botswana definitive
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DRIVING SUISTAINABLE GROWTH
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Three periods:
1. Before colonization
2. During colonization
3. After independence
.A brief history intro
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POLITICAL ORGANIZATION:
Chief maximal authority Assembly (Kgotla) consultive and control institution
1. Before colonizationVIII century BC: settlement of the ancestor of the original
EightTribes in Botswana land.
ECONOMIC ORGANIZATION:
based on Breeding
privately owned cattle
NO
INTERFERENCES
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Europeans settled Africa and entered the
Botswana History
2. During colonization
1818-1840
difaquane period
1. War with Zulu Kingdommore unity amongtribes
2. Creation of the british protectorate ofBochuanaland to contrast the expansion ofGermany in south Africa
soft colonialism, the tribes maintain theirauthonomy
1885
S E C O N D W O R L D W A R
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CREATION OF TWO POLITICALPARTIES 1960
BECHUANALANDPEOPLES PARTY(BPP)
First Botswana party Antiaparthaid inspiration
Urban groups and workers
BECHUANALANDDEMOCRATIC PARTY(BDP)
educated elite of teachers, civil
servants and chiefs
Exploaition of loyalty betweencommoners and chiefs
BRITISH GOVERNMENT SERETSE KHAMA
WON
FIRST ELECTION
1965
INDIPENDENCE : 1966
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STATE ORGANIZATION President executive power National Assembly general attorney, 31 elected members, 4
members chosen by the president election of president House of Chiefschiefs of eight tribesconsultancy role
3. After Indipendence
CONDITIONS AT INDIPENDENCE:
little infrastructure and few assets only two secondary schools low quality of education high imports of good independence expenditures financedby Britain
REFORMS
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HOW DID IT BECAME A SUCCESS STORY?
PRE-COLONIALINSTITUTION
RAWMATERIAL LOW
COLONIZATION
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TSWANA
TRIBES
KGOTLADIALOGUE
ANDCOOPERATION
CONSEQUENT POLITICAL MANAGEMENT:
1. HIGH PARTECIPATION RATE IN POLITICAL DECISION MAKINGPROCESS
2. HIGH CONSIDERATION OF PUBLIC INTEREST BY POLITICIANS
3. REGULAR ELECTIONS
4. HIGH SENSE OF LEGITIMACY OF THE POWER
5. FREEDOM OF PRESS AND THOUGHT
PRE-COLONIALINSTITUTION
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IS DEMOCRACY FOUNDAMENTALFOR DEVELOPMENT?(D.Rodrick)
Examples of non
democratic countries:
China, Singapore..
Barro(1996)
IN BOTSWANA, DEMOCRACY HELPED GROWTH:
1. DEMOCRACY PRODUCE SHORT-TERM STABILITY attractive country forFDI
2. DEMOCRACY HANDLE ADVERSE SHOCK MUCH BETTER
3. DEMOCRACY DELIVERS BETTER OUTCOMES Prudent management
Domestic development fund
Revenue stabilization fund
Public debt service fund
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BOTSWANA : copper, nickel, salt, soda ash, potash, coal,
iron ore, silver, diamonds.J.Sachs: negative relationshipbetween natural resources andgrowth.
Why?
natural resource industry isfavored
Immediate Consumption
increasesNo long-run growth
BOTSWANA ESCAPE THERESOURCE CURSE
GOOD GOVERNANCE
RAWMATERIAL
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GOOD GOVERNANCE OF NATURALRESOURCES
BOTSWANA GOOD MANAGEMENT OF N. R.: INVESTMENT OF REVENUESFROM DIAMONDS IN EDUCATION, HEALTH AND INFRASTRUCTURE FOR ECONOMICDEVELOPEMENT.
GOOD LEADERSHIP: HONEST LEADERS COMMITED TO THE INTEREST OF THECOUNTRY RATHER THAN THEIR OWN INTERESTS.
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IS IT COLONIALISM GOOD FOR DEVELOPMENT?
YES
EXAMPLE : INDIA
NO
EXAMPLE: KENYA
BOTSWANA
LIGHT COLONIALISM
motivated by need to contrast German expansionin Africa
75% of expenditures were for administrativecosts, no investment!
