to use to process palm oil kernes grown by Nigerian farmers. By 1919 Lever was able to raise enough capital to buy the Niger Company, the beach head of colonial trading in Africa. After the acquisition of the Niger Company by Lever and his Lever Brothers' Company one of its managers wrote - "The raison d 'etre of our business is the purchase of cash wherewith to buy produce."

This assessment was not shared by all Niger Company staff, many of whom saw their company as much more than a produce buying subsidiary of Lever Brothers. These issues were still unresolved in 1929 when the Niger Company merged with the African and Eastern Trade Corporation to form the United Africa Company on a shaky financial basis. UAC's financial standing was improved following the merger of Lever Brothers and the Margarine Unie to form Unilever which became a joint guarantor, with the African and Eastern Trade Corporation, of UAC's debts. But a series of disasters in 1930 and 1931 meant that Unilever had to pump in £3 million to keep UAC afloat.

UAC officials said at the time, however, that they would work to maintain their company's independence from its Unilever parent. While UAC was to provide Unilever with vegetable oils and oilseeds on "most favored terms" it was, at least in theory, not expected to sell materials to Unilever at "less than full or fair market prices." As the majority shareholder, Unilever would control UAC in the legal sense, but this control did not extend to Unilever establishing an administrative department to control UAC. While UAC reported its results to Unilever at the year's end for consolidation into the parent company's accounts, it didreport to Unilever day by day or even month by month. That ostensible autonomy gave UAC its special position in Africa which was lost in the integration of UAC International into Unilever.

But for the best part of 60 years UAC's strategy proved to be highly effective for Unilever, both in terms of corporate profit performance and in terms of a supplier of produce. The recession between the two world wars weeded out many of the foreign trading companies in Africa and gave UAC proportionately more leverage as a produce buyer. UAC organized pools of commodity buyers with companies like Cadbury's and John Holt to protect their profits by squeezing the margins of the predominantly African middlemen and to force prices down.

For companies like UAC and Cadbury's, the "middlemen" were a source of abuse and disorder in marketing. But while competition for the favor of the "middlemen" was clearly costly to the foreign produce buying companies, it could be advantageous to the African farmers for whose custom the "middlemen" competed. The issue was ultimately resolved by an unholy alliance between the foreign trading companies, the colonial governments in Africa and selected African "middlemen." This arrangement entailed setting up state-run commodity marketing boards which fixed prices and created de facto monopolies for favored and protected traders and opportunities for profitable collusion between business people and officials, civil police and military. Under either the laissez faire market system or the state-controlled marketing boards, UAC's position as a preeminent produce buyer was unassailable and provoked much resentment from those in Africa's commercial class outside the system.

But as African nationalism gained strength in the countdown to independence UAC increasingly drew unwelcome political attention. Corporate image became far more important and UAC became involved with a range of social and welfare projects which other multinationals operating in Africa initially shunned. The management of UAC was eager to be seen at the forefront of the "new Africa" and as Africa became more urbanized and the pace of industrialization quickened, UAC diversified its operations accordingly.

Even before the Second World War UAC had diversified from produce buying into various processing activities, timber extraction ranching and the distribution of automobiles and gasoline. These developments intensified in the 1960s and 1970s with UAC investing in breweries, assembly and distribution of consumer and industrial electrical goods, medical equipment and pharmaceuticals, construction equipment, marketing support services, department stores, office equipment, insurance companies, building materials, production and processing of foods and textiles, warehousing services and a shipping line.

By 1979 UAC had interests in 23 African countries as well as interests in Abu Dhabi, Australia, Bahrain, Dubai, France, Holland, Hong Kong, Indonesia, Italy, Japan, Malaysia, Oman, Saudi Arabia, Singapore, Solomon Islands, Britain, the United States and West Germany.

The geographic and sectoral spread of these operations makes it the more surprising that many African consumers saw UAC as an "African company." Of course in a real sense UAC was an African creation--with its roots firmly in the region's agricultural sector--but as nationalist consciousness grew in Africa, criticism of the company focused on both its dominant position in domestic African economies and on its rate of profit and the easy remittance of those profits overseas to its Anglo-Dutch parent.

Professor Bade Onimode of Ibadan University in Nigeria has criticized the Nigerian government for not doing more to control the operations of UAC after the country's independence in 1960: "The multinational sharks are led by the United Africa Company (the same AC of the colonial era), Lonhro (London and Rhodesia) and Unilever.... This complex organizational structure has woven these MNC's into a foreign subsector of manufacturing which together with MNC's in other sectors constitutes a formidable foreign social system within the Nigerian economy."

While Onimode's is essentially a Marxist critique, it is one with which several indigenous African capitalists have been able to identify--complaining that they are shut out of the local market by the multinational's greater economic clout. Onimode is equally skeptical about UACs collaboration with African governments. He says, "The heavy capital requirement, sophisticated technology and long gestation period associated with these capital intensive enterprises make them a haven for imperialist multinationals. Their participation in such ventures with government offers credible political cover and attractive guarantees against expropriation and labor militancy."

