Diamonds or development ? A structural assessment of Botswana’s forty years of success ELLEN HILLBOM* Department of Economic History, Lund University, P.O. Box 7083, S-220 07 Lund, Sweden Email : [email protected]ABSTRACT Due to its four decades of high long-term economic growth and democratic system, Botswana has been depicted as an exceptional success story in a region full of economic and political failures. In this article, a structural analysis is applied, and it is argued that Botswana’s success should be understood as one of pre-modern growth without development. It is claimed that although the country may be a growth miracle, it has not yet experienced ‘modern economic growth’, characterised by structural change in patterns of production as well as in social and political institutions. Such analysis also offers an explanation for the duality of Botswana’s economy and society, since pre-modern growth, as opposed to development, allows for significant poverty rates and extremely unequal resource and income distribution to prevail in the midst of plenty. INTRODUCTION At Independence in 1966, Botswana was a poor, undeveloped and seldom heard of part of the world. Forty years later, it is regarded as a growth miracle (Samatar 1999), a sign of hope for sub-Saharan Africa, and as an exemplar of prosperity and success. The country experienced a staggering GDP per capita increase of 13% per annum in the years 1980–89 (Mpabanga 1997), and a long-run growth over the last four decades that even surpasses the performance of the Pacific Asian tigers (Leith 2005: 4, * The research for this article was conducted within the research project ‘The Role of Equity in Development’, funded by the Swedish International Development Cooperation Agency, Department for Research Cooperation (Sida/SAREC). The author wishes to acknowledge the valuable comments given by her colleagues Christer Gunnarsson, Martin Andersson and Erik Green, and by two anonymous referees. J. of Modern African Studies, 46, 2 (2008), pp. 191–214. f 2008 Cambridge University Press doi:10.1017/S0022278X08003194 Printed in the United Kingdom
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Diamonds or development ? A structural assessment of Botswana’s forty years of success
Due to its four decades of high long-term economic growth and democratic system, Botswana has been depicted as an exceptional success story in a region full of economic and political failures. In this article, a structural analysis is applied, and it is argued that Botswana’s success should be understood as one of pre-modern growth without development. It is claimed that although the country may be a growth miracle, it has not yet experienced ‘modern economic growth’, characterised by structural change in patterns of production as well as in social and political institutions. Such analysis also offers an explanation for the duality of Botswana’s economy and society, since pre-modern growth, as opposed to development, allows for significant poverty rates and extremely unequal resource and income distribution to prevail in the midst of plenty.
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Diamonds or development ?A structural assessment of
Botswana’s forty years of success
ELLEN HILLBOM*
Department of Economic History, Lund University, P.O. Box 7083,
Due to its four decades of high long-term economic growth and democraticsystem, Botswana has been depicted as an exceptional success story in a regionfull of economic and political failures. In this article, a structural analysis isapplied, and it is argued that Botswana’s success should be understood as one ofpre-modern growth without development. It is claimed that although the countrymay be a growth miracle, it has not yet experienced ‘modern economic growth’,characterised by structural change in patterns of production as well as in socialand political institutions. Such analysis also offers an explanation for the dualityof Botswana’s economy and society, since pre-modern growth, as opposed todevelopment, allows for significant poverty rates and extremely unequal resourceand income distribution to prevail in the midst of plenty.
I N T R O D U C T I O N
At Independence in 1966, Botswana was a poor, undeveloped and seldom
heard of part of the world. Forty years later, it is regarded as a growth
miracle (Samatar 1999), a sign of hope for sub-Saharan Africa, and as an
exemplar of prosperity and success. The country experienced a staggering
GDP per capita increase of 13% per annum in the years 1980–89
(Mpabanga 1997), and a long-run growth over the last four decades that
even surpasses the performance of the Pacific Asian tigers (Leith 2005: 4,
* The research for this article was conducted within the research project ‘The Role of Equity inDevelopment ’, funded by the Swedish International Development Cooperation Agency, Departmentfor Research Cooperation (Sida/SAREC). The author wishes to acknowledge the valuable commentsgiven by her colleagues Christer Gunnarsson, Martin Andersson and Erik Green, and by twoanonymous referees.
