References:
- “Botswana: A Diamond in the Rough” Harvard Business Review; Boston, MA; March 2003; Laura Alfar, Debora Spar, and Faheen Allibhoy
- Bank of Botswana
- IMF International Financial Statistics
- World Bank World Development Indicators
- Botswana Central Statistics Office
Botswana as an economy has proved that foresighted economic decisions can turn adversities into advantages. With no physical infrastructure, envious neighbors and adverse weather conditions, Botswana could have easily been disregarded as a country with bleak future. Under Sretse Khama’s leadership and guidance, all the citizens had an equal right to vote for a stable government. The citizens were used to the idea of an elected council earlier by the name of “kgotla”. They knew how to voice their opinions. As Botswana did not have a say in setting the external tariffs, it lobbied a policy of free trade. Free trade means lesser regulations and formalities for setting up a business venture for the investing country. Sretse Khama, their leader saw that the country could not depend on agriculture because of its uncertainties. He brought in transparency and accountability in the system. His proactiveness saw the geographical potential that Botswana had in mining. The country needed investment. The government collaborated with multinational firms in the mining project. This got revenues as well as ownership in the projects. This revenue was used for improving and building basic infrastructure of the economy.
At the same time DeBeers also saw business opportunity in Botswana. DeBeers was facing tough competition elsewhere; Khama took full advantage of this and readily accepted their offer. The government tied up with them to create Debswana. By attracting foreign investment and getting a share in revenues and equity, Khama gave a boost to the countries infrastructural development. Multinational investment created the much required job opportunities. The literacy rate of 78% was higher when compared to other developing nations. Any countries growth indicators are the sectors like education, healthcare, transport etc. The government used the revenue to develop these. The resources were well allocated and properly utilized. With new mines being discovered Khama renegotiated their ownership clause with DeBeers, by threatening them with nationalization policy. This meant more profit sharing and greater hold in the company. Even when the diamond market slowed down the government again saw opportunity in this. It sold off its stocks in Debswana to DeBeers for cash, making up for the shortage and also got %5 equity share in DeBeers. This move got the government high revenues, which were in turn used in development.
The Healthcare sector became very organized and showed tremendous growth. The government had a control on the interest rates and inflation by its well managed contractionary monetary and fiscal policy. This was done to avoid the situation of a demand shock that would arise as imports had become cheaper.Now Botswana is promoting its textile industry as it enjoys duty-free access to US market. All the political, geographic and economic hurdles were successfully crossed by the country.
