Diamonds will not last forever
When the Bechuanaland British Protectorate became independent on September 30 1966, henceforth to be known as Botswana, one analyst quipped that the Batswana must be either “very foolish or very brave”.
His fears were not unfounded. At that time Botswana was one of the poorest countries in the world, with roughly 10km of tarred road, no infrastructure in place and no known mineral deposits to finance development.
At that time it was also slap-bang in the unenviable geo-political situation of being between two countries controlled by two white-minority governments: South Africa and Southern Rhodesia. The man who led Botswana to independence, then president Sir Seretse Khama (1966-1980), had also irked both the British and South African governments by marrying a white woman.
The challenge for the founding fathers would be to nurture the country to prove that it could survive as a multi-racial democracy.
Molosiwa Selepeng recently retired after spending his life working as a civil servant; he was there as Botswana struggled to survive economically and politically against all odds. He modestly attributes Botswana’s leap from one of the world’s poorest countries to a middle-income country as being due to teamwork.
Selepeng recently retired after a stint as high commissioner in Australia, but before that he held several jobs in the civil service, including the powerful post of permanent secretary to the president.
His career in the civil service started in the early 1970s after he graduated from university and joined the foreign affairs ministry. He later became senior private secretary to Khama, a post he retained under then president Ketumile Masire (1990-1998).
He says: “In my career I have worked for four presidents, interacting not only with senior government officials and government ministers but also the private sector. I contributed to the development of this country by working as a member of a team.”
Challenges in the early years
Selepeng says the challenge facing Botswana and Khama in 1966 was to make independence a reality.
“During the first six years we were not able to balance our recurrent budget. So for those six years, our recurrent budget was subsidised by the British to the tune of 50%. But in 1972 we managed to balance our budget, so we were progressing.”
He also notes that Khama’s other challenge “was of course, political, because of our geo-political situation, surrounded by South Africa and Rhodesia, and as the only democratic country in the region surrounded by minority, white-ruled countries.”
Khama’s policy was to not have anything to do with the apartheid government in terms of diplomatic relations, but Botswana nevertheless had to maintain economic relations. This was because Rhodesia Railways ran through the country and the country depended on it, as well as depending on South Africa for imports and exports of goods and services. “We traded heavily with South Africa, notwithstanding the fact that we did not recognise the apartheid government.”
Khama was able to balance our independence against the challenges of being in a minority ruled geo-political environment. He had to be pragmatic because “wewalked a tight [financial] rope”.
“We needed to get aid from other countries and we joined the Non-Aligned Movement and were able to attract direct foreign investment, particularly from European countries.”
Selepeng praises especially the Scandinavian countries for the role they played in helping to develop the country. They concentrated on providing infrastructure for the provision of clean water, construction of roads and setting up the health system.
He adds that the South African private sector also came in to invest, as most companies were subsidiaries of British and American firms. The British companies were particularly prominent in the construction industry.
Due to its geo-political situation, Botswana attracted a number of refugees both from South Africa and Rhodesia. “In 1969 Botswana had 4 000 refugees, but by 1975 we had 25 000. The South Africans saw them as terrorists and from the 80s launched a series of attacks. The Rhodesian regime also launched attacks in the north, engaging in what they called ‘hot pursuit incursions’.
“At this time we did not have an army, so in 1977 we formed the Botswana Defence Force, particularly because of the situation in the north. This was out of necessity, to protect our citizens from attacks by Southern Rhodesia. But the biggest raid was by the South Africans in the 1980s. On June 14 1985 the South Africans launched an attack in which 25 South African refugees were murdered in their sleep.”
Botswana had to rely on especially the US to prevent the recurrence of such attacks. Selepeng explains that Botswana was greatly assisted by American condemnation of such attacks; this helped to restrain the South Africa government.
“Every time we got intelligence of a planned South Africa raid we would share this with the Americans and they would issue a statement saying Botswana is a peaceful country and did not deserve any unprovoked attacks. I know that on several occasions this did prevent potential attacks.”
Discovery of diamonds
The discovery of diamonds helped boost Botswana to its present position as a middle-income country, but Selepeng says one of the challenges the country faced was generated by the controversy over so called “blood diamonds”, used to fuel civil wars across Africa.
Developing the diamond mines was not easy because “we did not have any capital, so De Beers came in with money, personnel and knowhow”. They became partners in setting up the diamond mines in Orapa in central Botswana, and at Jwaneng in the southern part of the country.
