Economic quagmire

SHARE   |   Sunday, 31 August 2014   |   By Kabelo Adamson
Dr Keith Jefferis Dr Keith Jefferis

Economists say the reluctance of the private sector to play a meaningful role in the diversification of the local economy is rendering the country’s mineral-led economy vulnerable. 

A macroeconomist and Managing Director of Econsult firm, Dr Keith Jefferis told a workshop organised by Botswana Institute for Development Policy Analysis (BIDPA) in conjunction with the University of Botswana and Friedrich Ebert Stiftung on Wednesday that the challenges facing the local economy are more complex than 20 years ago as diamonds are nearing an end.

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Though admitting that the GDP and government budget are much less dependent on minerals than two decades ago it is most vulnerable as the economy is moving tradeables (exports) to non-tradeables (services), “but you cannot export services”, said Jefferis.

Jefferis is of the view that the agricultural sector which could have been an alternative has failed to be competitive as it was initial thought to. He said the sector despite receiving support from the economy has not been able to provide the diversification needed.

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“Government activities and popular expectations are built around higher revenues than will be sustainable in the future,” Jefferis said, explaining that the government is too big and as the sole provider of services.

Though the role of the minerals, especially the diamond in exports revenues, is said to have decreased as other sectors such manufacturing and agriculture are having an input, the economy is still led by mining sector as rough diamonds account for more than half of mineral exports.

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Jefferis said at the moment it cannot be stated as to how much is earned from cutting and polishing of diamonds in Botswana for a simple reason that “diamonds and polishing is not listed national accounts therefore we cannot know how much is generated from this.” 

Furthermore, he said, as there is no agreed definition of diversification, the focus should be on sustainability and living standards, structure of the GDP as well as sources of GDP growth, employment and income distribution.

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“We should move from an economy based on windfall income, well managed but unearned to one where income is based on competitiveness, efficiency and productivity,” advised Jefferis.
Dr Grace Tabengwa, a research fellow at BIDPA, agreed with Jefferis that not much has changed in terms of export diversity. “Positives are emerging but the concern is their sustainability,” she said.
Tabengwa said it is impossible to talk about revenue diversification due to limited export diversity and other challenges such as customs duties and tariffs.  She observed that the country’s non-diamond exports have remained concentrated around the same commodities such as copper-nickel, soda ash, beef and hides and skins.

Over the last few years, the government has in a bid to diversify the economy introduced few policies that would help in the quest to move the economy away from being mineral-based.
Policies that include Citizen Economic Empowerment Policy, Economic Diversification Drive (EDD), Selebi-Phikwe Economic Diversification Unit (SPEDU) and the new Industrial Policy, which was approved in July this year, have been drawn to help spread the revenue income.

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According to the Trade Policy Advisor at the Ministry of Trade and Industry (MTI) Joel Sentsho, the government is creating a conducive environment for the private sector and will do so through the Botswana Investment Trade Centre (BITC).

Sentsho told the workshop that BITC predecessor, BEDIA, failed in its mandate to lure investors to Botswana. “People at BEDIA used to globetrot and when they arrive in for instance Japan, the potential investor would ask the officials what sector they should come and invest in and would fail to give an answer.”



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