Botswana: A Small Developmental State in Africa

1. Botswana: A Small Developmental State in Africa

2. “DEVELOPMENTAL STATES” Thinking on the role of the state in development has differed over past 50 years: • State-led development was encouraged/supported in the 1950s and 1960s; • State-led development was then criticised in 1970s/early 1980s as inefficient and distorting in the light of growing debt and economic problems in Africa and S.America; • Structural adjustment and market-oriented reforms (“Washington Consensus”);

3. Role of the state in development was re-evaluated based on the successful experiences of state-led development in “Asian Tigers” since the mid-1990s; • Each of these stages has reflected the lessons learned from the previous one(s)  While too much faith seems to have been placed in state-led development in the 1950s and 1960s, efforts to curtail the state in the 1980s and 1990s were perhaps too strong and dogmatic

4. Since the end of the 1990s, accelerated development has spread further in Asia, and is increasingly including the Indian sub-continent • 1997 World Development Report was dedicated to ‘rethinking the state’, and reaffirmed the position that ‘the state is central to economic and social development’ • Growing awareness that the orientation and effectiveness of the state is the critical variable explaining why some countries succeed whereas others fail in meeting development goals • State capacity and effectiveness is the key bottleneck in Africa’s ability to meet the Millennium Development Goals • Recognition of the developmental success of East Asia has led to new thinking on what states should accomplish

5. A developmental state project must possess at least two essential attributes: 1. The state must have the capacity to control a vast majority of its territory and possess a set of core capacities that will enable it to design and deliver policies 2. The project must involve some degree of reach and inclusion, and have an institutional, long-term perspective that transcends any specific political figure

6. Adrian Leftwich emphasises commitment  in his view, an ideal-type developmental state is one that demonstrates a ‘determination and ability to stimulate, direct, shape and cooperate with the domestic private sector and arrange or supervise mutually acceptable deals with foreign interests’ • Thus, a developmental state is broadly understood as one that evinces a clear commitment to a national development agenda, that has solid capacity and reach, and that seeks to provide growth as well as poverty reduction and the provision of public services

8. The attributes of “developmental” states embody the following capacities: • Regulatory capacity – ability to establish and enforce rules throughout the society, including the traditional and religious realms • Administrative capacity - ability to manage the personnel and resources of the state and to ensure accountability and efficiency in service delivery • Technical capacity- expertise and knowledge required to make and implement technical decisions as well as the policy tools and instruments necessary to implement those decisions effectively • Extractive capacity - to raise the revenues needed by the state to pay for the expenses of implementing state policies and goals – includes the revenue for hiring, paying, and providing public servants with the resources to work with

9. Developmental states and public services (by the above definition) are rare in Africa - outside of South Africa, Namibia Botswana and Mauritius; the quest for the developmental state elsewhere in Africa has proved highly elusive • Top ten best governed SSA states on the Ibrahim index: 1. Mauritius2. Seychelles3. Botswana4. Cape Verde5. South Africa6. Gabon7. Namibia8. Ghana9. Senegal10. Sao Tome and Principe  The challenges of development are firstly, political

10. BOTSWANA • Was extremely poor at independence – is now a middle-income country • It was landlocked, surrounded by hostile neighbours but also resource rich (i.e. potential disaster in terms of the “resource curse”) • It did not simply pursue the “right policies” - we have to ask what were the dynamics of Botswana’s ability to avoid the sort of problems its neighbours encountered i.e. what were the politics that made it possible?

11. At independence in 1966, Botswana was rated among the poorest states in the world with a per capita GDP of only US$283 • By 2010, Botswana’s had attained the status of an upper middle income country. • between 1966 and 1999, Botswana had the highest rate of economic growth in the world and way ahead of rest of Africa

12. Life expectancy at birth was estimated at 50 years in 1965, rose to 68 in 1995, then dropped to 59 by 2010 (HIV/AIDS) • Infant mortality was 108 per 1000 live births, had dropped to 42 by 2009 • Adult literacy rate was 34% in 1970, had risen to 81% by 2010  Has enjoyed peace, stability and democracy since independence

13. Botswana was a livestock economy until 1967 when diamond mining commenced • Before 1967 agriculture accounted for 40% of the total GDP • Contribution of mining (particularly diamond mining) to GDP rose from 1.6% in 1967 to 34% of the country's GDP and 50% of its tax revenues • Mining’s share of total government revenue was virtually zero in 1967, rose to between 45 and 65% by 2000s

14. NOTE: mineral wealth not a sufficient condition for economic growth, let alone economic development – Angola, Sierra Leone, Liberia, Nigeria etc • Botswana has so far been successful in utilizing the financial capital from mining to drive and sustain economic growth and development • One of the most popular explanations is the country’s adoption of, and strict adherence to, sound macro-economic objectives and corresponding policies to achieve the objectives i.e. pursuing a developmental state path

15. Two objectives adopted very early: • Avoidance of external debt and stabilization of government expenditure • Management of the exchange rate in order to promote economic diversification • These objectives were to be achieved using the following policies:

16. 1. Policy towards avoidance of external debt and stabilization of public expenditure • Avoided excessive public expenditure during mineral export boom periods  instead built up budget surpluses and accumulated international reserves • The surpluses and reserves were used to finance spending during periods of mineral export ‘drought’ without having to borrow or to cut public spending drastically • Consequently, Botswana was successful in avoiding “boom and bust” cycles and built up mounting financial surpluses since the 1980s

