THE GEM OF AFRICA: BOTSWANA
How to go from the world’s poorest to the world’s fastest-growing economies
In the middle of the 1947 heat-wave, Seretse Khama, the Prince of Bechuanaland (colonial Botswana) and heir to the throne, met the English Lloyd’s clerk Ruth Williams at a London ball. The Prince was smitten — after only a year of courtship, the Prince and the English clerk got hitched. However, what came after their union was everything but a fairytale.
At the time, Bechuanaland was one of the poorest territories in the world. Having recently implemented racist apartheid laws banning interracial marriages, the much more powerful neighboring South Africa took the union between the Prince and a white woman as an attack. South Africa demanded from the U.K. that the Prince be exonerated of his title and exiled from the country. After intense pressure, the U.K. government conducted an investigation into Seretse Khama’s capabilities and concluded that there was no reason for him not to become chief “but for his unfortunate marriage”. The Prince and his wife were exiled to Europe, and he was forced to relinquish his title.
In 1959, due to public acclamation, Seretse and his wife were strictly allowed to return to Bechuanaland as private citizens. Seretse was highly trained in law and politics, so he quickly became involved with national politics. In 1961, he founded the Bechuanaland Democratic Party — a party whose core values were prudence, centrist-liberal ideologies, and economic growth. Seretse Khama benefitted from his “outsider” status due to his exile, as the population grew more and more dissatisfied with the British colonial rule. Being a persona non-grata for the U.K. and South African governments benefited his political popularity. In 1965, Seretse rose to prime-minister, and by 1966, Bechuanaland officially became Botswana, finally an independent country.
Independence was only the start. Botswana was now the third poorest country in Africa, with most of its population surviving on unreliable subsistence farming. The 581,730 km2 country (comparable to the size of Germany) only had 12 km of paved roads. At the time, only 22 people in the entire country had university degrees. However, Seretse had an ambitious, albeit simple, plan: the government would encourage three main sectors of the economy (beef, copper, and diamonds) to make Botswana an exporter country. The following list of policies was essential in helping Botswana achieve its exporting goal and economic growth:
- Low marginal income tax to avoid tax evasion (as well as decreasing the administrative costs of the tax office).
- Strong laws and programs against corruption
- Merit-based hiring guidelines for government workers
- Increased personal freedoms
- Diplomatic neutrality in a very unstable region
- Business-friendly policies such as low taxation incentive programs for mining companies
- Subsidizing of productivity-increasing technology, such as cattle vaccines and building fences around cattle farms.
Botswana grew quickly and became the fastest growing country in the 1970s. As the government budget grew organically, Seretse’s government decided to invest in the country’s education, healthcare, and infrastructure, achieving free education in Botswana and laying the groundwork for the foundation of the first university in the country. By 1972, Botswana’s economy was growing at an astounding 22.432% rate:
GDP per capita growth rate, 1965–2019. Source: World Bank
The impressive legacy of Seretse Khama still benefits the country today, which boasts a higher literacy rate than most other African countries, higher productivity scores, and lower unemployment rates. For a country that was one of the world’s poorest in the 1960s, Botswana became the 4th wealthiest African economy in 2019 (GDP per capita, PPP). In 2019, GDP per capita in Botswana was measured to be 18,552.753 international dollars, which accounts for differences in purchasing power between countries. This number looks even more impressive when compared with other countries: China (I$ 17,200.751), Brazil (I$ 15,300.00), Rwanda (I$ 2,325.00), Colombia (I$ 16,132.4), and Greece (I$ 32,506.4).
In terms of real GDP, Botswana nearly doubled its output from $5,216.371 in 1970 to $10,178.365 in 2014. According to the macroeconomic doubling time equation (doubling time in years = 70/yearly growth rate), doubling GDP in 44 years would imply an average annual growth rate of 1.59%, which includes the negative growth period during the global financial crisis of 2008. But growth in the past doesn’t guarantee growth in the future. Botswana has relied too much on its diamond industry, increasing its exposure to shocks in the diamond market, which has become very volatile in recent years. The Covid-19 pandemic has proved to be a major challenge for the country’s economy, which was expected to contract 9.1% in 2020. Despite these challenges, Botswana continues to be a successful development story. If the ruling party follows Seretse’s core ideologies of prudence and stability, Botswana will have many opportunities for Botswana to continue its upward trajectory.
If you are interested in Seretse Khama, I highly recommend the movie “A United Kingdom” based on his personal and political life story.