﻿How did Botswana become so Rich Despite Africa's overall economic
underdevelopment, some countries have achieved relatively high levels of economic growth
and prosperity. Botswana is one of them. Botswana is in the heart of Southern Africa,
sandwiched between South Africa, Namibia, Zambia, and Zimbabwe. It shares a single border crossing
with Zambia in the northeast (Kazungula on the Zambezi River). It covers 220,000 square
miles (570,000 square kilometres), roughly the size of France, Kenya, or Texas. Botswana
is endowed with two great fortunes: vast diamond deposits, as well as a large expanse of wilderness
where big cats roam free. Botswana is home to a plethora of wildlife, including the largest
population of elephants on the planet. For more than three decades after gaining independence in
1966, this country has been one of the world's most impressive success stories in terms of
development. Significant mineral (diamond) wealth, good governance, prudent economic management,
and a relatively small population of slightly more than two million have elevated it to an
upper-middle-income country with a transformation agenda of becoming a high-income country by 2036.
Botswana has had the highest rate of per capita growth of any country in the world over the
last 35 years. Botswana has been praised by the African Development Bank for sustaining
one of the world's longest economic booms. This occurred despite many adverse initial conditions,
including low investment during the colonial period and high inequality.
Botswana achieved this rapid development by pursuing conventional economic policies.
It's a mystery how Botswana managed to implement these policies because "good economics" is
usually bad politics in Africa. That is why almost everyone agrees that Botswana's spectacular growth
performance is due to good policies. Botswana had a PPP-adjusted income per capita of $5,796
in 1998, nearly four times the African average, and it grew at a
7.7 per cent annual rate between 1965 and 1998. Welcome to *THINK RICH AFRICA*, the community
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In the late 1960s, Botswana was one of the poorest countries in the world, with a GDP
per capita of about US$70 per year. It has since transformed into an upper-middle-income country
with one of the world's fastest-growing economies. The economy is driven primarily by mining,
livestock, and tourism. In 2020, Botswana's per capita gross domestic product was estimated at
$6,525.51 US dollars. Botswana's GDP per capita is equivalent to 52% of the global average.
According to data from the World Bank, Botswana had the world's highest annual
growth rate in per capita income from 1965 to 1999, at over 7%.
As a direct consequence, the average real income in Sub-Saharan Africa (SSA) decreased
over 35 years. Botswana’s GDP grew 10.6 per cent and exports 10.5 per cent annually.
From 1965 to 1999, manufacturing exports grew at a rate of more than 16 per cent per year. Employment
of Batswana in Southern Africa declined to a small percentage of the labour force after 1980
when employment growth in the modern sector peaked at about 7.5% per year.
In recent years, the country's foreign exchange reserves have exceeded two years' imports, making
external debt negligible. It was in 1965 that Botswana's per-capita income was about 60% African
and 10% global average. In 1999, Botswana had a per capita income that was 60 per cent higher
than the global average and six times greater than that of the rest of sub-Saharan Africa.
The largest rough diamond discovered in the last century was discovered in Botswana. When
De Beers announced in 1969 that significant diamond-bearing rock formations had been
discovered at Orapa, the company was already prospecting in the country. In 1982, Botswana
had two major diamond mines, Orapa and Jwaneng; by 1990, it was the world's largest diamond producer.
Botswana's mineral wealth was effectively managed and not squandered during the administrations of
Seretse Khama and Ketumile Masire, the country's first two presidents. The pair prioritised
development above all else. Using international development aid and rising diamond revenues,
they made substantial investments in social services such as education and health. Any
competent observer of development is aware that the presence of mineral wealth is insufficient
to ensure broader economic success. Indeed, the political and economic challenges of managing
mineral wealth frequently lead mineral-rich nations to abandon their mineral resources.
Nigeria and Venezuela are contemporary examples of countries experiencing severe economic, political,
and social difficulties. Botswana's non-mining economy has grown by more than 10 per cent per
year, a rate that would have been the highest in the world. Botswana is De Beers' largest supplier
of rough diamonds; however, Debswana, Botswana's diamond mining partnership with De Beers,
transfers more than 75 per cent of its profits to the Botswana government
and now owns approximately 15 per cent of De Beers. Due to Botswana's reliance on diamonds,
global demand must be robust for the economy to thrive.
