The Mineral Dependent Economic Structure and Incentives Fac - PowerPoint Presentation

Slide1

The Mineral Dependent Economic Structure and Incentives Faced by Government

Conference: Are Diamonds Forever? Prospects for a Sustainable Development Model for Botswana27-28 August, 2014Ita Mannathoko Slide2
2

Mineral Dependent Structure Distorts the Performance Incentive Government Faces

Source: Adapted from Mick Moore (2007), Institute of Development StudiesSlide3
Distorted Incentives Affect Public Sector Performance Over Time: e.g. 1Slide4
Distorted Incentives Affect Public Sector Performance Over Time e.g. 2Slide5
Main Corrective Actions

Correct incentives faced by government: the fortunes (welfare) of government officials and politicians should move in tandem with those of the Batswana they serve

Correct government’s organizational effort so it is directed at non-mining business sector growth and developmentStrengthen & safeguard accountability systemsStrengthen management and operational systemsSlide6
Main Corrective Actions

A

. Correct incentives faced by government: the fortunes (welfare) of government officials and politicians should move in tandem with those of the Batswana they serveAn adverse economic climate for people in the non-mining sector should correspond to an adverse economic climate for public servantsLosses and waste of public resources impact Batswana negatively => should impact the responsible officials and ministers in public agencies, parastatals, likewiseNon-performance and poor service delivery by the public sector impacts Batswana negatively

=>

should impact the responsible managers and officials likewise

Loopholes and corruption impact Batswana negatively

=>

should impact the responsible

managers, officials, politicians likewiseSlide7
Main Corrective Actions

B.

Correct government’s organizational effort so it is directed at non-mining business sector growth and developmentMinistry and Parastatal efforts should focus as much on improving the welfare of Batswana by growing the domestic business sector as on attracting foreign investors Develop firm capabilities and more productsEnsure microeconomic policies target and serve local businesses - not just foreign investorsEnsure macroeconomic policies are appropriate to non-mining sector growth (avoid Dutch Disease tendencies)Slide8
Main Corrective Actions

C

. Strengthen & safeguard accountability systemsuse technical team decisions for high-cost activities and remove discretionary or veto powers of senior officials and ministersRe-instate the appropriate checks and balancesEliminate personal and institutional conflicts of interest and take corrective action to remove such conflicts when they ariseD. Strengthen management and operational systems

Ensure strong managers and strong program and project management systems

Build systems & know-how for private sector development

Do not allow complacency to weaken or remove systems that work or remove checks and balances

Safeguard and perpetuate institutional memorySlide9
Importance of the Right Approach

Adverse incentives arising from an economic structure that works against diversification have to be corrected;

incentives don’t motivate officials to serve Batswana in private sectorDiversification requires that we produce more and different non-mining products; Products require capabilitiesDiversified economies have more capabilities and so are able to make more products (Hausmann

)

Botswana wants to graduate from the “poor economy” model that is dependent on mining because of a lack of capabilities in its people;

to

The model of a middle income economy with many capabilities enabling it to produce different and more complex products;

However..

Botswana

has

not

developed

the requisite capabilities (along value chains) to match private sector expansion

needsSlide10
Thank You