DRIVING SUISTAINABLE GROWTH

….A brief history intro

Three periods:
1. Before colonization
2. During colonization
3. After independence
 1. Before colonization
VIII century BC: settlement of the ancestor of the original
“Eight Tribes” in Botswana land.


POLITICAL ORGANIZATION:
 Chief  maximal authority
 Assembly (Kgotla)  consultive and control institution

NO
INTERFERENCES

ECONOMIC ORGANIZATION:
• based on Breeding
• privately owned cattle
 2. During colonization
Europeans settled Africa and entered the
Botswana History

1. War with Zulu Kingdom  more unity among 1818-1840
tribes difaquane period

2. Creation of the british protectorate of

1885
Bochuanaland to contrast the expansion of
Germany in south Africa
soft colonialism, the tribes maintain their
authonomy

S E C O N D W O R L D W A R
 CREATION OF TWO POLITICAL
PARTIES 1960

BECHUANALAND
PEOPLE’S PARTY(BPP)
 First Botswana party
 Antiaparthaid inspiration
 Urban groups and workers
BECHUANALAND
DEMOCRATIC PARTY(BDP)
• educated elite of teachers, civil
servants and chiefs
•Exploaition of loyalty between
commoners and chiefs

BRITISH GOVERNMENT SERETSE KHAMA

INDIPENDENCE : 1966 WON

FIRST ELECTION
1965
 3. After Indipendence
STATE ORGANIZATION
 President  executive power 
 National Assembly  general attorney, 31 elected members, 4
members chosen by the president election of president
 House of Chiefs chiefs of eight tribes consultancy role

CONDITIONS AT INDIPENDENCE:
REFORMS
• little infrastructure and few assets
• only two secondary schools
• low quality of education
• high imports of good
• independence expenditures financed
by Britain
 RAW
PRE-COLONIAL MATERIAL LOW
INSTITUTION COLONIZATION

HOW DID IT BECAME A SUCCESS STORY?

 PRE-COLONIAL
INSTITUTION

TSWANA
TRIBES

DIALOGUE
KGOTLA AND
COOPERATION

CONSEQUENT POLITICAL MANAGEMENT:

1. HIGH PARTECIPATION RATE IN POLITICAL DECISION MAKING
PROCESS
2. HIGH CONSIDERATION OF PUBLIC INTEREST BY POLITICIANS
3. REGULAR ELECTIONS
4. HIGH SENSE OF LEGITIMACY OF THE POWER
5. FREEDOM OF PRESS AND THOUGHT
 IS DEMOCRACY FOUNDAMENTAL
FOR DEVELOPMENT?(D.Rodrick)
Examples of non
democratic countries: Barro(1996)
China, Singapore..

IN BOTSWANA, DEMOCRACY HELPED GROWTH:

1. DEMOCRACY PRODUCE SHORT-TERM STABILITY  attractive country forFDI
2. DEMOCRACY HANDLE ADVERSE SHOCK MUCH BETTER
3. DEMOCRACY DELIVERS BETTER OUTCOMES  Prudent management

•Domestic development fund

•Revenue stabilization fund
•Public debt service fund
 RAW
MATERIAL
BOTSWANA : copper, nickel, salt, soda ash, potash, coal,
iron ore, silver, diamonds.
J.Sachs : negative relationship
between natural resources and
growth.

Why?
• natural resource industry is
favored
•Immediate Consumption
increases
BOTSWANA ESCAPE THE
RESOURCE CURSE •No long-run growth

GOOD GOVERNANCE
 GOOD GOVERNANCE OF NATURAL
RESOURCES

BOTSWANA GOOD MANAGEMENT OF N. R.: INVESTMENT OF REVENUES

FROM DIAMONDS IN EDUCATION, HEALTH AND INFRASTRUCTURE FOR ECONOMIC
DEVELOPEMENT.

GOOD LEADERSHIP: HONEST LEADERS COMMITED TO THE INTEREST OF THE

COUNTRY RATHER THAN THEIR OWN INTERESTS.
 LOW
COLONIZATION

IS IT COLONIALISM GOOD FOR DEVELOPMENT?

