“Bosa iphuteng metlhala bo tsosa di letseng.” Fail to know your relatives and one day it will turn on you. I found this proverb very interesting because it is a contrast to voguish viewpoints being conversed in and across the business spectrum. Viewpoints that at times elude the basic construct of business in general.
One such viewpoint I found ‘intriguing’ was one which states: “For Botswana to reach the status of a high-income economy, there is need for the country to focus more on broadening its export base.” How I cringed before this statement! How do we not appreciate the science behind the basic concepts of business? How do we not acknowledge the constructs of international relations and sovereignty?
I must admit that I am not one to comment on international relations. My understanding is limited to observations made and the business cycle of an economy from a general sense. And of course, history kind of effaces the weight bearings off this statement. For instance, China’s economy is vastly built on their export economy. The world’s second largest economy has seen international investors tap into the nation’s ideology of reallocation of resources, i.e. decentralisation, as economic reformation.
China’s decentralisation of the economy led to the rise of private firms which had been historically known to pursue more productive activities than the centrally controlled SOEs and were more market-oriented and more efficient. Additionally, a greater share of the economy, mainly the export sector, was exposed to competitive forces. Local and provincial governments were allowed to establish and operate various enterprises without interference from the central government. In addition, FDI in China brought with it new technology and processes that boosted efficiency.
China is not the only nation that has tried to prioritise exports to reach a high-income status. Several developing economies, mostly in Asia and Latin America, experienced rapid economic development and growth during the 1960s and 1970s by implementing some of the same policies that China has utilised to-date to develop its economy, such as measures to boost exports and to promote and protect certain industries. However, at some point in their development, some of these countries began to experience economic stagnation over a sustained time, a phenomenon described by economists as the middle-income trap.
Currently, China’s export economy is slumping, dropping from 14.7 percent growth, and exports are hitting the slowest growth. These figures reflect the state of China’s trade sector, which accounts for about one-third of the country’s GDP. This has investors pulling out of the economy, which has led to a decline in their saving and is now affecting its large property market, making the domestic market’s confidence weak and people feel unsure about the overall economic situation.
When you think about it rustically, “the Challenge is not accessing a broad export base, the challenge is about comprehending the psyche in sustaining that broader export base by understanding the niche, and in that way, establishing a positive correlation between supply and demand”.
The focus should be building and understanding demand conditions in the domestic market to act as the primary driver of growth, innovation and quality improvement. The idea is that a strong domestic market stimulates the firm from being a startup to a slightly expanded and bigger organisation.
As an illustration, we can take the case of Germany which has some of the world’s premier automobile companies. German auto companies have dominated the world when it comes to the high-performance segment of the world automobile industry. This can be linked to a domestic market which has traditionally demanded a high level of engineering performance.
How do we link centralisation of economic effort on the domestic market and export development? Since the domestic market is more direct and impacts earlier than the export market, the stimulus provided is higher in terms of demanding innovation and efficiency, which then endows for relevant factor conditions such as infrastructure, labour force and natural resources.
In conclusion, a nation cannot inherit but instead creates its most important factors of production and markets. Therefore, we cannot outsource the onus for a high-income economy to outside markets without developing our domestic market, thus bespeaking our resources to our economic make-up. Therefore, “a re iphutheng metlhala” before “ re tsosa diwelang” (subjection to global economic shocks).
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