世界银行-博茨瓦纳-寻找包容性增长新动力的国家经济备忘录

PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorized

BOTSWANA

CountryEconomic

Memorandum:In

searchofnewdriversofinclusivegrowth

May2024

ed

1

2

Acknowledgements

•TheBotswanaEconomicMemorandum“Inthesearchofnewdriversofinclusivegrowth”wasco-ledbyJacquesMorisset(LeadEconomist,EFIProgramLeader);JavierBaez(LeadEconomist);andTshephoBabatshiGasha(Economist).ThecoreteamalsoincludedMarkoKwaramba(SeniorEconomist)andDumisaniNgwenya(Economist).

•ThereportbenefittedfrominputsbyWorldBankexperts,including(byalphabeticalorder):BernardAritua(LeadTransportSpecialist);CarolinaDiaz-Bonilla(SeniorPovertyEconomist);ConsolateRusagara(FCIPracticeManager);ElizabethNinan(HDProgramLeader);HartwickTchale(SeniorAgricultureEconomist);KarlaGonzalezCarvajal(TransportPracticeManager);MarcSchrijver(SeniorFinancialSectorSpecialist);MichaelEhst(SeniorPrivateSectorSpecialist);NadiaTaobane(SeniorEnergySpecialist);OmowunmiLadipo(GovernancePracticeManager);SmitaKuriakose(LeadPrivateSectorSpecialist);andStevenMichaelPennings(SeniorEconomist).AssistancewasprovidedbyNaniMakonnenandAnnaMaryEsterhuizen.

•Theteamisgratefultothetwopeerreviewers,HabibRab(LeadEconomist)andNathaliePicarelli(SeniorEconomist),fortheirusefulcomments.ThecollectionofinternationalbestpracticeswasmadepossiblebythecontributionsfromMarcSchiffbauer(LeadEconomist),MarcForni(LeadUrbanSpecialist);NadiaRocha(LeadEconomist);andJean-ChristopheMaur(SeniorEconomist).

•TheteamextendsgratitudetotheBotswanaofficials,includingcabinetmembers,andlocalstakeholderswhoprovidedfeedbackduringseveralworkshopengagements.AspecialthankyoutotheGovernoroftheCentralBank,CorneliusDekop,andthefollowingdiscussantsWilfredMandlebe,CláudiaConceição,AlinahSegobye,GloriaSomolekaeandKeithJefferiesfortheirparticipationtotheconsultationmeetingorganizedinNovember2023.

•ThereportwasfinalizedunderthecollectiveguidanceandleadershipofSatuKahkonen(CountryDirector),Marie-FrancoiseMarie-Nelly(formerCountryDirector);AsadAlam(EFIRegionalDirector);HassanZaman(EFIRegionalDirector);AsmeenKhanManager(OperationManager),MarcoHernandez(MTIPracticeManager);dPierellaPaci(PovertyPracticeManager),andLiangM.D.O.Wang(CountryRepresentative).

Keymessages

1

Botswanaaspirestobecomeahigh-incomeeconomyanderadicateextremepovertyby2036,but...

•Ithasshiftedfromatoptoamid-rangeperformeroverthepastdecade–thegrowthratedeclinedtoanaverageof3%peryearoverthelastdecade,downfrom5.1%inthe2000s.

•Closetohalfofitspeopleliveswithlessthan$6.85perdayby2022,extremelyhighforanuppermiddle-incomecountry.

•Thepublicsector-ledgrowthmodelbuiltondiamondrentsshowssignsofexhaustion,whiletheeconomyhasbecomemorevulnerabletofinancial,climateandhealthshocks.

2

3

Botswanacanmeetitsaspirationsandavoidgettingcaughtinamiddle-incomecountrytrapwithagreateremphasisoncreatingtheconditionsforproductivity-ledinclusivegrowth.

•Thecountryneedstogenerateproductivitygainsofabout2%peryear,whileinvestingmoreandaboveallbetterinbothphysicalandhumancapital.

BoostingBotswana’sproductivityrequiresspecialattentiontofivedeterminants

•Encouragingdynamicfirmcreationandgrowthandtechnologyadoption/innovation

•Developingskillsinthelaborforce

•Improvingaccesstofinancialservices

•Enhancingconnectivitytoenlargemarkets

•Upgradingpublicsectorperformance3

Whythisdiagnostic?

ThisReportintendstobeaninputintothegovernment’sstrategicvisionandpolicymakingtohelpmoveBotswanaclosertoitsambitiousobjectiveofbecomingahigh-incomeeconomyby2036by:

i.Carryingoutdiagnosticsonpasteconomicperformanceandpotentialgrowthtrajectoriesgoingforwardto

uncoverbindingconstraintsandrealisticopportunities.

ii.Usingaconceptualapproachbasedonwellestablishedmethodologies(Box1)andbenchmarkinganalysisusingasetofaspiringcountries(Box2).

iii.Emphasizingpolicyobjectivesforproductivitygrowth,innovationandinclusion.

iv.Drawingfromthepolicyexperienceofcountriesthatfacedsimilarchallenges,includingsomethatgraduatedorareclosetograduatingfromuppermiddle-tohigh-incomestatus.

Thisreportdoesnotcoverkeyaspectsthatareaddressedinparallelstudies(e.g.,climatechangeimpactsandactionsintheCCDR)orrequiregreaterattentioninfutureresearch(sectorspecificdevelopmentstrategies,thefinancingofcapitalinvestmentsorthepoliticaleconomyofreforms).

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4

5

Box(1):Theunderlyingconceptualapproachofthisreport

Thisreportisanchoredonthreecomplementarymethodologies:

1.Theanalysisisguidedbyseveralconceptualapproachestoassesseconomicgrowthperformance:i)growthdecompositionmodels(SolowandShapley)toassesstheroleofaccumulationoffactors(capitalandlabor)andefficiencygains(productivitygrowth),ii)evaluatingtheprocessofeconomictransformationtogainunderstandingofthereallocationofresourcesawayfromagricultureasthecountryurbanizes(Romer,Henderson),andwithinsectors(Lewis,Kuznets),iii)theroleofnaturalresources(diamonds)(Sala-I-Martin);andiv)theroleofinstitutions(Acemoglu,Rodrik).

2.EstimatingdifferentfuturegrowthtrajectoriesusingtheWorldBank’sLongTermGrowthModel-tobringaforward-lookingperspective.

3.Employingcasestudiescomprisingcountriesthathavebeenabletoavoidthemiddle-incometrapinrecentyearstoillustratehowsuchgainscanbejumpstartedinBotswanaaftertakingintoconsiderationthecountry’spoliticaleconomycontextandneeds.

6

Box(2):Benchmarkingselection

•FourcountrieswereselectedtoinspireBotswana’sgovernmentintheirquesttomeettheirtargets.Theyachievedrapidandsustainedgrowthepisodesinrecentyears,mainlythroughproductivitygainsand,forsomeofthem,diversificationawayfromnaturalresources.Allhaveclosetozeroextremepoverty($2.15/dayinternationalpovertyline)andrelativelylowinequality.Twoaresmalleconomies(ChileandMauritius),whileoneisgeographicallyisolated(Mauritius).KoreaandMalaysiaaretwoofthegreatestdevelopmentstoriesinmoderntimes.

•Botswanaisranked92ndintermsofGNIpercapita($7,430)anddistantby$6,495fromthehigh-incomethresholdin

2022.ItsGNIpercapitagrowthaveraged1.4%overthepast10years(2013to2022).

Aspiringcountries(basedon2022data)

•Chileranks66thintermsofGNIpercapita($15,360)andreachedHICstatusin2012.ItsGNIpercapitagrowthaveraged2.9%inthe10yearsprecedinggraduation.

•Korearanks33rdintermsofGNIpercapita($36,190)andreachedHICstatusin1995-97and2002.ItsGNIpercapitagrowthaveraged9.0%inthe10yearsprecedinggraduation.

•Malaysiaranks74thintermsofGNIpercapita($11,830)andisdistantby$2,065fromtheHICthreshold.ItsGNIpercapitagrowthaveraged2.4%overthepast7years.

•Mauritiusranks78thintermsofGNIpercapita($10,360)andisdistantby$3,085fromtheHICthreshold,whileitsGNIpercapitagrowthaveraged2.4%overthepast10years.

Outline

5.Concludingremarks

1.Whyshould

Botswanasearchfornewdriversof

inclusivegrowth?

3.Isthetraditionalmodel

ofgrowthsuitabletosustainletalone

accelerategrowthandsharedprosperity?

4.Howtojumpstartthesedrivers?

2.Whatwerethedriversofgrowthuntiltheslowdownineconomicperformanceinthelate2000s?

7

7

1.WhyshouldBotswana

searchfornewdriversofinclusivegrowth?

8

IsBotswana’sgrowthanditseffectonpovertyrunningoutofsteam?