Exports of diamonds provide Botswana's economy with substantial amounts of foreign currency,
have served as a foundation for industrial growth, and have stimulated infrastructure improvements.
The government of Botswana has identified tourism as a sector that could help diversify
the economy from its dependence on commodities. Botswana's GDP grew from 6.3 per cent in 2000
to 13.1 per cent in 2019. In Botswana, 8.9% of all jobs were linked to travel and tourism in 2019.
The country's game reserves, wildlife, and wilderness are the primary draws for tourists.
Botswana is endowed with a wealth of enticing natural beauty. When you arrive in Gaborone,
Botswana's capital, you'll see this for yourself. The city's streets are spotless and well-kept,
the traffic, when there is any, moves smoothly, and the city's modern glass buildings gleam
against the frequently blue sky. As a result, Botswana has earned a reputation as one of
the world's most special and one-of-a-kind travel destinations. More than 70% of Botswana is desert,
making it an ideal place for wildlife to roam free. Botswana is one of the most
popular safari destinations in Africa because of its wide range of wildlife.
Tourism's contribution to the global economy in 2019 was nearly $9 trillion1, making it roughly
three times as large as agriculture. Small and medium-sized businesses (SMEs), which
account for the majority of the tourism industry's suppliers and intermediaries,
have historically had poor communication and coordination among themselves. Limited oversight
and light-touch management have been the norm for government involvement in the industry.
For perhaps the first time in history, COVID-19 has thrown the tourism industry into disarray.
A 60-80% drop in international arrivals was indeed expected in 2020,
and tourism spending won't reach pre-crisis levels until 2024. As many as 120 million
jobs are at risk as a result of this. For Botswana to be successful and wealthy,
it must have adopted good policies. Rapid accumulation, investment,
and socially efficient exploitation of resource rents have resulted from these developments. Good
policies may have been chosen in Botswana because the country had well-established institutions,
such as institutions of private property. The fact that private property institutions only exist
in Botswana and not in other African countries suggests that a variety of factors are at play.
Botswana's political elites were restrained by inclusive pre-colonial institutions. Also,
the effect of British colonialism on Botswana was limited and did not destroy these institutions.
It was in the elite's best interest to maintain and strengthen private property institutions
following independence. Botswana's wealth in diamonds made it impossible for any group
to risk "rocking the boat" by challenging the status quo.
Finally, we stress that post-independence leaders, particularly Presidents Khama and Masire,
made several critical decisions that impacted this situation.
Botswana's success is also closely tied to the country's strong political and economic
institutions, which have elevated the Sub-Saharan country to the top of the region's wealth and
prosperity rankings. The economy of Botswana is one of the most liberated in all of Africa.
It has a sane legal system and a rational regulatory environment. As a result,
trade and investment are made easier and more attractive to foreign investors. Furthermore,
trade barriers are low, and successive governments have managed to keep public finances in check.
Botswana's lack of exchange controls, stable currency, and outperforming stock market
has drawn a slew of international investors seeking higher returns. Immediately following
independence, the Botswana Democratic Party was successful in establishing strong institutions
that contributed to the achievement of political stability and long-term economic growth.
Botswana is a consolidated democracy that has held free elections since 1966.
Botswana is ranked as the least corrupt country in Africa according to the Corruption Perceptions
Index (its score is twice as high as the average for Sub-Saharan countries). Institutions,
on the other hand, are not immutable: they can be undermined if civil society does not
hold governments accountable for their actions. However, despite massive government investments
in agriculture and rural development, cattle ownership continues to be a major
source of rural wealth and rural aspirations. Regrettably, agricultural development has been
a major disappointment. Annual expenditures by the Ministry of Agriculture amounted to more than 60%
of the total value added in agriculture by the late 1990s. Other factors to be concerned
about include economic inequalities, unemployment among school-leavers, the extremely high rate of
HIV/AIDS infection, and the high cost of military defence. A high prevalence of HIV/AIDS results in
a shrinking workforce and presents challenges for employers who must provide healthcare and
death benefits to their employees. Because more affluent individuals and families are better
equipped to pay for health-care expenses and financially cope with the loss of a family member
than an impoverished family, the wealth gap in Botswana is widening as a result of this issue.