Management of the Natural Resources by the Government of Botswana - Dissertation Example

Case study 1: Botswana Despite initial success, that took place just when the post-colonial era started in African continent during the 1960’s and 1970’s, in the modern context, Africa is on an on economic downslope where poverty and hunger is persistently increasing in many of its States, with an universally accepted pessimism regarding its future economic prospects (Easterly and Levine’s, 1997). Various reports show that the general Sub-Saharan countries are turning poorer at a faster rate, than any low-income country worldwide (ibid). The average economic growth rate has been persistently in the negative from round 1965, with an average 35-times difference in US and the African per-capita income level (ibid). However, amidst this depressing picture of low economic growth one African country has performed better than any other nation in the world, in the span of the last 35 years, which is Botswana. Botswana “had a PPP-adjusted income per capita of $5,796 in 1998, almost four times the African average, and between 1965 and 1998, it grew at an annual rate of 7.7 percent” (Acemoglu, Johnson, and Robinson, 2001, 2). In 2002, we find that Botswana “exported some US$ 2 billion of diamonds, nickel, copper, gold, and other resources—over 80 percent of its total exports” (Iimi, 2006, 6). Botswana has one of the highest amounts of natural resources in the world, and we see in the above-mentioned figures that it had been experiencing significant growth in economy and infrastructure for several decades. The presence of diamonds had significantly backed Botswana’s strong economic growth, until the late 1990s, after which the average growth rate has fallen slightly owing to recent diversification of economy, where we find Botswana is now not dependant purely on the revenues that is earns from its natural resources (fig 1). Fig 1: Natural Resource Abundance and Terms of Trade, 1998–2002 in Botswana, (Iimi, 2006, 3). It is a general belief that economies that are wholly dependent on natural resources, tend to have a slow economic growth, which is often referred to as the “resource curse.” Botswana however did not have a favourable start right after its independence, and was considered a poor country with little chances of elevation in their economic conditions. It is here that diamonds have played an important role and currently account for almost 40 % of the country's natural resource output (Acemoglu, Johnson, and Robinson, 2001). Even though we find that Botswana had in the past experienced strong growth owing to its rich natural resources, however such growth, as predicted by many economists, is not sustainable for a long-term basis (Sachs, and Warner, 1995). This is owing to the fact that the mining industry does not offer too many job opportunities. Figures show that in Botswana while the mining sector contributed almost 40 % to the total national GDP, it created only around 4 % employment opportunities (Iimi, 2006). The present economic diversification has already started showing a negative impact on the national economic, and it is as Iimi framed it “specific and intensified capital investment in the primary sector has restrained Botswana from benefiting from forward and backward linkages and labor market externalities”(2006, 8). Besides this factor, it has been contended by many experts that geographical location where a country is far from the sea, makes it difficult to create strong economy that is based only on the abundant natural resources. Products from the natural resources are generally exported to other countries by the sea route, thus leading to very high shipping charges. A look at the African resource rich countries will show us many of them are landlocked, including Botswana (Sachs and Warner, 1995). Almost all experts universally acknowledge the fact that Botswana achieved this unprecedented economic growth and development by adopting effective management policies, and with a stable basic legal system that functioned reasonably well (fig 2). “State and private predation have been quite limited. Despite the large revenues from diamonds, this has not induced domestic political instability or conflict for control of this resource. The government sustained the minimal public service structure that it inherited from the British and developed it into a meritocratic, relatively non- corrupt and efficient bureaucracy. The parastatal sector has never been large and to the extent it has existed, it has faced hard budget constraints. Although there was a government marketing board, usually an institution employed by the urban interests to exploit farmers in Botswana the board was not used to extract resources from the rural sector. Moreover, the government invested heavily in infrastructure, education and health. Fiscal policy has been prudent in the extreme and the exchange rate has remained closely tied to fundamentals” (Acemoglu, Johnson, and Robinson, 2001, 2). The institutions of Botswana institutions have always encouraged participation from all segments of the society, with constraints on the political leaders. There is a universal belief that Botswana achieved rapid economic growth owing to the adoption of sound policies. With the “government appear[ing] to have pursued relatively sound economic policies, and there is little evidence of infighting across different tribes or groups for control of the state apparatus. Therefore, in Botswana good economics appears to have been good politics” (ibid, 4). Fig 2: According to the Governance Research Indicator Country Snapshot (GRICS) database we find that Botswana shows comparatively good governance, as per the international, national