17. Botswana: current public revenue and expenditure, 1971-1995 (Pula millions)

18. Part of the surpluses was invested in national development projects • All new domestic investments: a) had to be based on expected/projected revenue flows in the medium and long-term b) Had to always taken into account necessary recurrent expenditure to ensure their sustainability with or without export booms (i.e. upsurge in state income) c) Had to always be budgeted for in 6-year national development plans and approved by parliament  Only projects provided for in the published national plans were funded during the plan periods

19. Domestic investments were always well below recurrent revenue • Surpluses not invested in national development projects were used to build up foreign exchange reserves  estimated to represent approximately 19 months' cover of imports of goods and services

20. Explanation 2: Good governance and institutions • Botswana has had a good, earned and sustained record of good governance • A functioning constitutional multi-party democracy has existed since 1966 • All elections held have been conflict free and declared free and fair. • Low levels of corruption: consistently lowest in Africa, and amongst lowest in the world according to Transparency International. • Enduring social and political stability

21. According to Transparency International, Botswana has a strong National Integrity System (NIS): • The NIS = “the sum total of laws, institutions and practices in a country that maintain accountability and integrity of public, private and civil society organizations” • Some scholars have traced the evolution of effective governance structures to traditional heritage and to the fact that some of them were established before mineral wealth became a factor

22. Traditional kgotla system – consultative assembly as well as a court through which decisions were made, justice was administered and traditional authorities were held accountable • Close similarity with post-independence parliament • In 1967, before mining commenced, parliament enacted the Mines and Minerals Act which vested all sub-soil resources in the state • pre-empted future conflict over mineral wealth.

23. The first president, SeretseKhama, enjoyed a legitimacy, drawn from his position as (former) chief of the dominant Tswana tribe (the Bangwato) that was unrivalled • Khama’s charismatic style of leadership and his integrity, combined with his natural authority helped secure the BDP’s position and shaped system of governance • There was also no real organised opposition to Khama’s agenda • The electorate was steeped in a traditionalist culture of respect for authority • This granted space to Khama and his BDP

24. The emergent elite were also conscious that its interests would be better served by private capitalist accumulation rather than state capitalism • At independence, the state was in dire financial problems and could not be the means of accumulation  consequently, the elites did not see the state as a source of self-enrichment • Instead, constructing an interventionist state to facilitate development and the accumulation of capital was the main vehicle advancing the elites’ interests

25. The BDP and political elite that emerged after 1966 had important interests in the cattle industry, the main productive sector of the economy • It was in their interests to build infrastructure and generally develop institutions • This promoted national development, but also their economic interests

26. 1. THE FIRST PHASE: 1960 - 1975 – Initial base creating, a transitional phase • Significance of the historical, socio-economic, and political context, especially survival of traditional Tswana political culture in colonial context and integration into modern institutions; • New ruling elite ultimately merged local interest into broader commitment to build a non-racial and unitary state

27. Start of Development Planning & its integration with the budgetary system • Policy stance sought to maximize flow of foreign capital – aid and private investment; • Introduction of multi-party system of government under inherited market-based economy; • Development strategy entailed state-led development strategy similar with many other African states at independence; • Membership in SACU and Rand Monetary Area providing external agency of restrain in fiscal and monetary policies.

28. Second Phase 1975 to 1989: Consolidation of both market based & multi-party system • Built a relatively strong and competent state that provided visionary leadership & management; • Mining sector clearly emerged and consolidated itself as the engine of growth; • Fastest economic growth •  per capita GDP (in US$) between Botswana and Nigeria:

29. By the end of the second phase, viable traditional and modern institutions of economic, political and legal restraint had been in place and relatively well consolidated Development Planning and its integration with budgeting system ensured that development projects were initiated locally, and any donor-funded projects addressed identified government priorities

30. Extreme shortage of skilled/educated manpower did not seriously affect economic growth partly due to increased inflow of aid in the form of technical assistance • Botswana avoided rushing into Africanization. • Export-led growth driven mainly by FDI – setting in in motion a process of sustained growth, transmitted to the whole economy • Government acted as a conduit primarily on infrastructure and human capital • Avoided corruption and leaders are not prone to rent seeking

31. CONCLUSION 1. The democratic system of governance appears to have enhanced good policies with national policies contested through regular elections and legislative roles,  both of these enforced a discipline of accountability for results that benefited the electorate more broadly. 2. Democracy has been in the interest of Botswana leaders • seen as a way to deliver better public goods by using it to attract foreign resources and also manage internal politics in which the opposition has been largely marginalized due to popular policies in place

32. 3. Botswana illustrates the positive role the leadership can play in sustaining economic growth and development  the essence of state-led development hinged on a secure political elite  This elite developed or modified and maintained viable inherited traditional and modern institutions of political, economic, and legal restraint

33. 4. Botswana’s success story is not due to good fortune or good luck factors  a result of effective management, pursued by a relatively strong and competent state that provided visionary role operating under viable traditional and developed modern institutions of economic, political and legal restraint Conducive policy environment included restraint, broad-based development planning, pragmatism, etc.

34. Compare and contrast……

35. 5. Botswana’s prudent macro-economic policy of treating diamond price increases as temporary and declines as permanent – led to reserve accumulation during boom periods and rapid responses in downturn periods • Credit for this goes to the founding leaders of independent Botswana. • To appreciate this observation, compare the following statements from two renowned statesmen:

36. “….we intend to conserve our resources wisely and not destroy them. Those of us who happen to live in Botswana in the 20th century are no more important than our descendants in centuries to come” – Ketumile Masire, Second President of Botswana • “We are in part to blame, but this is the curse of being born with a copper spoon in our mouths” –Kenneth Kaunda, First President of Zambia

37. Questions?