From a sample of eight selected sub-Saharan African countries for the period 1990-2015, Botswana is adjudged to be one of those which have been able to capitalise on considerable opportunities given to them through their natural resource endowment to build up and maintain their physical and human stock of capital in exchange for the exhaustion of their stock of natural capital.
“Botswana consistently experienced positive adjusted net savings and, with very high reserves to production ratios, there seems to be no indication of weak sustainability,” says research from the University of Cape Town that studied mineral resource accounting measures in Angola, Botswana, Congo (Brazzaville), Gabon, Equatorial Guinea, Mauritania, Nigeria, and South Africa.
Adjusted net savings are calculated on the basis of gross national savings, current education expenditures, depreciation of produced capital, depreciation of natural resources and damage caused by carbon dioxide emissions.
As the authors (Louis Moussi Sopp and Anthony Leiman) state, the main advantage of this measure is that it allows an assessment of the degree to which the investment of natural resource rents and consequent increases in the stock of produced and human capital compensate for the present depletion of natural resources.
“This has significant consequences for intergenerational equity in the exploitation of natural resources and welfare. Numerous studies on adjusted net savings rates have revealed a disturbing trend among natural resource-rich countries in sub-Saharan Africa, where high GDP growth rates often hide decreases in the underlying stock of natural capital. While a very few countries have been able to successfully transform their natural capital into human and produced capital, the vast majority have failed to do so,” says the research, adding that in several cases, the exploitation of natural resources has created an unsustainable surge in current consumption expenditure at the expense of long-term sustained economic growth. “Furthermore, some studies have shown a strong correlation between negative adjusted savings rates and persistently low socio-economic development indicators, such as literacy rate, infant mortality and access to water and electricity.”
Botswana’s successes is limited though because “the widening of the gap in recent years between
gross savings and adjusted net savings suggests that some amount of the national wealth that is consumed is in excess of what should be the case under efficient resource-rent management.” Additionally, its sustainability index (indication of how at-risk an economy is to shocks or fluctuations in the price of the dominant natural resource) is the second highest in the sample group after Equatorial Guinea’s. The higher the index value, the more at risk the economy is to fluctuations in the price of the dominant natural resource.
“It should not be surprising that South Africa is the least exposed given that its economy is more diversified relative to the other countries,” the study notes.