Monday, March 8, 2021

Progress is being made in economic diversification

For far too long, the effort to diversify Botswana’s economy away from diamond-mining has been reliably disastrous but in his 2014/15 budget speech, the finance minister, Kenneth Matambo, says that some progress is finally being made.

For some unclear reason, this bit of good news did not get nearly enough acreage in the minister’s speech but the little he said will certainly allay fears that many have about a future, diamond-less Botswana.

“The negative performance of the mining, and water and electricity sectors during 2012, was partly offset by the high performance of some non-mining sectors, which collectively registered a positive real growth rate of 6.2 percent in 2012, compared to 7.8 percent recorded in 2011. Among the non-mining sectors that registered high growth rates were: Construction at 14.4 percent; Social and Personal Services at 12.2 percent; and Finance and Business Services at 11.0 percent,” said Matambo, adding that growth in these non-mining sectors “shows progress in economic diversification.”

Be that as it may, Lesego Sekwati, a Motswana economist who is currently based abroad says that Botswana desperately needs to accelerate growth in non-mining sectors, including diversification within the mining sector itself. He cites the work of scholars like Olivier Basdevant, a senior economist at the International Monetary Fund, who have raised the possibility of a grim spectre hanging over Botswana.

Sekwati says that if predictions of empirical studies such as these are correct, “then our diamond┬áreserves, along with diamond-related fiscal revenues which have been so important to us over the past five decades, are likely to be depleted over the next decade and a half, which is a discomforting prospect for the economy. Of course you have to put such predictions into context with the recent upscaling of explorations in the country, so┬áno one knows for┬ácertain the quantity of diamonds we still have.”

Whatever happens, Sekwati says that it is still important to diversify Botswana’s economy, not only to avoid economic stagnation as diamond reserves decline, but to also expand employment opportunities for the country’s labour force as well. He attributes part of the country’s high rate of unemployment to the limited employment generation capacity of the economy.

“Naturally you expect employment opportunities to increase as the economic base expands. This is not happening at an encouraging rate right now,” says Sekwati, adding that in addition to the high unemployment rate, Botswana is still riddled with poverty and inequality.

The latest data published by Statistics Botswana shows that almost one fifth of the population lives below the national poverty datum line. Sekwati says that while social security nets remain important for vulnerable sections of the population, productive employment is the most durable way of responding to poverty.

“So as you can see, economic diversification goes beyond just avoiding economic stagnation; it is┬áessential to┬ápromoting human development as well,” he states.

In 2010, when he was working as a lecturer in economics at the University of Botswana, Sekwati published a paper in the Botswana Journal of Economics in which he argued that the country’s private sector was “narrow and shallow”; that there was a mismatch between skills required by industry and the ability of graduates produced by tertiary education institutions; and, that policies to diversify economy were piecemeal, fragmented, uncoordinated and lacked clearly defined performance indicators and monitoring mechanisms and time frames.

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