Can Botswana Achieve High Income Status By 2036?

In his maiden budget speech about a month ago, Botswana's Minister of Finance and Economic Development Dr Thapelo Matsheka laid out his government's aspirations for the country's economic development over the course of not only the 2020/2021 financial year but the 5 years that they'll be governing and beyond.

One of the aspirations that the government—which is helmed by Dr Mokgweetsi Masisi—mentioned was to transform Botswana into a high-income status economy by the year 2036. By definition, a high-income economy refers to an economy that has a Gross National Income (GNI) of just over $12 000 per capita. In layman terms, GNI refers to the total money earned by a country's people and businesses.

Currently, Botswana is classified as an upper-middle-income country with a GNI of just over $8000 per capita. The fact that the country, which was one of the poorest in the world in the 1960s, managed to become an upper-middle-income country by the 1990s is nothing short of a miracle considering the recurrent trend of post-independence civil turmoil which impeded so many of the new African democracies' development.

To achieve high-income status by 2036, Botswana's economy will have to grow by an average of 6% year-on-year for 16 years. This is no easy feat. To put things into perspective, Botswana's expected growth over the next financial year is projected to be 4.4%,2.6% lower than the needed growth meaning we are already playing catch up.

With a largely undiversified economy that is overly reliant on mineral resources, high unemployment rates and one of the top 5 worst income inequality in the world, it is clear that President Masisi's administration as well as the citizenry have a mountain to climb if they are to reach their 2036 aspirations.

On the budget speech, Minister Matsheka outlined several ways by which his government will go about achieving these ambitious milestones and these include the promotion of export-led growth, ensuring more efficient government spending and financing, building human capital as well as the provision of appropriate infrastructure, all which I agree should be the areas of concern if the country has any chance of achieving that economic growth.

Looking at the first one—promotion of export-led growth—Botswana is currently running on an export-import deficit of about 10 billion pula, an increase from 4.2 billion pula in 2018. This is concerning for two main reasons. The first one is obviously that the country's imports are increasing at a higher rate than exports with the country importing even products and services which can easily be produced within its own borders. Secondly, as aforementioned, most of the country's exports are minerals specifically diamonds so the fact that the country's breadbasket cannot balance its accounts presents a scary question of what will happen if diamond prices were to slump significantly?

The second area identified by the government for economic growth is ensuring more efficient government spending and financing, another area that is currently in tatters. Rampant with corruption in most government departments, perennial loss-making parastatals, and poor implementation of government projects among many other problems, the country's spending and financing model would need a total review if it is to contribute in any way to the country's 2036 aspirations.

Another area identified by the government for economic growth is the building of human capital. Currently, this is not going very well. Not only is the country's basic education system basically defunct, the tertiary education system is not any better. The government continues to spend billions of pula on tertiary education for students but the number of unemployed graduates keeps increasing. Instead of graduating into jobs, graduates are met with a grim reality of graduating into the streets The healthcare system, which together with education are the two most important components for building human capital, is also inanimate with public clinics and hospitals in states of disarray from lack of appropriate facilities and shortages of staff among other problems. A mess.

Lastly, the government identified the provision of appropriate infrastructure as another avenue to achieve the desired economic growth. As I mentioned in my last post, infrastructure development has to be approached with caution so I find it promising that on his budget speech, the honorable Minister clearly stated that the government plans to provide infrastructure which has been identified to be a complement to pre-existing economic developments but at the moment, this promise has yet to translate to practical implementation.

From the above analysis of all the areas identified by the government as potential epicenters for economic growth acceleration, it is clear that each and every single one of them has its own grave issues so expecting them to champion economic growth, I believe, is too much of an ask. Looking at the current state of things, the task of just addressing all the aforementioned problems in these areas is bound to take at least a decade which will leave the country with a meager 6 years to attain its 2036 high-income status aspirations.

As a patriotic citizen, my heart and love for the country want me to believe that it is possible but from a realist perspective, it is practically impossible to achieve this if we are to follow the model of action laid out by the government. Almost all of the initiatives laid out by the government on the budget as plans of action are either too far-fetched or would take way more than 16 years to get the country to high-income status. 

How is the government going to go from a 10 billion export-import deficit to an export-led economy in just a few years? How is the government going to fix up our institutions to eliminate corruption and foster efficiency in just a few years? How is the government going to make our education and healthcare systems efficient enough to support the building of human capital in just a few years? How is the government going to be able to create a framework that will enable the provision of appropriate infrastructure in just a few years? If the current status quo was pointing at all these being achieved I would be hopeful but the problem is that the way things are at the moment, it is not at all promising.

No amount of robust government-led interventions and initiatives are going to get us to the promised land by 2036. As a matter of fact, I believe that they will only serve to worsen the current state of affairs. I believe that it is high time the government sit this one out and let the markets drive Botswana's economic growth forward while it concerns itself with regulatory frameworks to support these markets. I believe that innovation by way of vibrant markets and not government-led growth drives will get us safe and sound to 2036 and on my next post, I will discuss further how I think we can go about doing this.