Saturday, 16 April 2016

Comprehending Botswana’s Economic Success

 (First published on
Botswana has for a long period of time been regarded as one of the successful African countries in terms of the economic growth and economic development. Despite some arguments brought forth by some scholars that its structural transformation has been slow, I find it necessary to term it as one of the African economic success stories in view of the other African countries especially in Sub-Saharan Africa, whose economies have been rocked by various challenges that seem to be unsolvable. This does not in way imply that Botswana’s economic trajectory is smooth because it is also faced with several challenges.

Amid the challenges which Afro-pessimists derive pleasure in highlighting them when debating about the African narrative, it is very important that the positives from the continent should also be noted down. Conversations focusing on the African narrative should seek to single out the positives and build on them so as to engender prosperity from an African perspective without any special comparison whatsoever with states that experienced economic take-off in the 19th or early 20th Centuries. The reason as to why I am championing for matters to be viewed from an African perspective is to relieve the African countries from the pressure that comes from comparisons made between them and the developed countries. Hence, there is need for relative comparison other than absolute comparison.

Though aspects of various economies tend to be universal in terms of the similarities, there is a lot of dynamism as the development or growth of one economy by following a certain pattern doesn’t imply that perhaps other economies will realize prosperity by sticking to the same pattern of growth. The economic trajectories of some may be lineal while for others it may be cyclical. To illustrate this, the economic growth and development pattern of the Western European nations and the North American ones is different from that of the Asian Tigers. Therefore, the pattern for economic growth and development for the African countries should also be relatively different.

Botswana is a landlocked country located in southern Africa with her size being nearly the same as Kenya’s. Only 4% of the land is suitable for arable farming with the remaining swaths of land being totally arid largely due to the presence of the Kalahari Desert. In 1966, after attaining her independence, Botswana was among the poorest states in the world whose budget largely relied on foreign funding and agriculture was the dominant sector. In fact, during the formal years after independence, 60% of the national budget comprised purely of funds from foreign sources. The agricultural sector being the largest at that particular time largely involved cattle ranching which produced beef for export. Agriculture contributed about 40% of the Gross Domestic Product(GDP). At the moment, agriculture contributes approximately less than 3% to the GDP while external financing of the budget is pegged at around 4%. 

From 1970 to 1999, Botswana recorded an economic growth rate of around 9%, the highest in the world during this period of time. Her economic growth rate slowed from the year 2000 to 2005 but soon began to be on an upward trend. The country currently has a per capita income of about $8,000 compared to $70 at the time of her independence. From the 1960s up to 2014, Botswana’s GDP averaged $4.11 billion. Botswana’s economic growth has largely been fueled by the revenues generated from the commercial sale of diamonds. It has been established that the discovery of diamonds led to the economic take-off that has been witnessed in this particular country. As a matter of fact, the mining sector’s contribution to the GDP is the largest in comparison to the other sectors.

Several factors have been attributed to Botswana’s economic growth. As put forth by economic historians and development economists Daron Acemoglu, Simon Johnson and James A. Robinson, the economic success of Botswana is hinged on the effective and efficient institutions of private property that were established in this state. These particular institutions have been able to protect the property rights of the investors, they have ensured political stability and they have constrained the political elite from carrying out expropriation of public resources. In other words, these institutions are inclusive and not extractive.

The inclusivity of such institutions has enabled Botswana to have a committed political leadership and sound economic policies. The political leadership has put in place measures to streamline the country’s economic governance. This involves the mechanisms that have been established to be able to deal with corruption and as a result Botswana remains to be the least corrupt country in Africa. For this southern African state, corruption is not endemic when compared to other African states. It is because of the nature of the institutions that seem to highly disregard the risks and subsequent problems that emanate as a result of expropriation, that have enabled the levels of corruption to be very low.

