Saturday, May 15, 2021

Can Botswana’s economy sustain despite obstacles?

The one question that persistently lingers in many citizens’ minds is if the decisions made by the government will leave the country better off or worse off. There seems to be a veil of overwhelming uncertainty that is draping over the country regarding the economic value of current and prospective projects and activities. In hindsight, different observations regarding Botswana’s economy as elucidated by expert economic analysts weave a thought provoking narrative that the country needs to come to terms with, perhaps even interrogate. The observations alluded to will attempt to draw clarity and maybe even understanding of the economy from an analyst’s point of view.

At a recent business seminar, Martyn Davies, an emerging market analyst indicated Africa’s vulnerability to commodity prices, a demonstration which among other countries highlighted the extent of Botswana’s dependence on its resource exports (diamonds, nickel, copper) as a percentage of its total exports between the period 2005 and 2010. Botswana in this regard falls among top 10 of Africa’s big diggers in the Sub-Saharan region, indicated by a percentage of over 80 percent, according to the International Monetary Fund (IMF). This over-dependence is what triggered Botswana to diversify its economy lest it exposes itself unduly to global market variations. It is a widely known fact that Botswana has been trudging the diversification path but what Davies demonstrated in terms of Botswana’s export growth between 2000 and 2013 depicted a regression.

Using the 2015 Atlas of Economic complexity data Davies showed the segmental percentage of Botswana’s export make-up. In 2000 Botswana exported 45 percent of diamonds, 10 percent of Copper, 5 percent of Nickel and 21 percent of unclassified transactions. Fast forward to 2013 Botswana exported a significant 84 percent of diamonds, 3 percent of Copper and 6 percent of Nickle. This observation could be assessed in two folds. Davies opines that exports reflect a competitive advantage more accurately than Gross Domestic Product (GDP) because they indicate clearly that what a country produces is what is demanded.

The shift in export make up reflects a lapse in the economy’s efforts to move away from the heavy reliance in diamonds, suggesting as a result that Botswana has failed to diversify.

At the former Cabinet Minister and evolving author, David Magang’s book launch a few months ago, renowned economic analyst Dr Keith Jefferies expounded the relationship between government and the private sector. His observation was that government does not understand the private sector. They may perhaps be truth in that observation given the recent announcement by President Ian Khama at the BDP Special Congress meeting that the economy will soon experience a big bang stimulus, termed the economic stimulus package (ESP). Looking at the development of ESP one notices that government is spearheading the anticipated projects. The various media reports on ESP mention that a committee has already been put in place which is largely comprised of government bodies. The Private Sector seems aloof on the details of ESP. It could be concluded that that the involvement of Private Sector in playing its hand in the big bang stimulus is minimal, perhaps even non-existent. This might suggest that government is not yet ready to relinquish its control as the engine of the economy.

Providing his ESP analysis to the Sunday Standard, Moatlhodi Sebabole, an independent economist and research manager at First National Bank Botswana cited how ESP is going to stand the chance of economic value. Sebabole prescribes that the stimulus should include private sector participation, import substitution, export oriented, sustainable job creation and downstream economic activities. Sebabole’s suggestion is that government should restrict its role to enabling a private sector led growth environment. He argues that previously government projects have lagged due to its implementation inefficiencies and also proposes that emphasis should be placed on return on investment against the cost. It appears that Sebabole welcomes the ESP initiative but cautions however that it must focus on deriving economic value.

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