GDPgrowthisonadownwardtrend

6

5

4

3

2

1

0

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

AverageannualGDPandGDPpercapitagrowthbyperiod

(percent)

5.1%

3.1%3.2%

2.3%

1.2%

0.4%

GDPGDPpercapita

Povertyreductionhasslowedwhileinequalityisamongstthehighestintheworld

70

60

50

40

30

20

10

0

60.864.760.5

54.253.3

41.8

34.1

29.1

15.4

17.7

PovertyGini

19851993200220092015

•Uptothelate2000s,BotswanawasoneofthebestperformersintheworldwithaGDPgrowthrateaveraging7.1%(1980-2008)andfastreductioninextremepoverty($2.15perday),achievingoneofthelowestpovertyratesinSub-SaharanAfrica(17.7%in2009).

•ItwastheonlycountryfromtheregionselectedbytheGrowthCommissionasasuccessstory.

•Yet,Botswana’sGDPgrowthhassystematicallyunderperformedothermiddle-incomecountriessince2010(itaveraged3%),exceptin2015.

•Botswana’spovertyreductionsloweddowntoo.Extremepovertyfellbyonly2.3percentagepointsbetween2009and2015,whileinequalityremainsamongthehighestintheworld.

Note:Thepovertyrateisbasedontheinternationalpovertylinewhichissetat$2.15perdayusing2017purchasingpowerparities(PPP).TheGiniindexmeasurestheextenttowhich9

thedistributionofincomeamongindividualsorhouseholdsdeviatesfromaperfectlyequaldistribution.Source:WorldDevelopmentIndicators.

Botswanawillneedasignificantandsustainedboosttoachieveitsgoalof

reachinghigh-incomecountrystatusby2036

•Thegovernmenthassetambitioustargetsfor2036:

•JoiningtheclubofHICs($13,846in2022)and

•Eradicatingextremepoverty($2.15perday)andreducingsignificantlypoverty($6.85perday).

•Yet,atthepaceofgrowthofthelastdecade,thecountry

willnotreachtheabovetargets:

•GDPpercapitawillbe$9,103,farfromthetarget

•Thepovertyrate(at$6.85perday)willbeover40%.

•Reinvigoratingthedevelopmentmodelisthereforerequiredtoachievefasterandmoreinclusivegrowth.

High-incomestatusmaybedifficulttoreachby2036withoutfasterandmorestablegrowth

15000

BWA:RealGDPPCLevel(inUS$2021)

10000

5000

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Baseline(Business-as-usual)

HistoricalData(3yrcenteredmovingaverage)*HICThreshold

Andpoverty($6.85line)willremainprevalentby2036

70

60

50

40

30

20

10

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

0

Baseline(Business-as-usual)

Note:$6.85(2017PPP)perdaypercapitaistheuppermiddleincomepovertyline.Note:Source:WorldBankLong-TermGrowthModel10

2.Whatwerethedriversof

growthuntiltheslowdownineconomicperformanceinthelate2000s?

11

12

Botswanagrowthsuccessstoryinanutshell

•Botswana’sgrowthstoryhasbeenconsideredoneofthegreatestsuccessesineconomicdevelopment,atleastuptotheglobalfinancialcrisisinthelate2000s.

•Thecountrytransitionedfromlow-toupper-middle-incomestatusby:

•Growingitsincomepercapitafivefoldbetweenthemid-1980sand2009,withlowvolatility.

•Reducingextremepovertyfrom41.8%in1985to17.7%in2009.

•Thissuccesshasbeenexplainedlargelybyfourmaindriversofinclusivegrowththatreinforcedeachother:

1.Afactoraccumulationstoryasthecountryincreaseditsphysicalandhumancapitalthroughsignificantinvestments.

2.Astructuraltransformationstoryaseconomicactivities(andworkers)movedfromlowtohigherproductivitysectors,whilerapidurbanizationhelpedgeneratealbeitstillmodestagglomerationeffects.

3.Adiamondresourcestorywithmassivefiscalrevenuesandforeigncurrencyearnings,efficientlyusedtofinancepublicinvestmentsandmanageexternaleconomicshocks.

4.Aninstitutionalstorywithstronggovernanceandtransparencyrecordedthathelpedavoidthewell-known“curseofnaturalresources”.

13

Botswana’sfourmutually-reinforcingtraditionaldriversofinclusive

growthatwork

•Economicactivitiesandworkersshiftedfromsubsistence

agriculturetohigherproductivityactivities.

•Rapidurbanizationfrom8%to50%between1970and2008.

