False Economy - Alan Beattie [63]
Postcolonial hopes for the new country, which was landlocked and bordered apartheid South Africa and white-ruled Rhodesia, were not high. A 1960 British government report on Botswana's future stated that it had "dismal economic prospects ... based on vague hopes of agriculture, salt and coal."
Nonetheless, its government made a whole string of good decisions where other countries made bad ones. Sound political institutions, including the rule of law, if not multiparty democracy, managed to develop alongside the exploitation of diamond wealth (rather than existing before it).
Seretse Khama, Botswana's first president, and his associates made a series of textbook moves. They created a national fund for the diamond wealth, thus avoiding the ethnic divisions that would have followed had tribes been allowed to appropriate the proceeds for themselves. They mined the diamonds slowly, in order to match the capacity of the country to spend the proceeds wisely. (De Beers actually wanted to dig them out faster.) They chose projects for the fund in strict order of what economic return they were likely to produce. Khama even turned down an offer to give priority to the construction of the street that would pass by the presidential residence, saying that roads must be built in order of national priority. One of the few truly great leaders of post-independence Africa, Khama nearly didn't make it to the presidency at all: shamefully, the British had removed him from his previous post as tribal chief, fearing that his interracial marriage to a white Londoner would antagonize apartheid South Africa.
Rather than turn diamonds into a zero-sum game, in which De Beers's gain is Botswana's loss, the revenue-sharing plan has ensured that both benefit. De Beers gets predictability of income and good confidence that political interference will not interrupt its revenues. Botswana gets the diamonds mined honestly and skillfully, and can plan on the basis of the diamond wealth it will receive. De Beers is not bankrupted by having to buy expensive "political risk insurance" against a sudden change of policy. Botswana does not fear that De Beers will one day without warning pack up and go.
By binding itself to a tough agreement with De Beers, Botswana showed that it was serious about the way it would manage its resources. It made what economists would call a "credible precommitment." It bound itself to the mast. In Homer's epic poem, Ulysses had himself tied to the mast of his ship before passing the island of the Sirens so he could hear them singing without being tempted and thus diverting his ship onto the rocks, to suffer destruction and death. He knew from stories of the Sirens' bewitching songs that, while he had no wish to succumb to temptation, the only way he could avoid it was forcibly to prevent himself from doing so in advance.
Botswana has now become rich and powerful enough in the relationship to start influencing more of its terms without fear of driving De Beers or other foreign investors away. In recent years it has pulled more of the supply chain into the country by negotiating with De Beers that the company set up local operations sorting, cutting, and polishing rough stones in return for being able to continue mining in Botswana.
By contrast, neighboring Zambia, which first pushed out foreign investors and then mismanaged its mines, is in a much weaker bargaining position. Rather than be able to dictate terms, as can Botswana, it took much deliberation before it gingerly increased somewhat its minuscule mineral royalties, taking back some of the gains from the foreign private investors who have been receiving the lion's share of the income from its copper. The Zambian nationalization of copper after independence was politically attractive and appealed to a sense of redistributive justice.