In 1990, the government published a White Paper that became to be known widely as the Incomes Policy. This was a groundbreaking move by the government of Botswana And the main idea was to promote and liberalise economy and to fuel growth. It was a recognition that while the diamond mining business was generating handsome revenues for the government the broader economy was not, at the same time, creating enough jobs for the people. This was mainly due to the fact that mining is, on the whole, capital intensive. In other words, it is a business where you put in a lot of money, on machinery, as opposed to, manual labour.
And this is why, essentially, they decided to publish this White paper . And one needs to underscore the fact that it was a seminal move. And what it did was to do away with a number of backward commercial practices. One of the key ones that was abandoned , of course was, the practice of allowing competitors, especially in the retail sector , to object to new entrants . Back then, before, your licence for a retail store could be approved , the Town or District were allowed to invite objections from competitors.
The other major development from the 1990 Incomes Policy was the removal of the need for submission of business plans. So previously when you applied for a trade license, you would also be asked to provide a business plan. This did not make sense because the licensing authorities do not offer applicants any financial assistance, so that made no sense. If, for instance, your business ran into trouble it is not as if they would give you a loan.
A business plan makes sense if it is submitted to those who offer financial assistance. So that was also abolished. Although they are still pockets of some government departments, that request for business plans such as the Department of Tourism. Even that is a waste of the entrepreneur’s time and resources.
So as a result of that, The Incomes policy facilitated, Free Entry and Free entry of businesses, and that is what you need in a market economy. And then the other major development was to abolish price controls.
Previously, Government had a whole department whose task was to control prices. And as we all know, that is an extremely difficult thing to do because controlling prices requires what people call economic calculation. There are major factors that influence the price of a good or service. It’s mostly the interaction of demand and supply that would determine the price. And it is almost impossible for someone sitting in a government department to know with precision, the price of any product. But somehow for years, there was a belief that Government officials were imbued with some wisdom to know the price of a product. So thankfully that was also abolished and market forces were instead allowed to determine prices.
However, government persisted with price controls in the petroleum sector. They would set prices at the pump station beyond which a retailer would not be allowed to sell their products. Every now and then we know that prices for fuel change owing to market forces.
The fuel price is has not worked well over r time. The current crisis has just exploded the flaw of the government trying to determine the price of fuel or bus fares . This is due to the fact that the price of fuel, just like that of public transport is determined by the market. Any effort by the state to prescribe the fuel price is not going to work.