Tuesday, April 7, 2009

Botswana's Forward Leap From a Rent Economy

Landlocked in a sub-region of a continent tragically characterized by chronic dysfunctionalism, Botswana has been widely recognized as a democratic and economic success story since the mid-1960s. Like other nations of the region, Botswana's economy rests upon agriculture, safari tourism and, of course, diamond mining. While the country navigates the expected challenges of limited arable land, wild-life poaching, and resource speculation, Botswana has made positive moves in the direction of national progress and economic sustainability.

Dr. Cheick Diarra, a former NASA aerospace engineer, and currently the Chairman of African Operations for Microsoft, spoke last fall at the University of Botswana. Diarra, a native of Nioro du Sahel in Mali, West Africa, who earned his PhD at Howard University, Washington DC, said that he is impressed with the measures already undertaken by the government in recent years to ensure the stability of Botswana society and the health of its economy. Seemingly undeterred by the current global credit crunch and the looming specter of global economic instability, Botswana is encouraging enterprises that will add value to domestic resources before they are shipped to export markets.

Much of the political credit for the nation's progress in recent years goes to Festus Mogae, Botswana's president from 1998 until his retirement from government in 2008. Mogae was named as the 2008 recipient of the Ibrahim Prize for Achievements in African Leadership. Praised in Time Magazine as "Africa's Good Leader," Festus Mogae led a government characterized by stability and sound economic judgement.

His economic management, they said, produced "remarkable growth," stymied inflation, attracted investment and allowed him to pursue diversification away from diamonds, while simultaneously using tax revenue to fund investment infrastructure, health and education. All this, while maintaining a "tough stance against corruption."

So, what is it exactly that Botswana's Mogae government did (that other sub-Saharan African countries might do well to emulate)? What sorts of reforms did the Mogae government put in motion? Well, for starters, the Mogae government took a firm stance to eliminate corruption -- in effect, to pre-empt any possibility of Botswana descending into kleptocracy as diamond royalties rolled in. Then the government reinvested revenues from the diamond trade by funding both social and physical infrastructure projects.

Well, as Mmegi journalist Brian Benza reports, "Botswana is on the right track towards moving from a rent economy to one whose growth is based on competitiveness on the global market." At least this is the message that Dr. Diarra came to the University of Botswana to deliver. Dr. Diarra sees tremendous potential in the current generation of African youth to take the rhinoceros by the horn and develop a greater and more sustainable prosperity for their homelands. To this end, Dr. Diarra has developed a series of Microsoft Leadership Lectures to awaken the entrepreneurial and developmental spirit of a new generation of educated African youth.

With over 10,000 students enrolled at the University of Botswana, this seemed a perfect venue for Dr. Diarra to broadcast his 'leadership for development and prosperity' theme.

In his address, Diarra remarked:

"If you bring in technology into a transparent environment such as Botswana is doing with the Innovation Hub (and I am told you have begun adding value to your diamonds here), a lot of investments are going to come in and this will not only create employment but, more importantly, avail opportunities for joint ventures and make the dream of the country a reality."

As Botswana takes a more direct control over its diamond resources, opportunities have opened up for the country's entrepreneurs to established secondary industries.

Diarra added that the establishment of the cutting and polishing industry in Botswana should now be magnified with the Innovation Hub so that the country adds value to the highest level in all its products.

Diarra emphasized that it would not be the multinational corporations, like De Beers, that would be the seedbed of recovery and prosperity; rather, this would depend upon entrepreneurs, creating small to medium-sized enterprises. "That is why we want young entrepreneurs to take the initiative and take themselves where they want to go," he said.

DeBeers opens DTC Botswana, March 18, 2008.

Of course, all is not savanna, sunshine, and sparkling diamonds in Botswana. The global banking and credit crisis is dampening prospects for the time being. As a resource economy with nascent secondary and tertiary industries, Botswana is vulnerable to constrictions in the fluidity of global capital. Although Botswana has enjoyed the top sovereign credit rating in Africa, last month the country's rating was downgraded by Moody's.

A third of the country's gross domestic product (GDP) flows from diamonds, and the gemstones account for 80 percent of all export earnings and about 39 percent of public revenue.

Botswana's Finance Minister, Baledzi Gaolathe, has forecast declining government revenues to the end of 2011, and warns that revenues may fall well short of public expenditure commitments. Unfortunately, these commitments lie deep in the weave of the very fabric that Dr. Diarra praised only months ago.

Diamond revenues have created a heavily subsidized education system from pre-school to university, about 95 percent of the population of 1.8 million reside 15km or less from a clinic providing free health care, and all HIV-positive citizens have access to antiretroviral therapy.

"There can be no doubt that diamonds have played a major part in the transformation of our country's fortunes and the lives of our citizens," Botswana's then president, Festus Mogae, told parliament in 2006.

"For our people, every diamond purchase represents food on the table, better living conditions, better healthcare, potable and safe drinking water, more roads to connect our remote communities, and much more."

The government of Botswana has been investing significantly in education, from primary to post-secondary, in the hopes that over time a more educated population would result in even more entrepreneurial activity, the development of a knowledge-sector economy, and a reduction in the country's reliance on diamonds.

As for health care, the global credit crunch could well exacerbate a human crisis. The high incidence of HIV/AIDS is Botswana's (and Africa's) immense tragedy. According to the International AIDS Charity, Avert, Botswana "has an estimated adult HIV prevalence of 23.9%, the second highest in the world after Swaziland."

Other problems may loom as well. A recent outbreak fires on the veldt have raised concerns about arson and sabotage possibly linked to low levels of morale amongst the military and security force.

The recent media reports that some disgruntled Botswana Defence Force (BDF) soldiers are threatening sabotage through anonymous leaflets will be investigated, says a report from the Minister of Defence, Justice and security.

While Botswana will clearly face major challenges in the short-term, it would be well to remember how well-placed the country's economy looks to overcome its challenges and lead the pack in Sub-Saharan Africa. Current challenges aside, what Dr. Diarra saw only months ago might still be readily seen -- an increasingly educated youth, an entrepreneurial spirit, a rich resource base, a developing social infrastructure, and a stable democratic government. The challenges seem large; so does the vision.

Fingers crossed.

Photo credits: Tamba Africa (map), Wilderness Safaris (Savanna).

No comments: