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(NEWZIMBABWE) Botswana: beware the IMF and World Bank

Botswana: beware the IMF and World Bank
13/07/2011 00:00:00
by Bhekinkosi Ngubeni

AS REPORTED by the Economist online and other reliable painters of grim, Botswana's economy is headed south.

In 2010, the country had a US$1,7 billion budget deficit, forecast to increase this year. Diamond deposits are fast depleting and production is at record lows. With half the national cake coming off diamond sales, reduced output has unthinkable repercussions.

Rising unemployment, pay disputes and strikes by public sector workers are just but a small part of Botswana’s predicament. In a country with limited alternative sources of employment, there is an undercurrent of real fear as to when, not if, the bubble will burst for the two million Batswana.

Enter the western-dominated IMF and World Bank and their controversial cures. They suggest Botswana reduce the rate at which national debt is increasing by cutting jobs and privatising parastatals. Dejavu! Think 1994, ESAP in Zimbabwe, when the IMF attempts to cure the country’s economic ills turned into a colossal austerity flop. Government assets were sold on the cheap, workers laid off and cutbacks on social services hit the poorest.

Botswana must avoid being snared by this classic capitalist entrapment. Private investors who take advantage of these half-price national assets are none other than American and European hedge fund managers in capital markets who somehow acquire this privileged knowledge before it gets publicised. After buying these parastatals, they raise prices and rack in obscene profits -- much to the delight of their shareholders outside of Africa.

Call me a conspiracy theorist, but the above, in its true form, is mordenised slavery. It exists not so much through physical coercion but through cognitive dimension, a comprehensive interference whereby their actions, disguised as assistance, hinder other worlds from emerging.

As a Keynesian thought "card-carrying-member", my rudimentary understanding of economic functionality follows that jobs are a vital ingredient of any economy as consumer spending drives production and output. Cuts do not work!

As a nation in economic transition, Botswana’s fundamentals will need to be overhauled. The country’s political institutions, ideologies and international relations will require deconstructing. Inevitable structural alterations will eventuate. Remodelling will require broad government-funded diversification. A gradual shift from activities directly related to natural resources to a more service-based economy must occur.

Positively, a visionary education framework is already in place. Bostwana is currently eighth in world country comparison ratings, with 8.5% (US$490m) of the government expenditure put into education. Thanks to this input, top institutions including the University of Botswana and Limkokwing University are churning out more graduates by the year and broadening the scope of knowledge.

Initial groundwork would include analysing past performances. This would embrace factors such as balance of payments and exchange rates. Can they convincingly pitch ideas to win over businesses and attract the much needed inward investment in a country already in the red? Is the Pula showing any weakness or maintaining stability against other major currencies? At present, one US dollar will buy you P6.70. A slight devaluation would be consistent to creating an import-friendly environment. China successfully adopted this strategy. If managed properly, it works.

Inflation currently stands at 8.1%. The Linah Mohohlo-headed Bank of Botswana’s immediate concern is making sure this figure does not go any higher at the same time managing a possible deflation. The bank says it expects to attain its target range of 3 percent to 6 percent by the second half of 2012. It has left its interest rate unchanged at 9.5 percent to control inflation pressures.

Achievable yes, though 3 percent would be up there with turning water into wine. As of now, it safe to assume consumer purchasing power is momentarily grounded. Theoretically, this should discourage spending and keep inflation in check.

Spending policies in the past have been impressive. Recent overspending has unsettled economists, but this can be directly or indirectly attributed to the global recession and Botswana, like everyone else, was not immune to its effect. A lid has been kept on money supply with prime lending rates at 13.96%. Luckily, foreign investors already have their operating capital in place and need not borrow from commercial local banks.

Botswana is an advanced industrialised nation. The infrastructure of government agencies, businesses, labour and religion exists and operates like most developed countries. Political stability has ensured that even though corruption exists, it is kept to a minimum. The country’s main challenge will be rerouting its economic strategy since its main natural resource is running out.

Botswana can and should be the pioneer of true independent economic freedom, liberated from any externalities. Taking advice from IMF and World Bank is not necessarily harmful, but these two institutions have adopted a blanket “drip feed” staple model approach towards African nations in economic downturns. Already interpreted, they fail to incorporate and embrace indigenous knowledge or at least give native thinkers some legitimacy. Only western perspectives are taken seriously.

Africans needs to do away with such Eurocentric attitudes and trust in their own to effectively manage a crisis. I am against the idea of western knowledge as a base for all judgements. If Botswana can develop ideas and successfully manage structural change, there is hope for the whole of Africa.

The writer can be contacted on e-mail: bheki213@yahoo.co.uk

Labels: BOTSWANA, IMF, World Bank

posted by MrK @ 1:42 PM