Sunday, September 27, 2020

“Poverty hand in hand with wealth”

It’s a dichotomy as Botswana celebrates its 40th anniversary of independence from Britain this long weekend. It boasts one of the world’s highest growth rates, but is saddled with high unemployment and poverty.

Luxury 4X4 vehicles ply the roads alongside weather-beaten taxis in the capital Gaborone, where fashionable mansions neighbour crude shacks.

Ultra-modern glass government buildings tower over the city where the moneyed chic share space with mostly poor rural traditionalists. Makeshift one-man shops dot the roadsides, competing with large, mainly South African financed, malls.

“Wealth distribution is a problem that has to be addressed,” says Investec Asset Management economist Alphonse Ndzinge.

“There are huge disparities between the wealthy class and those in the lower income group.”
Forty years after independence, the thinly populated Southern African country is regarded as a model for the rest of the continent for its economic and political stability.

Botswana boasted economic growth of 8.3 percent in the 200/05 financial year – averaging about 9 percent since independence in 1966 to 1999.

The growth rate forecast for this year is in the region of five percent – still higher than the 4.3 percent world average last year.

Following the discovery of diamonds in the mid-1970s, the country transformed itself from a “poor desert state”, in the words of businessman Elias Dewah, into a middle-income country with a per capita GDP of about $10 000 in 2005, according to international agencies.

Considered one of the world’s three poorest countries in 1966, Botswana is now the largest exporter, in value, of gemstone diamonds.

Yet an estimated third of the 1.7-million-odd population lives below the poverty line.

The success of the diamond mining industry, the backbone of the economy, is also partly the reason for Botswana’s unemployment figure, estimated to be anywhere between 24 and 40 percent.

“The diamond industry is capital intensive, not labour intensive,” says Ndzinge.
“It does not create jobs.”

The government relies heavily on diamond mining for revenue through its 50 percent stake in diamond company Debswana and little was done in the past to diversify the economy.

Unemployment is the bane of young adults in a country that invested heavily in their education.
“The knowledge base is there, but not the industry or structures to support it,” Ndzinge said.

“Look at me, I have a tertiary qualification yet I am driving a taxi,” complained Goodwill Moswang, 26.

He completed a university diploma in computer science and applied for many jobs in vain.
“There are many others in my shoes. They have qualifications but they mow lawns for a living.”

The Botswana government has adopted a strategy recently to expand and improve the technology, manufacturing and financial services sectors.

Private money is being invested to create a local diamond polishing and cutting industry, while government loan schemes seek to encourage entrepreneurship.

But non-mining private sector GDP for 2005 was only 0.2 percent, said Ndzinge.

Dewah, executive director of the Botswana Confederation of Commerce, Industry and Manpower, said the economy is too small and undiversified to create jobs, adding: “We have a problem of educated unemployment.”

The country has an 80 percent failure rate for new businesses. “Those who have ventured into manufacturing have failed,” said Dewah.
“This is a high-cost economy, it is landlocked, and it has a small domestic market.”

The solution, he said, was focusing on niches and comparative advantages, including political stability. Botswana has Africa’s best credit grading and has been rated the continent’s least corrupt country. It has not experienced armed conflict since independence, and all elections are regarded, overall, to have been democratic, free and fair.

“We can mitigate the fact that we are a high-cost area by creating a very liberal investment climate,” said Dewah.

“We must enable people to do whatever they do here, and profitably.” -AFP

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.