botswana definitive

8/6/2019 Botswana Definitive

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DRIVING SUISTAINABLE GROWTH


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Three periods:

1. Before colonization

2. During colonization

3. After independence

.A brief history intro


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POLITICAL ORGANIZATION:

Chief maximal authority Assembly (Kgotla) consultive and control institution

1. Before colonizationVIII century BC: settlement of the ancestor of the original

EightTribes in Botswana land.

ECONOMIC ORGANIZATION:

based on Breeding

privately owned cattle

NO

INTERFERENCES


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Europeans settled Africa and entered the

Botswana History

2. During colonization

1818-1840

difaquane period

1. War with Zulu Kingdommore unity amongtribes

2. Creation of the british protectorate ofBochuanaland to contrast the expansion ofGermany in south Africa

soft colonialism, the tribes maintain theirauthonomy

1885

S E C O N D W O R L D W A R


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CREATION OF TWO POLITICALPARTIES 1960

BECHUANALANDPEOPLES PARTY(BPP)

First Botswana party Antiaparthaid inspiration

Urban groups and workers

BECHUANALANDDEMOCRATIC PARTY(BDP)

educated elite of teachers, civil

servants and chiefs

Exploaition of loyalty betweencommoners and chiefs

BRITISH GOVERNMENT SERETSE KHAMA

WON

FIRST ELECTION

1965

INDIPENDENCE : 1966


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STATE ORGANIZATION President executive power National Assembly general attorney, 31 elected members, 4

members chosen by the president election of president House of Chiefschiefs of eight tribesconsultancy role

3. After Indipendence

CONDITIONS AT INDIPENDENCE:

little infrastructure and few assets only two secondary schools low quality of education high imports of good independence expenditures financedby Britain

REFORMS


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HOW DID IT BECAME A SUCCESS STORY?

PRE-COLONIALINSTITUTION

RAWMATERIAL LOW

COLONIZATION


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TSWANA

TRIBES

KGOTLADIALOGUE

ANDCOOPERATION

CONSEQUENT POLITICAL MANAGEMENT:

1. HIGH PARTECIPATION RATE IN POLITICAL DECISION MAKINGPROCESS

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



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IS DEMOCRACY FOUNDAMENTALFOR DEVELOPMENT?(D.Rodrick)

Examples of non

democratic countries:

China, Singapore..

Barro(1996)

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


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BOTSWANA : copper, nickel, salt, soda ash, potash, coal,

iron ore, silver, diamonds.J.Sachs: negative relationshipbetween natural resources andgrowth.

Why?

natural resource industry isfavored

Immediate Consumption

increasesNo long-run growth

BOTSWANA ESCAPE THERESOURCE CURSE

GOOD GOVERNANCE

RAWMATERIAL


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GOOD GOVERNANCE OF NATURALRESOURCES

BOTSWANA GOOD MANAGEMENT OF N. R.: INVESTMENT OF REVENUESFROM DIAMONDS IN EDUCATION, HEALTH AND INFRASTRUCTURE FOR ECONOMICDEVELOPEMENT.

GOOD LEADERSHIP: HONEST LEADERS COMMITED TO THE INTEREST OF THECOUNTRY RATHER THAN THEIR OWN INTERESTS.


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IS IT COLONIALISM GOOD FOR DEVELOPMENT?

YES

EXAMPLE : INDIA

NO

EXAMPLE: KENYA

BOTSWANA

LIGHT COLONIALISM

motivated by need to contrast German expansionin Africa

75% of expenditures were for administrativecosts, no investment!

GOOD FOR DEVELOPEMENT IN BOTSWANA IT DIDNT HINDER THEPRESERVATION OF DEMOCRATIC INSTITUTIONS AND PRACTICES

INHERITED FROM TSWANA TRIBES

LOW

COLONIZATION


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RAWMATERIAL LOWCOLONIZATION

GOOD GOVERNANCE

PROPERTYRIGHT

NATIONAL

PLANNING

CONSTRAINT

SERESETEKHAMA

DEREGULATION

FDI

FISCALPOLICY


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1) LIMITS TOTAX EVASION

2) THE STATECREDIBILITYCOMMITS TOPROTECTINGPRIVATEPROPERTY

3) NO THREATOFREVOLUTIONFROM THE

POPULACE

The state has tobe credible inprotectingproperty rights

CONS

TRAINT

S

ON:

Set of conditions necessary to enforce good governance and so property rights:(Theory of the Proprietary State, Grossman and Noh, 1994)

The state has topursue policies thatlimit tax evasion

In order to detersocial upheaval, thegovernment must beable to satisfy thedemands of the

electorate

PRE

DATORYGOVERN

MENT

P

R

OT

E

C

T

I

O

N

O

F

P

R

I

V

A

TE

PR

O

P

E

RT

Y

R

I

G

H

TS

PROPERTY

RIGHT


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1 constraint) LIMITS TO TAX EVASION

the HIGHESTMARGINALCORPORATE TAX in

South Africa

the HIGHESTMARGINALCORPORATE TAX inBOTWSANA

Source: World Bank, World Development Indicators - Last updated March 2, 2011

36% onaverage

23%

PROPERTYRIGHT
http://data.worldbank.org/data-catalog/world-development-indicatorshttp://data.worldbank.org/data-catalog/world-development-indicators


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2 constraint) THE STATE COMMITS TOPROTECTING PRIVATE PROPERTY

seems

PROHIBITION OF THE

NATIONALIZATION OFPRIVATE PROPERTY

IMPROVEMENT IN THEPROTECTION OF

INTELLECTUAL PROPERTYRIGHTS

INDEPENDENT JUDICIARYIdentification of illegal actions

taken by goverment

seems

GOVERNMENT TAKE-OVER

OF THE OWNERSHIP OFMINES (Mines and mineralsAct (1967) ..BUT

The government used itsownership to channel thegains from mining to thenation as a whole

GOOD GOVERNANCE

PROPERTYRIGHT


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3 constraint) NO THREAT OFREVOLUTION FROM THE POPULACE

Higher approval in favour of democracy and not on the verge ofrevolution..

PROPERTYRIGHT


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44 out of 125 inthe InternationalProperty RightsIndex

2 after South Africaamong the Africancountries PROPERTY

RIGHT
http://american-conservativevalues.com/blog/wp-content/uploads/2011/02/property-rights.jpg


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Factors influencing companies decisions to invest inBotswana

(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)

FDI


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DISTRIBUTION OF FDI PER SECTOR

Stockof FDI by industry, 1999 (per cent)

PARTNERSHIP BETWEEN STATE-OWNED AND FOREIGN FIRMS

Debswana Kiamond Company

BCL Ltd

Tati nickel Ltd


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HISTORICAL TRENDFDI inflows into Botswana, 1975-2000 (millions of dollars)

Joint ventures in mineralsector (diamonds)

Introduction of pula

Liberal exchange controls BCL Ldt losses and

change of ownership

FDI


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NATIONALPLANNING

No private diamond mining

operations in the country.

The world's leading producer ofdiamonds by value.

Diamonds account for:

fully one third of the nation's GDP over 90% of earnings from exports 50% of government revenues.


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Social ExpenditureNational Plan

Literature Social security

Investmentinfrastructure


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Botswana

MadagascarAngola

ZambiaMozambico


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Education

BOTSWANA

Numbers of School Failure


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Social Security


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Corruption

Overview of the index of perception of corruption, 2010.


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HealthNATIONALPLANNING


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CONSTRAINT

Institutions are able to limit the power of rulers

GOOD POLICIES

Are favored

POLITICALSTABILITY

WILLIGNESSTO

DELEGATEPOWERS TOTHE STATE

Example: Mines and minerals Act (1967) thatgives subsoil mineral rights to the state. Before itbelonged to the tribes, and especially diamondsmines were under the tribe whose chief was Mr.

Khama.