Certainly UAC's strong position in post independence Africa is due in large part to its selection of its senior African staff, especially those with close links to government. A case in point is the managing director and chairman of UAC Nigeria, Ernest Shonekan. Shonekan has a wide range of establishment contacts including Nigerian President General Ibrahim Babangida. "I know the government well," Shonekan told the London Financial Times, "I've known Babangide for some time, our chemistry tallies."

Shonekan's rapport with the Nigerian president means that he and therefore UAC Nigeria have been close to policy making in Nigeria since Babangida came to power three years ago in a palace coup. As Yusuf Bala Usman at Ahmadu Bello University said, "To paraphrase an Americanism, there is an increasing perception in this government, that 'what is good for UAC, is good for Nigeria."'

Babangida's structural adjustment program, developed with the backing of the World Bank and the International Monetary Fund (IMF), has been good for UAC Nigeria and its 40 percent shareholder, Unilever. Over the past five years turnover has increased to Naira 977 million for the year ending September 30, 1988 compared with turnover of Naira 720 million in 1983. But more remarkable is the increase in operating profits to Naira 133 million in 1988 from Naira 37 million in 1983.

Further analysis of these earning figures shows a massive growth in technical sales and service profits--up to Naira 113 million in 1988 from a loss of Naira 1.1 million. At the same time the manufacturing and processing activities have become less important, yielding Naira 19 million towards operating profits down from Naira 21 million in 1983. This is ironic as one of the professed aims of the economic adjustment program, of which UAC Nigeria is such a keen supporter, is to promote Nigeria's self- reliance in manufacturing and processing and to decrease its dependence on imported raw materials and services.

In fact the adjustment program has forced the closure of many of the shallow manufacturing operations set up in Nigeria by foreign trading companies during the oil boom in a bid to maintain their market presence. For the foreign investor the rationale of these operations - most of which were established without reference to what local inputs were available - was to maintain their profitable position as a supplier to the Nigerian economy. While the strategy worked for foreign investors, Nigeria was left with a range of costly, import dependent, manufacturing/assembly operations which have little or no chance of competing on the world market.

By shedding some of these non-viable manufacturing operations, UAC Nigeria was able to improve its performance. As Chairman Shonekan put it, "The restructuring exercise of the past few years has competitively positioned us to take advantages showing up under the structural adjustment program."

In its heyday, UAC Nigeria contributed two thirds of UAC International's earnings. Slashed import capacity, however, and the impoverishment of the Nigerian people through a combination of decreasing earnings from oil and other commodity exports and high debt-service commitments started to have a generalized effect across the UAC empire. The depressed conditions in several of the company's other African markets reinforced the effect.

UAC's major difficulties with Nigeria started back in the 1970s in the aftermath of the civil war when nationalist leaders were demanding more indigenous control over the economy. The government passed a series of indigenization decrees initially dictating that 40 percent of all foreign businesses in Nigeria must be owned by Nigerians, and subsequently raising that figure to 60 percent.

This dramatically changed the outlook for UAC International and Unilever in their biggest market in Africa. By 1976 some 60 percent of the equity of UAC Nigeria had been sold to private Nigerian stockholders and to state governments in the Nigerian federation. UAC International held a 40 percent equity stake in UAC Nigeria and set up a technical services agreement between Unilever and UAC Nigeria. In the process of Africanizing UAC Nigeria, Unilever had lost a major source of income from its African operations. A similar indigenization process was undertaken with regard to UAC operations by governments in Ghana and Sierra Leone. Unilever could also have lost control of the company given the new voting balance, but its long-standing historical ties, its astute choice of African stockholders and its continued association with UAC Nigeria helps to maintain the company's position at the top of the profits league in Nigeria and has assured this position, at least in the short term.

Indigenization has undoubtedly helped UAC's public image in Africa. Instead of being the obvious target of any government seeking to reduce foreign intervention in the economy, it has nurtured its image as an African company ostensibly answerable to African shareholders. UAC managers in Africa have also been quick to support government initiatives in the economy, sponsor various social and welfare facilities, play the good corporate citizen and generally avoid contentious political issues.

Where UAC is vulnerable is on investment levels. Proportionately, Africa received the lowest level of capital investment in relation to Unilever and UAC's other operating regions. For example, in 1976 Unilever spent £2.1 billion in its European operations to yield £344 million in operating profits; it employed £306 million in North America to yield £52 million in operating profits, but in Africa it employed £310 million to yield £148 million in operating profits.

Unilever's full incorporation of UAC into its corporate structure signals a scaling down of its African operations. This change of focus, however, does not mean that the company will forfeit its capacity to influence those African countries in which it still operates. UAC played a key role in developing commodity-based, export economies which many African countries are grappling with today and Unilever, no matter what name it uses, remains positioned to direct and shape the markets to its own advantage.