Problems of Low Economic Growth, Economic Diversification, and Unemployment in Botswana

AS AN ECONOMIST DISCUSS HOW THE 2013 BUDGET SPEECH HAS ADDRESSED OR NOT ADDRESSED THE PROBLEMS OF LOW ECONOMIC GROWTH, ECONOMIC DIVERSIFICATION AND UNEMPLOYMENT IN BOTSWANA

ECO 322 ASSIGNMENT

2/1/2013

OFENTSE JIMMY SEEMULE ID:201000445

INTRODUCTION
The budget speech is important information for the nation, and other countries, because it is able to attract both local and foreign investors, therefore it is imperative that issues addressed by the budget speech be clear, truthful and prise to acquire valid feedback regarding national progress which will help the nation to exact more effort in dealing with macroeconomic issues like unemployment and economic growth. The nation is informed about national progress every year via the budget speech, which addresses several issues of great national concern, mostly economic issues. The budget speech is also a review and a preview of financial issues regard economic growth, central bank reserve policies of local and foreign financial performance of the nation.
Economic issues addressed by the budget speech are very sensitive issues, which relate to one another simply because they are dependent economic variables. If unemployment rates are high that can mean that there will be less contribution of employment towards national revenue through income tax, which will lead to low economic growth. If there is lack of performance from economic factors like diversification that if there is low diversification there can be low economic growth if the dominant sources of government (mining sector) fail to produce good results. The government is responsible to inform the nation on these issues through the budget speech, therefore there is need for analysis to ensure as to whether these sensitive issues have been really addressed or not. In my analysis will focus on problems of low economic growth, economic diversification and unemployment in Botswana.

