Rethink development strategy, AFDB urges Botswana
Brian Benza | Wednesday May 6, 2015 18:00
In a Country Strategy Paper (CSP) for the period 2015-2019 approved by the Bank this week, the Tunis based AFDB says there is a need to accelerate the transformation from primary sector-driven economy to advanced manufacturing and services as the country is highly vulnerable to global shocks as evidenced by the 2009 financial crisis.
In 2009, Botswana borrowed $1.5 billion from the AFDB for budgetary support after diamond revenues were adversely affected by the financial crisis.
Executive directors of the AFDB this week endorsed the Botswana Country Strategy Paper, which provides a framework for the development bank’s support to Botswana during the period to enable the country achieve inclusive sustainable growth. “The Bank’s support will focus on two pillars which include infrastructure development and private sector development. “These pillars are consistent with the core priorities of the Bank’s 10-year strategy, 2013-2022, and the priority actions of the country’s 10th National Development Plan.
“Discussing the CSP at their regular meeting in Abidjan on April 29, 2015, board members observed that infrastructure project-driven productivity would provide opportunities for Botswana’s private sector development.
“This will be complemented by promoting private sector participation in public service provision through public-private partnerships (PPPs), and enabling policy and regulatory reforms,” said the Bank.
Botswana’s next development plan to succeed NDP10 that ends in 2016, is the NDP11 that will cover the period 2016/17 to 2021/22.
Despite the country’s success in promoting economic growth prior to the global financial crisis of 2008/09, the three major development challenges of unemployment, poverty and income inequality have remained an albatross on the development history of Botswana.
According to Statistics Botswana (SB), the proportion of the population living below the poverty datum line (PDL) stood at 19.3 percent in 2009/10.
On income disparity, the latest available estimate of the Gini coefficient of per capita consumption is 0.49 in 2009/10, one of the highest in the world. The Gini coefficient measures the extent to which income or consumption expenditure is equally distributed among individuals or households within an economy.
On the other hand, the unemployment rate is also very high at 17.8 percent in 2009/10), although according to the IMF the number could be as high as 30 percent if discouraged workers were taken into account.
According to the CSP, Botswana is at a cross roads in its development; noting that the economy would also face a difficult challenge in the medium- term with the depletion of diamond resources.
In 2009, Real Gross Domestic Product (GDP) contracted by 7.8 percent from an annual average growth of 10 percent experienced over the previous four decades.
“All of these call for a rethinking of the country’s development strategy. In particular, Botswana needs to accelerate economic transformation from the primary sector to advanced manufacturing and services in order to reduce its vulnerability to shocks in the diamond trade.
“To revive private sector investments and increase the productivity of economic investments, the government would have to invest in high impact infrastructure to improve competitiveness, provide a sound regulatory business as well as enhance skills development,” argued AFDB.
The AFDB also said it would creatively use its range of financial products, in addition to Public Private Partnerships (PPPs), to implement the CSP, as well as continue to coordinate closely with development partners to improve development effectiveness and enhance operational collaboration.
Its Botswana portfolio comprised six operations as at January 31, 2015. Agriculture accounted for 94.7 percent of the total portfolio, followed by multi-sector (3.9 percent) and social sector (1.4 percent). Cooperation between the AFDB and Botswana dates back to 1972. As of October 2012, the Bank had financed 50 operations (41 loan projects, seven institutional support operations, and two studies) valued at approximately US $2.1 billion.
Apart from the $1.5 loan, the AFDB has helped fund the construction of the Morupule B power station and Pandamatenga agricultural projects.