A SERIES OF NOTES FROM THE WORLD’S DEVELOPMENTAL FRONTIERNOTES. FROM AFRICA 3: Botswana (Part II)
Map of Botswana / Joe Studwell
ABSENCE OF POLICY VISION
In deploying surpluses, however, what Botswana lacked was any vision for structural change that would better fit its economy to the needs of its people. There was no vision for the large numbers of small-scale farmers and cattle herders in rural areas and no vision for manufacturing and industrial development to provide jobs for semi-skilled city dwellers.
Like the national leader, Seretse Khama, the administration was fundamentally reactive, dealing with opportunities and challenges effectively, but with no overarching, proactive strategy beyond the long-established support for big cattle.
The role of orthodox economists — who were not a feature of the early developmental states of East Asia — encouraged this; they looked to make the current state of affairs as efficient as possible, not to structurally re-shape the economy. With the benefit of hindsight, Festus Mogae, Botswana’s third President, concludes: ‘We reacted to situations as they arose but failed to imagine our future.’
MFDP economists concentrated investment in education, healthcare and basic infrastructure. Secondary school enrolment, for instance, increased from 1,531 pupils in 1966 to almost 10,000 a decade later.
Hospitals increased from seven in the early 1970s to 30 in the 1990s and life expectancy rose from 48 years in 1966 to 65 in 1990. Paved roads increased from 12 kilometres in 1966 to more than 8,000 kilometres by the end of the century.
These investments, however, were not enough to prevent large swathes of the rural population living in poverty. There was a continuation of the private borehole drilling that effectively privatised communal land to large herd owners who could afford the wells.
In Botswana’s Central District — what had been the Bamangwato Reserve and the biggest concentration of cattle grazing — fewer than 500 individuals gained de facto private grazing rights over a quarter of the area.
An inclusive agriculture policy would have prioritised small-scale cattle farming and involved local communities in managing communal land. However, such a strategy was never considered. In the 1990s, an estimated five percent of the population owned half the national herd. It was a large-scale but low-efficiency cattle economy and was accompanied by a steady increase in the proportion of rural families reporting they owned no cattle — from 28 percent in 1980 to 46 percent in 1999.
Such families formed the core of the rural poor — a large block making up about one quarter of Botswana’s working population. From the 1970s, as diamond revenues increased, the government’s policy to address rural poverty was to increase subsidies to arable agriculture. However, rainfed arable agriculture in almost all parts of Botswana is so precarious that it only works as a counterpart to less rain-dependent cattle ownership. The subsidies are in effect disguised welfare transfers.
Apart from small-scale farming, the other sector in which the Botswanan government could help to create employment opportunities for a population with limited education was manufacturing. The mines which produced so much profit employed only ten thousand people and new entrants to the labour force in the 1970s were twenty thousand a year. However, manufacturing policy was incoherent.
This reflected the dominance of orthodox economists in government who knew that a mineral-driven economy needed to diversify but who were ideologically sceptical of the use of subsidies to induce manufacturing expansion. A lack of conviction led to dabbling in state-led import substitution projects on the one hand, and an unwillingness to aggressively subsidise private sector exporters on the other.
The Botswana Development Corporation (BDC) was created in 1970 as the country’s vehicle to invest in industrial projects. However, it limited its activities to the most basic, low value-added import substitution, including a brewery, a soap factory and a flour mill. There were no investments in more complex industrial plants, such as cement or large-scale metal working.
Over time the BDC put more and more of its investment into real estate projects. The government was unwilling to subsidise credit and electricity prices for export-oriented manufacturers — the types of intervention that underwrote export manufacturing expansion in east Asia.
Instead of subsidising manufacturing at scale with firms’ competitiveness tested by their capacity to export — the crux of the East Asian model — from 1982 Botswana implemented a programme to provide subsidies to enterprises based on their employment generation.
The Financial Assistance Policy (FAP) provided up to 90 percent of the capital cost of starting a business, and 80 percent of wages, declining to 20 percent, over five years. The programme ballooned, and was characterised by increasing abuse, over 20 years. The manufacturing share of the economy remained stuck at 4-5 percent as FAP projects closed down when grants ended.
The one area in which government did eventually deliver a little manufacturing success was the cutting and polishing of diamonds, which it was able to orchestrate as part of its periodic renegotiations with De Beers.
In a deal signed in 2011, De Beers was compelled to relocate its global wholesale diamond aggregation and trading operation, which sells to its approved ‘sightholders’, or wholesale buyers, from London to Gaborone. As of 2018, eight sightholder cutting and polishing operations were running and total downstream diamond employment was around 3,000 people.
Overall, however, the orthodox economic prescription in Botswana left elevated levels of poverty and inequality despite rapid and sustained economic growth. The sectoral economic focuses of East Asian developmental states such as Japan, China or Vietnam on smallholder agriculture and manufacturing, which brought very broad-based development, were absent.
Instead, in a Botswana whose population today is 2.3 million, there are only 340,000 formal jobs. Of these, the private sector accounts for 190,000, of which manufacturing is less than 40,000. The other 150,000 public sector jobs are in central and local government. Four times as many people work for the government as in manufacturing.
The failure to create more private sector jobs leaves large numbers of Batswana dependent on welfare of one form or another — 60,000 employed on a work-for-welfare scheme, 70,000 destitutes and orphan carers who exist on welfare, and 150,000 subsistence farmers who survive through subsidy programmes.
Ellen Hillbom, a Swedish academic specialised in Botswana’s development, emphasises the contrast between Botswana and the developmental states of East Asia by describing the former as a ‘gatekeeping state’. The BDP gatekeeper, she argues, delivered a stable coalition based around a cattle-owning elite that managed mineral wealth in a disciplined fashion. However, Hillbom says: ‘Stability has lacked original thinking about how to change society.’