África, Pecado de Europa is a book written in Spanish, translated to mean Africa, Sin of Europe in English. It is the work of Luís de Sebastián Carazo, Emeritus Professor of the Department of Economics at the ESADE Business School. In the video clip below he takes a few minutes to talk about what the book entails.  I get the feeling this may not be the last time I hear about his assertions.  I also doubt the good professor has won any popularity contests in Europe lately…

Margaret Sengwaketse is a Research Fellow at the Botswana Institute for Development Policy Analysis (BIDPA).  She is currently undertaking research towards a Ph.D. degree at the University of Manchester.  Margaret’s thesis explores three possible explanations to manufacturing growth in Botswana; mineral abundance, the trade policy environment, and the general macroeconomic environment.  Margaret was kind enough to share her thoughts on some of my questions.

Q>> Can you please give an overview of the work BIDPA does and what your role there entails.
MARGARET>> BIDPA conducts policy research. As one of the researchers I conduct research particularly in the area of international trade.

Q>> Botswana’s economic success has invariably been linked to the mining of diamonds in the country.  Is there any basis for fears of a decline in mineral reserves?
MARGARET>> There is definitely reason to worry over declining mineral reserves. Data suggests that Botswana is over-dependent on mining as mining constitutes a significant share in government revenue, national output and exports. A decline in reserves would affect government revenue, output and exports.

Q>> Would you say the Tswana economy is diversified enough for the current economic success to be sustained?
MARGARET>> I have not calculated any diversification indices to give a definite answer. However, national output and export data suggests mining sector share in gross domestic product and exports is significant and has been so since the 1980s. The government has long acknowledged the need to diversify the economy away from over-dependence on mining and has introduced initiatives to stimulate growth in other sectors. However, up to this point I would say that although there has been growth in non-mining sectors, the dominance of the mining sector is still evident.

Q>> In your opinion, is the relatively small population of Botswana (approximately 1.6 million the last time I checked) a limiting factor to economic growth?
MARGARET>> This is one of the most difficult questions I will have to answer I think. A small population means a small domestic market, therefore future economic growth cannot depend on domestic demand. According to literature, export growth is one of the channels through which economic growth can be achieved in small economies. The impressive economic growth that Botswana has achieved was through mineral exports. We have already discussed the dangers of relying on non-renewable resources and that mining cannot sustain growth in the future because minerals are finite. That means other sectors with export growth potential should contribute to economic growth. The key here is diversification because if the economy moves from over-dependence on mining to over-dependence on something else, it is still vulnerable.

Some diversification has been achieved as some sectors such as tourism do contribute to exports. But more needs to be done to increase the contributions of other sectors to export growth. Manufacturing for example, could contribute more to exports than it does currently. But learning to export and increasing export shares takes time, effort and resources and exposure to the international trading environment can be a challenge especially for small and medium firms.

Q>> Botswana has been one of the few African countries funding a significant number of its citizens to study in universities and colleges beyond its borders.  Do trends suggest that these Batswana graduates return home upon completion? Either way, is the economy ready to assimilate their skills back home?
MARGARET>> I do not have figures on graduates who have trained and have not returned home to take employment or vice-versa so it is hard to give a definite answer. However, one of the challenges the government has been facing in recent years is graduate unemployment as well as a shortage of key skills. I do not have figures to give you an idea on the scale of the problem.

My thinking is that in as much as the government is committed to skills development and has used its mineral wealth to develop human resources, it cannot be the only employer and some skills have to be absorbed by the private sector. Like most of Africa, the government sector is already large and cannot grow bigger than it currently is. Though mining contributes a significant share to national output and exports, it employs a few people as it is capital intensive. Sectors such as manufacturing and services should absorb the excess sector. However, as we discussed earlier, these sectors need to grow more than they do currently to be able to absorb all these skills.

Q>> Botswana has often been cited, along with Ghana, as one of the few African countries where women are found in influential positions in relatively large numbers.  Would you say this is true?  If so, why is this so?
MARGARET>> I think the number of women in influential positions in Botswana is impressive. I am not able to relate it to the rest of Africa as I do not have the necessary data. Where women have demonstrated ability and have the necessary skills, I think they have been given the chance to be in influential positions in Botswana. However, it is never easy as women have to work extra-hard juggling all their responsibilities and [still] prove that they are capable.