J. of Modern African Studies, 46, 2 (2008), pp. 191–214. f 2008 Cambridge University Pressdoi:10.1017/S0022278X08003194 Printed in the United Kingdom
Table 1.1). Simultaneously, the government has managed to establish
one of the longest running multiparty democracies on the continent.
The question is frequently posed how a country that used to be among
the poorest, situated in the most underdeveloped and conflict-ridden
continent in the world, could achieve outstanding growth paired with
political stability. The explanation for the success story is found mainly in
limited colonial influence, good political institutions, wise leaders and
prudent economic policy (see e.g. Acemoglu et al. 2003; Beaulier &
Subrick 2006; Harvey & Lewis 1990; Iimi 2006; Leith 2005; Mpabanga
1997; Owusu & Samatar 1997; Samatar 1999).
In this article Botswana’s economic performance is, however, analysed
not from the viewpoint of stability and growth, but from that of structural
change and development. The position is taken that while commendable
advances have been achieved during the last four decades, these need to
be complemented with technological innovations, significant productivity
increase, change in economic and political structures, a significant rise in
living standards for the poor, and a more equal distribution of resources,
incomes and opportunities, for there to be long-run sustainable opulence
with substance. It is necessary to distinguish between growth and devel-
opment. Botswana’s significant economic and political advances make up
a clear case of growth without development, as long as such change has
not taken place.
The diamond-led economic growth record of Botswana is truly im-
pressive, and the country is presently classified as an upper-middle-income
country with an estimated GNI per capita of US$5,900 in 2006 (World
Bank 2008a). Although average GDP growth rates have been levelling
off and falling below 4% per annum (World Bank 2008b), no immediate
end to further economic expansion is in sight. The most serious socio-
economic threat is the estimated 24% prevalence of HIV/AIDS in
the productive population aged 15–49 (World Bank 2008a), resulting in a
35-year life expectancy, and infant and under-five mortality rates at 87 and
120 respectively (ibid.). This gives the country the unique and deplorable
combination of impressive growth with diving social indicators.
As part and parcel of the successful growth, Botswana is also associated
with political progress. Independence was peaceful, and compared with
other African leaders, the Botswana political elite has shown an ability to
govern both peacefully and prudently (see e.g. Acemoglu et al. 2003;
Beaulier & Subrick 2006; Hill 1991; Leith 2005). The country has a high
regulatory quality, and is considered by many not only to be the least
corrupt country in Africa, but as on par in this regard with Western
Europe (Robinson & Parsons 2006: 107–10). This view is, however, being
192 E L L EN H I L L BOM
contested as increasing mismanagement and corruption on the part of
the power elite has been documented (Makgala 2006).
In the midst of this peaceful growth miracle, there thus exist serious
deficiencies. Apart from a degree of elite capture, these include concerns
over high and unchanging inequalities, poor and neglected rural areas, high
unemployment rates, failure in limiting the AIDS epidemic, discrimination
against minority groups such as the San and a weak civil society (see e.g.
Allen & Heald 2004; Good 1993, 1994; Gulbrandsen 1996; Heald 2006;
Lekoko & van derMerwe 2006;Makgala 2006; Nthomang 2004; Phaladze
& Tlou 2006; Wikan 2004). Dual development and contradictory in-
dicators are typical of a country experiencing pre-modern growth without
structural change and development. A holistic structural analysis that
recognises Botswana’s socio-economic institutional structure as partly
pre-modern underscores the ambiguity in the growth process, and is
necessary for drawing up strategies for turning growth into development.
