Road Ahead for Botswana

Road Ahead for Botswana

By 2007 Botswana had 7,000 kms of paved roads, and per capita income had risen to about $6,100 ($12,000 at purchasing power parity), making Botswana an upper middle-income country comparable to Chile or Argentina

Determinants of TFT

Education, health, infrastructure, imports, institutions, openness, competition, financial development, geographical predicaments and absorptive capacity (including capital intensity) appear to be the most important.

What Went Well

Good Inherited political and economic Institutions coupled with legal restraint proved beneficial to Botswana when it had an initial large aid inflow and fantastic mineral rents which catapulted it from a poor income developing country to a middle income country in 4 decades. However Botswana is faced developmental challenges such as limited economic diversification, increase in mortality due to AIDS and poverty

The government enforced property rights and the rule of law with a high degree of transparency demonstrated by continuing the Tswana tribal tradition of consultation. Known as kgotla, still helped maintain the trust on the government that it will serve people and promote development.

1. The Govt avoided the “Dutch Disease “by investing in public goods and infrastructure. The government took measures to boost productivity, by limiting parastatals and avoiding import substitution policies.
2. Botswana overcame “The volatility curse” by unlinking public expenditure from revenue. The government established savings funds to avoid typical procyclical behaviour and real exchange rate volatility.
3. Whether the govt overcame the exhaustibility challenge is unclear. It is predicted that the diamond revenues will start to decline from 2016 and exhaust by 2029

Botswana has been proactive and actioned appropriate policies to prepare for the depletion of its natural resources, the mineral base, by accumulating funds for the future,building infrastructure, and investing in health and education.

However, the growth of the non-mineral traded goods sector, remains flat at 5% GDP.This needs to accelerate to avoid balance of payments problems as diamond revenues start to decline.

Planning for a Future without Mineral Revenues

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Good fiscal policies are not by themselves sufficient as demonstrated by mineral-based economies which have high rates of investments.

The key lies in the intention and action, how the government plans to utilize the funds. Moreover, in the hands of the venal and corrupt, government savings funds can easily turn into slush funds for the favoured elites.

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