By The Solutions Tower Staff.
A comparative analysis of Botswana’s Foreign Direct Investment (FDI) to that of Zimbabwe is only achievable by analysing an array of weighted statistical tools and reflecting on past performance trajectory objectively. Botswana just like Zimbabwe is a landlocked country located in Sub-Saharan Africa with a population of just over two million compared to Zimbabwe’s estimated population of 16 million.
Botswana gained its independence from British rule in 1966 and at the time perceived as one the poorest nations then with a per capita gross domestic product (GDP) of only US$70 according to World Bank statistics. Botswana grew from an agro based country which was contributing approximately 43% to GDP to a diamond mining economy when it discovered vast amounts of diamonds. Botswana’s real GDP increased at an average annual rate of 4,6% between 1994 and 2011. Its agriculture productivity shrunk from 39% of GDP in 1966 to about 2% today.
In contrast, Zimbabwe got its independence in 1980 after the unilateral declaration of independence (UDI) in 1965 by Ian Smith as Rhodesia. It was put under international sanctions until its independence in 1980. Its growth potential shrunk during this UDI era due to the effects of internal strife and the liberation struggle. Zimbabwe signed the ZIMCORD agreement in 1981 with FDI inflow pledges of US$1,45 billion over a 3-year period. This generosity from the international community was premised on Zimbabwe’s newly acquired independence and undertakings agreed at the Lancaster House Conference in 1981.
Comparative World Bank figures show that Botswana did not receive any FDI inflows in 1970 and US$393m in 2015 accounting for 2, 7% of GDP whilst Zimbabwe received US$ 18,7m in 1970 and US$399m in 2015 which accounted for 2, and 8% of its GDP. Zimbabwe’s recorded a Current Account deficit of US$ 2,595.30m in 2015. Overall, Zimbabwe’s current account deficit averaged US$ 576.44m from 1977 with an all -time high of US$ 698m in 1992 and a record low of US$ 3,432,23 in 2013. On the other hand, Botswana recorded a Current Account surplus of US$ 349,64m in the 4th quarter of 2016 and averaged a surplus of US$172,15m from 2004 until 2016, reaching an all- time high of US$ 1 102,09m in the second quarter of 2016 and a record low deficit of US$ 365,18m in the fourth of 2008.
A brief comparative economic outlook overview shows that Zimbabwe’s GDP growth declined from 1,1% in 2015 to 0.5% in 2016. It is projected to increase to 1,3% in 2017 due to the above normal rains as a major boost to this agro-based economy. It endured years of mismanaging and endemic corruption due to sanctions leading to economic contraction which was worsened by a severe hyperinflation and subsequent of the suspension of its national currency in favour of a disastrous multi-currency regime.
Resultantly, the economy is experiencing severe cash liquidity crisis which has crowded out fiscal revenue performance. Lack of resources has curbed capital expenditure and social policy interventions, exacerbating unprecedented hardships and poverty in both rural and urban areas. The World Bank forecasted Zimbabwe’s GDP to grow to 3,7% following a good rainy season characterised by Command Agriculture and firming metal prices. Botswana is forecast to grow by 4,1% against the Sub-Saharan average of 2,0%.
Botswana was one of poorest countries in the world when it gained its independence in 1966 and relied 60% of its recurrent expenditure on international aid until the 1970s. Its per capita income increased from US$ 70 a year to the current US$ 6 000. Botswana’s extraordinary growth was fuelled by discovery of diamonds from about 1974/75. Its economic success is most importantly due to the adoption of good governance and economic management policies such as the fundamental respect of property rights and equitable rule of law.
Botswana has avoided poor governance ethos such as rent- seeking, corruption, primitive accumulation of assets associated with malignant dictatorships and predatory tendencies. However, it is critical to point out that despite this high economic performance, Botswana’s social gains have stagnated. The proportion of poor people fell from about 50% in 1985 to 33% in 1994 and the literacy rate rose from less than 2% at independence to about 85, 1% in 2011 in contrast to Zimbabwe literacy rate which is estimated at 83% according to UN statistics.
Zimbabwe was weakened by the “government curse” which is a disease of the state claiming ownership of all minerals and subsequently succumbing to the temptation of irrational resource utilisation, rent-seeking, corruption and impunity of the law. Most of these factors are the key ingredients that opposed to confidence and trust that deter FDI across the globe.
Looking ahead, both countries have challenges of divergent magnitude. Botswana needs to invest substantially in its social policy and infrastructure to equitably redistribute its resources and economically empower its citizens. Zimbabwe is economically in a critical state and needs to reform and truly commit itself to developing its capabilities and wealth creating infrastructure that gives prospects of sustainability.
It means embarking on a cleansing exercise to improving on its principles on governance, rule of law and independence of the judiciary, guaranteeing property rights and build investor trust by reforming and overhauling its archaic and aged hierarchy. It needs to demonstrate policy consistency without necessarily disenfranchising the spirit and minds that ushered in political independence to triangulate economic independence and social justice.
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