G R O W T H O R D E V E L O P M E N T
Kuznets (1973) argued that in our time the end goal for any society is to
reach ‘modern economic growth’ (MEG), thereby leaving the pre-modern
growth process behind. This modernisation, which is the equivalent
of development, is characterised by technological advances, high rates
of growth, a rise in productivity, and structural transformation of the
economy, society and ideology. Depending on its causes and character-
istics, growth may be more or less likely to promote such processes of
structural change, and societies can experience growth while staying
pre-modern. Botswana is an example of a small country possessing ex-
ceptionally valuable resources, allowing the state to provide its population
with increasing rents. Such types are not representative in Kuznets’ orig-
inal model of MEG, where they are treated as atypical cases. Building
on Kuznets, using comparative history and comparative economic devel-
opment, Adelman and Morris (1997 : 833) elaborate on the modernisation
argument, taking the position that all processes of economic development
are multifaceted and non-linear. Recognising variations in possible paths
to modernisation and development does not, however, contradict stipu-
lating a uniform end goal. In their categorisation, Botswana falls into a
typology of agricultural, primary-export oriented, sharply dualistic and
land-abundant countries. Within this group, the characteristics of existing
natural resource endowments and degrees of government autonomy
from tribal domestic elites and colonial powers determine patterns and
sequence of structural change.
D I AMOND S OR D EV E LO PMENT I N BO T SWANA 193
A theoretical approach to the potential development process of this
category of economies is offered by a modified Lewis model. Lewis (1954,
1979) stipulates a closed economy, where population is large relative to
capital and natural resources and, consequently, there is an unlimited
supply of labour. As this labour leaves the subsistence sector where mar-
ginal productivity is negligible, zero or even negative, and moves into the
capitalist sector with significantly higher productivity, structural change
and economic modernisation are realised. The industrialisation process
is at the heart of the capitalist sector, but this also includes capitalist agri-
culture, and Lewis was highly concerned with raising agricultural pro-
ductivity in order to prevent the creation of a dual economy. The original
Lewis model must be restated for the analysis of economies of the
Botswana type to an open-economy model, where export incomes from
primary products are invested to achieve industrialisation and agricultural
transformation (Adelman & Morris 1997 : 838). Such substitution for poor
capital accumulation in other sectors, specifically agriculture, is the pri-
mary opportunity for catching up offered to natural resource-dependent
developing countries (Gerschenkron 1962).
MEG marks a distinct economic epoch, and is separated from the pre-
modern structure by six characteristics : (1) high rates of per capita and
population growth; (2) high rate of rise in productivity ; (3) high rate of
structural transformation of the economy; (4) rapid change in social and
ideological structures ; (5) participation in a globalised economy; and (6) a
significant level of modern technology. At the same time as MEG rep-
resents a new structure, it also comprises the continuation of old trends,
albeit in an accelerated form, and this makes the break between the pre-
modern and the modern difficult to identify and analyse (Kuznets 1973:
248–9). The conventional Botswana success story, resting on significant
growth rates due to high earnings from diamond exports, corresponds to
only two of the above stated characteristics. However, the structural
analysis provided in this article is concerned for all of the above presented
characteristics of MEG, the presence of which would signify a break with
the pre-modern growth process.
Technological advance, productivity increase and structural change
in patterns of production raise the income levels, while the distribution
of resources and incomes via a modernised institutional structure leads
to widespread improvements in human welfare. It is in the nature of de-
velopment that all segments of society significantly benefit from economic
gains. With such a demanding definition of development, there is only a
very exclusive group of mostly Pacific Asian countries that have become
developed since World War II. A lesson from the last 50 years is, however,
194 E L L EN H I L L BOM
that economic development of developing countries is possible (Adelman
2003: 17–18). The growth performance and improvements in infra-
structure and human capital that are characteristics of Botswana’s success
are significant, but they depend on export earnings from primary pro-
duction, and the country has not reached development as defined above.
The second issue to be investigated is then how pre-conditions for a
transformation can be created, and whether there are any implications
from the Botswana case for other natural resource-abundant countries
striving for development.