STRUCTURAL

TRANSFORMATION

FACTORACCUMULATION

•Highdomesticinvestmentrate(>30%ofGDP)fueledbythepublicsector

•Humancapitalaccumulation

anduseoflaborresultingfromdemographic,education,andemploymentdividends.

•Fasterinstitutionaldevelopmentthaninmostmiddle-income

countries,mainlybecauseofpoliticalstabilityandanearlycommitmenttoameritocraticcivilservice.

INSTITUTIONS

DIAMONDS

•Boominproductionwithapeakinlate2010s.

•Majorsourceofrevenueforthegovernment(50%),main

foreigncurrencyearner(85%)andonethirdofGDP.

14

2.1Afactoraccumulationstory

Solowgrowthdecompositionanalysishighlightsthe

keycontributionoffactoraccumulationfrom1980to2009

•InlinewitheconomictheoryandevidencefromEastAsia,

BotswanawasabletosubstantiallyincreaseitsstocksofhumanandphysicalcapitaltoleveragehighGDPgrowthratesinitsfirstphaseofdevelopment.

•TheaccumulationofphysicalcapitalandlaboraccountedforallGDPpercapitagrowthsincetheearly1990s.

•Productivitygrowthwasacontributorinthe1980sbutbecamenegativeinthe1990sand2000s.

14

ContributiontoGDPgrowth

12

10

8

6

4

2

0

-2

-4

1980-19891990-19992000-20092010-2019

CapitalstockLaborTotalfactorproductivity

Note:ThecolorsshowthecontributionofeachfactorandproductivitytothechangeinGDPineachperiod.Source:PennWorldTable;WorldBankCEMCountryScan.

15

Physicalcapitalaccumulationwaslargelydrivenbythepublicsector,…

Withadomesticinvestmentrate

over30percentofGDP,Botswana

Botswana/middeincome

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

almostsystematicallyoutperformedothermiddle-incomecountriesuntilthelate2000s.

1.801.60

1.40

1.20

1.00

0.80

0.60

0.400.20

0.00

Publicinvestmentwasthedriving

force,witharateonlycomparabletotheoneobservedinasetoffast-

growingeconomiesinEastAsia.

Publicinvestmentwashighly

correlatedwiththeavailabilityofrevenuesfromextractives.

Governmentdevelopmentspending/GDP

0.40

0.35

0.30

0.25

0.20

0.15

0.10

0.05

0.00

.

y=1

.0448x+0.0667

R²=0.2112

0.050.100.150.20

Mineralrevenue/GDP

Source:BankofBotswana,IMFInvestmentandCapitalStockDataset,StatisticsBotswana.

…Whilehumancapitalaccumulationandlaboruseweredrivenby

demographic,education,andemploymentdividends

HumanDevelopmentIndex(HDI)increaseduntilmid-2010s.Theagedependencyratiofellby60percentagepoints

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2021

Universalprimaryeducationenrollmentachievedinthe1980sandsignificantgainsobservedatthesecondarylevel

120

100

80

60

40

20

0

Schoolenrollment,primary(%gross)Schoolenrollment,secondary(%gross)

Sources:UNDP-HumanDevelopmentReport,WorldDevelopmentIndicators,StatisticsBotswana.

(1970-2009)

120

Percent140

0

100

80

60

40

20

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

2012

2016

2020

2024

2028

2032

2036

2040

2044

2048

2052

2056

2060

2064

2068

2072

2076

2080

2084

2088

2092

2096

2100

Structuralunemploymentdeclinedby5.4percentagepointsbetween1996and2009.

Unemploymentrate5-year

movingaverage

22.021.020.019.018.017.016.0

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

21.6

21.9

20.7

16.2

16

2.2Structuraltransformationawayfromagriculture…

Theradicaltransformationoftheeconomy(1982-2012)

•1982:62%ofthelaborforcewasemployedinagriculture,whichcontributedto10.3%ofGDP.

•2012:75.5%ofthelaborforcewasemployedinindustriesandservices,whichcontributedto97.7%ofGDP.

Valueaddedbysector,

percentofGDP

Shareofemployment,percent

100

80

60

40

20

0

43.3

34.4

49.7

34.7

44.0

47.6

37.6

55.6

29.7

63.6

10.34.62.42.31.7

100

80

60

40

20

0

19821992200220122021

aAgricultureuServicesaIndustry

14.7

26.2

7.1

62.2

56.7

58.1

62.4

23.1

15.7

59.2

30.5

23.2

24.5

20.1

16.3

19821992200220122021

AgricultureServicesIndustry

Source:StatisticsBotswana,WorldDevelopmentIndicators,InternationalLabourOrganization.

