Thursday, April 22, 2021

Botswana still struggling to diversify its exports

The resolve by Botswana to diversify its economy away from diamonds through the Economic Diversification Drive (EDD) has proved to be challenging with the initiative stirring at a slow pace.

The EDD was formally approved as a programme in 2010 with the urge to lessen the burden of economic dependency on mining.

The National accounts data suggest the economy has somewhat diversified. Generally, Government and Mining’s share of GDP has certainly fallen from 48.12 percent in 2003 to 27.25 percent in 2012. This indicates that the economy is becoming less dependent on Government and the mining sector. However, Botswana still fails to diversify her exports. Botswana’s exports are still dominated by Diamonds accounting for 75 percent of exports in 2012.

Probing the major causes of the slow pace, Dr Grace Tabengwa a research fellow and macro economics analyst with the Botswana Institute for Development Policy Analysis (BIDPA) said while the progress is not impressive we cannot hasten to overlook the challenges that the economy faces.

Tabengwa said economic diversification remains fundamental in the context of Botswana’s future long term sustainable growth and key in unlocking the growth potential besides the mining sector.

She highlighted that it is an immense task unlocking the export potential of the economy and, more importantly, in identifying the export opportunities and activities that can actually kick start the diversification process.

Compared to other countries, like Mauritius, the march to diversification for Botswana has been rough and bumpy due to its dependency on mining sector for too long.

Tabengwa said further improvements need to be done in the doing business environment, which, to some extent, affected and impacted on attracting the much needed foreign direct investment.

To her understanding , long-term sustainable development in Botswana and diversification hinge on the diversity of exports and growth factors which depend, to a larger extent, on investment opportunities that can be realised through promoting factors that improve efficiency enhancers, technology, innovation and business sophistication.

In addition, the other facts that have limited the diversification process include human capital and the requisite skills. “We are conscious of the doing business and human capital development strategies that should address some of these challenges but they should be done with speed,” she said.

“Unlocking the pace of diversification currently would depend largely on the ability of government, the private sector and individuals to play a role and, more importantly, in implementation of strategies that support the diversification drive,” said Tabengwa.

Efforts to address these problems should be hastened. It should be a result oriented coordinated effort by all because government alone cannot succeed.

Thabelo Nemaorane, an Economic Analyst with Econsult, appreciated the minimal progress achieved so far but noted that not much attention is paid to Services sector in Botswana.

“In the past 10 years, the Finance and Business services sector has been the largest source of the economy’s growth. Botswana needs to award more attention to the services because that is where we seem to have a potential to grow,” said Nemaorane.

He emphasised the need to further develop the Manufacturing and Agriculture sector as they have the potential to boost exports, they are also potentially very large employers. However, these haven’t been among the best performing sector in the past 10 years.

Tabengwa is adamant that diversification is a process that takes time and varies across countries such that looking critically at the Botswana case, one would actually see that it may actually take time.

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