Friday, November 27, 2020

Botswana fights declining productivity

Since the late 1990s, Botswana’s economic growth has slipped below the rates achieved previously, real GDP today grows by around 5 percent per year, compared to previous growth rates in excess of 8 percent per annum, a keynote policy paper for the NDP 10 midterm review by the Ministry of Finance and Development Planning has observed.

Some of this outcome is attributable to the world economic slump of 2008-2009, which cut GDP growth by about half that amount in 2009. Part of this outcome, however, was attributable to declining productivity over the past decade.

“If the productivity of the additions to the labour force and the capital stock during the decade to 2010 had been zero, in other words there had been no change in total factor productivity over the last decade, real income would have reached a level about 10.2 percent higher than the level actually achieved,” the paper observed.

The paper said it was also important to note that a substantial portion of the additions to the capital stock during the last decade was in the form of Government projects.

The question is whether such projects yielded positive returns to the nation or, rather, did projects selected have a high return potential? Similarly, where cost-overruns were permitted, did such projects ultimately yield a positive net benefit to society?

Beyond individual projects, many of Government’s policies and procedures have also contributed to declining productivity in Botswana. The World Bank’s Ease of Doing Business ranking of Botswana, released in late 2011, pointed to several areas where far too much time and money was required to comply with lengthy procedures.

While the rationale of these procedures and policies is to ensure fairness for all, they reduce productivity and investors incur costs in having to address their negative impact.

In the long-term, however, competitiveness is facilitated by productivity improvements, which in turn affect pricing and growth in real incomes. More importantly, improvements in productivity are associated with lower rates of increase in cost, thereby fostering competitiveness.

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