There is a clear connection between theories on MEG on the one hand,
and development on the other. Although Kuznets only used the term
development explicitly in the sense of self-sustained growth, together with
structural change in production and technological advance, the redistri-
bution of resources is implicit in the model. Kuznets (1955) hypothesised
that societies prior to MEG are characterised by fairly equally distributed
low levels of income and a high incidence of poverty. During the process
of structural change, inequality temporarily increases, but in the modern
economy the higher levels of income will be distributed to all levels of
society, leading to significantly improved living conditions. Equity, defined
as equal opportunities for all members of society and an avoidance
of deprivation in outcomes (World Bank 2006: xi), is both a means of
reaching development and the goal of development itself. In the case
of Botswana, the point of departure involved high poverty rates, combined
with high degrees of inequality and growth. Adelman and Morris (1997)
claim that the individual starting point is decisive for the development
process, and for Botswana a conscious strategy of fairness, improvements
of living standards and inclusion would then be imperative for reaching
equity in development.
E C O N O M I C S T R U C T U R A L C H A N G E
Hirschman (1958) argued that in a small country with an economy domi-
nated by a valuable natural resource, growth usually has few linkages to
other aspects of the economy and society, unless there is active govern-
ment involvement to substitute for stagnating sectors. Technological
advance and innovation need to be paired with a flexible and encouraging
institutional structure, in order to produce a significant increase in
productivity. The general technological level of industry in Botswana has,
however, stayed low, and productivity has not experienced any significant
increase with the exception of the mining sector. In fact, the increase in
Total Factor Productivity is brought about mainly by increase in factor
D I AMOND S OR D EV E LO PMENT I N BO T SWANA 195
input of capital and skilled and unskilled labour, and less than 10% of the
growth in output in the 1980s and 1990s was due to increases in pro-
ductivity (Leith 1997a: 29–30). Unfortunately, mining employs only 4% of
the labour force, is not complemented by other forms of industry, and has
not encouraged or contributed to technological advance, via either im-
ported technology or domestic innovations (Gaolathe 1997: 412–13;
Mpabanga 1997: 373; RoB 2004a: 12, Fig. 2.4). It mainly has spin-off
effects on the public sector via government employment (Good 1993) and
spending. The service sector has at present expanded to 45% of GDP
(World Bank 2008a), becoming the largest sector as increased incomes
allow for increased demand from government and the public for certain
services and goods. Most consumption goods are imported from the
Southern African Customs Union (SACU) (RoB 2003: 114), which lowers
market incentives for domestic producers.
In 1968 agriculture dominated the economy, representing over 40% of
GDP, only to decline to less than 2% in 2006; it continues to hold a very
modest position. Mining instead expanded from 8% of GDP in 1974/75 to
53% in 1988/89, only to shrink again to roughly 35% in 2002 (Leith
are 81%, and more than 5% of the population has completed tertiary
education (World Bank 2008a, 2008b). Contemporary health indicators
are severely negatively affected by the rampant HIV/AIDS epidemic,
which makes them difficult to evaluate. It is, however, relevant to point out
that although they were good they were never exceptional, and that less
has been spent on health improvement than on education (Leith 2005: 86,
Fig. 3.10). In the early 1990s, before the impact of HIV/AIDS, the best
figures recorded for life expectancy and infant mortality were 65 years
T A B L E 2
GINI Coefficients
Region
Disposable Cash Income Disposable Income
1993/94 2002/03 1993/94 2002/03
Cities/Towns 0.548 0.513 0.539 0.503
Urban Villages 0.552 0.552 0.451 0.523
Rural 0.599 0.622 0.414 0.515
National 0.638 0.626 0.537 0.573
Source : RoB 2004b. Higher numbers indicate greater inequality.
D I AMOND S OR D EV E LO PMENT I N BO T SWANA 207
and 45 out of 1,000 births respectively (Leith 1997a: 23, Fig. 2 ; 2005: 13,
Table 1.2).
Government policy has given better results than can be detected simply
from levels of income poverty, as it has improved human capital and the
capabilities of the poor. In a broader based approach the concept of
capability poverty can be used, in which case Botswana scores much more
favourably, with 30% suffering from capability poverty in 1996 according
to UNDP, as opposed to 46% being income poor in the same year (Jefferis
1997 : 492–3). The actions of the Botswana government in improving
capabilities have thus been commendable, but they have not automatically
generated dynamic processes of increasing productivity and are not
equivalent to equity. Indeed, the reliance on government welfare pro-
grammes has made many rural destitutes passive, and cemented existing
structures (see e.g. Nthomang 2004; Wikan 2004).
