the share of agriculture and manufacturedeclined. The sectors that showed a

M K SUKUMARAN NAIR

T

Botswana’s growth strategy is relyingincreasingly on “private initiative” [NDP2003]. In line with this, efforts are afootto privatise the major state enterprisessuch as Air Botswana, Botswana Telecommunications Corporation, BotswanaMeat Commission, etc, which are the largest three non-mining enterprises in thecountry. At present, the majority of privateenterprises are in road transport, restaurant and trade, construction and financial services. Interestingly, the growth of thesesectors is crucially related to the size ofgovernment expenditure. Though thecountry has been depending heavily on foreign direct investment (FDI) for private sector growth, its inflow has sharplyfallen in recent years. FDI which constituted 27 per cent of the GDP in 2000-01fell to 12.24 per cent by 2004-05. Exportsas a percentage of GDP at constant prices fell by 10 percentage points during the last10 years whereas imports fell by only 5percentage points during the same period. The exchange rate of Pula, the Botswanancurrency – which was known as the “Swissfranc of Africa” – against all major currencies fell sharply in recent years due totwo successive devaluations adding up to

19.5 per cent. Furthermore, the Pula was put under a crawling peg programme lastyear where market adjustments automatically and instantly take place. To add fuel to fire, the rate of inflation has climbed to a double digit level during the last two years.

It is in response to the deceleration in the economy that economic diversificationwhich is earmarked as a key result area inthe Vision 2016 and Millennium Development Goal documents was given overridingpriority while Botswana celebrated its 40thindependence last September. Despite the best efforts of the government, developingthe non-traditional industries has been far from satisfactory [Limi 2006]. As may be seen from the data, not only that during2000-01 to 2004-05, the share of the mining marginal increase in their share in GDPwere trade, banking and insurance, generalgovernment and non-profit institutionsserving households. The land locked natureof the country which increases transportcosts, relatively high prices of utilities, asmall market that does not enjoy economiesof scale, a prime bank lending rate as high as

15.75 per cent, lack of skilled man powerand increasing crime rates are identifiedas some of the road blocks to economic diversification in the country. The averagetotal factor productivity growth sharplydeclined from 4 per cent during 1974-75 to1984-85 period to 0.5 per cent in the next10 years [Leith 2000]. To cap it all, as shownin a recent World Bank study, Botswana’sperformance in the areas of investor protection, “ease of doing business”, bureaucraticefficiency in the issuance of licences andpermits are worsening as time passes by.

Finally coming to the major theme ofPillai’s study, viz, growth versus development, most of the indicators of development are not very conducive to amelioratethe situation. The Gini coefficient of income inequality increased from 0.54 in1994 to 0.57 in 2003. As Pillai has alreadyindicated, poverty and unemployment areabove the tolerance limit by any standardin Botswana whose per capita income is ashigh as a little above US$ 4,000. Even whenpursuing the so-called prudent management of the economy, the government isreligiously adhering to the neo-liberal economic policy that has played havoc incountry after country. It seems the existingpolicy framework that sustained highgrowth rates for the last three decadescannot deliver the goods any longer andhence needs a radical restructuring.

EPW

Email: nairm@mopipi.ub.bw

Economic and Political Weekly December 23, 2006