So Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources?
I think it's probably a much better plant to extract a good deal of wealth from the natural resource and invest it in other areas of higher value creation, even in the same vertical.
There's a good chance that Ghana's policies are needlessly constrained.
More obviously there are 100 things Ghana could do to improve living conditions in more obvious areas i.e. corruption etc..
Consider the immediate situation:
Ghana's exporters have just been banned from exporting. They are going to go out of business very soon.
Ghana doesn't have all of the layers of industry necessary to support development and export of products i.e. there are no market buyers at any reasonable price.
Result: collapse of the industry - unless somehow the Government of Ghana can artificially inflate prices and keep them alive for a very long time while domestic partners somehow magically are able to get off their feet.
Other points are already addressed in different comments, but to address this one:
> Ghana doesn't have all of the layers of industry necessary to support development and export of products i.e. there are no market buyers at any reasonable price.
Per the article, they literally control half of the world's cocoa. This means they get to define what "a reasonable price" is, as long as the rest of the world wants to keep its chocolate plentiful.
I'm not a politician or economist - but to me, it seems obvious the plan here is to bootstrap domestic cocoa processing industries, get the current exporters to sell cocoa to domestic producers, and export processed products (like chocolate). They're not going to just stop cultivating cocoa - being in control of half of the supply of raw materials for a highly prized product is their one big leverage on the international market.
As to not having the necessary industry base to pull it off - the question is, how fast can they build one? I'd guess a couple of years, if no foreign powers try to make it hard for them.
The last time Ghana blocked cocoa sales, the European powers responded by creating plantations in other countries to break Ghanas monopoly of the supply. Then they went a step further in researching and marketing low cocoa chocolate so their domestic population would be less reliant on cocoa.
Agricultural luxury goods are one area where it’s hard to continually push a monopoly advantage.
That said, I think that if Ghana can take the short term repercussions, then the country will come out ahead. It can become to chocolate, what France is to wine. But that would require heavy marketing in order to change people’s perception about what kind of chocolate is most delicious.
Like coffee, this seems to be the better business model. Higher quality rather than quantity.
There is a great demand for high quality cacao and high end chocolate makers have been organizing for a while to develop quality cacao production in the producing companies. While it has largely been occurring in Central and South America, I have no doubt that people are looking to reproduce this success in Africa and elsewhere, which is good for both the workers and the chocolate makers.
The sooner exploitative makers of low quality chocolate are pushed out of the industry, the better. Europe's reputation as a maker of high quality chocolate may still endure, but it is far less the case now. The state of the art has rapidly been eclipsed by smaller producers in the 21st century.
> European powers responded by creating plantations
So European companies setup plantations?
But yes, Swiss chocolate manufacturers have some options:
a) setup a processing plant in Ghana,
b) increase production somewhere else,
c) reduce usage..
The first question is: where are the main markets for chocolate? If Ghana loses access to a large percentage of the global chocolate market, controlling half the supply is as much a liability.
The second question is: Is there any reason cocoa can't be grown elsewhere, or the second biggest producer can't increase production?
There is a location/clima reason. Cocoa grows (well) only in a certain part of the world around the equator line as it requires tropical weather with regular rains and small dry seasons.
It may be possible to use artificial techniques to grow it elsewhere, but I'm assuming it's not economically viable or you get a product with worst quality in the end
Yeah, I already see other tropical-zone countries cutting down even more rain forest to make space for cocoa plantations (in addition to the rain forest they are already cutting down or burning for e.g. palm oil plantations). That's not really the desirable outcome here I think...
> Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources?
Actually yes. The trend happening there is reminiscent of the spice trade. The UAE will stay afloat because of its massive externally invested wealth fund and Canada's liberal policy will keep the talent coming (although imo destroying the local population's affordability). But Saudi Arabia has a huge problem right now, since they squandered a lot of their oil wealth and are in no position to rely on immigrant growth - especially when native Saudis are not employable at all. I know for a fact that the UAE actually monitors intelligence in Saudi Arabia to make sure that a revolt or an insurgency doesn't happen there. OPEC annual meetings are literally a mercantilist exercise.
