Drought, Dutch disease and controlled transition in Botswana agriculture

Abstract

The rapid expansion in diamond production in Botswana during the 1980s places the country into that category of economies where the growth of other sectors can be examined only with reference to the direct and indirect impact of the ‘booming sector’. Parallels with the impact of North Sea gas exploitation on non‐gas sectors of the Dutch economy in the 1970s, which came to be known as ‘Dutch disease’, are evident. It is shown that, principally through exchange rate movements, the exceptional growth of the mineral sector in Botswana created relative price disadvantages in the agricultural sector and that these were positively correlated to output. To focus on the irregularity of rainfall patterns alone is thus to relegate the importance of economic and political factors in accounting for low agricultural productivity in Botswana. In its role as beneficiary of most of the domestic revenues from mineral exploitation the government has, however, adopted a discriminatory expenditure pattern, favouring livestock development over arable production. Though this can seemingly be justified by reference to numerous scientific reports, it also serves to facilitate the transition by a traditional dominant group of cattle owners to a contemporary capitalist class of commercial farmers and industrialists. Where the interests of this group are not threatened, and where there is advantage to existing wealth holders, then current policy tends to be legitimised by neo‐classical economic thinking.