Exchange to Change January 2018 E2C January 2018 web | Page 18

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RESEARCH
resource dependence and build an
economy more resilient to external or
internal shocks.
Macroeconomic related policies: avoid
large scale debt; accumulate budget
surpluses, follow prudent exchange
rate management policy by controlling
the appreciation of the exchange rate;
create a stabilization fund to guard
against commodity-price volatility;
Other policy suggestions: promote or
reinforce autonomy of fiscal and
monetary authorities to counter rent
seekers and special interest groups;
adopt Environmental and Natural
Resource Accounting (EARA) policies
for an effective management of
mineral windfalls.
Botswana’s success
With 40% of GDP stemming from
diamonds, Botswana had one of the
world’s highest growth rates over
1965-2005 and managed to halve
national household poverty incidence
from 21.7% in 2002-2003 to 10.8%
in 2009-2010 (Statistics Botswana,
2013). According to Acemoglu et al.
(2003), this remarkable performance
is explained by good institutions in
Botswana. Particularly the constraints
on political elites helped to avoid a
distortionary economic policy (Iimi,
2007) and to a large extent, Botswana
was able to escape the resource
curse (Lewin, 2011; Iimi, 2007; Atsu
Amegashie and Kamara, 2008 ; Sarraf
and Jiwanji, 2001). For instance:
Dutch disease was avoided by
government investments in public
goods and infrastructure. For instance,
the “use of mineral revenues has
followed an implicit self-disciplinary
rule, the Sustainable Budget Index
E xchange to change J anuary 2018
(SBI), under which
any mineral revenue
is supposed to finance
investment expenditure”
(Iimi, 2007). Policies were
also implemented to boost
productivity, particularly
in non-mineral sectors,
by “limiting parastatals
and avoiding import
substitution policies”
(Lewin, 2011).
“In developing countries in
particular, the quality of regulation,
such as the predictability of changes
of regulations, and anticorruption
policies, such as transparency and
accountability in the public sector,
are most important for effective
natural resource management and
growth.” (Iimi, 2007)
The volatility curse was
overcome by unlinking
public expenditure from
revenue. The government
established savings and assets
funds (e.g. the long-term financial
assets ‘Pula Fund’ which is managed
in a transparent and accountable
manner (Iimi, 2007); and avoided
typical procyclical behavior and
real exchange rate volatility (Lewin,
2011). Additionally, by tying its hands
with parliament authorization, the
government was able to effectively
control public expenditure (Sarraf and
Jiwanji, 2001).
The governance curse was avoided,
through strong political leadership
since independence, constraints
on political elites, independent
anticorruption authority, respect for
property rights and the rule of law,
a high degree of transparency and
traditional consultative institutions
(Kgotla, 2010) to reinforce trust in the
government (Lewin, 2011; Iimi, 2007).
It is worth noting that on the one hand
Botswana’s relatively homogeneous
population reduces political and
ethnic tensions that can s