Tuesday, September 29, 2020

Stuck in the middle…

Since the discovery of diamonds Botswana maintained strong economic growth in excess of eight percent per annum. The only other country recorded as having enjoyed a rapid economic growth over such a long period is said to be none other than Botswana’s newest economic buddy ÔÇô China.

Business Botswana ÔÇô the country’s private businesses mouth piece recently held its annual conference in the city of Francistown under the theme ÔÇô “Breakthrough to a high income Botswana ÔÇô the role of the private sector in charting the path”.

The conference was set as a stage in which the country’s think-tanks, from both the government enclave and the private sector will identify economic paths to move the country from an upper middle income to a high income economy in line with the national Vision 2036. The organisers also roped in international speakers from Estonia, Switzerland as well as Batswana living abroad.

With 18 years left before 2036 ÔÇô the year in which Botswana aspires to become a high income country, pundits are already questioning whether the country is trapped in the middle income bracket.

Globally, the notion of a middle-income trap has generated much interest and discussion, but little consensus. There is no agreement on what the trap is or how long a country needs to be at the middle-income stage to be considered trapped.

The global debate centres on a well-known stylized fact. Many countries, including Botswana made the jump from low income to middle income, but only a handful were able to make the final jump from middle income to high income. Economists suggest that a number of structural factors, such as the shift from input-led growth to productivity- and innovation-led growth, make the middle-to-high transition more challenging.

While the just ended Business Botswana conference did not clearly answer the question of whether Botswana is trapped in the middle income bracket or not ÔÇô it did however come to a conclusion that in the last decade, the rate of economic growth slowed down to an average of 4 percent compared to a 8 percent in the prior decade.

Business Botswana says over time, it became apparent that Botswana’s continued reliance on diamonds as the main driver of economic activity is unsustainable hence the need to diversify the economy as a matter of urgency.

“While the country has made strides towards “Prosperity For All”, it is still faced with a number of challenges. In particular, the successes of the past do not necessarily guarantee future success in raising living standards”, reads part of the concept paper of the BB national Business Conference.

At this stage, considerable debates have also focused on privatisation and strengthening public private partnerships as possible solutions for sustained prosperity.

When officially opening the conference, President Mokgweetsi Masisi noted that the theme of the conference it is aligned to the Botswana Government’s roadmap of addressing current challenges facing the country which he said includes poverty, unemployment, bureaucratic red tape, and the quality of education.

Unemployment remains a major issue in Botswana precisely amongst the youth including university and college graduates. Income inequality is extremely high, as is poverty.

Even on the eve of general elections, formal labour market opportunities are very limited, and a large number of adults work in low productivity ÔÇô low wage jobs. The unemployment rate was also very high at 17.8 percent in 2009/10, though if discouraged workers are taken into account, the rate would be closer to 30 percent.

The Bank of Botswana governor, Moses Pelaelo was the first to admit to the economic challenges that Botswana is facing. Speaking on the eve of the NBC, Pelaelo said that in the last decade or so the country’s growth momentum seems to have lost steam.

Evidently, Pelaelo said, “this is constrained by several factors including the narrow economic base, high levels of unemployment, insufficient innovation and private investment spending, infrastructure constraints, thin and fragmented markets as well as low level of financial sector development and, relative to other upper middle-income countries, less inclusive growth”.

Balisi Bonyongo ÔÇô Managing Director of Debswana, a diamond mining company jointly owned by the Botswana government and De Beers Group of Companies also admitted during the conference that while the diamond revenue growth helped the country to be promoted to the middle income bracket, there is need to look elsewhere for future “promotion”.

“Let’s chart the future into 2036. Do we believe that high income status is attainable, if we do our actions should show”, Bonyongo said in one of the sessions that he chaired.

Another think tank ÔÇô the Botswana Institute for Development Policy Analysis (BIDPA)’s Patrick Malope cautioned that the country should not move into the upper economic bracket leaving its Small and Micro Enterprises sector behind. Malope says the sector has the potential to increase income for those employed in it and hence contribute to the Gross Domestic Product growth and diversification.

It is estimated that the sector contribute 35-40 percent to Botswana’s GDP.

“The sector is important for inclusive growth ÔÇô we do not want a high income Botswana with poor people”, Malope said.

The NBC, which ended on Tuesday, drafted resolution which will form part of the solutions to be submitted to Botswana cabinet. The resolutions will also define and prescribe the role of the private sector in helping Botswana make the transition to high income.

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The Telegraph September 30

Digital edition of The Telegraph, September 30, 2020.