A new growth model for Botswana

Good evening and hello to all – dumelang !

This is my first time in Botswana, and I am honored to visit one of the continent's most successful stories. And probably the "most brilliant" – no pun!

I would like to thank Governor Pelaelo and Minister Matambo for this opportunity and for the organization of this dinner.

I would have liked to follow in the footsteps of Prince Harry and Lady Markle – but unfortunately my visit this time is too short. I'll just see rough diamond stones for the first time in my life.

As some of you may know, I have just arrived from South Africa, which hosts the BRICS summit. The general theme of this year's meetings was how to ensure growth in an environment increasingly marked by inward-looking attitudes and an erosion of the multilateral system.

It is true that the multilateral system needs to be repaired. reason to disbademble it completely. And being optimistic, I am confident that the differences will be resolved to prevent further escalation of economic tensions.

I. Global and Regional Context

Here are the three main thoughts I have taken on how we view the world and regional perspectives.

First of all, it is understandable the anxiety aroused by the rise of trade tensions and how these can affect growth prospects, particularly in emerging and developing economies. in development.

At present, we expect the global growth outlook to remain unchanged from our April forecast – at 3.9% this year and next year. But we believe the downside risks of this forecast have increased.

Clearly, escalating trade tensions can derail the global recovery – a recovery that has been fueled by a rebound in trade and investment.

But there are also other challenges – sudden change in investor sentiment and tightening financial conditions. Emerging market economies with relatively weak fundamentals could be particularly vulnerable. Think about the recent experience of Turkey and Argentina.

So, overall, the outlook is still good. But the global backdrop could become more difficult, including for Africa.

Which brings me to the second takeaway delivery – the message about Africa . I have felt a lot of optimism about this region and the opportunity it holds. It has a huge demographic dividend, a lot of natural resources and untapped potential in many areas.

Africa is the youngest continent in the world. By 2035, this could represent up to 110 million workers. The implications for the region – and indeed for the entire world – are enormous, in terms of potential markets and opportunities.

Yet, harnessing this potential means creating 20 million jobs each year up to 2035. That's double the average number of jobs created each year during the 2011-2017 period .

It is clear that the third delivery is : yes, there is a huge opportunity. But to harvest it, the countries must put their house in order .

Many countries in sub-Saharan Africa need to reduce their vulnerabilities to debt, while finding ways to fund significant infrastructure and social spending needs. These are essential for achieving the United Nations Sustainable Development Goals and achieving higher and more inclusive growth

II. Botswana: Towards a New Growth Model

So what does it mean for Botswana? The global backdrop offers both opportunities and challenges.

The good news is that alongside the high growth rates in the United States and China, diamond prices are picking up and sales and production are rising. .

On the other hand, the recovery in South Africa, as you may have seen in the latest Reserve Bank forecasts, should not be strong enough. With 1.2% this year and about 2% in the coming years, revenues from SACU countries, including Botswana, are likely to be affected.

In light of these developments, we are cautiously optimistic about Botswana's prospects. We expect a rebound in growth this year and about 4.5 percent – up to 5 percent in the medium term.
Yet, here too, there are risks, and efforts are needed to bring order and prepare the economy for the future.

III Short-term Priorities: Fiscal Sustainability

In the short term, fiscal sustainability is essential. But it must be pro-growth and pro-poor. This means containing public spending by adjusting its composition – away from non-priority spending while protecting investment and social protection expenditures.

This also means greater revenue mobilization, such as lower exemptions and a higher perception of property taxes.

I am confident that the authorities will take appropriate measures to restore fiscal balance in the coming years and maintain significant savings for rainy days or future generations.

Beyond the current challenges, we must not lose sight of what is needed for the future. Like other countries in the region, Botswana must respond to the aspirations of its young population by creating jobs, diversifying the economy and reducing inequalities.

How can this be done? I'm sure many of you would agree – diamonds are not eternal! Botswana needs to exploit a new growth model. One where the role and size of the state is different and where the private sector takes the lead

IV. Long-Term Priorities: A New Growth Model

So let me offer some thoughts on the contours of this new model – in light of our own experience and research. I can see four key dimensions

The first is the diversification of exports . When diversifying, sectors with high export and employment potential, such as beef and tourism, should be considered.

However, unlocking the potential of these two sectors requires the elimination of distortions and the promotion of market-friendly solutions. This means abolishing monopolies to foster competition, improve air and tourist transport infrastructure, and facilitate visa procedures.

The second dimension is the role of the private sector . Some elements need to be in place for the private sector to play a central role in the economy. This includes a welcoming business environment with high quality utilities and lower bureaucratic investment requirements. Technology, such as e-government, can be usefully exploited in this regard.

A thriving private sector also needs the support of a strong and well-developed financial system. Efforts to facilitate bond market growth and increase access to financing will be particularly important here.

The third dimension relates to employment . Obviously, creating jobs requires the willingness to hire. But it also requires a well-trained workforce. Here, well-conducted educational reforms, a focus on vocational training and the opening of the work permit and visa process for foreign workers are essential.

Naturally, these latter aspects can be somewhat debatable. But experience has shown that exposure to skilled and well-trained domestic and foreign workers can help strengthen skills at home. And this is essential to improve the skills of local workers.

The fourth and last dimension concerns the public sector and its role in this new growth model.

Clearly, as the private sector grows, the public sector should step back and refocus its objectives. This means providing high quality and cost-effective public services, including infrastructure. It also means the divestiture of state-owned enterprises and the consolidation of parastatals, if any.

At the same time, fiscal policy could play a greater role in reducing income inequality. Up to now, the country has been very successful in reducing poverty. But the improvement of equity may require a re-examination of the social subsidy system and their targeting.

Conclusion

Let me conclude.

Being here in Botswana, I remember a Chinese proverb: " The finest diamond must be cut ."

Your country has such a diamond potential. To unlock it, you have to "cut" with the old growth model and "polish" the new model.

I am encouraged by what I have heard from His Excellency President Masisi, policy makers and business leaders, when I met with them today, that the good choices will be made. Transform the country into a new sustainable model, with more jobs and higher and more inclusive growth.

Thank you.