In the agricultural sector, poverty is a matter more of access to resources
than of income levels, and since smallholders are mainly subsistence
farmers, their standards of living are difficult to estimate. A minimal access
to resources is generally guaranteed within the traditional property rights
systems, where key resources such as water and land have a strong public
goods dimension (Carlsson 2003: 101–7). Batswana farmers are vulnerable
and prone to poverty due to limiting climatic and soil conditions and
recurring droughts. This weakness of the agricultural sector has implica-
tions for poverty reduction on a national level, as traditional agriculture is
only estimated to be able to support 15–20% of the labour force, thereby
augmenting the pressure on other sectors for offering employment (Jefferis
1997 : 478).
Distribution of wealth is to a high degree associated with distribution of
cattle, which has a long history of being very unequal, with the traditional
chiefs and their relatives being the largest cattle holders (Colcough &
McCarthy 1980: 22 ; Lawry 1983: 6). Cattle continue to be amassed by
a minority of large holders, while the number of cattleless smallholders
is increasing. In the 1940s only 10% of households had no cattle, while
in 1993/94 that figure was 57%. In 1990 33% of cattle holders had
on average six beasts each, while 35 commercial farms, representing 0.6%
of cattle holders, held above 4,000 head on average, and 19 farms
held more than 10,000 (Good 1993: 223–4; Silitshena & McLeod 1998:
127). After Independence, the traditional economic elite moved into the
new state, establishing a strong connection between large cattle holders
and government. In the early years of Independence, two-thirds of the
members of the National Assembly were large or medium sized cattle
owners (Samatar 1999: 69–70).
208 E L L EN H I L L BOM
There is a well-documented and uncontested history of the economic
and political elite being one and the same in Botswana (see e.g. Acemoglu
et al. 2003; Good 1993; Peters 1994; Wylie 1990). Very few Europeans ever
settled in the Bechuanaland Protectorate as they saw little future in either
agriculture or mining, and only 3% of farm land came under European
control (Colcough & McCarthy 1980: 7). This marginal colonial influence
allowed the Tswana political and economical institutional structure to stay
strong, and to guarantee a continuity in the social structure of the pre-
colonial, colonial, and post-colonial era (Acemoglu et al. 2003; Colcough &
McCarthy 1980: ch. 1).
That the political and economic elite are identical is presented by some
researchers as a decisive factor explaining Botswana’s economic success
(see e.g. Acemoglu et al. 2003: 104). Maintaining the status quo has, how-
ever, allowed this elite to protect its own interests, and there is no reason to
assume that it would act according to anything other than its own self-
interest (Kaufmann & Kraay 2002: 204). The political elite is further
connected to the leading bureaucrats, who share common economic in-
terests in cattle and commerce (Good 1994: 499). This overlap between
the wealthy, the political leaders and the bureaucracy explains the lack of
interest in equity in resource and income redistribution.
The theory of MEG, however, implies that growth has to lead to shifts in
the economic position of various groups attached to particular production
sectors. Hence, old economic elites have to be challenged and transformed
or replaced, in order for new production sectors to appear, together
signifying a break with old economic and social structures (Kuznets 1973:
252). Such change may not be welcome in the eyes of the elite. While
pre-modern growth is in their best interest, it is questionable whether they
are motivated to promote development, as this requires structural change
and not the continuity of existing political institutions.
If the elite is interested in maintaining the status quo, the demand
for change and equity may come instead from the grass-roots level, but
this does not appear to be the case in Botswana, as there are no sizeable
social movements or contesting political parties (Good 1994: 518). Political
stability, consensus building and economic growth appear to have
dampened the opposition. Diamonds have kept all content and happy, as
there has been some for all, and a lot for a few.
