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Commentary

Lessons From Botswana: Africa’s Economic Dynamo


     
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Many Westerners think that Africa is hopelessly lost. I encountered some of this pessimism first-hand recently at the 13th Annual Wharton African Business Forum (WABF) at the University of Pennsylvania in Philadelphia, where I spoke about Africa’s greatest economic success story: Botswana. Botswana, the world’s fastest growing economy for over 30 years, offers important lessons for fostering economic progress throughout the developing world.

Botswana has averaged nearly 7 percent GDP growth per year since it gained independence in 1965. Its recipe for success has been fairly simple: a fiscally conservative policy of low taxes and little government spending. Botswana’s corporate tax rate—15 percent—is the lowest among all sub-Saharan African countries. And its highest marginal tax rate on income is 25 percent. Botswana has maintained a balanced budget throughout most of its post-colonial history and has shown a willingness to cut spending when revenue declines: In 2004, Botswana officials cut government spending by 18 percent in response to a revenue shortfall. Botswana’s relatively cosmopolitan attitude towards foreigners and migration has also kept it politically stable.

Other sub-Saharan African countries could enhance their economies if they adopted Botswana’s recipe for success by lowering taxes, balancing budgets, and becoming more tolerant of trade and foreigners.

Unfortunately, this message is not getting through because most Westerners—policymakers and businessmen alike—continue to treat the entire African continent as one big political and economic failure, an overgeneralization that costs successful African nations, such as Botswana and Mauritius, much foreign investment. When Westerners cling ignorantly to negative stereotypes about Africa—based on movies such as The Heart of Darkness or infomercials featuring Sally Struthers and starving children—they tend to write off a diverse continent of nations trying to develop their economies. Rather than base their policies on the successful development model of Botswana, African nations get policy advice from Westerners that relies on failed economic growth models and the unrelenting flow of aid that never seems to bring any development.

Until recently, I was an American idiot who thought that most of Africa was hopeless. Even when I looked at Botswana’s economic growth, I felt that the data exaggerated the country’s overall level of well-being. As I prepared for my travels to Botswana two years ago, I bought into the negative information I was fed. Western "experts" in Washington, D.C., told me to boil water before drinking it, avoid eating any fruits and vegetables, and stay inside after dark. Some of my well-educated, well-traveled American friends even asked me if people in Botswana still practiced cannibalism.

However, what I found when I arrived in Botswana’s capital, Gaborone, were BMWs buzzing by on paved roads. The quality and variety of dining options was outstanding. The water was safe to drink in both the capital and in rural areas. Shopping malls in Gaborone were full of affluent Batswana (the proper name for citizens of Botswana) shopping for designer jeans and the latest Harry Potter book. Even when my team of researchers and I moved to the more rural country away from Gaborone, the overall size and variety of Botswana’s markets greatly exceeded my most optimistic expectations. My stereotypes and fears about Botswana were far off target.

Like Botswana, Mauritius, Madagascar, and Mozambique are also more stable and better places to do business than the media makes them out to be. Unfortunately, getting Americans to believe this message is an uphill battle. In a fundamental sense, this is the new African tragedy—a tragedy that is not the result of HIV/AIDS, civil wars, or a major famine, but, rather, of American ignorance.


Scott A. Beaulier is Research Fellow at the Independent Institute’s Center for Entrepreneurial Innovation and BB&T distinguished professor of capitalism. He is the department chair of economics at Mercer University. He performed field research in Botswana in 2004.






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