ACTIVE JUDICIARYSYSTEM

Identification of illegal

actions taken bygoverment


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SERESETEKHAMA

A SHORT BIOGRAPHY 1921 Born in Serowe, Botswana Studying period in South Africa, and Oxford 1947 Marriage with Ruth Williams (English woman)

1951-1956 exile due to his marriage with 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 andintegrity

GOOD LEADER:

1. Application of national programs withoutsuccumbing to external political whims

2. Non-antagonistic approach to south-Africa

3. Training of his Botswanan successor

4. Adherence to a governance ethic

5. Investment of the whole outcomes from mines fordevelopment infrastructure without personal gain

6. Nationalization of mines and basic utility services


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DEREGULATION

Removal or simplification of government rulesand regulations that constrain the operation of

market forces

Eliminating or reducing governmentcontrol of how business is done take

to new investment


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DEREGULATION

SCA


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CONTINUOUS BUDGET

SURPLUSBudget Surplus = Tax Revenues

Government Expenditures

NOT TEMPED TO BORROWEXCESSIVE SUMS

INTERNATIONALLYDEBT PROBLEM AVOIDED

EX. In 1981/1982 and in 1994 :

Since1971

Advantages of a prudent fiscal

policy:SAVING FOR RAINY DAYS

current

expenditurein 94

current

revenues in 93

Diamon

d exportin 93

FISCALPOLICY


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due to ...DOUBLING OFGOVERNMENTEXPENDITURES

(an ambitious roll out ofdevelopment projects, including

building of schools, hospitals,

airport facilities, roads...)

Despite during the pasttwo years

..and a DROP IN TOTAL REVENUESdue to decreasing mineral revenues ..

FISCAL


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But the future projections seems to confirmit was only a exception and the trend willbe reversed again..

FISCALPOLICY


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RAWMATERIAL LOW

COLONIZATION

GOOD GOVERNANCE

PROPERTY

RIGHT

NATIONAL

PLANNING

CONSTRAINT

SERESETEKHAMA

DEREGULATION

FDI

FISCALPOLICY


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GOOD GOVERNANCE


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World map showing countries above and below the world GDP (PPP) percapita, currently $10,700. Source: IMF (International Monetary Fund).Blue above world GDP (PPP) per capita

Orange below world GDP (PPP) per capita


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RAWMATERIAL LOW

COLONIZATION

BAD GOVERNANCE

LOW

INVESTEMENT

NO

CONSTRAINT

POLITICALFIGHT

Somalia

Botswana vs....


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PRE-COLONIAL

INSTITUTION

(KGOTLA)

RAWMATERIAL HIGH

COLONIZATION

BAD GOVERNANCE

LOW

INVESTEMENT

NO

CONSTRAINT

POLITICALINSTABILITY

Lesotho


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HIV

INEQUALITY AND POVERTY

UNEMPLOYMENT

DIFFICULTIES in DIFERSIFYINGTHE ECONOMY FROM MINING


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HIV


UNEMPLOYMENT

DIFFICULTIES in DIFERSIFYINGTHE ECONOMY FROM MINING


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One of the biggest spenders on health and HIV prevention in

Southern Africa...

HIV

..but


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


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NOT A PROBLEMOF LACK OF

COMMITMENTPROBLEMOF DELAY

OF ACTION

PROBLEM OF

LACK OFDEEP

KNOWLEDGE


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PROBLEMOF DELAYOF ACTION

On most development indicators excluding adult health, Botswana hasmade progress and indicators of child health and nutrition are relatively

sound


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PROBLEM OFLACK OF

DEEPKNOWLEDGE


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The impact of AIDS on economicgrowth:

WithAIDS

Inabsence

of AIDS

OUTSTANDINCHALLENGES


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While ABSOLUTE POVERTY is likely to havedecreased in light of the high growth rate...


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Measure of income distributionwithin the country

REMARKABLY HIGHINEQUALITY

WHYIF THEECONOMYHAS BEEN

GROWINGRAPIDLY

Poverty at below$2/day PPP basis

HIGH POVERTYRATE

HIGHUNEMPLOYMENT

suggestthat highlevels ofRELATIVEPOVERTYexist

OUTSTANDINGCHALLENGES


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UNEMPLOYMENT

ACCESS TO CREDIT ANDFINANCIAL SUPPORT OF:

-social programmes-extended families

NOT ACCESS TO EDUCATION

AND LACK OF SKILLS

INCREASE IN THERESERVATION WAGES morethan the market clearing level


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LARGER SIZE OF THE PUBLIC SECTOR inthe LABOUR MARKET...