“By 1975 we discovered that they were making too much profit, and that the deal we had entered into was unbalanced. So we renegotiated to get 50%. There was the famous article in the Financial Times of London in which they described Botswana as having joined the ‘rapacious’ club. Our High Commissioner in London wrote a rebuttal, pointing out that we were merely asking for a fair share.
“The diamonds came in handy, and the rest is history, in the sense that we used diamonds for development. That’s why we call them ‘diamonds for development’.
“Of course the phrase ‘diamonds for development’ came later, in the 1980s, because of the controversy about blood diamonds used in civil wars in other parts of Africa, especially in the civil war in Sierra Leone. We then launched a campaign in the US and Europe to clarify that our diamonds are used for development. We also enlisted the support of other diamond producing countries, which eventually led to the setting up of the Kimberley Process, to certify which stones were not so-called blood diamonds.”
Selepeng notes that the revenue from diamonds enabled the government to allocate a huge part of the budget towards education, health and infrastructure. Because diamonds will not last forever, the biggest challenge Botswana faces is that of economic diversification.
He says one strategy has been in investing in human capital. There have been attempts to provide almost free education up to university level, coupled with a lot of scholarships at the tertiary level.
He laments that there are constraints, particularly since the economic crash of 2008, which had a particularly bad impact on Botswana’s diamond markets in the US and Japan. “But some countries have had their economies improve, and those —particularly China, India and Thailand — are buying our diamonds.”
Another milestone for the country was in 1976 when it introduced its own currency known as the Pula to replace the South African Rand, used by all countries in the region that were part of the regional Southern African Customs Union.
Selepeng notes that although the Pula is stronger than the Rand because South Africa is one of its biggest trading partners, a deliberate policy has been adopted to ensure that it is kept only 30% higher than the Rand.
He say Botswana has to keep its eye on the quest for economic diversification by emphasising to potential investors that even though they operate from Botswana, they have the huge potential market of 200 million people in the Southern African Development Community, which links 11 countries in the region.
The struggle to lure investors and encourage new industries has not been easy. Two failures are always remembered —Prinz Brau and Hyundai.
Selepeng says initially the government tried to encourage South African Breweries (SAB) to set up a brewery in the country, but these attempts were rebuffed. The government then approached German company Prinz Brau to set up a brewery in Gaborone.
“When SAB realised that they had made a mistake by refusing to set up here, they sabotaged the operations by ensuring that there was debris in the bottles, rendering it unsafe to drink.” The German company eventually folded up, only to have its assets bought up by SAB.
The state attempt to have South Korean company Hyundai set up a car assembly plant in Botswana also went belly up when the tariffs they were charged for importing the assembly kits through South Africa proved too prohibitive.
Selepeng notes that Brexit may also place financial strain on Botswana, but it has benefitted from a special provision the British negotiated in 1975 to allow it some respite from the fierce competition in the EU beef market.
Turning to potential investment opportunities in Botswana, Selepeng is optimistic that they can be lured in several areas.
Botswana is a stable, democratic and investor friendly country that is competitive as far as power, water and communications are concerned, with a well-developed road infrastructure.
Selepeng says Botswana’s vast coal reserves can be exported to countries such as China, using the Transkalagadi Highway to access Botswana’s dry port in Namibia. The coal could also be used to generate power for the region, especially if a deal could be worked out with the region’s biggest consumer, South Africa.
Another possibility has been opened up by the recent discovery of uranium deposits and the large company A-Cap will soon start mining operations.
Leather from the beef industry could also be used to manufacture items for export such as shoes and leatherwear.
He also says there is a need for more beneficiation in the diamond industry; polishing and cutting can be developed. These activities are still being performed in Antwerp and Israel and it is hoped that they will move to Botswana, but he notes “this will not be an overnight change”.
Selepeng says although current international surveys back up Botswana’s claims of low corruption and good governance there are still many challenges to overcome.
“We are currently standing on the shoulders of those who came before us, but we have to carry on their work. We need to fight crime and corruption and challenges still remain such as youth unemployment, economic diversification and educating our youth to be globally competitive.
“Botswana has really to do more on economic diversification, but we should not just depend on Batswana entrepreneurs. What we need to do is bring in investors from abroad, especially the Asian countries, to come and invest in Botswana.”