GOOD FOR DEVELOPEMENT IN BOTSWANA IT DIDNT HINDER THEPRESERVATION OF DEMOCRATIC INSTITUTIONS AND PRACTICES
INHERITED FROM TSWANA TRIBES
LOW
COLONIZATION
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PRE-COLONIALINSTITUTION
RAWMATERIAL LOWCOLONIZATION
GOOD GOVERNANCE
PROPERTYRIGHT
NATIONAL
PLANNING
CONSTRAINT
SERESETEKHAMA
DEREGULATION
FDI
FISCALPOLICY
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1) LIMITS TOTAX EVASION
2) THE STATECREDIBILITYCOMMITS TOPROTECTINGPRIVATEPROPERTY
3) NO THREATOFREVOLUTIONFROM THE
POPULACE
The state has tobe credible inprotectingproperty rights
CONS
TRAINT
S
ON:
Set of conditions necessary to enforce good governance and so property rights:(Theory of the Proprietary State, Grossman and Noh, 1994)
The state has topursue policies thatlimit tax evasion
In order to detersocial upheaval, thegovernment must beable to satisfy thedemands of the
electorate
PRE
DATORYGOVERN
MENT
P
R
OT
E
C
T
I
O
N
O
F
P
R
I
V
A
TE
PR
O
P
E
RT
Y
R
I
G
H
TS
PROPERTY
RIGHT
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1 constraint) LIMITS TO TAX EVASION
the HIGHESTMARGINALCORPORATE TAX in
South Africa
the HIGHESTMARGINALCORPORATE TAX inBOTWSANA
Source: World Bank, World Development Indicators - Last updated March 2, 2011
36% onaverage
23%
PROPERTYRIGHT
http://data.worldbank.org/data-catalog/world-development-indicatorshttp://data.worldbank.org/data-catalog/world-development-indicators -
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2 constraint) THE STATE COMMITS TOPROTECTING PRIVATE PROPERTY
seems
PROHIBITION OF THE
NATIONALIZATION OFPRIVATE PROPERTY
IMPROVEMENT IN THEPROTECTION OF
INTELLECTUAL PROPERTYRIGHTS
INDEPENDENT JUDICIARYIdentification of illegal actions
taken by goverment
seems
GOVERNMENT TAKE-OVER
OF THE OWNERSHIP OFMINES (Mines and mineralsAct (1967) ..BUT
The government used itsownership to channel thegains from mining to thenation as a whole
GOOD GOVERNANCE
PROPERTYRIGHT
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3 constraint) NO THREAT OFREVOLUTION FROM THE POPULACE
Higher approval in favour of democracy and not on the verge ofrevolution..
PROPERTYRIGHT
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44 out of 125 inthe InternationalProperty RightsIndex
2 after South Africaamong the Africancountries PROPERTY
RIGHT
http://american-conservativevalues.com/blog/wp-content/uploads/2011/02/property-rights.jpg -
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Factors influencing companies decisions to invest inBotswana
(rating 1= unimportant, 4=very important)
Survey UNCTAD and UNDP (2001)
Ease of doing business rank : -52 place over all OECD countries (Italy 80)
-3 place over sub-Saharan Africa(www.doingbusiness.org)
FDI
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DISTRIBUTION OF FDI PER SECTOR
Stockof FDI by industry, 1999 (per cent)
PARTNERSHIP BETWEEN STATE-OWNED AND FOREIGN FIRMS
Debswana Kiamond Company
BCL Ltd
Tati nickel Ltd
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HISTORICAL TRENDFDI inflows into Botswana, 1975-2000 (millions of dollars)
Joint ventures in mineralsector (diamonds)
Introduction of pula
Liberal exchange controls BCL Ldt losses and
change of ownership
FDI
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NATIONALPLANNING
No private diamond mining
operations in the country.
The world's leading producer ofdiamonds by value.
Diamonds account for:
fully one third of the nation's GDP over 90% of earnings from exports 50% of government revenues.
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Social ExpenditureNational Plan
Literature Social security
Investmentinfrastructure
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Botswana
MadagascarAngola
ZambiaMozambico
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Education
BOTSWANA
Numbers of School Failure
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Social Security
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Corruption
Overview of the index of perception of corruption, 2010.
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HealthNATIONALPLANNING
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CONSTRAINT
Institutions are able to limit the power of rulers
GOOD POLICIES
Are favored
POLITICALSTABILITY
WILLIGNESSTO
DELEGATEPOWERS TOTHE STATE
Example: Mines and minerals Act (1967) thatgives subsoil mineral rights to the state. Before itbelonged to the tribes, and especially diamondsmines were under the tribe whose chief was Mr.
Khama.
