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BY TLOTLO LEMMENYANE
In Botswana, “Howzit” which is slang for “how is life?” is so important it comes even before enquiries about the health of children. What would your answer be?
The hardline numbers used to depict the health of a country’s economy, loosely referred to as its size hardly answers the question. There is a growing narrative that seeks to look beyond Gross Domestic Product (GDP) which is a measure used to gauge the size of an economy. The big question that this new school of thought coined by OECD asks is ‘how is life?’ Dubbed the better life index, this measure delves into the well-being of people, in quest of setting the tone for a richer quality of life with the end goal of achieving tangible progress for the people.
A growth strategy proposed by the Central Bank
What brings this topic into the picture is what the Central Bank of Botswana dished last week on what it proposes should be done to transform the economy of Botswana. The strategy is called “Financing strategies for industrialization and transition to high income status”. What it speaks to is the different ways through which the financial sector can be made more productive and as such translate into growth for the economy. Bank of Botswana makes a convincing case that Botswana has a significant financial resource gap when compared to other countries. It presents four main evidence-based financing options identified as government; development finance institutions (DFIs); private sector and capital markets. It posits that if access to finance widens it will allow for the funding gap to be closed as well as address market failures. Judging the strategy purely by its economic merits, the recommendations made on bringing financial resources into effective use provide a plausible roadmap.
The strategy isn’t necessarily calling out anything new to the fore but appears rather to be attempting to move things around; fixing what isn’t working and increasing the value created by existing economic activities. What comes out clearly as the driver behind this strategy is for Botswana to escape the middle income country trap so as to propel into a high income status country. The strategy appears more concerned with Botswana avoiding the middle income country trap. In 1997 the World Bank categorized Botswana as a middle income country which came as the culmination of the economic growth and prosperity that followed the discovery of diamonds. The middle income trap therefore means that after a country has achieved a certain level of income it is prone to stagnating around it.
One might ask if pursuing the hardline economic numbers is enough to tackle deep seated challenges that have formed a shadow behind the Botswana’s prosperity. Beneath the flowery numbers Botswana achieved along her growth journey lies the reality of a country that prospered but left her people behind. Perhaps BoB’s strategy may result in further growth but like the economic snowballing that came from diamonds mining, Botswana may on the other hand continue to miss the blindspot that her people are not moving in tandem with her growth.
Economic growth left Batswana behind
The years from 1965 to 1989 marked the great wealth and sound economy Botswana achieved, yet underneath the prosperity there was another fabric forming of lack, hunger and poverty. A research paper by T. C Matsheka and M. Z. Botlhomilwe says that the rate of economic growth during the period 1965-1980 and 1980-1989 was 13.9 percent and 11.3 percent respectively. The paper adds that the year 1989 “marked the end of a decade that would stand out in the economic history of Botswana as a period of unparalleled economic growth.” The prosperous trajectory changed in 1993 when the global economy experienced a slump. The rate of Botswana’s economic growth declined from 6.5 percent in 1991/92 to a modest 0.3 percent per annum in 1992/93.
In 1999 the United Nations Centre for human settlements published a report on mainstreaming the city’s urban poverty. It found that in 1989 slightly more than half of the households in Gaborone had incomes below the national designated poverty line. It had estimated the average household income at $99.52 per month against the average household poverty line value at $148. This indicated that household’s income was below the cost of goods and services considered sufficient to meet basic needs. “As in the rest of the country, there is a great disparity in incomes in the city of Gaborone. Whereas some households are quite rich, the bulk of the households are reeling in abject poverty.” The study assessed that incomes were highly skewed and poverty endemic in the midst of plenty. “The distribution of income is such that the poorest 40% of the people earn 11.6% of national income; the next 40% earn 29.1% of national income and the richest 20% earned 59.3% of total income.”
What this points to is that though impressive growth was registered, the distribution of such economic expansion failed to trickle to people. Economic experts commonly make the assumption that people’s lives are made better when economic growth happens. Finance Minister Kenneth Matambo is one such expert who postulates that as a general principle rapid economic growth results in economic development and employment creation. “It is our expectation that attaining fiscal sustainability should result in enhanced economic growth which is necessary to provide for; employment opportunities, eradication of abject poverty, and promotion of equitable distribution of the country’s wealth,” he has said when delivering the budget speech.
If that were the case Botswana would not be saddled with being one of the world’s most unequal countries in terms of income distribution. Statistics Botswana released a study which demonstrated that over the years the level of disparity in income between the rich and the poor widened. “The 2015/16 BMTHS preliminary results indicate that the consumption Gini Coefficient has increased from 0.495 to 0.522 at national level. At stratum level, the rural and urban areas also recorded increases from 0.438 to 0.474 and 0.510 to 0.518 respectively.” The consumption Gini Coefficient is used to measure inequality on a scale from zero to one, with a figure close to one indicating greater inequality. BMTHS showed that most of the country’s districts experienced noticeable increases in the number of people living in poverty. For example in Francistown the number increased by 3,592 from 7,675 in 2009/10 to 11,267 in 2015. The highest poverty level was observed in Kweneng West with 50.6 percent. Poverty in Botswana is a reality and despite it declining over the years, it remains a challenge.
Alternative economic model
In 2018 the United Nations Children's Fund (UNICEF)’s Principal Advisor on Social Policy for Eastern and Southern Africa, Jean Dupraz, advanced that for Botswana to address its high inequality conditions, she should at the fastest pace develop policies aimed at doing so.
Moreover, the World Economic Forum (WEF) grounded the issue of income inequality to a new growth model that is needed. “A new growth model that places people and living standards at the center of national economic policy and international economic integration is required to transform inclusive growth,” cited WEF in its 2018 Inclusive Development Index report. It added; “As many countries have experienced and the Inclusive Development Index data illustrate, growth is a necessary but not sufficient condition for robustly rising median living standards. Accordingly, policymakers and citizens alike would benefit from having an alternative, or at least complementary, bottom-line metric that measures the level and rate of improvement in shared socioeconomic progress.”
It goes without saying that growth is important to Botswana’s economy but likewise the improvement of Batswana’s lives is equally of great significance. A South African emerging markets expert said during his visit to Botswana that growth comes from people and not from the ground. He said this within the context of Africa’s ‘dig a hole’ business model, which forms a big part of Botswana’s story, arguing that successful countries in the world are those without natural resources but arrived where they are by investing in talent.
BoB is rightfully placed to offer economic growth proposals, particularly through its policy making role. By submitting the arguments of the alternative economic model, perhaps what the Central Bank should also place keen focus on is making sure that future growth takes Batswana along. An important question BoB can ask Batswana is “how is life” and use the answers for their betterment. Jacinda Arden, the Prime Minister of New Zealand, is fast becoming known for her bold ‘well-being’ economic model which marks 2019 as the beginning of her government growing people in tandem with the economy. Her argument is that while growth is important it has not quite gushed over for the improvements of people’s lives. This indicates that such a quest is not so farfetched.