Joint Venture between the Government and Business in Africa - Term Paper Example

?Joint venture between the government and business in Africa Among the most prosperous countries in Africa, Botswana is one of them. The country’s economy has grown tremendously since it attained self-governance from the British. A large amount of the growth is credited to the discovery of diamonds in the country. De Beers, a company that deals with diamonds, discovered the diamonds. The company collaborated with Botswana’s government to help in the growth of the country’s economy by construction of infrastructure that has helped both the country and the company as well. The company has engaged in many social and economic activities that have benefited the country and the citizens. This includes the construction of roads, hospitals and schools. This has helped in growth of the economy and improvement of the living standards as the per capita income has grown from $80 to $6000 per year. In its early years of its operations, after the discovery of the diamonds, De Beers operated, as a monopoly by regulating diamond supply, which meant the price of diamonds, remained high. After sometime, De Beers realized that they could not control the market anymore. The company was forced to stock enormous amounts of diamonds when the demand for the diamond was extremely low. The company also discovered that they could not control the discovery of diamonds in the entire world. For instance, Canada refused to join the cartel that De Beers had formed. The change of policy was also largely influenced by the unfavorable image created by blood diamonds. Rebels in the neighboring countries would force civilians to extract the diamonds and sell them off in order to get money to purchase weapons. The company’s change of focus changed from scheming the supplying the diamonds to a moderate policy of marketing and selling the diamonds already in their stores. This focus helped in creating demand rather than controlling the supply. The company still maintained a significant market control through selling the diamonds to traders who were willing to conform to the laws of the land and regulations set by De Beers. This helped to create an environment to conduct business in a more ethical manner. The construction of the Kimberly process in Gaberone ensured that all the sold diamonds were mined legally. This helped in diminishing the blood diamond issue, which was used to finance wars across Africa. This also helped to restore the reputation of the company, which had been eroded by the blood diamond issue. (JOE NOCERA, Diamonds) The success story of this joint venture between De Beers and the government of Botswana has worked because the Botswana government believes in democracy and encourages economic growth in the country. The government also saw the partnership as a way to improve the living standards of the citizens in the country. For this type of partnership to flourish, the government must have the will to improve for the benefit of the common citizens. The company had previously attempted to work in partnership with other countries and government but, it did not work due to corruption in those countries. Since Botswana attained its independence, she has always remained democratic and free state. Here, the leaders in the government are sincere and intelligent. This is the rationale as to why the joint venture has been of help to the Botswana citizens. We can therefore hardly compare Botswana leaders with other African leaders who only enhance their selfish interests. Many African leaders accept money from foreigners in order for foreigners to extract the country’s resources without benefiting the people of that country. WTO trade negotiations over farm subsidies The government of United States has for many years partnered with private businesses in the country. Among the common partners are the farming industries. They enjoy many subsidies from the government each year. The World Trade Organization (WTO) was established after the World War II. Its main role was to regulate and create an economic order where all countries would benefit from trading with each other. The US as well as other countries of the WTO, signed the famous General Agreement on Tariffs and Trade (GATT) in the year 1948. The main aim of the agreement was to reduce controls on cross-border economic deals on the assumption that this would create greater affluence for all countries. (Goldsmith, p 49, 1995) After being unsuccessful in reaching an agreement over government subsidies, the WTO initiated another attempt in Geneva to review and debate a proposal by developing countries that would eliminate or reduce tariffs on farming.   This would give poorer countries the ability to be able to compete in international trade. Since the beginning of the Doha round of talks that began in 2001, the U.S. and the E.U. have offered compromises on farm subsidies in order to help developing countries. Farmers in the U.S, Europe and Japan have fought hard against attempts to cut back on an estimated $300 billion in annual subsidies. U.S. agriculture is receiving $11 billion in domestic subsidies. They are arguing for an increase that would cap at $17 billion. Poorer countries have had no incentive to open their markets further to these rich nations because of these subsidies.   The price of cotton has plummeted leaving many developing countries without the ability to trade. In West and Central Africa, 10 million cotton growers are being affected negatively by the low prices in cotton. In many cases they are not even able to make back the money they have put into their cotton production. Countries such as Brazil, India and South Africa along with a group of twenty other developing countries are bringing forth a proposal to have the richer countries reduce the subsidies they provide for their domestic products. The U.S. and Europe seem to be open to these proposals but have not received any indication that those countries would also scale back some of their own trade barriers. Not being able to reach any concrete agreements, Brazil moved to instill trade sanctions against U.S. goods because of what they deem as illegal subsidies to cotton farmers. They have targeted $591 million worth of products produced in the U.S. In the case of cotton produced in the U.S, Brazil would charge an import tariff of 100%. The WTO approved these sanctions and ruled that the subsidies provided by the U.S. to their farmers were indeed discriminatory.   (W.T.O, BECKER) A country as Brazil and India that have large economies seem able to put some pressure on countries like the U.S. Unfortunately, some of the other countries like Mali are lost in the mix. The cotton subsidies are stifling Mali’s economy because this industry is linked to everything in that country. Falling cotton prices are affecting a third of the Malaysian population. Mali’s government calls the rich countries when the money they provide to their farmers is five times what they give to Mali for development assistance. They give their farmers an unfair advantage on the world stage. To a country like Mali, diversifying what they produce is not an option. Proponents of agricultural subsidies maintain that they are needed in order to protect the supply of food and to create a strong domestic farm sector. This has led to other countries not being able to keep up with the changes in prices in effect destroying their chance for economic growth. Maintaining equilibrium is difficult when the countries that are strong are not taking steps to create a fair way of conducting trade for all involved. Governments must align first in order for conditions to improve. De Beers in Botswana proves that government and business can create changes beneficial to everyone. Although they are a business for profit, corporate social responsibility seems to be the catalyst that has made De Beers more successful in their industry. Their management recognized the need to get Botswana’s government on board and not only because it is suitable for business but because it is advantageous for everyone. The socially responsible direction for a business is, in the words of the utilitarian slogan, to produce “the greatest good for the greatest number.” (Goldsmith, p. 58) By keeping the greatest number happy, they had become more successful in business now than they were when they were trying to monopolize the industry. References Goldsmith Arthur, Business, Government, Society: The Global Political Economy; Irwin: 1995. Diamonds Are Forever in Botswana By JOE NOCERA W.T.O. Moves to Revive Talks on Farm Subsidies By ELIZABETH BECKER Read More