1.

Botswana Institutions’ high quality is ascertained from its allocation and protection of property rights,
lack of corruption, limits on executive power, and existence and enforcement of the rule of law. Merck,
the maker of one of the world’s leading AIDs drugs, wanted to experiment with free distribution and
treatment, and it chose Botswana as its pilot size with the confidence on the government respecting it is
intellectual property as well as support to medical infrastructure that program demanded. Transparency
International ranked Botswana 24th in Corruption Perception Index out of 102 countries it surveyed in
2002, finding the country less corrupt than either France or Portugal. Jonathan Oppenheimer, former
Chairman of De Beers, expressed the same sentiment. He quoted, “in Botswana, we deal with civil
servants as effective principals, whereas in other countries the principals are a politician.” It further
exhibits the limits imposed on executive power and enforcement of the rule of law. Also, Otsweletse
Moupo, leader of the Botswana main opposition party, in an interview, reflected that Botswana is on the
right path in the rule of law, accountability, and right economics incentives.

2. The government of Botswana achieved the right balance of public institutions and private sector
development. Historically, Botswana did not have a significant source of self-sustenance. To compensate
for its small domestic market and less-than-robust financial system, the government had created a host
of institutions to fill the gaps left by the private sector. In search of revenue, Botswana stumbled onto a
remarkably open free-trade regime. The country growth strategy was on the belief that private sector
mining revenues can quickly be channelized into a physical, social, and human capital infrastructure.
Because the public sector was cash poor, foreign firms shoulder the burden on investment in the mining
sector, leaving the government to translate the mining revenues into the basic development activities
dams, water, electricity, and universal health care. For example, Botswana Enterprise Development Unit
diversified the economy using Diamond revenue and created new industries and entrepreneurs in
sectors other than mining.

3. The growth story of Botswana is a perfect combination of prudent macroeconomic and socio-economic
policies that made it a poster boy in Africa. Not only in the African continent, and indeed elsewhere
across the developing world, the investment by foreign entities in abundant natural resources economies
has led to the imbroglio. Botswana is the only nation that is out of the league following prudent policies
with a perfect blend of promoting attractive foreign investments with a complementary development
role in establishing sound institutions with the focus for the public welfare. Botswana has seen 60% of
revenue coming from the diamond service sector, and the government openly acknowledged the critical
role of the private sector in harnessing mining revenues and nurtured investors – both current and
potential – with great care. A series of National Development Plans provided the organizational
framework for future government spending and strictly followed. As a result, over the period, returns
from foreign direct investment were used in education, health, roads, dams, but no fancy cars or palaces.
As budget deficit frowned upon, surpluses become the norm. On the financial front, two special funds
were established to channel mineral revenues into long-term for a loan for local authorities and
parastatal bodies. Diamond revenues further used to finance construction, transportation, power, and
water projects. Also, Botswana Enterprise Development Unit diversified the economy using Diamond
revenue and created new industries and entrepreneurs in sectors other than mining. In Botswana,
Central Bank pursued an exchange rate policy that maintained the competitiveness of their domestic
industry while mitigating the impact of imported inflation. Botswana revalued the pula seven times
during the 1980s to minimize the internal impact of external shocks.

4. Sustainability of country growth is primarily a function of capital, labor, and productivity. Key challenges
facing Botswana going forward is reducing GDP post high growth decades, rising unemployment, high
unskilled workforce, economic diversification in industrial sectors, unable to attract the required level of
foreign direct investments in non-mining sectors, extremely high AIDS/HIV decreases cases and political
instability in the neighboring countries impacting the tourism potential and leading to perception issues.