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Tuesday, Oct 28, 2014

World

Botswana, Africa's diamond, risks losing its sparkle

Reuters | Tuesday, Oct 28, 2014

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GABORONE - When environmental scientist Bakang Bogopa graduated first in his class from the University of Botswana two years ago he did not expect that his first job would be moving furniture or that he would still be living off handouts from his mother.

Bogopa, who studied on a government scholarship, is among thousands of unemployed graduates in Botswana who exemplify both the country's swift economic progress in the five decades since independence from Britain, and the challenges it now faces.

One of the world's poorest countries in the 1970s, Botswana transformed into one of its fastest-growing economies by harnessing around $3 billion a year in diamond sales, to become the world's biggest producer, and gained middle-income status.

The landlocked country of just 2 million has also been heralded as a beacon for African democracy, avoiding the conflict and corruption that has ravaged resource-rich countries across the continent.

But dependence on its wealth from the diamond industry is catching up with the southern African country.

Diamond revenues have enabled it to build a much-admired education system, but also allowed the ruling Botswana Democratic Party (BDP), in power since independence in 1966, to secure economic growth without diversifying into newer industries or implementing reforms to develop the private sector.

As a result, the economy is not sophisticated enough to employ many of the country's expanding stream of highly skilled graduates, such as Bogopa.

As diamond prices are now falling, economic growth has slowed to just 1.6 per cent year-on-year in the second quarter and unemployment is stuck at around 20 per cent, with youth joblessness believed to be much higher.

President Ian Khama, the son of Botswana's first president, won a second five-year term in elections on Friday but with a reduced majority for his BDP party as many young and urban middle-class voted for change.

The IMF does expect the economy to grow by 5 per cent annually until 2015, but that is down from last year's 5.4 per cent and well below growth rates of 8-10 per cent in earlier decades.

Botswana's budget moved back into the black last year, but the surplus of 0.7 per cent of gross domestic product was down from 4.8 per cent in 2008 before the global financial crisis hit.

"We are mindful of the fact we've had it good and we're far better off than most places in Africa," says Bogopa, 27, breaking off from discussing the economy with friends in a lively bar tucked away in a dusty suburb of Gaborone.

"But we're being led by people stuck in the past, using outdated ideas, who can't see our regression," he said.

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