Growth, Inequality and Poverty in Emerging and Transition Economies

Published in Transition Studies Review (Vol 16 No. 4), this paper explores the quality of economic growth in a sample of 50 emerging and transition economies (ETEs), which are countries experiencing a process of fast growth and institutional change. Economic growth during 1995–2006 is regressed against poverty, inequality and human development variables using OLS cross-country regression models.

The main findings are that growth did not reduce poverty and income inequality worsened too. On the one hand, economic growth occurred despite the worsening of income inequality. However, this result does not identify a ‘‘U-shaped’’ Kuznets curve because even after a consistent period of growth, inequality did not decrease and it remained at higher levels.

The paper observes that only countries with higher education levels and public expenditure in strategic dimensions seem to escape from this trap. On the other hand, growth occurred at the expense of an important human development variable i.e., life expectancy, and of an important indicator of democracy, i.e., voice and accountability. Click here to read more.

World Bank scolds Botswana over NDPs

An article in the Sunday Standard newspaper (Botswana) indicates that although Botswana’s traditional planning and budgeting systems have served the country well since independence, they are no longer in tune with modern times, so much that there is real risk of not being able to deliver on the projected targets, especially in view of the need to cope with demands presented by the current global financial crisis and dwindling revenues. This emerged during a presentation by World Bank officials during Public Expenditure Review Workshop in Gaborone.
The World Bank also notes that there is more money going out of state coffers than is practicable to make up for the costs resulting from remunerating a big public service that takes the bulk of the country’s financial resources.
It was observed by the World Bank Group delegation that on formulating the NDPs, no provision was ever made for existing projects, with the result that every NDP since independence has been leaving in its trail a legacy of either dilapidated or incomplete projects. Click here to read more...

Implementing competition law in Botswana: A formative analysis

This article, authored by Dr Gape Kaboyakgosi (Research Fellow at BIDPA), was published in a local newspaper and discusses aspects of the new Competition Law in Botswana. It posits that the recent legislating of the Botswana Competition Bill into law, as well as the appointment  of commissioners and subsequent gazetting of the Commission points towards the end of a long process of the reformation of aspects of Botswana’s microeconomic environment. It is tempting to imagine that the Law might address all the challenges facing the economy. Yet Competition Law is an important aspect of the transformation which was also the object of the Privatisation Policy (2000), the implementation which however has met numerous challenges to date. This article is a snap preview of matters that might face the Commission and the Authority. The article concludes that due to the many challenges that face the new Competition Law, bargaining between actors will be the most important regulatory tact to adopt especially in the nascent years of the implementation of the law. Click here, OR here to request for the full article.

Botswana at little risk of debt distress - IMF

According to the Mmegi Newspaper (Friday, 20 August 2010) the International Monetary Fund (IMF)has reported that despite the rapid build-up of external debt in 2009, Botswana is at little risk of debt distress.

In a report following consultations between government officials and the Fund's staff, the IMF says external debt for Botswana is expected to reach nearly 50 percent of the GDP by 2012, to finance construction of two power stations, but should stay below 60 percent of GDP in stress test scenarios.

"Public debt would rise to 25 percent of GDP in 2010, before falling to 15 percent by 2014," the report says. "If growth and the primary balance were to return to recent levels, however, Botswana would be able to repay its public debt by 2012." According to IMF statistics, Botswana's gross external debt stood at $1.2 billion (11.2 percent of GDP) at the end of 2008, with short-term debt accounting for one-fifth of total external debt. The initial increase in 2009 is also explained by the projected 10.3 percent contraction in real GDP due to significantly lower diamond production. Click here to read more. IMF Report URL: http://www.imf.org/external/pubs/ft/scr/2010/cr10172.pdf

 

What Does the Future Hold for SACU? From Own Goal to Laduma! Scenarios for the Future....

This paper discusses the outcomes of a recent scenario-planning exercise on the future of Southern African Customs Union (SACU), an exercise that involved a group of  SACU experts and other interested parties. The paper gives an account of the scenarios developed, which range from SACU collapsing to a scenario where it deepens into a common market.The exercise first mapped out the key certainties and uncertainties that SACU is facing. These range from the certainty that SACU will be impacted by the global economic slowdown to the uncertainty over whether an Economic Partnership Agreement (EPA) will be concluded and what the final content and configuration of this agreement will be. The impact of these circumstances (and others) will shape the future of SACU.

The key certainties and uncertainties identified were then used to map the likelihood of these elements transpiring and what their potential impact will be on SACU. They constitute the gameboard of the scenarios. On the gameboard four quadrants are envisaged, each representing a different future for SACU. SACU’s current position is noted on the board, as well as its ideal future. Driving forces are identified that would either move SACU towards or away from this ideal future. The group envisaged four possible futures for SACU and named them ‘Laduma! ’, ‘Wild Card’,‘Own Goal’ and ‘Red Card’, with ‘Laduma! ’ representing the quadrant in which SACU’s ideal future lies. Click here to read more...

