Guest post: Is the diamond losing its shine?

The future of Botswana

Botswana is distinguished for two remarkable things. First, its diamonds, which since the early 1980s has propelled the country to become a leading producer of high-quality gems, that now dominates its economy. Second, the nation's unwavering stability, an achievement that sadly made it one of a handful of outliers in Africa’s post-colonial history, particularly in comparison to the outbreaks of widespread violence that has accompanied political turmoil in nearby Southern African nations. As the map illustrates, Botswana emerges as a beacon of political tranquillity amidst its neighbours in Southern Africa, contrasting perhaps most noticeably with neighbouring Zimbabwe and the violence there due to recent political instability.

Scholars of Botswana's political and social landscape highly regard this stability, as it, they argue, has facilitated continuous economic growth of the country. This aligns with the widely held belief that a well-functioning democratic state is essential for sustainable economic growth, especially when managing substantial resource reserves. Countries like the Democratic Republic of Congo, Sierra Leone, and Sudan exemplify the adverse consequences of exporting minerals without a functional state, leading to their economies' further decline and eventual collapse. However, Botswana stands out as a notable exception, achieving a new equilibrium outcome that fosters widespread developmental growth for its population.

Although Botswana's economic growth in recent decades has been remarkable, its true efficacy is subject to ongoing debate (Jerven, 2010). While statistical agencies report strong economic growth, questions still remain about whether this growth has benefited the broader population or merely the elite (Hillbom & Bolt, 2018). Botswana is now classified as an upper-middle-income country, with a GDP at PPP per capita of approximately $16,000, comparable to countries like Brazil and Colombia. Nevertheless, it seems to be the case that a dollar holds a far greater value for someone in Botswana than it does for citizens of the aforementioned countries.

As someone interested in this small country’s success story, and whether it can be a model for others on the continent, the question of whether this shining beacon is in real jeopardy has recently been on my mind. To answer this, one can start by simply talking with local Batswana, who almost unanimously have a general outlook that appears very pessimistic about the country’s future. Conversations with individuals from various backgrounds reveal a consensus that, despite impressive growth rates over the last decade, Botswana is experiencing a relative decline. This feeling of deterioration is attributed to factors such as minimal real wage growth, increasing corruption, and diminishing civil liberties.

The expatriate business communities echo these concerns with even heightened intensity, a natural consequence of many having first-hand experiences in other nearby turbulent countries and the loss of personal financial and physical assets due to such regression.

Additionally, one can analyze media coverage, particularly in publications like The Economist, which, despite being subject to certain criticism, does provide a good benchmark for how many in the Western world perceive a country. Sentiment analysis can be employed for this purpose. The graph below quantitatively demonstrates the shift in external perceptions of Botswana's economy over the past 14 years, transitioning from an optimistic outlook to a more pessimistic one.

Another approach to assessing Botswana's recent performance and current state is examining underlying economic data, such as how productive the average worker in the economy is. Despite significant spending on education, training schemes, and initiatives like the Botswana National Productivity Centre, as the graph below shows, productivity growth has not been forthcoming. This is attributed to the inefficiency that, due to the state’s provision of secured employment in certain sectors, has become an intrinsic feature of the country.

Botswana's recent economic history can be broadly divided into two distinct chapters. The first, acknowledged by experts and international observers, involves failure to grapple with Dutch disease, resulting in stagnant or negative growth in non-mineral sectors and declining productivity. At the same time, Botswana has managed to avert the institutional decay commonly observed in other resource-rich African nations, creating a society built upon redistributing resource rents to ensure widespread living standard growth and stability.

The second chapter, commencing around the early 2010s, is marked by the gradual erosion of institutions and norms vital for sustaining social stability and driving economic growth. The most widely reported issue and most commonly cited when talking to both Batswana and foreigners alike is the recent increase in intensity of corruption, spanning from daily petty offences to grand transgressions at the highest levels.

So where is Botswana headed? Although the country does not fully exemplify an upper-middle-income nation, it does possess essential elements for economic growth, such as relatively functional institutions, a somewhat free press, and an openness to international agencies and actors. These factors were self-evident in Botswana’s successful Covid response and may just be enough to prevent a dramatic downward spiral as seen elsewhere. However, at the same time, the nation’s future is heavily reliant on diamond sales, currently worth a third of the country’s GDP, which face impending challenges such as expected declining domestic mine output, the continued growth in the market share of synthetic diamonds, and changing attitudes towards marriage and gift giving. These factors pose genuine threats to the diamond industry and, consequently, to Botswana.

A more intriguing question, though, considering the broader context of economic history, is not predicting the country’s future but understanding why this new chapter began in Botswana in the early 2010s. This insight is vital not only for the country's 2.6 million inhabitants but also for comprehending the global trend of institutional erosion and the decline of democracy. Before the 2008 financial crisis, the consensus was that the world, including Africa, was gradually moving down the inevitable road towards multiparty liberal democracy. Instead, as the table from Freedom House below shows, there has been a global democratic decline now running into its seventeenth year.

Understanding why, over the last decade and a half, there has been an aggressive rise of authoritarian leaders operating with impunity has become one of the most critical questions facing social scientists. Investigating the mechanisms behind Botswana's shift using its comparatively rich supply of primary and secondary materials for a middle-income country would be a valuable exercise. For instance, what was the significance of the Arab Spring in spurring leaders in developing regions towards reducing political freedoms and increasing internal security operations to deter challenges to power? How important has Western countries’ reduced presence in both the business and diplomatic communities, particularly post-2008, been in causing the erosion of the fundamentals that keep society on the right road? Similarly, how vital has the rise of the Chinese superpower and non-Western powers been in creating alternative paths for African leaders other than the hoped-for movement toward liberal democracy? What role has the growth of affordable technology and social media played in all of this?

Understanding what went wrong in the specific case of Botswana will provide broader and more general comprehension of the powerful societal forces at play around the world.