The Smokescreen of Batswana Growth: Is Private Development the answer?

by Ashley Wu
GoldRushDiamonds1 Botswana’s Resource Curse?

Stable politics, sustained double-digit economic growth, and comparatively good governance brought us here. Botswana was supposed to be a shining success story of prudent political and economic management amidst a crowd of struggling sub-Saharan African peers. But as we spend time interviewing business leaders across sectors in Botswana’s capital city, it appears that there is significant room for improvement on all counts.

The first illusion was the story of economic growth, which turns out to be more dependent on the diamond trade than we previously thought. “Through 2005, growth in Botswana exceeded almost every country in the world – but it was all coming from diamonds,” said Domingo Villaronga, Economic Officer at the U.S. Embassy. “Now it’s predicted that diamonds in the open pit mines will run out between 2025 and 2050 – what then? They make up 80% of export revenue,” he wonders.

Bashi Gaetsaloe, Managing Director of Accenture Botswana summarizes the malaise with which the government acts as a problem of incentives. “When you have a lot of money, you don’t spend your time bargaining or searching for good deals. You just pay whatever it is. And if it becomes too much of a hassle, you might even just send your driver to go buy it. The government was the same way with diamond money – they weren’t concerned with building infrastructure like schools or stadiums efficiently. It isn’t finished this year? Well, we’ll spend 20 million more next year then,” he said.

Taking economic matters into their own hands, the Magang family is dominating the business of private real estate development in Gaborone. The new Phakalane suburb has its own private schools, hospitals, and access roads. Thola Magang, managing director of the family enterprise, believes that the suburb will eventually grow to have as many inhabitants as Gaborone itself. Inspired by visiting Santa Barbara, he believes that Phakalane has the ability to “overtake the government in terms of provision of services.”

And the model seems to be working – Phakalane’s first 560 residential plots sold out within two weeks. Telling of the high-profile clientele that Phakalane serves, Thola gestures toward the home that ex-president Festus Mogae and his wife built for their retirement as we drive along a row of immaculately designed houses.

Still, private development in Botswana is not without its challenges. “Because it’s never been done before in Botswana, you invariably spend many hours with lawyers; wasting a lot of time challenging laws,” said Thola. The battle to get sewage pipes running under the center of properties, instead of to the back as traditionally done, was one such protracted legal struggle. Corruption poses another significant threat. As we pull into the parking lot, Thola points to the golf estate’s main hotel building. “We had a hell of a time getting an occupation certificate for that building because the department ‘lost’ the plans for the building eight time. How could you lose paperwork eight times? Eventually I think they quit waiting for a bribe and said, okay just give it to them,” said Thola.

I asked Thola what he thought about more players in the realm of private development. “Sure, there’s room for another two, three big guys in the game,” said Thola. “I just don’t think anyone else is ready to deal with the struggle of forging the path.”

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