VZCZCXYZ1993
PP RUEHWEB

DE RUEHOR #0785/01 2791559
ZNR UUUUU ZZH
P 061559Z OCT 09
FM AMEMBASSY GABORONE
TO RUEHC/SECSTATE WASHDC PRIORITY 6074
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHDC

UNCLAS GABORONE 000785 
 
SIPDIS 
 
STATE FOR AF/S, AF/EPS, EEB 
STATE PLEASE PASS USTR WJACKSON 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN EAID BC
SUBJECT: BOTSWANA 'S ECONOMIC SUCCESS OFFERS LESSONS FOR 
MINERAL-RICH COUNTRIES 
 
REF: GABORONE 754 AND PREVIOUS (NOTAL) 
 
¶1. Summary.  Botswana is a remarkable economic success story in 
Africa.  Since independence in 1966, it has escaped poverty to 
become a middle income, democratically stable success, avoiding the 
numerous pitfalls that commonly affect mineral rich countries in 
Africa.  There is no single reason for Botswana's success; rather, a 
combination of wise leadership, sound economic policies and 
effective institutions have allowed the country to prosper - growing 
by an annual average GDP per capita rate of over 6% since 1970. 
Botswana demonstrates that a country rich in minerals, in this case 
diamonds, can manage its resources with vision and in ways that 
enhance the country as a whole, supporting all of its citizens. 
While there are no cookie-cutter solutions, Botswana's achievements 
offer some best practices for other mineral-rich countries, 
including creating a revenue stabilization fund and empowering a 
well-educated, politically independent civil service.  End Summary. 
 
¶2. This is the fifth in a series of cables intended to assess the 
strategic value to the United States of our collaboration with the 
Government of Botswana (GOB). 
 
------------------------------- 
Leaders Serving the Common Good 
------------------------------- 
¶3.  Botswana has been fortunate to have had an unbroken series of 
competent political leaders who have worked for the common good.  At 
independence in 1966, Botswana's first President Seretse Khama 
recognized that his role as President was to develop Botswana's 
infrastructure and economy and improve the lives of its citizens. 
The country's subsequent leaders (Botswana has had only four 
Presidents so far) have largely followed Khama's example.  Strategic 
leadership in Botswana also takes place within the civil service. 
Well-educated technocrats manage the day-to-day operations of 
government.  Today, the GOB's track record of transparency and 
accountability distinguishes Botswana from many of its peers.  But 
the country's direction and priorities are not simply dictated by 
its elected leaders.  Historically, important decisions were made by 
chiefs after first building consensus at the village meeting place 
(the "kgotla") through long discussions where all village males were 
able to express their opinions regardless of their social status. 
Botswana's modern political leaders still address and consult at 
kgotla meetings today, and this longstanding tradition of discussion 
and consensus building helps to influence and legitimize government 
policy. 
 
--------------------------------- 
Conservative, Consistent Policies 
--------------------------------- 
¶4.  Botswana's sound and consistent economic policies are another 
reason the country has been able to achieve such rapid growth and 
development.  While diamonds were discovered in Botswana in the late 
1960's, large-scale mining only began in the late 1970's.  Because 
it was created before Botswana reaped the benefits of its diamond 
wealth, Botswana's macroeconomic policy focused on resource 
conservation and minimizing risk; the Batswana were farmers raising 
cattle on the edge of a desert and were cautious in the face of 
drought.  From independence, the country has embarked on a series of 
long-term National Development Plans, which prioritize development 
Qlong-term National Development Plans, which prioritize development 
projects, including construction of schools, roads and health 
centers.  These economically conservative policies have continued 
even as diamond revenues have increased.  Outside investors were 
also attracted to Botswana because its economic policies have been 
consistent over time.  Soon after large-scale diamond mining began 
in Botswana, the GOB had the foresight to create a "rainy day fund" 
with its excess revenues, rather than spending its newfound wealth 
on consumption or white elephant projects.  The GOB then used its 
foreign exchange and cash reserves to offset recurring short-term 
economic fluctuations.  Botswana's consistent macroeconomic 
environment and high rate of savings not only earned the country a 
Grade "A" investment rating from Moody's, but also enabled Botswana 
to keep this rating despite the current economic crisis.  While 
these policies laid a foundation for Botswana's economic success, 
they have ultimately been successful due to their implementation by 
independent institutions within Botswana. 
 