Global Financial Stability Report: Financial Stability Set Back as Sovereign Risks Materialize

The IMF has released the Global Financial Stability Report - (GFSR Market Update -July 2010) which indicates that  despite generally improved economic conditions and a long period of healing after the failure of Lehman Brothers, progress toward global financial stability has recently experienced a setback. Sovereign risks in parts of the euro area have materialized and spread to the financial sector there, threatening to spill over to other regions and re-establish an adverse feedback loop with the economy. Further decisive follow-up is needed to the significant national and supranational policy responses that have been taken in order to strengthen confidence in the financial system and ensure continuation of the economic recovery. Click here to read more...

Development Progress in sub-Saharan Africa

The UNU-WIDER Working Paper 2010/07 lists Botswana, Ghana, Mauritius and South Africa as sub-Saharan African countries that stand out for their development progress. Apparently each of these countries has succeeded against the odds, and against expectations. This paper synthesizes the common ingredients of these countries’ success, and derives lessons.

From the dry, sparsely populated desert expanses of Botswana, through the densely populated tropics of Ghana, to the small sub-tropical island of Mauritius with its Asian heritage, and to the multicultural melting pot of densely urbanized, industrial South Africa, these four countries provide proof that the peoples of Africa have succeeded, and can succeed, in all environments and contexts. The paper  concludes that smallness, landlockedness, tropical location, distance from world markets, racism, colonialism and other challenges can be overcome through appropriate institutions, governance and good economic policies. Click here to read more.

 

ISPAAD to have horticulture component

Botswana government has approved the second phase of the Livestock Management and Infrastructure Development (LIMID) project, which include a horticultural component under the popular Integrated Support Programme for Arable Agriculture Development (ISPAAD), officials said.

Sarah George, Acting Permanent Secretary at MOA said ISPAAD will now have a horticulture component comprising production inputs support and farm equipment. Under the Production Inputs Support (IPS), assistance will be given to farmers to purchase fertilizers, pesticides, seeds and seedlings, whereas farmers will be assisted to acquire drip irrigation and shade nets under the Farm Equipment (FE) sub-component. Click here to read more.

Tourism Development in Africa: Focus on Poverty Alleviation

This journal article examines the contribution of tourism in African Development with an emphasis on poverty reduction. The analysis focuses on the performance indicators in the economic factors, employment and government revenue. The paper projects tourism as one of the fastest growing sectors of the global economy and underscores the fact that developing countries are attempting to cash in on this expanding industry in an attempt to boost foreign investment and financial reserves. Although the value of tourism has long been recognized, international attention to the role of tourism development especially in Africa is still lacking. The argument for tourism as a development strategy is primarily economic although ideals such as bringing increased understanding among peoples and cultures are invoked. Faced with civil wars, poverty, sanitation and other myriad of problems, Africa continuously faces the challenge of tourism marketing for various destinations against other competing regions such as Europe. Click here to access the full paper.

Africa’s renewed confidence

According to this article (Botswana Gurdian) fears that the global crisis would result in a structural setback for sub-Saharan Africa have largely dissipated. Real GDP growth has recovered from the weak but mostly positive levels recorded in 2009, with rising expectations that 2011 may see a return to trend growth across most sub-Saharan African economies. This stands in contrast to earlier economic slowdowns in Africa, when weakness in the global economy had a marked lagged effect on African economies. African economies entered this downturn with strong growth momentum. Perhaps as a result of this, the recovery from the crisis also appears to have been more rapid.

Nonetheless, headwinds associated with continuing global uncertainty persist. Africa is not immune to the slowdown. With intra-regional trade estimated to account for as little as 11% of total trade, Africa’s export growth remains highly correlated with world growth. Rising South-South trade has cushioned African economies from the brunt of the global slowdown. However, more subdued growth in Asia and other emerging regions would pose risks to the African outlook. Click here to read more.

Quality of Government is Needed to Reduce Poverty and Economic Inequality

It is a fact that lots of people in some developing countries have been lifted out of poverty during the recent decade, but severe poverty remains a huge problem, not least in Sub-Sahara Africa. Recognizing the importance of institutions for alleviating poverty and economic inequalities, this paper starts by asking the question “which institutions”. The paper posits that representative democracy seems to work poorly as a cure against poverty or large-scale economic inequalities. According to the paper, empirical analysis shows that this holds true for poor (non-OECD) countries. The main empirical analysis tests the relation between measures of QoG - Quality of Government – (such as levels of corruption and the rule of law) and poverty/inequality. The empirical analysis covers both a large n-analysis and a comparison of two cases (Singapore and Jamaica), The main conclusion from the large-n empirical test is that the quality of government matters for reducing absolute poverty among poor countries and for reducing relative economic inequalities among rich as well as among poor countries also after controlling for democracy. This conclusion if strengthened by the comparative analysis of democratic but low QoG Jamaica and authoritarian but high QoG Singapore. Click here to read more.