Scholars also greatly attribute Botswana’s economic success to the pre-independence conditions were fundamental to the establishment of the inclusive institutions of private property. For instance, Botswana’s colonial experience was pacified in nature, involving no battles with the British but instead lots of pleading and dialogue by the traditional chiefs for the Britons not to destroy the existing indigenous institutions. As a result, the British never imposed their own rule on the Tswana which if imposed would have led to the establishment of completely new and different institutions that would negatively re-organize the way of life of the people. The lack of interference of the indigenous system of governance limited the room for extractive institutions to thrive. Comparatively, countries where the colonialists did away with the traditional system of governance reeled from the effects of expropriation as extractive institutions were established to carry out forced labour and impose heavy taxation.

The pre-colonial institutions also allowed for discussions, deliberations and dialogue to take place between the chiefs and the community members. Such institutions were referred to as the kgotla and any major decision was therefore made with the involvement of the entire community. This hence injected the aspect of accountability on the part of the traditional political leadership.

There is no doubt that the traditional political leadership set a firm foundation for the post-independence political leadership of Botswana right from the founding president Seretse Khama, to Quett Masire, Festus Mogae through to the current president General Khama Ian Khama. President Seretse Khama in particular pursued a political leadership and system that embraced accountability, contingency planning and responsible fiscal policies among other positives. For example, just immediately after gaining independence, diamonds were discovered in a geographic region largely inhabited by Seretse’s ethnic community known as the Bamangwato. 

Instead of him allowing for expropriation by his own tribesmen, President Seretse pushed for the enactment of the Mines and Minerals Act of 1967 which vested the mineral rights in the national government instead of the tribes. This averted the possible conflicts that were to occur in case the mineral rights were to be given to the ethnic communities. This particular legal framework largely contributed to political stability which has been elusive for majority of the African states that have minerals such as the Democratic Republic of Congo, Nigeria among others. 

Most importantly, the political leadership has ensured that the revenues obtained from the sale of diamonds have been invested in public goods including infrastructure, education and health, rather than being embezzled. This seems to be quite unusual in Africa where many political leaders use such opportunities as mechanisms to amass wealth and impoverishing the masses. The Government of Botswana pursued effective fiscal saving policies so as to save part of the rents accrued from the commercial sale of the diamonds.

The fiscal savings have been able to cushion Botswana’s economy against the crowding out effect and have also been instrumental in maintaining stable rates of inflation. Furthermore, some of the savings from the government have been invested in offshore financial centres and this has helped to reduce the effects of the exchange rate depreciation in addition to securing the country’s future foreign exchange rate revenues. These measures have also played an integral role in ensuring that the public debt remains at a very low level. Domestic savings level is at 40% of the GDP while investments are at 35% of the GDP. This is significant in sustaining the economic growth trajectory as more savings denote more investments, ceteris paribus.

Some of the challenges facing Botswana’s economy include the diversification of the economy, the high economic disparities, the HIV/AIDS scourge, the relatively high rate of unemployment, limited freedom of expression and unchecked presidential powers. According to various geologists, the diamond mines are expected to be exhausted beginning from 2016 to 2029 hence the need to heavily invest in the manufacturing sector and the services sector to ward off any sort of economic meltdown. The income inequality should be checked being among the highest in the upper-middle income countries with a Gini co-efficient of around 0.5.

The limited freedom of expression and unchecked presidential powers are attributed to the dominance of a single party, the Botswana Democratic Party. This leads to another discussion of whether African states should pursue development first then democracy later or the other way round. May be democracy is a Westernized political mechanism and perhaps African countries need clean governments that are focused on economic prosperity. As long as tyrants aren’t at the helm of the political leadership then such a system can be considered. Botswana’s elections have hardly been affected with fraud and the presidents have always honored the term limits. The dominance of the ruling party should not be castigated because it has engendered economic prosperity, political stability and the opposition parties have been given room to also ascend to power. In conclusion, being an upper-middle income economy, Botswana still remains a model of economic success in Africa.

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