Avoiding the Resource Curse

The resource curse is a paradox; countries with an abundance of non-renewable natural resources often have less democracy and less social and economic development than countries with fewer natural resources. You see this curse play out all over the world from Angola to Zimbabwe. It’s a curse that Botswana and Namibia have largely escaped and we spent most of our seminars before leaving for these countries trying to understand why and how. Despite sitting on some of the largest and highest value diamond mines in the world, Namibia and Botswana saw long periods of steady economic growth. Today, the question is not about how to avoid the cyclicality of an extractive-industry dependent economy, but around what the next frontier of growth is in light of declining reserves and long-term commodity prices.

The two countries presented us with different alternatives. In Botswana we met with the BDC, the Botswana Development Corporation. It is a private investment corporation owned 100% by the government. It invests not only in development opportunities in Botswana, but also globally to return revenue to the government. For me, some of the most interesting investments were ones made to complement South African industries. For example, they invested in a plant for labor intensive components manufacturing for the South African car manufacturing industry. The BDC was formed during Botswana’s boom times, when every investment would give an attractive return. Since the global recession, the company has struggled, but new management has turned it around and the BDC is once again profitable and an interesting source of revenue for the government.

In Nambia, we met with the Walvis Bay Corridor Group. It is a public-private partnership dedicated to transforming Namibia into a logistics hub. It is investing in ports, roads, and related infrastructure to take some of the back-log off of the South African ports and provide faster shipping times to Namibia’s landlocked neighbors. Increasing efficiency and plans to open a direct route with Brazil are contributing to the competitiveness of the Walvis Bay Port.

Namibia is hoping that their roads will be as full of container trucks as they are of safari vehicles.

Both of these initiatives are showing promise in helping these economies diversify and create economic futures not based on mining. A growing unemployed youth population though still threatens the long-term success of these countries. While neither of these initiatives inherently create many jobs nationally, both are working to maximize youth job creation. For me, this will be the crux of success. If Namibia and Botswana can diversify and industrialize while creating jobs, I believe that these two countries will continue to be success stories.

 

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