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Botswana, an African oasis

Botswana, an African oasis
January 13
15:30 2021

The Africa Rising narrative, a result of consistent economic growth and political stability on the continent at the beginning of the millennium, has suffered a terrible blow in the last couple of years. With headwinds from falling commodity prices, many African countries suffered significant economic slowdowns. Some of the continent’s largest economics like Nigeria, South Africa and Egypt did officially enter into a recession. The COVID Pandemic that has blighted economies all over the world has made these worse.

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Despite the challenges, there is hope that the continent will be on a slow path to recovery. Africa was fortunate to have escaped the worst of the first wave of the COVID pandemic. This has enabled it to be better prepared for subsequent waves, while conserving already scarce resources. Furthermore, the commencement of the Africa Continental Free Trade Area (AfCFTA) in 2021 opens up the whole continent to greater intra-continental trade and partnerships. All these provide opportunities for growth and development to African countries.

Some countries are well positioned than others to tap into the new opportunities, and to thrive despite the challenges. One of such countries is Botswana, an oasis in the Southern African deserts and a compelling investment and trading destination, is a case in point.

To start, it is important to understand the context of Botswana’s formative years. This sparsely populated country at independence in 1966, was one of the poorest countries in the world. It had annual per capita income of just about $70. Worse, about 60% of government expenditure consisted of international aid. The country’s infrastructure was seemingly hopeless, with only about 12km of paved roads, and agriculture (mostly cattle farming for beef production) accounted for 40% of gross domestic product (GDP).

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Since independence, and especially over the last two decades, things have changed significantly, driven by relative political stability and economic growth. Botswana now has an ‘A’ Standard Sovereign Credit ranking (Moodys, S&P); high GDP growth rates (consistently around 5% in the past decade); 87th out of 190 countries on Ease of Doing Business Index and 8th in Africa (World Bank Report, 2020); an identity as the least corrupt country in Africa, having been rated same for 18 straight years by Transparency International; a workforce that is 87% literate; and strong adherence to the rule of law and judicial independence. Its per capita GDP moved from $70 in 1960 to $7,859 in 2019.

Botswana is now one of only a handful of upper-middle income countries in Africa. In this position, it offers clues for how African countries can achieve economic prosperity. In the 35 years leading up to 2001, it had the fastest per capita growth rate of any country in the world. It has shown sustained and stable economic prosperity, a high level of intolerance for corruption and relative political stability, given the struggles most of its African counterparts have had with same. These are essentially the pillars on which this land-locked country of about 2m people has built its economic prosperity.

With the discovery of Diamond in the early 1970s, Botswana had two choices – fritter it like many of the other African countries were doing with their mineral resources or prudently manage the resource. Thankfully, it chose the latter, with the government choosing to own only half of the single diamond mining company in the country, Debswana (owned with the global mining group, De Beers). Even more important, it elected to judiciously spend the proceeds from diamond exploration on social development efforts.

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The country’s leadership was always different from what its African counterparts had to offer. It took decisions that protected the country from the dangers of mineral discovery. One of such was the decision of the government to significantly invest in public infrastructure. It also improved government efficiency by controlling the growth in the size of the civil service. It overcame the curse of commodity

volatility by saving mineral income, thus preventing the exchange rate volatility that comes from pro-cyclical government expenditure. This approach to governance has helped to reduce the incentive for corruption and facilitated the ease of transfer of power. This much can be seen from the voluntary stepping down of the country’s former President, Ian Khama, paving the way for the emergence of the erstwhile Vice President, Mokgweetsi Masisi, as President.

In making the country investor friendly, Botswana has a 22% corporate tax rate, which is lower than the global average of 23.5% and well below the African average of 27.85%. The country offers duty exemption on importation of plant and machinery, and no foreign ownership restrictions. The country’s attempt at economic diversification is premised on the commercialization of agriculture and the agribusiness sector, mining, manufacturing (with a particular focus on import substitution), and services. Other diversification opportunities include infrastructure and property development, hospitality and tourism, energy and transport & logistics.
With its Special Economic Zones (SEZs), the country offers local and international investors developed infrastructure, state of the art technology, beneficial inter-sectoral linkages, economies of scale, specially trained and skilled labour force, and targeted economic incentives.

Another major contributor to its growing economy is Tourism. With its fauna and flora, and the Kalahari Desert in its full glory, Botswana is a favourite tourist destination, and the tourist lodges that abound in the country make it a haven for tourism that ensures that it is booked all year round. This is further accentuated by its reputation for producing the best beef in the continent.

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The story of Botswana truly inspires. It is a story that demonstrates that with vision and focused attention on good governance, setbacks can indeed be used as elixir for prosperity and transformational growth. It is one that many African countries will do well to study and learn from, especially seeing how this tiny nation that is focused on peace, tranquillity, good governance and the rule of law has set itself apart in a continent desperate for good news. The stability required of a nation on the quest for industrialization and economic development is very much in view from this tiny oasis in the desert.

Botswana the Land of the Zebras is open for business. Let us embrace it with open arms.

Ade Adefeko is Botswana’s first honourary consul to Nigeria

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1 Comment

  1. Kantara
    Kantara January 16, 17:05

    Great piece, goodluck with the new assignment Ambassador Ade Adefeko.

    Reply to this comment

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