and regional standards. The GRICS indices indicate six different aspects of governance: voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption. Here, each index is normalized between zero and one (Iimi, 2006, 9). Despite this strong economic growth, for past many decades and a stable political condition, Botswana is recently facing some serious social issues that if unattended, may seriously attenuate the achieved development. One major issue that Botswana currently faces is from HIV/Aids. In June 2000 a report by the United Nations estimated that “the incidence of HIV/Aids in Botswana in June 2000 at 35.8% of those aged 15–49 years—the highest rate in the world. The Economist Intelligence Unit estimates that Botswana has the highest death rate from natural causes in the world” (Nkala, 53-54). From these figures, it is evident that the country is facing a large-scale social crisis. The second issue faced by Botswana is the increasing instances of organised crime in the country, and for a country that was seen as the hallmark for all other African nations epitomising strong economy and democracy, corruption and organised crime poses to be major risk. This has been primarily caused by the immigration of people from other states into Botswana, attracted by its prosperity, and the “influx of people into Botswana has unfortunately exposed the country to the hazards of organised criminal activity, which transcend boundaries” (ibid). It has also been opined that the landlocked position of the country has turned into a haven for the organised criminals that mainly use the country “as a transit point for conveying illicit commodities from sources to markets. [with] South Africa, the largest source and the biggest regional market for a variety of criminal enterprises [as its neighbour], Botswana is naturally vulnerable. Illegal drugs, mostly acquired in the East, are transported to South Africa along routes that sometimes include Botswana, and stolen goods from South Africa destined for countries to the north occasionally pass through Botswana with the aid of local criminal syndicates” (ibid, 54). Various reports have clearly shown that corruption and criminal activities are fast turning into a major problem for the Botswana government, and if not handled with urgency the criminal industry would continue to flourish and adverse effects on the economy of the entire region. If the entire region of southern Africa turns into a hub of criminal activities then inevitably it “would lead to erosion and dissipation of investor confidence” (ibid, 67). It has been established beyond doubt that organised criminal groups are increasing their hold in Botswana. In July 2001, Interpol emphasised on the necessity to elevate the present information and technological systems in the country for a better-coordinated fight against the organised criminal groups (ibid). Even though the criminal groups in Botswana are not as sophisticated and technologically oriented, as their European or American counterparts, they still pose a grave danger and a strong potential to disrupt the country’s socio-economic order. From a study of the various African nations that are RR and a comparative study of the effectiveness of their governing bodies in using the revenues accrued from the resources being used for economic development, it was derived that abundant natural resources cannot guarantee socio-economic growth (Iimi, 2006). Good governance, strong judiciary, well planned policies with their stringent implementation, and strong law enforcement bodies, determine the level to which a country can effectively use its natural resources towards creating strong socio-economic growth. Thus, “good governance—specifically a strong public voice with accountability, high government effectiveness, good regulation, and powerful anticorruption policies—tends to link natural resources with high economic growth. The last two dimensions of governance are especially important for natural resource management in developing countries” (ibid, 24). Thus from the above two case studies it stands out clearly that effective management of the natural resources by the government is necessary to curb illegal diamond trade (or any illegal practice related to natural resource use). The government must make reforms to curb internal corruption and make the diamond processes more transparent while must make reforms to make the effective use of the revenues earned from the diamond sales through socio-economic developments. Until date, the local residents of Sierra Leone, Angola, and the Democratic Republic of the Congo have not earned any benefits from the revenues earned through their countries’ rich natural resources. To end a conflict the government must also make measures for arranging an alternate route for livelihood in order to keep the youth from straying into the illegal diamond business, while making sure that the rebels do not get easy access to illegal weapons. As the executive director of Human Rights Watch has written, “For all its flaws, an international certificate scheme for diamonds is a good place to start. But more important is to ensure that abusive forces never get weapons in the first place” (cited in Tamm, 2002, 30). Iimi, A., 2006. Did Botswana Escape from the Resource Curse? IMF working paper, Retrieved from, http://www.imf.org/external/pubs/ft/wp/2006/wp06138.pdf Nkala, G., 2003. “Botswana.” In, Peter Gastrow (ed.), Penetrating state and business: Organised crime in Southern Africa. Cape Town: Institute for Security Studies. Sachs, J., and Warner, A., 1995. Natural Resource Abundance and Economic Growth. NBER Working Paper 5398. Cambridge, Massachusetts: National Bureau of Economic Research. Read More