Sunday, May 28, 2023

Going forward Botswana should defend and maintain its economic gains

Considered one of the poorest countries in the continent at independence, Botswana discovered unparalleled prosperity and economic success after the discovery of diamonds. The unearthing of the precious stone and the enduring partnership with De Beers laid the foundation for Botswana’s story of “rags to riches.”

The rest of Africa paused to watch and learn as through prudent management of the economy and equitable sharing of resources, Botswana attained economic success and uplifted the lives of its people, in the process earning the enviable accolade of “gem of Africa” and “shining example of democracy.” Soon Botswana was one of the fastest economies in the world and it was not long before the country was ranked as an upper middle income country.

Fifty years down the line, the country’s Minister of Finance delivered the bad news that the exponential growth of yester years had receded as Botswana’s growth forecast had been revised downwards from 2.6 percent to 1.0 percent, a decline of 2.2 percentage points; against the 3.2 percent recorded in 2014. While Botswana remains one of the foremost global producers of diamonds, the industry has become vulnerable because of fluctuating demand, which has resulted in slackened economic growth.

The mining sector was a major contributor to this slow growth as it declined by 14.0 percent in 2015 due to reduced diamond production. However, Botswana expects a modest recovery of 4.2-4.3 percent between 2016 and 2017. On the other hand, Matambo’s recovery projections have been described by independent economists as overly ambitious.

Botswana’s recent growth trend is in sharp contrast to its growth trajectory over the years. According to a research paper by University of Botswana lecturers T. C Matsheka and M. Z. Botlhomilwe, the rate of economic growth during the period 1965-1980 and 1980-1989 was 13.9 percent and 11.3 percent respectively. The paper quotes the Bank of Botswana (BoB) stating that the year 1989 marked the end of a decade that would stand out in the economic history of Botswana as a period of unparalleled economic growth.

Matsheka and Botlhomilwe explained that the growth and development of Botswana’s economy after independence was a result of five contributing factors. The first was the significant contribution that the agricultural sector made to the economy, cited at 45.2 percent of total Gross Domestic Product in 1968. The second was increased beef exports while the third was re-negotiation of the South African Customs Union (SACU) agreement. The fourth reason for accelerated economic growth in the years 1980-1989 was increased inflows of aid from a wide range of donors; while the fifth was the discovery of rich diamond deposits in Orapa in 1967. However, in 1993 the global economy experienced a slump and the rate of Botswana’s economic growth declined from 6.5 percent in 1991/92 to a modest 0.3 percent per annum in 1992/93. Considering the current economic situation, the growth experienced in the years that followed after independence are somewhat illusory.

This sharp contrast brings to the fore an important question that Botswana must ponder as it celebrates its 50 years anniversary of independence. Will Botswana be able to defend and maintain its economic gains in the next 50 years?

The country’s hopes are currently pinned foreign direct investment (FDI), but its attraction model has often been criticised as unresponsive. In fact Professor Brothers Malema, an expert in Development Economics and lecturer at the University of Botswana opined in his research paper that common sense dictates that other means of economic diversification outside of FDI should be explored.

“To depend on the goodwill of potential investors who seem not to identify Botswana as an attractive investment destination amounts to gambling with the welfare of citizens, particularly the poor and unemployed,” he said.


Read this week's paper