YES NO
EXAMPLE : INDIA EXAMPLE: KENYA

BOTSWANA “LIGHT” COLONIALISM


• motivated by need to contrast German expansion
in Africa
•75% of expenditures were for administrative
costs, no investment!

GOOD FOR DEVELOPEMENT IN BOTSWANA  IT DIDN’T HINDER THE

PRESERVATION OF DEMOCRATIC INSTITUTIONS AND PRACTICES
INHERITED FROM TSWANA TRIBES
 RAW
PRE-COLONIAL MATERIAL LOW
INSTITUTION COLONIZATION

GOOD GOVERNANCE

PROPERTY NATIONAL DEREGULATION

RIGHT PLANNING
SERESETE
KHAMA FISCAL
POLICY
FDI CONSTRAIN
T
Set of conditions necessary to enforce good governance and so property rights:
(Theory of the Proprietary State, Grossman and Noh, 1994)

PROPERTY
1) LIMITS TO The state has to RIGHT
TAX EVASION pursue policies that
limit tax evasion C
O P
N
S
PRE R
2) THE STATE O
CREDIBILITY The state has to T DATO P
R T P
COMMITS TO be credible in RY E
R R
A R
PROTECTING protecting O I
PRIVATE property rights I GOV C I
P G
N T V
PROPERTY ERN E H
T I A
R T
S MEN O T
T S
In order to deter N E
3) NO THREAT social upheaval, the O T Y
OF government must be N
REVOLUTION O
able to satisfy the :
FROM THE F
demands of the
POPULACE electorate
1 constraint) LIMITS TO TAX EVASION


36% on the HIGHEST
MARGINAL
average CORPORATE TAX in
South Africa

23% the HIGHEST

MARGINAL
CORPORATE TAX in
BOTWSANA

PROPERTY
RIGHT
Source: World Bank, World Development Indicators - Last updated March 2, 2011
 2 constraint) THE STATE COMMITS TO
PROTECTING PRIVATE PROPERTY

…seems  …seems

 PROHIBITION OF THE  GOVERNMENT TAKE-OVER

NATIONALIZATION OF OF THE OWNERSHIP OF
PRIVATE PROPERTY MINES (Mines and minerals
Act (1967) ..BUT…
 IMPROVEMENT IN THE The government used its
PROTECTION OF ownership to channel the
INTELLECTUAL PROPERTY gains from mining to the
RIGHTS nation as a whole

 INDEPENDENT JUDICIARY
Identification of illegal actions GOOD GOVERNANCE
taken by goverment PROPERTY
RIGHT
 3 constraint) NO THREAT OF
REVOLUTION FROM THE POPULACE

Higher approval in favour of democracy and not on the verge of
revolution..

PROPERTY
RIGHT
 2° after South Africa
among the African
countries PROPERTY
RIGHT

44° out of 125 in

the International
Property Rights
Index
 Factors
FDIinfluencing companies’ decisions to invest in
Botswana
(rating 1= unimportant, 4=very important)

Survey UNCTAD and UNDP (2001)

Ease of doing business rank : -52° place over all OECD countries (Italy 80°)
-3° place over sub-Saharan Africa
(www.doingbusiness.org)
DISTRIBUTION OF FDI PER SECTOR

Stock of FDI by industry, 1999 (per cent)

PARTNERSHIP BETWEEN STATE-

OWNED AND FOREIGN FIRMS

•Debswana Kiamond Company

• BCL Ltd
• Tati nickel Ltd
 FDI HISTORICAL TREND
FDI inflows into Botswana, 1975-2000 (millions of dollars)

•Joint ventures in mineral

sector (diamonds)
•Introduction of pula
•Liberal exchange controls BCL Ldt losses and
change of ownership
 NATIONAL
PLANNING

The world's leading producer of

diamonds by value.

No private diamond mining

operations in the country.

Diamonds account for:

• fully one third of the nation's GDP
• over 90% of earnings from exports
• 50% of government revenues.
Social Expenditure • Literature
National Plan
• Social security
• Investment
infrastructure
 Botswana

Mozambico Zambia

Angola
Madagascar
 Education

BOTSWANA

Numbers of School Failure

Social Security
 Corruption

Overview of the index of perception of corruption, 2010.