SACU Revenue Sharing Formula: The History of An Equation

This paper examines the evolution of the SACU revenue sharing formula (RSF) and what implications it has had on the revenue of Botswana as well as the other small state members of the customs union that include Lesotho, Namibia and Swaziland (BLNS). The paper does not attempt to review the three SACU treaties per se and they are discussed only to the extent that their other provisions bear on the distribution of revenues from the customs union. There has been adequate and extensive commentary by many authors. The first section carries a historical review of the SACU revenue sharing formula from a Botswana perspective. The formula is considered through its various iterations over the last century. It is argued that the SACU revenue sharing formula has been a bell-weather in the history of southern Africa. The initial formula and the two reforms have been preceded by seismic historical changes in the geo-politics of the region- the creation of the Union of South Africa in 1910, the independence of Botswana, Lesotho and Swaziland in the mid-1960‟s and the end of apartheid which signaled the commencement of the 1994-2002 renegotiations.

In the second section of the paper the historical experience from other customs unions, the theory of the distribution of customs union revenue and the more significant studies on this in the SACU region are considered. In the third section the distribution of the revenues between SACU members is considered under various scenarios with an emphasis on the case of Botswana. The impact of a shift to a "development funding‟ as opposed to general revenue transfers as broadly envisaged by South Africa would impact Botswana and the other BLNS is also considered. Click here to access the full paper.

Pula hinges on Rand depreciation

The Mmegi Newspaper reports that there is increasing possibility of a Rand depreciation, which will ease pressure on the Pula reducing the country's import bill and ease domestic inflation. According to the newspaper article the Rand has gained against the Pula and other hard currencies since last year, strengthening from levels of R10.27 to the greenback in February 2009, to its current R7.31. From February 2009 to February 2010, the Rand rose by 37 percent against the US Dollar, during which period the Pula declined by approximately 12 percent against the Rand.

Over the same period, the Pula has generally firmed against the US Dollar, as a result of the operation of the currency basket against which it is managed. Botswana's currency basket includes the Rand, US Dollar, British Pound, Euro and Japanese Yen. Read more...

World Economic Outlook Update - Restoring confidence without harming recovery

This IMF report (released in July 2010) projects world growth at about 4½ percent in 2010 and 4¼ percent in 2011. Relative to the April 2010 World Economic Outlook (WEO), this represents an upward revision of about ½ percentage point in 2010, reflecting stronger activity during the first half of the year. The forecast for 2011 is unchanged. At the same time, downside risks have risen sharply amid renewed financial turbulence. In this context, the new forecasts hinge on implementation of policies to rebuild confidence and stability, particularly in the euro area.

More generally, the report suggests that policy efforts in advanced economies should focus on credible fiscal consolidation, notably measures that enhance medium-run growth prospects, such as reforms to entitlement and tax systems. Supported by accommodative monetary conditions, fiscal actions should be complemented by financial sector reform and structural reforms to enhance growth and competitiveness.

Policies in emerging economies should also help rebalance global demand, including through structural reforms and, in some cases, greater exchange rate flexibility. Click here for the detailed report.

The impact of EU - South Africa trade development and cooperation development on Botswana, Lesotho....

This paper apperas in Review of Economic and Business Studies, and examines the impact of the European Union-South Africa Trade Development and Cooperation Agreement (EU-SA TDCA) on trade between the RSA and Botswana, Lesotho, Namibia and Swaziland (BLNS). The results indicate that demand for imports are income elastic and price inelastic. This implies that imported goods are necessary and consumers and producers of the BLNS countries depend on them.
The results also indicate that the agreement between the RSA and the EU brought about increased imports to the BLNS countries. Demand for exports is also income elastic and price inelastic. The volume of exports to the RSA, from the BLNS, seems to increase following the agreement. The empirical findings imply first, that imports could have led to a crowding out of domestic production, which would negatively impact on domestic industry. Second, the EU-SA TDCA has benefited the BLNS countries by boosting their exports. The paper is available here.

The MDGS and beyond: Pro-poor policy in a changing world

This European Association Development Research and Training Institutes (EADI) Policy Paper indicates that the MDGs have had a significant impact so far at a global level, but national level impacts are less clear and need more exploration. The paper suggests that there is strong evidence of MDG impacts at a global level and in many countries (in the recent UNDP study of 30 countries, no fewer than 25 countries had added, expanded or modified indicators and 10 had added local goals), and there is good evidence of MDG impacts on social sector budget allocations.

The 2010 MDG review should assess the MDG experience and lessons learnt, build an MDG global action plan, and lay the political groundwork for a global commission on 2015 and beyond. Key issues for the 2010-2015 MDG ‘big push’ are cross-cutting ones: There is need for more focus on a stronger linking of the Rights agenda in the Millennium Declaration and the MDGs; more focus on gender (and the new UN agency), more focus on poor people’s adaptation to climate change, and more focus on equity and social justice issues (and the poorest). Click here to access the full paper.