DISCUSSION
UNEMPLOYMENT IN BOTSWANA
Unemployment is a major concern to the government and it is often given priorities when formulating national policies and strategies. The budget speech has addressed this issue, but failed to prove the effectiveness of the active and proposed employment policies to show that they has been progress. a wide range of policies and programmes, such as the Internship Programme, Youth Development Fund, LIMID, Youth Empowerment Scheme, Diamond Hub, Innovation Hub and Economic Diversification Drive, have been established to address issues of unemployment and job creation. Policies like the internship programme in which graduates are given opportunity to acquire practice in fields of their speciality, really helps to reduce unemployment although the wages given to participants are low. The youth development fund and other youth empowerment schemes have seen dedicated youths emerge with successful businesses. The youth of Botswana form a large portion of our population, and since they are our future, the budget speech does hint out that the government will continue to empower them through various programmes such as the Skills Development Programme aimed at identifying skills gaps and service providers with relevant programmes to bridge those gaps, the speech also addressed the other proposed policies aimed at creating employment, such policies include Multi-Sectoral Committee which among others will ensure full integration of youth matters into policies and programmes formulated by Ministries. In order the achieve enhanced economic growth the Botswana Qualification Authority is being established, to address issues of relevance, quality, accreditation, articulation, coordination and management of skills development programmes, as way of addressing problems of quality and advising the public on relevant qualification they can undertake, and this can also help reduce employment. The speech has also addressed proposed strategies like the
Comprehensive Education and Training Strategic Sector Plan which will provide a wide policy and strategic framework, guide the prioritisation and resource allocation processes, and ensure delivery of improved education and skills development. The budget speech also addresses issues of project management and allocation to insure that employment is created from implementation of national projects. (symes, 1995)
ECONOMIC DIVERSIFICATION
Botswana has been too long dependent of the mineral industry for sustained economic growth, but these industries can be left vulnerable by any financial crisis that hits the global economy, as proven by the financial crisis of 2008 which reduced the purchase of these minerals, hence low economic growth was experience in an overall picture due to lack of economic diversification, Botswana is still subject to greater risk of global economic collapse that can occur anytime from now, and the anticipated EURO debt crisis will hurt us because we are still in the process of diversification. The budget speech has addressed the progress of the economic diversification drive strategy (EDD), from which 570 companies have been issued with EDD certificates. As a result of progress from these strategy, government purchases from local manufactures has been projected to reach P2.5 billion by the end of the 2012/13 financial year, as compared to P1.9 billion in 2011/12. The government is also determined to develop other strategies like: Enterprise Graduation Framework, Outward Investment, and the adoption of both the Solicited and the Unsolicited Bidding Processes within the Government Procurement Framework, in order to ensure there is diversity in employed policies, which is what diversification is. In an effort to promote investment and trade the Botswana Investment and Trade Centre (BITC) has set out to create operational synergies with other organizations such as Citizen Entrepreneurial Development Agency and Botswana Tourism Organisation. The Botswana completion authority has also been assigned to fight economic crime and address issues like price fixing market allocation and bid-rigging, therefore this should stabilise local markets and regulate issues of completion which if not addressed, they have the potential to enhance economic instability which is a drawback in terms of attaining national economic objectives. The government has indeed addressed the issue of diversification; especially the progress of the tourism industry has been outstanding, both in improving economic growth, and currency competitiveness not forgetting employment creation.
PROBLEMS OF LOW ECONOMIC GROWTH
The Botswana economy is subject to local, regional and international economic problems that can result in low economic growth. the global economy was forecasted to grow by 3.3% in 2012 down from 3.8% in 2011, growth in both advanced economies and emerging markets fell respectively in 2012 compared to 2011, therefore the projected growth rates for 2013, 2014 and 2015 have been reduced as downside risk in major advanced economies remain significant, e.g. the alleged euro crisis which could affect our exports leading to reduced foreign reserves.
The fall in growth of world trade also meant that our international economic partners face reduced revenues which will affect our growth trade rates as our exports will be heavily affected, moreover the situation can worsen since the advanced economies are expected to slow down to a growth rate of 1.7% compared to 4.4% in 2011. The threat of a possible EURO crisis means that many countries are reducing their fiscal deficits as a precautionary measure, therefore this means that Botswana will be less effective in foreign trade, this calls for caution to the government to insure sustainably in terms of economic growth.
The regional economic growth (SADC) averaged 4.5% while inflation for the region stood at 7.8%, which resulted in overall fiscal deficits of 2.6% of GDP and 36.4% of GDP was public debt. The region is also subject to risks of increasing inflation, rising food and oil prices, depreciating exchange rates during times of constrained foreign exchange reserves. The region remains predominately un-diversified with primary production factors based mainly on mining and agriculture; therefore if Botswana is in region experiencing low economic growth and the region is expected to experience low growth in future, this means that Botswana is subject to the same average loss in GDP triggered by the reduction in total values of goods and services. (Matambo, 2013)
The slow growth recorded in 2011/2012 was dominated by contraction, general government and trade, hotels and restaurants, with the mining sector falling by 12.5%, even if the rest of the economy grew by 11.6%, nearly the rate at which the mining sector fell by, therefore the problem of low economic growth is lack of diversification, meaning that if the mining sector performs poorly Botswana will then face low economic growth. Furthermore delays in completion of mega projects such as morupule B and contraction of additional power supply to national grid, has opportunity cost of forgone output with the potential of bring light to the economy of Botswana, in terms of employment creation and positive effect on national income accounts by increasing national income.
Global financial crisis also has a lasting wonde on the economy of Botswana and it has over the past years contribute to low economic growth, therefore it is important that the government take caution because the global economy is a very uncertain home for many local economies especially for Botswana economy. (dutt, 1990)
CONCLUSION
The budget speech did address issues of unemployment diversification, and problems of economic growth. diversification does create employment, and high rates of employment will leads to improved economic growth interns of additional GDP which will lead to increased government budget for projects destined to creating more employment hence improved economic standards interns of infrastructure which affect the degree at which we attract foreign investors and tourists, the overall picture that reflect in the national income accounts can therefore preach a bright future for the economy of Botswana. The economy is a large pool of dependent economic variables therefore the budget speech should address all these variables with caution as they form part of important national information. For an economy to be stable there should be caution on the parties responsible for every sector in the economy, that is the public sector needs to be derived to perform, national projects need to be well managed, tenders need to be allocated while satisfying national interest like empowering local entrepreneurs, and states assets need to managed well to ensure stability. I have the confidence to say that although some issues where not clearly addressed, the budget speech has managed to addresses issues of unemployment, diversification and problems of low economic growth.

Bibliography dutt, a. k. (1990). growth, distribution and unemployment. notre dame: university of notre dame.
Matambo, H. O. (2013). 2013 BUDGET SPEECH. gaborone: Minister of Finance and Development Planning. symes, v. (1995). unemployment in europe. london: routledge.