International Business in Sub-Saharan Africa

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to market signals. There are also many other barriers that would affect free trade as well.

There are many benefits that would result from free trade for people in developing countries. Goods would become more affordable as countries are provided with access to cheaper food, clothing etc. which would improve the overall standard of living. Also many new jobs would be created. Because of the little cost associated with moving goods across borders they can be produced in the place where the most efficient production is achieved. This would be in developing countries where the cost of labour is low, resulting in labour-intensive companies setting up in developing countries. This would become a better option for workers as most likely they would rather be in a factory than growing rice on a farm. Natural resources are able to be harnessed. Many developing countries have access to vast reserves of natural resources and raw materials, but lack the capital required to exploit them. Free trade opportunities would allow these to be harvested.

There are both winners and losers in developing countries in international business. Growing trade means that the winners are countries such as Brazil, Russia, India and China, who could be the world’s second largest economy by 2020. All these countries have access to a plentiful supply of labour and a massive growing domestic market, whereas the losers are the populated countries of South Asia and Sub-Saharan Africa who do not have the ability to change their current economy. Sub-Saharan Africa’s gross domestic product growth rate averaged less than half a percent per year also its share of world trade is declining. In 2002 it produced only 2% of global exports compared with 6% in 1980 (UK Govt. 2002). This is because Africa relies heavily on primary commodities such as tea and cocoa and therefore they are vulnerable to depressed and volatile prices. Also it is now harder for African producers to meet the standards of purchasers who are increasing the demand for food to be shown as safe.

There are also winners and losers in developed countries. This relates to Gresham’s law of ‘bad money drives out good money, but good money cannot drive out bad money’ (Britannia, 2011). The winners are the companies with bad money who seek to only make a profit by migrating to countries where the environmental and social costs of enterprises are lowest and profits highest (such as in sub-Saharan Africa). The losers are the companies with good money where environmental costs are internalised through taxes in one country. These countries seek other benefits rather than just a profit by paying tax as this is needed for educational purposes in the community etc. These companies will not be able to compete against those who are not charged with taxes.

It is recommended that internal problems be addressed in sub-Saharan Africa before trying to expand to free trade and investment internationally. Skills and health of citizens needed strengthening to enhance productivity and institutions need to be put in place to safeguard people through change. Improved trade related capacity such as having roads, ports and better communication would allow these countries to progress onto the next stage of development, allowing them to bring goods to the market competitively. Finally there needs to be a capacity to cope with change and fluctuating economies to ensure that one problem would not affect the whole economy. This is done by having a flexible and dynamic economy that continually creates new makes new jobs and opportunities available.