Diamond miracle hurls Botswana to Africa�s elite,but...
Isaac Pinielo | Wednesday September 28, 2016 15:52
Botswana has always been described as an African success story since it has managed to transform itself from one of the poorest nations in the world into a modern, upper middle-income country.
At the time of independence in 1966, Botswana was one of the poorest countries in the world, with a predominantly agrarian economy.
Reports show that the agriculture sector, in particular cattle rearing and beef production, accounted for 43% of the country’s Gross Domestic Product (GDP).
Also, the country only had a five kilometre tarred road in Lobatse from the train station to the British High Commission.
The discovery of minerals, particularly diamonds, brought a ray of hope to the economy, and as a result, Botswana broke African records, as it became the fastest growing economy in the world for over a decade.
Diamond mining accounted for a large portion of the value added to the economy from the mid-1970s to the mid-2000s.
Since then, the country has made economic and social progress due to diamonds and high standards of governance, political stability, and the judicious investment of diamond-generated wealth.
The growth of the economy increased development investment and lifted national wealth levels rapidly.
From 1966 to 2014, Botswana’s GDP per capita grew at an average rate of 5.9% a year, one of the highest rates in the world in that period.
The country continues to be hailed as a model of excellence, achieving high growth rates, recording impressive budget surpluses and maintaining huge foreign reserves when other countries are plagued by insurmountable debt.
However, while some people have a high opinion of Botswana’s growth story since its independence, others think the country’s performance in the five decades has been abysmal.
Professor Brothers Malema, a senior economics lecturer at the University of Botswana, says the economy of Botswana has not made any significant success in diversifying the economy away from minerals, particularly diamonds.
He adds that the failure of the economy to diversify away from minerals has meant that the capital-intensive diamond sector, with its low employment capacity, did not help in reducing the high levels of unemployment.
“It is unsurprising that the country, despite of its widely acclaimed economic success, continues to have high levels of poverty,” says Malema.
He further notes that despite the globally acclaimed economic success that followed the discovery of minerals, poverty remained a cause for concern in the country, adding that in spite of Botswana’s vision of a diversified economy and poverty free society by 2016, the economy remains diamond dependent even though the government has, for more than two decades, endeavoured to diversify the economy away from diamonds.
Archie Oyega Thembe, a business development expert, argues that although Botswana’s stability as a country has had a good impact on investor confidence over the years, it has not really harnessed that attribute to the maximum.
“This inertia is evidenced by how countries that have previously been in the woes even when we (Botswana) were already doing well have literally whizzed past us in economic development,” he says.
Thembe points out that countries like Rwanda, Ethiopia and Namibia that are deliberate on Transformative Industrial Policies have seen a spike in the performance of their economies over the last few years as evidenced by the GDP growth in the respective countries.
He believes that one glaring failure from an economic development perspective is the pre-occupation with having state-owned resources, where ‘evidently’ a model that works is one of privatisation.
“To date, we have only been able to privatise a single entity despite the many years and it has been touted and necessarily deemed a panacea for ‘economic emancipation’ for the citizenry,” Thembe points out.
He says this has inadvertently stifled not just economic activity but to an extent service delivery.
Thembe further states that the country has also “refused” to stimulate the manufacturing industry.
Just as the sun rises in the east we also import everything from toothpicks, matches to digestible biscuits and buttons.
He notes Batswana does not see those as opportunities or industries they can venture into.
He says with an import bill in excess of P7 billion, it is the time for a clarion call to ensure a sizeable portion of the money stays locally by stimulating the manufacturing industry.
However, Thembe says Botswana also has been very successful in maintaining the requisite indices relevant for a conducive environment of doing business.
“When you look at our inflation over the years, it has always been maintained within the Bank of Botswana rate for any particular year.
Couple this with a GDP growth rate that generally hovers around the five percent mark yearly and this demonstrates the sterling job the Central Bank is doing,” he argues.
He acknowledges that it is worthy celebrating the extent of infrastructural development the country has attained to date, noting that by African standards, Botswana is way above average on this measure especially looking at it on a per capita basis and using the important ones being, schools, healthcare facilities, roads, and so on.
Despite criticism from some quarters, the Botswana growth story from 1966 to present is more like a fairy tale with the state providing free education and healthcare for all.
“It’s chalk and cheese when you compare what the country looked like back then to what it is now,” President Ian Khama told Reuters recently.