---------------------- 
Institutions That Work 
---------------------- 
¶5.  Financial institutions including the Ministry of Finance and 
Development Planning (MFDP) and the Bank of Botswana (BOB) - which 
serves as the national reserve bank - are models of effective public 
 
institutions within Botswana and across the continent. The 
institutions are run by well educated and capable leadership and 
staffed by a competent, apolitical civil service corps.  Most 
importantly, they function independently and are not subject to 
political interference in either policy matters or in daily 
operations.  Positions in these institutions are awarded on a 
person's qualifications rather than as a political reward.  As a 
result, both institutions have effectively fulfilled their mandates 
and have engaged sound economic practices in directing Botswana's 
growth.  Among other responsibilities, the BOB manages Botswana's 
extensive foreign exchange reserves and implements the country's 
exchange rate policy.  This stewardship is often cited as one reason 
why Botswana's economic performance has remained strong and why 
Botswana has been able to avoid the problem common to resource-rich 
countries of an overinflated currency, which often devastates local 
industry by making imports cheap and accessible. 
 
-------------------------- 
International Partnerships 
-------------------------- 
¶6. Though Botswana received significant donor attention in its early 
years, once it achieved middle income status in the late 1990's, 
foreign development assistance was largely withdrawn.  However, 
Botswana was one of the countries hardest hit by the HIV/AIDS 
crisis, and then-President Mogae reached out to the U.S., U.N. and 
other donors to request new assistance to address the epidemic.  The 
USG is currently Botswana's single largest donor, but our programs 
here are almost exclusively AIDS related.  (The U.S. PEPFAR program 
spent $93 million in Botswana last year, and over $300 million since 
2005.)  Outside of help with the AIDS crisis, Botswana today 
receives limited technical assistance and financial support from the 
USG and other donors.  The GOB is generally happy with the support 
it receives, although senior officials regularly note that Botswana 
still has significant development challenges and should not be 
"punished" for its successes by, for example, being left out of the 
Millennium Challenge Program due to its relatively high average 
income.  The USG has partnered with Botswana in recent years to 
provide strategic advice for economic diversification, the country's 
next challenge.  OPIC, for example, provided a $250 million loan 
facility to help start a diamond cutting and polishing industry 
here, while USTDA grants have helped with power sector and aviation 
security projects.  The GOB also works productively with the 
USAID-funded Southern African Competitiveness Hub, using Hub advice 
to improve the Trans-Kalahari transport corridor, implement common 
regional customs documents and work toward more efficient border 
posts. 
 
 
------------------- 
Exportable Lessons? 
------------------- 
¶7.  Comment.  Botswana is an example of how a mineral-rich country 
can use its resources well.  Botswana proves that good governance, 
sound policies and functional, independent institutions can lead to 
sustained economic growth.  While there are no cookie-cutter 
solutions, in many ways Botswana's success could be emulated in 
other countries, many of which have abundant unrealized potential 
through minerals and natural resources.  First, Botswana's 
experience suggests that resource dependent economies should 
Qexperience suggests that resource dependent economies should 
concentrate on saving revenues and create stabilization funds to 
buffer themselves as prices fluctuate.  Though it may be difficult 
to begin to accumulate reserves during an economic slowdown, 
countries should prioritize implementation of such funds as their 
economies recover.  Second, building a competent, politically 
independent civil service would appear to be essential.   Competent 
technocrats within Ministries not only help to deepen the expertise 
to make and implement policies, but also help mold future leaders 
from within the civil service, which could bring technical expertise 
and policy consistency over time.  Success is hardly easy or swift, 
but Botswana's experience suggests that true economic success and 
stability in Africa is possible.  End Comment. 
HAMILTON