Botswana has been able to build a remarkable growth record on its diamond endowment, without falling victim to the resource curse (How did Botswana avoid the "resource curse"?, Ben Muse Oct 17, 2006).
But yet, as John Holm posts at the Center for Strategic and International Studies (CSIS) Africa Forum, everything's not hunky-dory (Diamonds and Distorted Development in Botswana, Jan 8, 2007):
Yet there is another, more pessimistic side to the story of Botswana’s development. To put the matter simply, diamonds have produced distorted development. Most obvious has been the limited economic spin-off in terms of employment. Debswana, the diamond mining corporation owned jointly by the government and DeBeers, employs about 6,500 people, or just 2 percent of the workforce. To be sure, there is significant secondary employment generated by the company’s contractors and consumption by Debswana employees. The bottom line, however, is that after decades of rapid GDP growth, about 40 percent of the working age population is unemployed. Apart from the diamond industry, no other economic sector has experienced much growth. In the meantime, the educational system, well funded by diamond income, annually churns out large numbers of students who cannot find jobs, even when they have a university education. Top planners in the education have concluded that government must restructure the system to prepare youth for export to the global economy, since few jobs will be available inside the country in the foreseeable future!
Another distortion has to do with the size of government. Diamond sales have fueled rapid expansion of government employment. The result is that the public sector now employs almost 45 percent of the workforce (295,000), if parastatal corporations are included. The national government alone employs one-third of the total workforce. The result is the emergence of a bureaucratic behemoth with a capacity to penetrate and regulate many aspects of society...
Still another distortion is that the government is inclined to use its massive income to subsidize major sectors of economy and society. Other African states have privatized sizeable sections of their governments over the last several decades. In contrast, the Botswana government has been moving at a snail’s pace. Regular money losers like Air Botswana and the copper mines continue to limp along with subsidies from the government....
A looming political danger to government is the power of the diamond trade unions. If the unions should launch a sustained strike (Debswana holds a considerable diamond reserve, so government could survive a short strike), the government could be brought to its knees. As a result labor laws serve to restrict union activity severely, particularly in the diamond sector....
I learned about Holm's post from a Lars Smith's post at Conservation Finance: Diamonds and the resource curse (Jan 12, 2007)
re "hunky-dory" see also : World Wide Words. Michael Quinion writes on international English from a British viewpoint and Answers.com.
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