Diamonds Are Not Forever

10/04/2009 11:02 am ET | Updated May 25, 2011

I spent the third week of my Southern African tour in Namibia and Botswana, two of the middle-income countries of this generally speaking low-income area of the world. Namibia and Botswana are sparsely populated vast territories of about the size of Texas and a population of under two million.

Namibia has a per-capita income of $7,586 (PPP US $ as of 2007) whereas Botswana's surpasses the $12,000 mark. Both societies are extremely unequal. With a Gini index of 0.74 Namibia is the most unequal society in the world. It really is the equivalent of two societies overlapped, a high-income and a low-income and extreme poor. Botswana's inequality keeps about a third of the population under the $1 a day metric, a majority of which lives in rural areas in the best governed Subsaharan African nation.

Prior to its independence, Namibia was known as South West Africa (SWA). In the aftermath of World War I, the League of Nations decided that the former German colony should be administered by South Africa. After World War II South Africa expanded its apartheid to SWA.

Namibia ranks right underneath Botswana in the Human Development Index, at position 125 out of 177 countries. It is however one of the richest countries in Subsaharan Africa in terms of per-capita income. Only Equatorial Guinea, South Africa, Botswana and Mauritius have a higher per-capita income in Subsaharan Africa. The country faces the same challenges than Botswana, with a relatively small population of two million and an HIV/AIDS contagion rate that surpasses the 20 percent mark. Namibia ranks underneath Madagascar on economic freedom in position sixth out of forty countries. Namibia is the fifth best performer in Transparency right below Botswana, South Africa, Cape Verde and Mauritius. In terms of governance it ranks 12 out of 48 countries in the 2005 Ibrahim Index of African Governance.

The South West Africa People's Organisation (SWAPO) emerged in 1960 as a liberation movement against South Africa's apartheid. SWAPO fought apartheid's South Africa in an ongoing war that was settled through a United Nations resolution in 1988. Independence came in 1990. SWAPO became the leading political force and has maintained its supremacy ever since. Tommy Nambahu is a Member of Parliament with SWAPO. I met Nambahu on Friday 17 April 2009 in Windhoek (Namibia). From 1979 to 1981 Nambahu fought the liberation war against South Africa and subsequently spent ten years in Cuba. In 2004 SWAPO accomplished a major shift when former President Sam Nujoma stepped down and was substituted by Hifikepunye Pohamba, a former Minister of Lands. Nujoma however maintained SWAPO's leadership role.

Fanuel Tjingaete is the Director of Namibia's Economic Policy Research Unit (NEPRU), the prominent independent economic think-tank in the country. I met Fanuel on Tuesday 21 July 2009. Fanuel is disillusioned because the incremental progress we are used to will only change the face of extreme poverty and inequality on the long run.

A British protectorate until 1966, the country changed its name from Bechuanaland to Botswana once it secured independence from Britain. Only two years after independence the then extreme poor nation discovered it sit on a mountain of diamonds, its national natural endowment ever since.

Botswana is an example of how to wisely administer a natural resource endowment. The country's current challenges include one of the highest HIV/AIDS contagion rates in the continent, surpassing the 20 percent mark, an incidence that is dragging economic development and severely undermining the country's future economic prospects. Botswana should remove obstacles to trade and investment, prioritizing industrial development and improving labour productivity (Chipeta et al, 2007).

Average growth in Botswana has remained above the 7 percent mark since independence, a phenomenal accomplishment that only finds equals among the emerging Asian tigers. Botswana is the only A-rated country in Africa according to Standard and Poor's. The country stands at a low 124 position in the Human Development Index of the United Nations, out of a total of 177 nations ranked in 2005. Two languages are spoken in the country (Setswana and English), which some academics associate to a lower likelihood of armed conflict and civil war, so frequent in the African continent and so detrimental for a country's stability and prosperity.

Nonofo Molefhi is Minister of Lands and Housing of Botswana. I met Nonofo at the Ministry of Lands and Housing in Gaborone (Botswana) on Friday 24 July 2009. Nonofo is well aware that nothing lasts forever, not even diamonds. The diamond industry has allowed Botswana to concatenate four decades of strong economic growth. During the 2008 economic crisis the price of diamonds sunk, severely undermining the ability of the Botswanan Government to finance its public expenditure though diamond revenue. In the first half of 2009 Botswana borrowed $1.5 billion from the African Development to cover a 14 percent deficit in its annual budget. Diversifying the revenue mix to other sectors such as tourism away from the diamond industry is a strategy that could work for Subsaharan Africa's best managed nation.

Diamonds are not forever. Incremental change will not change the face of extreme poverty and inequality. We need excremental change. We need to move away from diamonds to more productive, labor-intensive sectors such as agriculture and tourism We need to embrace the value of consensus and start a new era of supranational cooperation.

Diamonds are not forever, unfortunately.