Institutions. Botswana case study African Economic Development Renata Serra – Feb 13 th 2007

Class Objectives Provide some background and supplementary info for putting into context your reading for today:  A I Samatar, “Translating class unity and autonomy into an effective institution: The Botswana Meat Commission” Ch. 3 in: An African Miracle, Heinemann, Portsmouth, 1999

What are parastatals? Public (state) enterprises Various roles in the economy, but mainly:  Purchase from producers at a previously agreed price  Process, market and export the produce Among the largest employers and investors in African economies  Between ¼ and 1/3 of urban wage labor force (often equal to numbers of government employees) Mostly dismantled with SAPs Some survive as semi-public entities

Effects in practice Pros:  Guarantee producers a price  Shield producers from the volatility of international markets  Provide allied services (marketing, access to inputs, extension) Cons:  They have tended to absorb most surplus: price paid to producers < international price  Inefficiencies and corruption  Lack of integration with either informal sectors or foreign capital Performance across SSA is very mixed

CMDT in Mali Another success story, though in more limited ways CMDT (cotton parastatal): 60% state and 40% private (French capital) It provides extension, access to credit/inputs, equipment to cotton farmers It works with formal “Associations Villageoises” in local level development initiatives SYCOV (the farmers union) is a vocal and active stake- holder Cotton is essential component of Malian economic growth, and poverty reduction in the cotton region The problem is not inequality within farmers but low cotton prices and, recently, mismanagement

Resource commoditization in Botswana What does commoditization of land, cattle and water mean? How do traditional pastoral systems work?  Access to land and water is for, and regulated by, all community members (this is not open access!!)  Access to water is key in the dry season What are the effects of borehole development and legislation?  Private property  Hierarchy of users  Inequality when the system becomes less inclusive

Politics in Botswana Political and economic elites are one and the same Cohesion and unity of the elite (aided by ethnic and linguistic homogeneity) Political stability and formal democracy  BDP always re-elected in power Large national support for the BDP government  Since political support basis is in the rural areas (moreover also civil servants now invest in cattle)

Trade with the EU Botswana has benefited from preferential access granted by the EU to ACP countries under the Lomé Conventions : The Cotonou agreement is meant to phase out preferential access Botswana is not LDC and thus cannot benefit from the EBA (“everything but arms”) initiative What will be the impact of preferences erosion on Botswana?  Possibly the impact on economic growth will be limited but that on the rural poor quite negative  greater inequality

The basis for BMC success Chance element  Timely opening of the British market for colonial beef in the mid 1950s Skillful negotiation of EU market access Self-restraint of the political class Good management and not-for-profit style  Producers’ price reflect international prices Ability to secure the support of small farmers  Abolition of the rigid quota system and other changes State support to the sector  Subsidies, incentives, tax breaks

Questions What are the main parastatals in your choice country and how did they perform?  What are the main institutional factors relevant to these experiences? Do you know the “main facts” about Botswana?  Remember! Always look up the main features for any country case study