Botswana’s economic transformation has been slowed by government’s obsession with managing threats that could result with the ruling Botswana Democratic Party (BDP) losing power instead of implementing reforms which address competitive concerns and diversify economy, a new economic review by International Food Policy Research Institute (IFPRI) and the World Bank has pointed out.
A review by leading economists from the two institutions criticized the Botswana government for failing to grow manufacturing industries after 50 years and running an economy that is dominated by natural resources like diamonds and beef.
Recent data shows that despite attempts to diversify the economy and industrialize since 1970’s the country’s economy is not transforming significantly. Recorded economic growth has left many Batswana behind, as evidenced by high rates of unemployment and extremely high income inequality including poverty. The economists who participated in the review indicated that for a country that has been hailed as an “African success story”, the results of economic growth and economic transformation are disappointing and demand further explanation.
The economists say it is not a secret that Botswana launched campaign after campaign targeted at diversification and it was puzzling why these campaigns have not yielded fruits since the country has an impressive track record marked by good governance and prudent macroeconomic and fiscal policy. “We do not pretend to have the answer to this puzzle, but only note that understanding why things have stayed the same for so long is key to unlocking Botswana’s future potential. One hypothesis is that a strong industrial sector stands to threaten the political and economic power of the longstanding ruling party, the Botswana Democratic Party,” said the economists. The lack of diversification, they add, has allowed the elites in Botswana to maintain their grip on the country for 50 years through investment in myriad social assistance programs even though unemployment and inequality also threaten the BDP.
Another explanation for the slow economic transformation and diversification, the review proffered, is Botswana’s structural problem of a high-cost base, such as high transport costs which poses challenges in achieving competitiveness in the production of exports:“Diversification policies have failed to address the high costs of production to sufficiently raise productivity. High levels of public spending on education and training have not succeeded in alleviating shortages of skills or in producing secondary school graduates and tertiary education graduates with the attributes needed by the private sector. Combined with a very large public sector and a restrictive immigration policy, this combination has led to high costs for the available skilled labour.”
The review further shows that the Botswana public sector investments in infrastructure have not been well targeted at addressing economic constraints, as government in the country is spending extensively on rural roads and infrastructure yielding limited economic benefits while businesses remain constrained by electricity shortages and inadequate Internet connectivity and bandwidth. “This prioritization in infrastructure spending may have political roots. The BDP gains its strongest support in rural areas; hence, rural infrastructure directly benefits its electoral base, rather than the economy as a whole.”
The review noted that several much-needed reforms that would help to address competitiveness concerns and propel economic transformation and diversification, are politically sensitive and could result with shortage of funds to keep the BDP’s support base.
According to the review report, another obvious reason for persistent poverty in the country is extremely unproductive agriculture sector and water unavailability. “Many problems affecting water availability are in the hands of the government, such as international agreements on the diversion and use of water sources that cross borders such as the Zambezi River.”