Health
NATIONAL
PLANNING
 CONSTRAINT

Institutions are able to limit the power of rulers

ACTIVE JUDICIARY
SYSTEM
Identification of illegal GOOD POLICIES
actions taken by Are favored
goverment
POLITICAL
STABILITY
WILLIGNESS
TO
DELEGATE
Example: Mines and minerals Act (1967) that POWERS TO
gives subsoil mineral rights to the state. Before it THE STATE
belonged to the tribes, and especially diamonds
mines were under the tribe whose chief was Mr.
Khama.
 SERESETE
KHAMA

GOOD LEADER:
1. Application of national programs without
succumbing to external political whims
2. Non-antagonistic approach to south-Africa
3. Training of his Botswanan successor
4. Adherence to a governance ethic
A SHORT BIOGRAPHY…
 1921 Born in Serowe, Botswana 5. Investment of the whole outcomes from mines for
development infrastructure without personal gain
 Studying period in South Africa, and Oxford
 1947 Marriage with Ruth Williams (English woman)
 6. with
1951-1956 exile due to his marriage Nationalization of mines and basic utility services
and white woman
 1961 foundation of BDP
 1965 won of elections
 1980 death

 In addiction to that he was member of Bangawato Family, known for their benevolence and
integrity
 DEREGULATION

Removal or simplification of government rules

and regulations that constrain the operation of
market forces

Eliminating or reducing government

control of how business is done take
to new investment
DEREGULATION
Since FISCAL
1971… POLICY
CONTINUOUS BUDGET
SURPLUS
Budget Surplus = Tax Revenues –
Government Expenditures

Advantages of a prudent fiscal

policy:
 “SAVING FOR RAINY DAYS”

EX. In 1981/1982 and in 1994 :

Diamon current current
d export revenue expenditu
in „93 s in „93 re in „94

 NOT TEMPED TO BORROW

EXCESSIVE SUMS
INTERNATIONALLY
DEBT PROBLEM AVOIDED
 Despite during the past
two years…

due to ...DOUBLING OF
GOVERNMENT
EXPENDITURES
(an ambitious roll out of
development projects, including
building of schools, hospitals,
airport facilities, roads...)

..and a DROP IN TOTAL REVENUES

due to decreasing mineral revenues …..
 FISCAL
But the future projections seems to confirm
it was only a exception and the trend will POLICY
be reversed again..
 RAW
PRE-COLONIAL MATERIAL LOW
INSTITUTION COLONIZATION

GOOD GOVERNANCE

PROPERTY NATIONAL DEREGULATION

RIGHT PLANNING
SERESETE
KHAMA FISCAL
POLICY
FDI CONSTRAINT
GOOD GOVERNANCE
World map showing countries above and below the world GDP (PPP) per
capita, currently $10,700. Source: IMF (International Monetary Fund).
Blue above world GDP (PPP) per capita
Orange below world GDP (PPP) per capita
 Somalia
RAW
PRE-COLONIAL MATERIAL LOW
INSTITUTION COLONIZATION

BAD GOVERNANCE

LOW
INVESTEMENT
POLITICAL
FIGHT

Botswana vs.... NO
CONSTRAINT
 Lesotho
PRE-COLONIAL RAW
INSTITUTION MATERIAL HIGH
(KGOTLA) COLONIZATION

BAD GOVERNANCE

LOW
INVESTEMENT
POLITICAL
INSTABILITY

NO
CONSTRAINT
  HIV

INEQUALITY AND POVERTY

UNEMPLOYMENT

DIFFICULTIES in DIFERSIFYING
THE ECONOMY FROM MINING
  HIV

INEQUALITY AND POVERTY

UNEMPLOYMENT

DIFFICULTIES in DIFERSIFYING
THE ECONOMY FROM MINING
 HIV


One of the biggest spenders on health and HIV prevention in
Southern Africa...

