Botswana’s middle-income trap worries authorities

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Botswana’s economy is at a critical juncture since the southern African country’s mineral-led growth model can no longer generate sufficient growth, an official said Tuesday.

There is an urgent need to diversify sources of growth, including redesigning the country’s industrial and trade policies to promote exports in non-traditional sectors, Moses Pelaelo, the governor of the Bank of Botswana, told the 2021 media economic briefing in Gaborone, the Botswanan capital.

“Botswana’s economy now needs to grow by at least on an average of 8 percent per annum over the next 15 years to address the current development imperatives,” said Pelaelo.

Furthermore, a key driver of economic and welfare prospects for Botswana, namely, the export potential has, over the last few years, faltered and shrunk as a proportion of gross domestic product (GDP), he said.

According to Pelaelo, Botswana has to redesign its attraction of foreign direct investment (FDI) specifically targeted and linked to integration into regional and global production value chains and strengthening export and investment promotion agencies.

This requires a transition toward sufficient scale of industrialization to generate diversified economic base and exports as well as better articulation of import substitution with performance incentives, he said, who believed in the goal of transition being to enhance international competitiveness of domestic firms and fostering productivity gains.

Comparative country studies and experiences suggest that deliberate promotion of large-scale industries and dedicated implementation of industrialization policies are instrumental to a successful escape from the middle-income trap and transition to high-income status. Enditem

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