Tuesday, December 7, 2021

Botswana’s hidden cracks: A nation at cross roads

Where did it go wrong? – This a question Spencer Mogapi – Deputy Editor of the Sunday Standard poses to economist and leader of the Alliance for Progressives (AP) – Ndaba Gaolathe after the latter explained in an interview that, “the scale of building infrastructure after the discovery of diamonds was transformative” but, “along the way we were not able to redefine, to refine the next stage of Botswana’s development”. Gaolathe says diamonds discovery was both a curse and blessing for Botswana.

“Diamonds discovery was a blessing in the sense that the government had resources to build the infrastructure but a curse as the country neglected the idea of aggressively building industry.” Gaolathe adds.

He says the only way to develop a great nation is to build diversified economic sectors like manufacturing. To date, official figures show that the manufacturing sector’s contribution to Botswana’s Gross Domestic Product (GDP) remains low, despite the fact that economic indicators and think tanks like Gaolathe point to it as the next messiah of the domestic economy. Traditional GDP data shows that the sector has not performed well over the past years as official statistics show that it has grown more slowly as compared to other non-mining sectors of the economy.

Econsult Botswana – an independent economic firm based in the capital Gaborone attribute the decline to what it calls, the “Dutch Disease”.

The Dutch disease is said to happen when increases in mining exports drive up the real effective exchange rate, which would make all non-mining exports, such as manufactured goods, more expensive to sell and possibly uncompetitive in international markets.

The Botswana Investment & Trade Centre (BITC) Chief Executive – Keletsositse Olebile in the past admitted that much work needs to be done to support the local manufacturing base.

BITC – a state owned agency that promote investment runs the Botswana Exporter Development Programme (BEDP), which is aimed at increasing exports by means of targeted interventions on both products and services to ultimately achieve some level of readiness to expand into highly competitive external markets.

Tremendous opportunities…….

A modern economy, whether it’s of an industrialised nation or a mono-economy like Botswana has more options than it did some five decades ago. There are more choices, more voices, more variables, more data, and more pressure coming at leaders faster than at any other time in recent memory. 

Given all these, Gaolathe as such describes Botswana as a country that has tremendous potential for its people but yet failing to realise such potential.

“There is no reason, given our history and resources why Botswana should be stagnant for so many years. There is no reason why we should have equity problems —–with so much wealth concentrated on a few people”.

Given a series of economic challenges that are robbing the nation’s younger generations of career-defining education and employment opportunities, Gaolathe says it is because Botswana has traditionally focused on macro-economic issues. The country, he says, has concerned itself with inflation, import cover at the expense of micro issues.

“We have neglected micro issues and infact these are the most important and immediate issues”.

Nation at crossroad….

Despite an ambitious 9.7 percent projected economic growth for 2021 as announced by President Mokgweetsi Masisi during the state of the nation address on Monday, Botswana’s economy remains dangerously fragile. There is surely need to cut on the heavy reliance on diamonds.

This is because while the retreat in the country’s economic activity is largely attributed to Covid-19 containment measures, economic cogs were already grinding slowly before the pandemic, creating extra pressure to the nation’s ballooning budget deficits.

Recent developments, exacerbated by Covid-19 outbreak in early 2020, have exposed the country’s long running developmental changes – failure to diversify the economy from diamonds economy and lack of productive capacity, according to Baby Mogapi and Karabo Badirwang, economists at Bank of Botswana.

On the other hand, the country’s Balance of Payments (BoP) – made up of the current, capital, and financial accounts – has deteriorated at the fastest pace in the last five years, mostly due to the underperformance of the diamond sector, which has been the anchor of the Botswana economy since they were discovered in the late 1960’s.

The deterioration of the BoP has been unfolding alongside the slowdown in annual economic growth, which dropped considerably from an average of 7.1 percent during 2005 – 2007 to an average of 6.4 percent during 2010 – 2012. This was followed by an average of 4.6 percent, and 3.9 percent during 2013 – 2015 and 2016 – 2018, respectively. Annual GDP growth dropped further to 3 percent in 2019 and contracted by 7.9 percent in 2020.

RELATED STORIES

Read this week's paper