Mr Michael ODowd, Chairman of the Free Market Foundation, presented the Annual Free Market Award to Sir Ketumile Masire, the recently retired, long-serving President of the Republic of Botswana in Cape Town on 4 April 2001. In presenting the award ODowd said:
Sir Ketumile became President of Botswana in 1980 and retired in 1998, and that means he was President for 18 of the Republics 35 years of existence.
The award honours, of course, the remarkable, indeed extraordinary, achievements of Botswana, which I shall describe in more detail in a moment. To this achievement, Sir Ketumile, as President, and before that, as vice-President made an enormous personal contribution, but it was nevertheless the achievements of the whole country and all its people; and so today we are honouring Sir Ketumile Masire in two capacities. We are honouring him personally for his personal contribution, but we are also treating him as the symbolic representative of the Botswana people as a whole, and through him we are honouring them all.
Some people may think it strange that a free market organisation should be honouring somebody for his acts as the head of a government, but this is not so. It is true, unfortunately, that free market organisations spend a lot of time criticising the actions of governments but they are not opposed to governments as such. On the contrary, we fully realise that free markets can only exist under the aegis of a good government. Many of the greatest heroes of the free market have been statesmen like Sir Robert Peel in England in the 19th century and Lee Kwan Yu in Singapore in the twentieth, and credit for the achievements of the successful economies of the world is quite rightly given primarily to their governments.
What then has Botswana done which is so remarkable? In the 35 years since independence, Botswana has an impeccable record of democracy, as good as anything in the world, including the first world. Such a record is extremely rare, not only in Africa, but equally in Asia, and for that matter, in South America.
Secondly, over 35 years, Botswana has had the highest rate of economic growth in Africa, and has been one of the high growth economies in the world, in the same league as such admired economies as Singapore. It has come from being one of the poorest countries in the world, to being one of the richest in Africa, in the same league with the Republic of South Africa (which took much longer to get there hindered as it was by apartheid). If Botswana can sustain something like the same rate of growth for another 30 years, it will by then, in the lifetime of many who are already mature adults, be a fully-fledged member of the first world. Botswana has proved that there is nothing about Africa, neither in the character of its people, nor in its traditions, nor in its history, that closes to them the prospect of joining the first world.
Finally, and in our opinion, this is the case of the second achievement, and a major contributor to the first, Botswana has, consistently over 35 years, maintained a basically free market based economy. The standard international comparisons show Botswana as being the freest economy on the continent of Africa. For many years, it towered above all the others. Recently, its lead has been narrowed not because it has gone backwards, but because many other countries in Africa (including, of course, our Republic of South Africa) have made big improvements, but still at todays date, it is the freest economy in Africa and the fastest growing, and one of the most democratic.
Those who wish to disparage Botswanas achievement will say that it was merely the result of an economic windfall the discovery of diamonds. There was such a windfall, but recent history shows that it is extremely rare for a mineral windfall to become the base on which sustained economic growth is built. In the second half of the twentieth century it was conspicuously resource-poor countries like Japan, South Korea, Taiwan, Hong Kong and Singapore that did well economically. So much was this so that some economists have seriously suggested that mineral wealth is a curse as it certainly can be. It would seem, from the historical record, that it is at least as difficult to administer an economic windfall successfully as to bring on a resources poor economy. Both things are possible both have been done, but what Botswana did successfully seems to be the more difficult of the two.
What then did Botswana do right? In the first place, they acknowledged that in order to develop their mineral resources they needed international expertise. At a time when other countries (like Zambia) were spending their own desperately scarce resources to drive foreign capital out of their countries, Botswana brought it in. They recognised that
De Beers achievement in stabilising their diamond prices was vital to their interests as diamond producers and they whole-heartedly co-operated with it. They made contracts with foreign investors which stuck.
Then they did not use the revenue, which they received from the mines either to build palaces, or to buy armaments, nor did they channel it into Swiss bank accounts (Botswana has been identified as the least corrupt country in Africa). They used it first to create an excellent but not extravagant education and health system. Then they used it to keep the rest of their taxes low. Low taxes have been a hallmark of most successful economies.
Then they did not allow the creation of a hot house of protected and subsidised industries, paying wages out of all proportion to what the bulk of the population can hope to earn, thereby creating a vested interest which would prevent the development of internationally competitive industries. This is perhaps the cul-de-sac into which countries that experience a mineralbased windfall most usually go. It leads to an economy entirely dependent on the primary producer, with a parasitic secondary sector. When the mineral producer comes to the end of its life, as all mineral producers, in their nature, must do, the secondary sector collapses as well.
In Botswana, on the contrary, we see at the present time, a much-improved rate of growth in the manufacturing sector as the mining sector begins to decline. One reason for this is that while Botswana has always (since independence), had proper free and democratic trade unions, the unions have never been allowed to exercise undue or disproportionate influence on government policy, as has happened in many places, not only in Africa, but in Europe as well, with dire consequences for economic growth.
Most important of all, as I have already said, throughout the period, Botswana maintained all the institutions and practices which constitute a free market economy. It consistently protected and respected property rights and nationalised nothing. This is crucial. It upheld a proper system of law under which contracts are dependably enforceable. It refrained from interfering with the day to day operation of the economy by means of controls and it refrained from setting up grandiose state enterprises as the old South African government did. This has been the road to success followed by every successful economy in the Twentieth Century, and it was the road followed by Botswana.
So Botswana got it right. Botswana is Africas success story, and if we are serious about an African Renaissance, African success stories are what we have to find, to acknowledge and honour.
I have the greatest pleasure and I am deeply honoured to be able to present to Sir Ketumile Masire both in his personal capacity and regarding him for the moment as the symbolic representative of the Botswana feat the Free Market Award 2000.
Publish date: 11 April 2001
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.