ACTIVE JUDICIARYSYSTEM
Identification of illegal
actions taken bygoverment
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SERESETEKHAMA
A SHORT BIOGRAPHY 1921 Born in Serowe, Botswana Studying period in South Africa, and Oxford 1947 Marriage with Ruth Williams (English woman)
1951-1956 exile due to his marriage with and white woman 1961 foundation of BDP 1965 won of elections 1980 death
In addiction to that he was member of Bangawato Family, known for their benevolence andintegrity
GOOD LEADER:
1. Application of national programs withoutsuccumbing to external political whims
2. Non-antagonistic approach to south-Africa
3. Training of his Botswanan successor
4. Adherence to a governance ethic
5. Investment of the whole outcomes from mines fordevelopment infrastructure without personal gain
6. Nationalization of mines and basic utility services
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DEREGULATION
Removal or simplification of government rulesand regulations that constrain the operation of
market forces
Eliminating or reducing governmentcontrol of how business is done take
to new investment
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DEREGULATION
SCA
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CONTINUOUS BUDGET
SURPLUSBudget Surplus = Tax Revenues
Government Expenditures
NOT TEMPED TO BORROWEXCESSIVE SUMS
INTERNATIONALLYDEBT PROBLEM AVOIDED
EX. In 1981/1982 and in 1994 :
Since1971
Advantages of a prudent fiscal
policy:SAVING FOR RAINY DAYS
current
expenditurein 94
current
revenues in 93
Diamon
d exportin 93
FISCALPOLICY
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due to ...DOUBLING OFGOVERNMENTEXPENDITURES
(an ambitious roll out ofdevelopment projects, including
building of schools, hospitals,
airport facilities, roads...)
Despite during the pasttwo years
..and a DROP IN TOTAL REVENUESdue to decreasing mineral revenues ..
FISCAL
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But the future projections seems to confirmit was only a exception and the trend willbe reversed again..
FISCALPOLICY
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PRE-COLONIALINSTITUTION
RAWMATERIAL LOW
COLONIZATION
GOOD GOVERNANCE
PROPERTY
RIGHT
NATIONAL
PLANNING
CONSTRAINT
SERESETEKHAMA
DEREGULATION
FDI
FISCALPOLICY
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GOOD GOVERNANCE
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World map showing countries above and below the world GDP (PPP) percapita, currently $10,700. Source: IMF (International Monetary Fund).Blue above world GDP (PPP) per capita
Orange below world GDP (PPP) per capita
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PRE-COLONIALINSTITUTION
RAWMATERIAL LOW
COLONIZATION
BAD GOVERNANCE
LOW
INVESTEMENT
NO
CONSTRAINT
POLITICALFIGHT
Somalia
Botswana vs....
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PRE-COLONIAL
INSTITUTION
(KGOTLA)
RAWMATERIAL HIGH
COLONIZATION
BAD GOVERNANCE
LOW
INVESTEMENT
NO
CONSTRAINT
POLITICALINSTABILITY
Lesotho
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HIV
INEQUALITY AND POVERTY
UNEMPLOYMENT
DIFFICULTIES in DIFERSIFYINGTHE ECONOMY FROM MINING
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HIV
INEQUALITY AND POVERTY
UNEMPLOYMENT
DIFFICULTIES in DIFERSIFYINGTHE ECONOMY FROM MINING
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One of the biggest spenders on health and HIV prevention in
Southern Africa...
HIV
..but
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yet it has one of the highest HIV prevalence rates in the world
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NOT A PROBLEMOF LACK OF
COMMITMENTPROBLEMOF DELAY
OF ACTION
PROBLEM OF
LACK OFDEEP
KNOWLEDGE
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PROBLEMOF DELAYOF ACTION
On most development indicators excluding adult health, Botswana hasmade progress and indicators of child health and nutrition are relatively
sound
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PROBLEM OFLACK OF
DEEPKNOWLEDGE
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The impact of AIDS on economicgrowth:
WithAIDS
Inabsence
of AIDS
OUTSTANDINCHALLENGES
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INEQUALITY AND POVERTY
While ABSOLUTE POVERTY is likely to havedecreased in light of the high growth rate...
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Measure of income distributionwithin the country
REMARKABLY HIGHINEQUALITY
WHYIF THEECONOMYHAS BEEN
GROWINGRAPIDLY
Poverty at below$2/day PPP basis
HIGH POVERTYRATE
HIGHUNEMPLOYMENT
suggestthat highlevels ofRELATIVEPOVERTYexist
OUTSTANDINGCHALLENGES
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UNEMPLOYMENT
ACCESS TO CREDIT ANDFINANCIAL SUPPORT OF:
-social programmes-extended families
NOT ACCESS TO EDUCATION
AND LACK OF SKILLS
INCREASE IN THERESERVATION WAGES morethan the market clearing level
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LARGER SIZE OF THE PUBLIC SECTOR inthe LABOUR MARKET...
