In the developing economies of Africa, one of the most relevant economic generating platforms has been mining activities. According to The Resource Curse: The Cases of Botswana and Zambia, “[i]n the 2007-2008 United Nations Human Development Report, the countries of Sub-Saharan Africa received, on average, 66% of their Gross Domestic Product (GDP) from the trade or export of primary products, such as mineral ores.” However, the need for resources such as minerals and oils has become a concern. There has been a correlation drawn between negative or slow economic growth and the countries that depend largely on natural resources. This correlation can be said to be the “resource curse.”
Botswana’s Economic Outlook
Botswana is seen to be a miracle country. This miracle is mainly from stable exports of diamonds and the good governance that the country has. One of Botswana’s biggest relationships and the most beneficial one is the global diamond cartel, called the De Beers. Botswana is the main diamond manufacturer in the world by carats worth and accounts for 66% of De Beers’ output.
According to A. Iimi in Did Botswana Escape from the Resource Curse?, Gaborone dominates diamond production. In fact, the international diamond price is determined by the average export value per carat for diamonds from Botswana. For Botswana the interest for De Beers is to keep their prices extreme and for the company to maintain them. One could say that Botswana has a monopoly within a monopoly, which has kept its revenue from diamonds high and stable relative to the fluctuation of other hard-mineral prices.
From 1975 to 1995, the GDP of Botswana was driven by the stream of diamond revenues, averaging 9.3% per year. The country enjoyed a period of stable four-fold development in diamond rent from the early-1970s to the early-1990s. Gaborone has been able to keep a relationship with the international donor community because of its high revenue. Unlike most of the countries in the sub-Saharan part of Africa, Botswana did not need help from World Bank funding or IMF funding. The stability of the diamond demand made the revenues of Botswana stable.
The Kalahari Desert covering the utmost of Botswana is one of the natural obstacles. Botswana is considered semi-arid and has a high possibility of having a drought. Cattle-herding is an agricultural activity that is prone in areas such as these. Arable land in Botswana is less than 5% and land that is close to rain-fed crops is less than 5%. The Dutch disease effects are blamed as the mechanism that is strengthening the South African rand against the Botswana pula, this is after the diamond booms. This causes the agricultural products of Botswana to have less competitiveness.
These difficulties were tried to be overcome by the government through agricultural sectors and manufacturing. This is done through policy solutions that put into the first partisan theory of the resource curse – which is the administration of the resource rents.
Explanation Through Politics
One of the important explanations for the resource curse comes from the political hypothesis. This is concerned with the policies that were implemented to try to control resource rents. The policies of Botswana have earned the title of being a resource-dependent success story. The country is often portrayed as following relatively liberal economic policies and development strategies The Resource Curse: The Cases of Botswana and Zambia. One of the most successful policies of Botswana is the savings of foreign currency, mineral taxation policy, physical infrastructure, its policy of negotiation with external agents and the formation of private-public partnerships, investment in human capital, and the use of expatriate experts. Gaborone has established an enterprise that is state-owned, having been established after Botswana attained their independence. This enterprise was aimed at strengthening the agricultural sectors and manufacturing. These organizations were, however, met with mixed results. Botswana’s objectives for the usage of diamond rents were to advance its physical organization and human capital.
During 1966, Botswana was one of the poorest countries in the world and it had no schools, no roads, and no railways. The Botswana Democratic Party (BDP) government accepted and executed a series of growth plans concentrating on investment in infrastructure, health, and education. The education system in Botswana showed success in attaining high levels of primary school enrolment, high levels of female enrolment in schools as well as high levels of adult learning. Development of the education system has been an objective of the government since liberation. Another aspect that shows Botswana’s successful rent was the government’s policy of savings – this was both in the aspect of foreign currency reserves. According to Managing development policy in Botswana: Implementing reforms for rapid change, Botswana kept substantial funds of foreign currency that was at 4.9 billion U.S. dollars during 1996.
Gaborone’s bureaucracy implemented a mineral policy, and this procedure has been very important to secure the mining development of the country as well as produce the following resource rents. A successful aspect of this policy is the mineral tax and the royalties. For diamond mining, 25% was from income tax and 10% was for royalty, another policy implemented by the government in order to secure its revenue sources and its resource rents was the policy of negotiating with foreign governments and MNCs.
The characteristics of the Weberian administration of Botswana was rational due to the meritocratic enrolment of the civil retainers and the expected, long-term career plunders. According to Von Soest in Stagnation of a “Miracle”: Botswana’s Governance Record Revisited, “the presidents of Botswana have not used the cabinet as an instrument for their methodical establishment of personal favours.” What can be argued is that Botswana has a robust obligation to its values of service of bureaucracy.
It has been revealed that although the government is transforming resource excessiveness into the development of the economy, it has been shown that the overflow of natural resources does not mean that there will be growth in that particular country. Governance in a country determines how much natural resources can actually contribute to the economy and its development. Natural resources that are linked to high economic growth are usually aligned with good governance. This good governance includes high government effectiveness, powerful anti-corruption policies, good regulation and a strong public voice that has accountability. Powerful anticorruption policies and good regulation are one of the most vital aspects when it comes to resource management within developing countries, inclusive of Botswana.