False Economy - Alan Beattie [62]
Botswana became independent from Britain in 1965, during the great clattering-down of empire in Africa. While most of the rest of the continent succumbed to civil war, inflation, corruption, disease, crippling debt, and economic disaster, Botswana, astonishingly, went on to become the fastest-growing economy in the world over the next thirty years. It grew faster than the United States or Japan, faster than South Korea, faster than Hong Kong or Taiwan or China.
At the heart of Botswana's successful management of its diamond wealth is a revenue-sharing agreement with De Beers, the company that for a long while ran the world's diamond market. De Beers digs up the diamonds and Botswana keeps a portion of the revenue. The way the arrangement is structured gives sufficient confidence to the company that it will be honored, so that De Beers keeps plowing investment into the mines to keep them functioning. For Botswana it provides the security of a given amount of income, and the knowledge that it will share in the windfall gain from any rise in the global diamond price while being insulated from falls against it.
One of the things working in Botswana's favor, ironically enough, is that the diamonds are hard to get at. As in South Africa, they are buried a long way underground. By contrast, the diamonds in troubled West African countries like Sierra Leone are alluvial gems that can be found by panning the beds of rivers. The process of collecting alluvial diamonds is labor-intensive rather than capital-intensive—which is the case with drilling down for diamonds buried deep—but it rarely results in a happy workforce. Harvesting alluvial diamonds is all too easy an operation for any gang of armed thugs capable of defending a few miles of riverbank and capturing enough prisoners to do the panning at gunpoint. A much more stable authority is needed to run an extraction operation for diamonds from mines as challenging as Botswana's. In practical terms, only a highly skilled, privately owned foreign company like De Beers had the expertise actually to dig the diamonds out.
But while the deep-down diamonds helped, geology by itself is not destiny. There are a number of oil regimes (Nigeria, Angola, Sudan) that relied, and indeed still rely, on foreign oil companies to extract the devil's excrement. They have still spectacularly mismanaged the proceeds.
The peculiarity of Botswana has attracted a lot of attention from political scientists and economists, who wonder why it is such a success, and why its success is such an anomaly. Looking over the array of rationalizations they have produced, it appears to be a struggle to keep such explanations from slipping toward tautology. Botswana is a success because it followed the right policies; Botswana is a success because it had better politicians or political institutions than other African nations; Botswana is a success because it was successful.
What seems very clear is that Botswana's success did not come principally because it was uniquely lucky in the political, legal, and social institutions it inherited from its colonial past. Some highly successful economies, such as Hong Kong, had few natural resources but colonial inheritances that turned out to be far more precious: the rule of law, fairly good infrastructure, and a relatively well-educated population. But in Hong Kong's case that was partly because a business class formerly based in Shanghai ended up there after fleeing communism.
Botswana had none of those things. When it gained independence from the British empire in 1965, it had twelve kilometers of paved road, twenty-two university graduates, and a hundred citizens who had been educated to secondary-school level. Indeed, because the Brits were unaware of the presence of diamonds, they devoted very little time or resources to the country, regarding it as no more than a buffer between their other African colonial possessions in the region and the German and Portuguese colonies that flanked them.
Nor was it free of potential ethnic rivalry. Contrary to the popular belief