Q>> Your other roles in life include being a mother and a wife. Any “work-life balance” tips for career-minded African women facing the challenges of raising a family?
MARGARET>> Like you said the key word is balance. It is never easy as parenting is a full-time job. But I try to do as much work as possible at work, leave work-related stuff at work and go home to be a mother and wife. By God’s grace, this strategy has worked for me.

Q>>Thanks so much for your insight and time Margaret!

UPDATE: A comprehensive discussion on this topic has been subsequently facilitated by the World Bank’s Chief Economist for the Africa Region.  Strongly recommended – click here to access it.

The week so far has definitely been diary material.  In view of the current global financial crisis, these are certainly unprecedented times.  Images of former Lehman Brothers employees weeping in public brought it all home for me.  Soaring UK unemployment figures have also put things into perspective.  Meanwhile AIG, HBOS, and other financial institutions have been teetering dangerously close to implosion.  Increasingly, I have been left wondering what this means for Africa even though the implications appear elusive.

There have been voices suggesting that some parts of Africa may be less exposed to the perils of the global credit crunch. For example, yesterday’s edition of Nigeria’s Vanguard newspaper made references to the Central Bank of Nigeria (CBN) which caught my attention:

…The CBN Director of Banking Supervision, Mr. Ignatius Imala… said the collapse of the American banks would not have effect on Nigerian banks but that the CBN was taking full measures as it did not want to leave anything to chance.

His words: “I naturally feel that you would be interested in not only learning that the collapse of Lehman Brothers and a few others will not affect Nigerian banks because of their trading relationships.”

Earlier on in the year, Nigerian tycoon Aliko Dangote spoke to the Mail & Guardian newspaper voicing his own opinions on the credit crunch.  He went as far as saying the global phenomenon could actually be a good thing for Africa.  I quote:

“The credit crunch works better rather than worse for Africa in terms of investment,” Dangote said while on a visit to Sierra Leone late on Sunday.

“It means there is a lot of money that needs to be invested somewhere and the best place is … developing countries like Africa,” he said, pointing to growth rates in some African nations more than double those of their Western counterparts.

Call me a pessimist, but that seems like a somewhat simplistic view of the current situation.  Given the decreasing liquidity of potential investors in the EU and the United States, I question where this foreign investment will come from.  China perhaps?  If anything I am more inclined to go along with Seeraj Mohamed’s view in an article written for the Polity.org.za website. He outlines the dangers of the global credit crunch in a South African context, highlighting the possible effects on domestic share prices.

Ultimately, I doubt anyone REALLY knows how the full impact of this fallout will accrue to African economies.  One universally acknowledged fact is that we are in uncharted territory.  Given the interlocking connections holding the global community together, I would be surprised if Africa is left unscathed.

There are currently four signs on the front lawn of the complex where I reside (pictured). Three of these signs are advertising properties for sale within the complex, while the fourth one indicates that a property has been rented out by the estate agency displayed. Collectively, these signs give a surprisingly accurate snapshot of the credit crunch currently ravaging the UK economy and the rest of the globe.

Our residential complex has always been a popular choice for people working in the surrounding metropolitan area. It has a reasonably desirable postcode with good access to regional transport links. Two years ago, any property within the complex advertised for sale was snapped up within two months on average. This is no longer the case. In stark contrast, two of the three “For Sale” signs pictured above have been on display for almost TWELVE months to date. The third sign is a recent addition. Meanwhile, potential buyers are nowhere in sight. On the other hand, the “Let By” sign (also pictured) refers to a rental property occupied within just a month of advertising. Combine all these elements together and a bigger picture emerges.

Simply put, this all reflects the prevailing chronic shortage of mortgage finance products for prospective buyers in the UK (and beyond). The knock-on effect is seen in the sharp decline in properties changing hands in the marketplace. It is interesting to note that, in contrast, rental properties are in high demand as more people are forced to look for temporary accommodation. The subsequent domino effect is infinite – falling house prices, job losses, a decline in construction and other associated sectors, to mention just a few examples.

All indications suggest that the signs pictured above are likely to be a long-term fixture on our lawn. Click here for a BBC overview of a recent International Monetary Fund (IMF) report on the global credit crunch.