Year

2015

Degree Name

Doctor of Philosophy

Department

School of Accounting, Economics and Finance

Abstract

Botswana is a natural resource dependent developing country in Sub-Saharan Africa (SSA) constantly in search of ways to diversify its economy so as to avoid economic stagnation. This is important as the economy’s mainstay, diamond mining, is expected to decline significantly in the next 15 years, with adverse implications for the country’s development prospects. A diversified economic base is likely to generate sustainable growth beyond diamond depletion. Economic diversification is also essential in generating broad-based, inclusive growth. Despite being able to sustain positive rates of economic growth over the past five decades, a significant proportion of Botswana’s population has not benefitted from this growth. An increasingly diversifying economy is likely to generate more productive employment opportunities for the population. This may in turn promote broad based, inclusive growth. The 2008 global financial crisis, which resulted in significant loss of national income, provided further evidence of the importance of economic diversification for Botswana. A diversified economy is essential to mitigating the impact of external shocks and commodity price fluctuations on the economy.

Entrepreneurial activity, especially the kind revolving around Small and Medium Enterprises (SMEs), has been identified by the Botswana Government as one avenue through which economic diversification can be pursued. This study investigates ways in which the Botswana Government can effectively promote entrepreneurial activity. The study relies on existing literature, specifically on policies likely to promote entrepreneurial activity in different contexts. It also relies on empirical evidence from analyses of technical efficiency of Botswana’s SMEs. Technical inefficiency of SMEs is likely to impact on feasibility and profitability of engaging in entrepreneurial activity, with the likelihood that promoting entrepreneurial activity may be difficult to achieve. Improving technical efficiency of these production units is likely to yield economic gains.

A review of the literature revealed that in designing policies to effectively promote entrepreneurial activity, policy makers must take into cognisance a country’s stage of development as challenges faced by entrepreneurs differ according to stages of development. At Botswana’s present stage of development, well-developed public and private institutions, quality infrastructure, stable macroeconomic environment, healthy and educated workforce, higher education and training, goods market efficiency, labour market efficiency, financial market sophistication, technological readiness, and market size are fundamental. Developing entrepreneurship framework conditions is also paramount. These include availability and accessibility of finance for SMEs, the extent to which public policy gives support to entrepreneurship, the extent to which national research and development leads to new commercial opportunities and is available to SMEs, presence of property rights, entry regulations, presence of programs that directly assist SMEs, the extent to which entrepreneurship education is incorporated in the education system, as well as the extent to which social and cultural norms encourage entrepreneurship.

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