Botswana's President Ian Khama has won a second five-year term. Photo: AP

Tiisetso Motsoeneng and Joe Brock

WHEN environmental scientist Bakang Bogopa graduated first in his class from the University of Botswana two years ago he did not expect that his first job would be moving furniture or that he would still be living off handouts from his mother.

Bogopa, who studied on a government scholarship, is among thousands of unemployed graduates in Botswana who exemplify the country’s swift economic progress in the past five decades and the challenges it now faces.

One of the world’s poorest countries in the 1970s, Botswana transformed into one of its fastest-growing economies by harnessing around $3 billion (R33bn) a year in diamond sales to become the world’s biggest producer, and gained middle-income status.

The country of 2 million people has also been heralded as a beacon for African democracy, avoiding the conflict and corruption that has ravaged resource-rich countries across the continent.

But dependence on its wealth from the diamond industry is catching up with it. Diamond revenues have enabled it to build a much-admired education system, but also allowed the ruling Botswana Democratic Party (BDP), in power since independence in 1966, to secure economic growth without diversifying into newer industries or implementing reforms to develop the private sector.

As a result, the economy is not sophisticated enough to employ many of the expanding stream of highly skilled graduates, such as Bogopa.

As diamond prices are falling, economic growth has slowed to 1.6 percent year on year in the second quarter and unemployment is stuck at around 20 percent, with youth joblessness believed to be much higher.

President Ian Khama, the son of Botswana’s first president, won a second five-year term in elections on Friday but with a reduced majority for the BDP as many young and urban middle class voted for change.

The International Monetary Fund (IMF) expects the economy to grow 5 percent in 2015, down from last year’s 5.4 percent and well below growth rates of 8 percent to 10 percent in earlier decades.

Botswana’s budget moved back into the black last year, but the surplus of 0.7 percent of gross domestic product (GDP) was down from 4.8 percent in 2008 before the global financial crisis hit.

“We are mindful of the fact we’ve had it good and we’re far better off than most places in Africa,” said 27-year-old Bogopa.

“But we are being led by people stuck in the past, using outdated ideas, who can’t see our regression.”

The BDP still has a solid base of loyal supporters who appreciate the generous welfare benefits they receive, but economists say relying on gem revenues is unsustainable.

With almost $7bn in foreign exchange reserves, a $5.5bn public pension fund and the highest sovereign credit rating in Africa, there is room to drive more diverse growth.

“It can’t be good for the government to continue being so dominant in the economy, it’s just not logical to rely on handouts anymore,” said Martin Makgatlhe, the head of Motswedi Securities. “We got comfortable. Now we need to take the quantum leap from the successes of the past to the growth of the future.”

The government has talked about creating jobs and new revenue streams by investing more in safari tourism, agriculture and improving poor water and electricity supply, but action has been less forthcoming.

Botswana’s sole power station shut down this month, forcing it to rely entirely on imported electricity from South Africa.

Economists say Khama is failing to provide incentives to attract foreign investment, relies too much on imports from South Africa and needs to make tough choices on cutting public spending. The public sector probably accounts for 40 percent of employment, and wages were 21 percent higher than in the private sector as of 2011, according to the IMF.

Economists urge the government to free up funds to lend to small businesses and to support areas of the economy outside the diamond industry, which accounts for around 40 percent of GDP.

Foreign investors complain about protectionist labour policies and uncompetitive taxes, but economists say if the government improved the ease of doing business, Gaborone could be a regional hub for areas like manufacturing and call centres.

The country also has growth potential in dairy farming, financial services and tourism beyond its current luxury market.

“Botswana has to work aggressively to be a successful open economy, sort of following the examples of Singapore or Mauritius,” said Keith Jefferis, the managing director at Econsult and Botswana’s former deputy central bank governor.

“The government knows what it needs to do but some of the reforms needed are painful. The longer you put them off, the harder it becomes.

“Botswana in many ways has been a victim of its own success, but for it to flip backwards would be disastrous both for the country and more widely for Africa,” said Jefferis. “It’s crucial that its record is preserved.” – Reuters