An African Success Story: Botswana

Abstract

Botswana has had the highest rate of per-capita growth of any country in the world in the last 35 years. This occurred despite adverse initial conditions, including minimal investment during the colonial period and high inequality. Botswana achieved this rapid development by following orthodox economic policies. How Botswana sustained these policies is a puzzle because typically in Africa, "good economics" has proved not to be politically feasible. In this paper we suggest that good policies were chosen in Botswana because good institutions, which we refer to as institutions of private property, were in place.

Why did institutions of private property arise in Botswana, but not other African nations? We conjecture that the following factors were important. First Botswana possessed relatively inclusive pre-colonial institutions, placing constraints on political elites. Second the effect of British colonialism on Botswana was minimal, and did not destroy these institutions. Third, following independence, maintaining and strengthening institutions of private property were in the economic interests of the elite. Fourth, Botswana is very rich in diamonds, which created enough rents that no groups wanted to challenge the status quo at the expenses of "rocking the boat." Finally we emphasize that this situation was reinforced by a number of critical decisions made by the post-independence leaders, particularly Presidents Khama, and Masire.

Keywords: Growth, institutions, property rights, divergence, industrialization, urbanization, population.

JEL Classification: D78, F43, N47, O55, P47