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....while another source of unemployment:CAPITAL-INTENSIVE NATURE OF MINING
that is THE LEADING SECTOR
OUTSTANDINGCHALLENGES
DIFFICULTIES i
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DIFFICULTIES inDIFERSIFYING THE
ECONOMY FROM MINING
80% AREDIAMONDEXPORTS
MOSTOTHER
EXPORTSARE MINING
RELATED
FDI LIMITEDTO DIAMOND
SECTOR
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WHY DESPITE
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cheaper to import from South
Africa than to manufacture
goods domestically: notcompetitive
the large diamondendowment and subsequentreliance on natural resources
Governments need tocomplement and facilitate theprivate sector:
- COST OF DOING BUSINESS- labour productivity by
RETRAINING PROGRAMMES
Increasing the potential ofTOURISM
Improvement of
AGRICULTURAL POLICIES
WHY DESPITEGLOBAL
RECOGNITION OFBOTWSANAS
INSTITUTIONAL
TRASPARENCY ANDSTABLE ECONOMY
WHAT CANBE DONE?
bl h
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Acemoglu, Daron, Simon Johnson, and James A.Robinson. 2003.An African Success Story:Botwsana, in In search of Prosperity, Dani Rodrik, editor. Princeton, N.J.: Princeton UniversityPressRodrik, Dani. 2007. One Economics Many Recipes, Princeton University PressAmegashie, J.Atsu, Ibrahim Kamara. 2008.The exceptionality ofBotwsana. Economics, Politicsand challenges, African Center for Economic Transformation Working Paper No.2Barro Robert. 1996.Democracy and growth, Journal of economic growthBaulier Scott A. August 2004.Explaining Botswanas success: critical role of post-colonialPolicyBeaulier, Scott, J. Robert Subrick. 2005.The political foundation of economic development
Iimi Atsushi. 2006. Did Botswana Escape for resource curse?. IMF working paper WP/06/138
International Monetary Fund. July 2007.Botwsana Selected Issues and Statistical Appendix,IMF Country Report No. 07/228International Monetary Fund. February 2008. Botwsana: Selected Issues IMF Country ReportNo. 08/57International Monetary Fund. June 2010 Botswana: 2009 Article IV ConsultationStaff Report;Public Information Notice on the Executive Board Discussion; and Statement by the ExecutiveDirector for Botswana, IMF Country Report No.10/172
Bibliography
International Monetary Fund. September 2010. Botswana: 2010 Article IV ConsultationStaff
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y pReport and Supplement; Public Information Notice on the Executive Board Discussion, IMF
Country Report No.10/280International Property Rights Index. 2011 Report (consultable at the following addresshttp://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdf )
Krishnaswamy, Siddharth. The effect of AIDS on Botswanas development, Field ExchangeIssue 29, December 2006MacFarlan, Maitland, Silvia Sgherri. 2001.The Macroeconomic Impact of HIV/AIDS inBotwsana, IMF Working PaperMaipose Gervase. Policy and institutional dynamics of sustained growth in BotswanaNdulu, Benno J. and Stephen A. OConnell. 2008. Policy Plus: African Growth Performance,1960-2000, in Economic Growth in Africa: 1960-2000, Volume 1, Benno J. Ndulu, Stephen A.
OConnell, Robert H. Bates, Paul Collier, and Chukwuma C. Soludo, editors. Cambridge:Cambridge University Press.Sub Saharan African Syndromes: The Differing Experiences of Zambia and BotwsanaRotberg Robert I. The roots of africasleadership deficit, editors. Center for public leadershipSachs J., Warner A. November 1997.Natural resource abundance and economic growth.Harvard University, Cambridge MAUnited Nations conference on Trade and Development. 2003.Investment policy review-BotswanaUnited Nations conference on Trade and Development. 2008. World investment directory-Volume x, Africa 2008.www.worldbank.orgwww.tradingsecomics.comwww.doingbusiness.org
www.bankofbotswana.bw
http://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdfhttp://www.worldbank.org/http://www.tradingsecomics.com/http://www.doingbusiness.org/http://www.bankofbotswana.bw/http://www.bankofbotswana.bw/http://www.doingbusiness.org/http://www.tradingsecomics.com/http://www.worldbank.org/http://www.internationalpropertyrightsindex.org/userfiles/file/ATR_2011%20INDEX_Web2.pdf -
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Shukrani kwa ajili ya mawazo yako
Thanks for your attention
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