A N A L Y S I S A N D I M P L I C A T I O N S
As sub-Saharan African countries became independent in the mid-1950s
through to the beginning of the 1970s, there was a great optimism for the
D I AMOND S OR D EV E LO PMENT I N BO T SWANA 209
future. Income levels were higher than in many Asian regions and on par
with Latin America, the continent held great riches in natural resources
and Africans were finally free to form their own destiny. Unfortunately,
the continent soon became troubled by ethnic and racial conflict, political
unrest, violent crime, ravaging poverty, economic failure and resignation,
predatory leaders and rampant corruption. Political and economic stag-
nation, decline, and chaos have been widespread experiences since the
1970s, and the overall economic crisis triggered the introduction of
the Structural Adjustment Programmes in the 1980s. Since then, the
continent’s aspirations have been lowered. Stability and growth have been
viewed not just as acceptable or sufficient achievements, but even as the
best imaginable result, while development has been reduced to an almost
forgotten utopia.
It is in this context that Botswana has qualified to be depicted as an
exceptional success story. What the country has experienced for the
last 40 years is export-led growth combined with political stability. It is
not enough, however, to rest content with describing only the Botswana
growth miracle, without discussing its fundamental socio-economic struc-
ture and possible future improvements. The key issue is MEG, develop-
ment and structural change.
Despite impressive growth, political stability, improved infrastructure,
prudent financial management, material modernisation and investments
in human capital, Botswana is at present also experiencing a decline in
population, there is no significant increase in productivity, little economic,
social or ideological transformation, and only sporadic introduction of
high levels of modern technology. Hence, four out of six characteristics
of MEG are missing, and the inference must be that Botswana is a case of
pre-modern growth and not development, while the socio-economic
structure is being cemented and hailed as stability. Although continuity
is an active process and may contain dynamic institutional change, it
does not amount to a break with earlier structures, and the lack of struc-
tural change is the reason behind faltering development indicators. The
advances that have been made are indeed very promising, but they are
only pre-conditions for turning growth into development, while there
are few signs that structural change is promoted either by agriculture
or industry, by the elite or the grass-roots level. Neither is equity part
of Botswana’s strategy, although it is a necessary ingredient in develop-
ment.
Botswana has experienced a profound change in factor relative price,
due to a massive increase in capital primarily from diamond exports, and
the success of the mining sector has the potential of becoming a window of
210 E L L EN H I L L BOM
opportunity for development. This sector could substitute for missing
capital formation in the low producing agriculture, and help transform
agriculture as well as diversify industry. In order for this to be realised,
however, the government has to step up and take on the challenge to
become a developmental state.
The success of Pacific Asia provides several important lessons con-
cerning economic development. It shows that development is possible, and
that a developmental state can create the institutional structure necessary
for subsequent development. Through intentional policy choices, coun-
tries such as Botswana can shift from a trade-led, natural resource inten-
sive, limited industrialisation with narrow based growth, to a broader
development strategy. Further, although development is a process
that entails a discontinuous break with earlier structures, it is also path-
dependent in that each country has a unique economic, political, and
social history, and an existing institutional setting. All development stra-
tegies must take this into account. The economic and political institutional
structures are of equal importance in this process of development, and are
closely linked to one another (Adelman 2003: 17–21).
Botswana offers lessons for other natural resource dependent develop-
ing countries, in the importance of prudent management in avoiding the
natural resource curse and Dutch disease, as well as the blessing of leaders
who have been relatively modest in their rent seeking. It can thereby be a
model for how to achieve important pre-conditions for development, but it
cannot be a model for actual development, since there has been no
transformation into modernisation. The progress of Botswana is truly
commendable, but the goal for any society must be development through
MEG, and the next step is to leave the safe haven of stability and growth to
venture into structural change and development. With a developmental
state promoting equity and bringing prosperity to all segments of society,
Botswana could use its diamond wealth to diversify industry, transform
agriculture, and become a modern society. This is necessary for long-run
economic sustainability because it is development and not diamonds that
lasts forever.
N O T E S
1. Published under the maiden name of the present author.
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