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Yaw's avatar

Great post, I had no idea that Indian outsourcing was increasing. I literally would have never guessed that. I guess we can't easily predict what AI will do the economy.

Also, just to add on Botswana. Sadly, Botswana's President Boko is doubling down on natural diamonds. I think this is a tragic and foolish mistake. I spoke more about it here a year ago:

https://yawboadu.substack.com/p/guns-germs-and-cobalt-q-and-a-9-insights

But on to manufacturing, Botswana has tried so many forms of manufacturing and has failed so many times. Botswana is a highly unequal economy that went straight from beef ranching during colonial times to diamond mining and services after colonialism.

Let's just start with its labor market. Diamond revenue funded high public sector wages, which set as a de facto "reservation wage" for young Batswana. Young Batswana prefer waiting for government jobs (sometimes over a year) and rely on family safety nets rather than take a much lower paying private manufacturing job, contributing to Botswana's high youth unemployment, There's also deep skill mismatches. Botswana spends a lot on education and has TONS OF EDUCATED UNEMPLOYED PEOPLE, At the same time, Botswanan manufacturers complain about shortages of practical vocational and technical skills. This World Bank employer survey found that plant operators and skilled tradespeople can't recruit talent, and university educated Botswanans don't want those jobs.

https://documents1.worldbank.org/curated/en/857621468012924519/pdf/930480WP0P11940C00Botswana0Note03wc.pdf

But beyond its labor sector. I'll give you three different industries that show Botswana's manufacturing issues.

Textiles: Botswana tried to take advantage of America's Africa Growth and Opportunity (AGOA) act to build an export-oriented clothing industry. But having duty-free access to selling T-shirts doesn't magically make Botswana competitive at actually producing clothes.

The easiest way to understand Botswana's problem is to look at the textile supply chain:

cotton/synthetic fiber --> yarn --> fabric --> dyeing/finishing --> cutting --> sewing --> buttons/zippers/labels --> packaging --> shipping ---> someone buys

Botswana basically entered at the visible, tail end of the chain: cutting/sewing the garments. It didn't develop much of the upstream ecosystem supplying the factories. That isn't fatal by itself, plenty of countries build companies at that step, but it's the stage where you compete on labor cost & almost nothing else.

When an American buyer tells a factory "I need 250K polo shirts, three colors, five sizes, delivered in 8 weeks!", the Chinese or Vietnamese cluster will have the fabric mill, dye house, zipper/button supplier, packaging company, machine repair firms, and freight forwarders within the same industrial region. They'll probably deliver the shirts ahead of schedule.

The Botswana garment factory sadly won't even execute well. He'll order the fabric abroad, import the fabric via South Africa (Durban port), import trims and accessories, transport everything hundreds of kilometers inland via truck from Durban South Africa to Botswana, sew the shirts, truck back to Durban, South Africa and then ship to the US. As you can imagine, every stage creates cost, inventory requirements to be financed, and another opportunity for delay. And for the apparel business, speed matters almost as much as wages. Botswana literally couldn't compete. Botswana's dependence on Durban also caused unpredictable delays. The Durban port is subpar container port by global standards.

Also, even if you are thinking "ok Botswana should make its own fabric!". There's another problem. Fabric production needs spinning/weaving/knitting, and fabric needs to be bleached, washed, dyed and finished. Dying and washing are hard for Botswana because of its water shortages (the country is semi-arid), and synthetic fiber production is even more water intensive.

If we compare Botswana to Lesotho (another landlocked, another country in the SACU, another country that routes goods via Durban, another country with no domestic cotton, another country that imports fabric and trims from Asia), then Lesotho executed better DOING EXACTLY the cut-and-sew work Botswana tried to do.

A) Lesotho has abundant water, it is literally the water tower of South Africa. Lesotho has the denim mill in 2004 from Taiwan's Formosa Textiles. Botswana can't do the dying and washing step because it doesn't have Lesotho's water.

B) Its wages are much lower ($1500 USD rather than Botswana's $7500 USD)

Car Assembly:

In the 1990s, Botswana set up factories to make Hyundai vehicles in their capital, backed by the Botswanan Development Corporation. Cars were initially their second largest export after diamonds in the 1990s, allowing itself to sell these cars mainly to South Africa duty-free. But then Nelson Mandela's administration responded with import quotas and tax incentives for cars assembled in South Africa (the Motor Industry Development Programme). Only the first 1K cars per month could enter South Africa under low tariffs, but after 1K it was repportedly slapped with a 100% tariff. The Botswana factories needed to sell at least 2K cars to be successful. As a result, it was uneconomical to set up a plant or to continue to sell in Botswana. The car plant in Botswana died by 2000. The Botswana president at the time, Masire, said that South Africa outright sabotaged Botswana's industrialization.

https://journals.ub.bw/index.php/bnr/article/view/2000/1271

https://www.tips.org.za/files/botswana_paper.pdf

Glass Manufacturing:

Botswana made a glass plant, and the Botswana Development Corporation (BDC) partnered with the Chinese Fengyue Glass manufacturing company. The goal was to use Botswana's local silicia sand deposits to build a large float glass manufacturing facility in Palapye. The government's investment arm, the Botswana Development Corporation spent 500M pula on the venture starting in 2007. The plant was made in 2010 and the project went bankrupt by 2014, and sold off for ~50M pula.

Why did it fail? BDC just chose a terrible technical partner. Apparently Fengyue Glass was a shell company with no experience in glass manufacturing. The cost wasn't even supposed to be 500M Pula, it was supposed to be 309M! So a massive cost overrun.

https://guardiansun.co.bw/News/ghost-of-doomed-palapye-glass-project-haunts-govt

https://yourbotswana.com/government-considers-resuscitating-failed-fengyue-glass-project/

https://www.glassonline.com/botswana-glass-project-on-course/

.

I could go more in to Botswana's failures to process copper, nickel and iron, Botswana's issues with leather production, or the failures in commercial agro-processing, but I don't want to sound too doomer. On the bright side, Botswana has more tourism.

Mike Huben's avatar

While the mega wave may be receding, what it has left behind is a new generation that has been taught it is normal to be hateful and hurtful. Not to mention validation of hatefulness and hurtfulness to older generations whose voices had been suppressed by growing common decency. Do not expect the Republican Party to abandon these gains. Likewise the rejection of science and expertise. Without outright suppression (as in post-war Germany), these ills will last for more generations.

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