The success of Botswana is due to its adoption of good policies. These have prompted rapid accumulation, investment, and the socially efficient exploitation of resource rents. These policies resulted from an underlying set of institutions of private property that encouraged investment and economic development.
Botswana’s good economic policies, and therefore its economic success, reflect its institutions or more particularly its institutions of private property. These protect the property rights of actual and potential investors, provide political stability, and ensure that the political elites are constrained by the political system. There are three factors that control institution building:
- Economic interests: A good institutional setup will lead to outcomes that are in the interest of the politically powerful agents, such as institutions that restrict state predation.
- Political losers: Elites that are relatively secure in their position will be less afraid of change, and therefore be less likely to block such change.
- Constraints: When institutions limit the powers of rulers and the range of distortionary policies that they can pursue, good policies are more likely to arise. Constraints reduce the political stakes and therefore increase political stability and imply that other groups are more willing to delegate power to the state.
Botswana is an optimistic example of what can be done with the appropriate efforts toward institutional design, even starting with unfavorable economic conditions. The success of Botswana is due to its adoption of good policies. These have prompted rapid accumulation, investment, and the socially efficient exploitation of resource rents. These policies resulted from an underlying set of institutions of private property that encouraged investment and economic development. The factors that could account for the distinct institutional equilibrium that emerged after independence are:
- Botswana possessed precolonial tribal institutions that encouraged broad-based participation and placed constraints on political elites.
- British colonization had a limited effect on these pre-colonial institutions because of the peripheral nature of Botswana to the British Empire.
- Upon independence, the most important rural interests, chiefs, and cattle owners were politically powerful and it was in their economic interest to enforce property rights.
- The revenues from diamonds generated enough rents for the main political actors, increasing the opportunity cost, and discouraging, further rent-seeking.
- The post-independence political leaders, in particular Seretse Khama and Quett Masire, made a number of sensible decisions.
Why is Botswana more developed?
Due to Botswana’s heavy reliance on diamonds, strong global demand is vital to the health of the economy. Diamond exports provide Botswana’s economy with strong supplies of foreign exchange and have offered a basis for industrial development and stimulated improvements in Botswana’s infrastructure.
How did Botswana become successful?
Diamonds accounted for much of the growth of Botswana’s GDP. De Beers announced a discovery at Orapa in 1967. By 1982 Botswana had two major mines at Orapa and Jwaneng, and by 1990 it was the world’s largest producer of diamonds.
Why Botswana is the fastest-growing economy?
Botswana was the world’s fastest-growing economy from 1966 to 1989. Rapid growth was to be expected because of the discovery of large diamond deposits. What is unusual is that the economy has not suffered from the Dutch Disease, as is common in mineral boom economies.
What is Botswana known for?
Botswana is well known for having some of the best wilderness and wildlife areas on the African continent. 38% of its total land area are devoted to national parks, reserves, and wildlife management areas.