Note:theseriesarenotstrictlycomparableovertimeduetochangesindefinition,buttheycapturetheactualtrends.

Valueaddedperworker(Constant2015)

40000

35000

30000

25000

20000

15000

10000

5000

0

1991200120112019

IndustryuServicesaAgriculture

Higherrelativeearningsinindustriesandservices

encouragesreallocationoflaborawayfromagriculture

17

18

…andfromruraltourbanareas

•Associatedwiththestructuralchangeoftheeconomy,

Botswanaurbanizedfast,from8%in1970toalmost60%in2008.

•By2009,onaverage,themedianearninginurbanareaswas45%higherthaninruralareas(withoutadjustingforspatialdifferencesinlivingcosts),contributingtohigherstandardsoflivingintheformer(ruralpovertywas24.4%in2009comparedwith15%inurbanareas).

•Thegapinearningsbetweenurbanandruralareashasremainedconstantinrelativeterms,whichspeakstothelimiteddynamismofcitiestofosterproductivitygrowth

•Thisperiodsawastrongdeclineinruralpoverty,from45.2to24.4%between2003and2009(whereasurbanpovertyfellfrom18to15%),whileinequalitydeclinedfrom64.7to60.5.

Sources:WorldDevelopmentIndicators,UnitedNationsWorldPopulationProspects.

Theattractionpowerofcities

Percentoftotal

80

70

60

50

40

30

20

10

0

Percent

18

16

14

12

10

8

6

4

2

0

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

UrbanpopulationUrbanpopulationgrowth(RHS)

Higherearningsinurbanthaninruralareas

Medianearningsperhour(2010

localcurrencyvalue)

1.401.201.000.800.600.400.200.00

2009

2015

Urban

Rural

19

2.3Anaturalextraction(diamonds)story

•Shortlyafterindependence(1966),diamondswere

discovered,makingBotswanathemainworldsupplier.

Productionpeakedinthelate2000s,almostequivalentto1/3ofthecountry’sGDP.Thediamondsectorbecame

quicklythemajorforeigncurrencyearneranditsrentsfundedalmosthalfofthegovernmentrevenue.

•PulaFund–astabilizationfund,wascreatedin1993to

managethefluctuationslinkedtomineralrevenues.Ithas

beenusedtofollowacountercyclicalpolicy,especiallywhenthecountryhasbeenhitbyexternalshocks.

•Diamondrentsalsofinancehighparticipationofthepublicsectorintheeconomy,includingcompetitiveandcontestablesectorsthatcouldbeservedwithoutpublicparticipation,suchasrealestateandwholesaletrade.TotalSOEassetsamountedto32percentofGDPin2021.

Sources:BankofBotswana,MinistryofFinance,CompetitionAnalysis(2021).

Asteadyincreaseinproductionuntilthelast2000s

Carats,million

40

demandCrisis

30

20

10

0

2009:severaldiamondmines

mothballedduetoacollapsein

inthewakeoftheGlobalFinancial

↓Iuul

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

Diamondproduction

Onaverage,85percentofexportrevenuearefromdiamonds

%oftotalexports

100

80

60

40

20

0

1980

1982

1984

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

DiamondOther

Thedependanceofpublicrevenueonminerals

%oftotalrevenues

80

60

40

20

0

MineralTaxes,Royalties&Dividends

2.4Aninstitutionalstory

•Post-independence,Botswanamanagedtobuildstronginstitutionalfoundationstosupporttheeffectivefunctioningofitssociety.Thecountry’sperformanceinglobalinstitutionalqualityindicatorswasbetterthantheaverageinaspirationalcountriesinawiderangeofdomainsrangingfromvoicetopoliticalstabilityandtocontrolofcorruption.

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Voice

1.00

0.900.800.700.600.500.40

0.30

0.20

0.10

0.00

BotswanaAverage

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

1.20

1.00

0.80

0.60

0.40

0.20

0.00

Governmenteffectiveness

BotswanaAverage

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Controlofcorruption

1.40

1.20

1.00一—

0.80

0.40

0.20

0.00

BotswanaAverage

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

RuleofLaw

1.20

1.00

0.80

0.600.40

0.20

0.00

BotswanaAverage

0.60

•Yet,thecountrywaslaggingintermsofgovernmenteffectiveness,regulationsandruleofthelaw.

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

1.20

1.00

0.80

0.60

0.40

0.20

0.00

PoliticalStability

BotswanaAverage

1996

1998

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Regulations

1.40

1.20

1.00

0.800.60

0.40

0.20

0.00