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....while another source of unemployment:CAPITAL-INTENSIVE NATURE OF MINING

that is THE LEADING SECTOR

OUTSTANDINGCHALLENGES

DIFFICULTIES i


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DIFFICULTIES inDIFERSIFYING THE

ECONOMY FROM MINING

80% AREDIAMONDEXPORTS

MOSTOTHER

EXPORTSARE MINING

RELATED

FDI LIMITEDTO DIAMOND

SECTOR


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WHY DESPITE


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cheaper to import from South

Africa than to manufacture

goods domestically: notcompetitive

the large diamondendowment and subsequentreliance on natural resources

Governments need tocomplement and facilitate theprivate sector:

- COST OF DOING BUSINESS- labour productivity by

RETRAINING PROGRAMMES

Increasing the potential ofTOURISM

Improvement of

AGRICULTURAL POLICIES

WHY DESPITEGLOBAL

RECOGNITION OFBOTWSANAS

INSTITUTIONAL

TRASPARENCY ANDSTABLE ECONOMY

WHAT CANBE DONE?

bl h


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Acemoglu, Daron, Simon Johnson, and James A.Robinson. 2003.An African Success Story:Botwsana, in In search of Prosperity, Dani Rodrik, editor. Princeton, N.J.: Princeton UniversityPressRodrik, Dani. 2007. One Economics Many Recipes, Princeton University PressAmegashie, J.Atsu, Ibrahim Kamara. 2008.The exceptionality ofBotwsana. Economics, Politicsand challenges, African Center for Economic Transformation Working Paper No.2Barro Robert. 1996.Democracy and growth, Journal of economic growthBaulier Scott A. August 2004.Explaining Botswanas success: critical role of post-colonialPolicyBeaulier, Scott, J. Robert Subrick. 2005.The political foundation of economic development

Iimi Atsushi. 2006. Did Botswana Escape for resource curse?. IMF working paper WP/06/138

International Monetary Fund. July 2007.Botwsana Selected Issues and Statistical Appendix,IMF Country Report No. 07/228International Monetary Fund. February 2008. Botwsana: Selected Issues IMF Country ReportNo. 08/57International Monetary Fund. June 2010 Botswana: 2009 Article IV ConsultationStaff Report;Public Information Notice on the Executive Board Discussion; and Statement by the ExecutiveDirector for Botswana, IMF Country Report No.10/172

Bibliography

International Monetary Fund. September 2010. Botswana: 2010 Article IV ConsultationStaff


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y pReport and Supplement; Public Information Notice on the Executive Board Discussion, IMF

Country Report No.10/280International Property Rights Index. 2011 Report (consultable at the following addresshttp://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdf )

Krishnaswamy, Siddharth. The effect of AIDS on Botswanas development, Field ExchangeIssue 29, December 2006MacFarlan, Maitland, Silvia Sgherri. 2001.The Macroeconomic Impact of HIV/AIDS inBotwsana, IMF Working PaperMaipose Gervase. Policy and institutional dynamics of sustained growth in BotswanaNdulu, Benno J. and Stephen A. OConnell. 2008. Policy Plus: African Growth Performance,1960-2000, in Economic Growth in Africa: 1960-2000, Volume 1, Benno J. Ndulu, Stephen A.

OConnell, Robert H. Bates, Paul Collier, and Chukwuma C. Soludo, editors. Cambridge:Cambridge University Press.Sub Saharan African Syndromes: The Differing Experiences of Zambia and BotwsanaRotberg Robert I. The roots of africasleadership deficit, editors. Center for public leadershipSachs J., Warner A. November 1997.Natural resource abundance and economic growth.Harvard University, Cambridge MAUnited Nations conference on Trade and Development. 2003.Investment policy review-BotswanaUnited Nations conference on Trade and Development. 2008. World investment directory-Volume x, Africa 2008.www.worldbank.orgwww.tradingsecomics.comwww.doingbusiness.org

www.bankofbotswana.bw
http://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdfhttp://www.worldbank.org/http://www.tradingsecomics.com/http://www.doingbusiness.org/http://www.bankofbotswana.bw/http://www.bankofbotswana.bw/http://www.doingbusiness.org/http://www.tradingsecomics.com/http://www.worldbank.org/http://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdf


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Shukrani kwa ajili ya mawazo yako

Thanks for your attention

botswana definitive

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