For a sparsely populated and landlocked nation in the middle of the Kalahari Desert, Botswana has achieved much in terms of social and economic development. The country has experienced stable economic growth since claiming independence in 1966. Unlike many other African nations, Botswana is not frustrated by political instability and widespread corruption. In addition, the government has long championed environmental stewardship and sustainable tourism. For now, Botswana remains one of Africa’s success stories.

But the nation is confronting a range of near and long-term problems that will require innovative solutions. First, Botswana is struggling to diversify its economy. Diamond exports comprise nearly 50 percent of government revenues and more than 70 percent of the nation’s export earnings. In last year’s State of the Nation address, President Ian Khama said, “Dependency on anything is never healthy.”

Sensing the consequences of this dependency, the government is initiating programs to bolster other industries such as agriculture, tourism and textile manufacturing. They have also created the Citizen Entrepreneurial Development Agency, which provides low-cost financing and mentoring programs for aspiring business owners. To date, there is little evidence that these programs are stimulating Botswana’s economy. Many economists believe that its proximity to South Africa will make it difficult for Botswana to successfully compete in global markets.

For years, Botswana’s unemployment rate has exceeded 15 percent. Even graduates of Botswana University have had trouble finding jobs that are commensurate with their skills and education. Many well-qualified young people are competing for a small pool of jobs. This dilemma contributes to Botswana’s growing poverty rate, which is currently just above 20 percent. To combat the problem, the government has increased expenditures on social programs, which more than doubled between 1997 and 2005.

Increased funding of social programs is the natural result of an expanding government. In 2005, the average wage of government workers exceeded those in the private sector by more than 40 percent. This disparity between the public wage and private wage has created a wage reservation, whereby people in the private sector believe they should be paid the same as public sector employees. For this reason, many Batswana refuse to seek employment and instead rely solely on the government’s social programs.

Botswana has achieved exceptional economic improvement since 1966. But reliance on diamond mining and government social programs is undermining the country’s ability to sustain economic growth. Appropriate policies should be implemented to diversify revenues, increase private participation in the labor force and reduce dependency on social programs. Otherwise, Botswana’s success could be in jeopardy.

– Daniel Bonass

Sources: Council on Foreign Relations, African Economic Outlook, International Monetary Fund
Photo: Telegraph