It's called the Dutch disease for a reason. When Holland discovered large natural gas deposits the entire rest of their economy became less competitive. High wages from natural resources (and oil is the worst for this because it is so valuable) raise wages in the rest of the economy. This makes your exports less competitive. It also shifts employment into the natural resources sector (due to high wages), when many of those people would maybe be better allocated elsewhere.
They only country that has been able to do what you're talking about successfully is Norway and maybe the US and Canada, which have much better institutions than anywhere in Africa and the Middle East.
> So Saudi Arabia, UAE, Canada and Saudi Arabia are 'stuck' selling natural resources?
Canada maybe not so much, but Saudi Arabia and the UAE? Yeah, and I think they understand that as well. If we have a fusion breakthrough next year, what will Saudi Arabia export besides Wahhabism?
The Saudi royal family is busy buying as much of Silicon Valley as they can, to ensure they can still live atop a mountain of cash once the oil runs out. As for the rest of the country - yeah, they are royally fucked (pun intended) since no other industry than oil was ever developed.
Or more likely, what happens when the oil wells eventually run dry? Or even, what happens in the years before, when those wells start producing less and less oil?
Maybe the government is trying to pressure Swiss companies up the value chain to move processing operations to Ghana? That seems like a reasonable way to increase income to Ghanaians and build local human capital, without having to start industry from scratch.
I don't know the fine details of how chocolate is made, but a chocolate bar seems like a fairly straightforward industrial product. Why should it be made in somewhere as high-cost as Switzerland, if not just because of operational and brand-value momentum?
>Ghana's exporters have just been banned from exporting. They are going to go out of business very soon.
I do. It isn't, necessarily. Quality is becoming much more important now and makers of high quality chocolate are growing in market share. Like coffee, there is more demand for higher quality and less exploitative business models.
There is a significant demand for high quality cacao such that producers of chocolate are helping to develop the cacao industry in producing countries to move to a higher quality,less exploitative model.
I don't know for certain, but Ghana, and other African countries, may be staking their future on this model, which has been successful in Central and South America, rather than continuing to use egregiously exploitative labor to produce low quality of cacao to sell large quantities to companies like Nestle. More and more, the money is elsewhere.
Why would the Ghanaian government be any better at economic planning than the Argentinian or Indian ones? Sometimes industrial policy “works”, as in South Korea or Japan. But we have no strong reason to believe either would have failed to develop without government help. Hong Kong didn’t need it. People talk about the successes of industrial planning a lot but Argentina and India aren’t the only countries to piss away enormous resources propping up domestic industries that vanished in a puff of smoke as soon as they stopped being protected by tariffs or non tax trade barriers.
Maybe you would want to research what Japan and South Korea have in common and what Argentina has different. Hint: it involves something that starts with U and ends with SA
SK's recovery from the war was very sluggish for a decade until a military coup, protectionist economic polices, nationalization and multi-$B US economic donations.
>Ghana's exporters have just been banned from exporting. They are going to go out of business very soon.
This is just refusing to sell to Switzerland. High end chocolate companies are very interested in developing higher quality and more equitable cacao production in other countries, as there is a shortage of high quality cacao.
I know the company I worked for has recently been buying cacao from Ghana, something that they did not previously do.
Working with these kinds of producers is probably far more beneficial than continuing to work with companies mass producing chocolate.
If the government supports the development of a chocolate production industry, including support for cocoa exporters, then it has every chance of success.
It might, and it might not. Even though Japan also makes some fine watch movements, Swiss ones command a premium over the Japanese ones. I'd assume that this would be similar for chocolate.
I think it's probably a much better plant to extract a good deal of wealth from the natural resource and invest it in other areas of higher value creation, even in the same vertical.
There's a good chance that Ghana's policies are needlessly constrained.
More obviously there are 100 things Ghana could do to improve living conditions in more obvious areas i.e. corruption etc..
Consider the immediate situation:
Ghana's exporters have just been banned from exporting. They are going to go out of business very soon.
Ghana doesn't have all of the layers of industry necessary to support development and export of products i.e. there are no market buyers at any reasonable price.
Result: collapse of the industry - unless somehow the Government of Ghana can artificially inflate prices and keep them alive for a very long time while domestic partners somehow magically are able to get off their feet.
This plan feels not very well conceived.
I'll bet something is lurking under the surface.