..but
…yet it has one of the highest HIV prevalence rates in the world


 NOT A PROBLEM
OF LACK OF

 PROBLEM
OF DELAY
COMMITMENT

OF ACTION

PROBLEM OF
LACK OF
DEEP
KNOWLEDGE
PROBLEM
OF DELAY
OF ACTION

…On most development indicators excluding adult health, Botswana has

made progress and indicators of child health and nutrition are relatively
sound
 PROBLEM OF
LACK OF
DEEP
KNOWLEDGE


The impact of AIDS on economic
growth: In
absence

 of AIDS

With
AIDS

OUTSTANDING
CHALLENGES
 INEQUALITY AND POVERTY


While ABSOLUTE POVERTY is likely to have
decreased in light of the high growth rate...
Measure of income distribution Poverty at below
within the country $2/day PPP basis HIGH
UNEMPL
REMARKABLY HIGH HIGH POVERTY OYMENT
INEQUALITY RATE


…suggest
that high
levels of
RELATIVE
POVERTY
exist

WHY
IF THE
ECONOMY
HAS BEEN
GROWING
RAPIDLY

OUTSTANDING
CHALLENGES
 UNEMPLOYMENT

ACCESS TO CREDIT AND

 INCREASE IN THE
FINANCIAL SUPPORT OF:
RESERVATION WAGES more
-social programmes
than the market clearing level
-extended families

NOT ACCESS TO EDUCATION

AND LACK OF SKILLS

LARGER SIZE OF THE PUBLIC SECTOR in
the LABOUR MARKET...


 And GENEROUS and
INCREASE IN THE RESERVATION
INCREASING GOVERNMENT
WAGES more than the market clearing
WAGES
level


 ....while another source of unemployment:
CAPITAL-INTENSIVE NATURE OF MINING
that is THE LEADING SECTOR

OUTSTANDING
CHALLENGES
 DIFFICULTIES in
DIFERSIFYING THE
ECONOMY FROM MINING

 • 80% ARE
DIAMOND
EXPORTS

•MOST
OTHER
EXPORTS
ARE MINING
RELATED

•FDI LIMITED
TO DIAMOND
SECTOR

 WHY DESPITE
GLOBAL
RECOGNITION OF
BOTWSANA’S WHAT CAN
INSTITUTIONAL BE DONE?
TRASPARENCY AND
STABLE ECONOMY 
 Government’s need to
 cheaper to import from South complement and facilitate the
Africa than to manufacture private sector:
goods domestically: not
- COST OF DOING BUSINESS
competitive - labour productivity by

RETRAINING PROGRAMMES

 the large diamond  Increasing the potential of

TOURISM
endowment and subsequent  Improvement of
reliance on natural resources
AGRICULTURAL POLICIES
 Bibliography
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Botwsana”, in In search of Prosperity, Dani Rodrik, editor. Princeton, N.J.: Princeton University
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Amegashie, J.Atsu, Ibrahim Kamara. 2008. “The exceptionality of Botwsana. Economics, Politics
and challenges”, African Center for Economic Transformation Working Paper No.2
Barro Robert. 1996. “Democracy and growth”, Journal of economic growth
Baulier Scott A. August 2004. “Explaining Botswana‟s success: critical role of post-colonial
Policy”
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Iimi Atsushi. 2006. “Did Botswana Escape for resource curse?”. IMF working paper WP/06/138

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International Monetary Fund. September 2010. “Botswana: 2010 Article IV Consultation—Staff
Report and Supplement; Public Information Notice on the Executive Board Discussion”, IMF
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http://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdf )
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Issue 29, December 2006
MacFarlan, Maitland, Silvia Sgherri. 2001. “The Macroeconomic Impact of HIV/AIDS in
Botwsana”, IMF Working Paper
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O‟Connell, Robert H. Bates, Paul Collier, and Chukwuma C. Soludo, editors. Cambridge:
Cambridge University Press.
“Sub Saharan African “Syndromes”: The Differing Experiences of Zambia and Botwsana”
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www.worldbank.org
www.tradingsecomics.com
www.doingbusiness.org
www.bankofbotswana.bw
Shukrani kwa ajili ya mawazo yako

Thanks for your attention