Services as a Determinant of Botswana’s Economic Sustainability

Joseph Phiri (), Karel Malec, Aubrey Sakala, Seth Nana Kwame Appiah-Kubi, Pavel Činčera, Mansoor Maitah, Zdeňka Gebeltová and Cathy-Austin Otekhile
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Joseph Phiri: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, 16500 Prague, Czech Republic
Karel Malec: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, 16500 Prague, Czech Republic
Aubrey Sakala: Department of Economics, School of Humanities and Social Sciences, Copperbelt University, Jambo Drive, Riverside, Kitwe P.O. Box 21692, Zambia
Pavel Činčera: BEZK, z.s. Letohradská 669/17170 00 Praha 7, 17000 Prague, Czech Republic
Mansoor Maitah: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, 16500 Prague, Czech Republic
Zdeňka Gebeltová: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, 16500 Prague, Czech Republic
Cathy-Austin Otekhile: Department of Management and Marketing, Faculty of Economics and Management, Tomas Bata University, 76001 Zlin, Czech Republic

IJERPH, 2022, vol. 19, issue 22, 1-21

Abstract: In 2015, the services sector contributed about 58 percent to the gross domestic product (GDP) in Sub-Saharan Africa (SSA), which was a significant increase from the 47.6 percent observed in 2005, and a shift from the mining, agriculture, and manufacturing sector. This increase calls to support services as the catalyst for sustained economic development as indicated by the structural transformation and modernization theories. The main objective of this paper was to examine the relationship between and the impact of services on the economic development in Botswana and make recommendations on how Botswana can apply well-directed policies to improve its services sector and diversify its impact on other sectors and GDP, making it less reliant on mining which is vulnerable to price volatilities. The paper applied econometric modeling and results of the Autoregressive-Distributed Lag (ARDL) Bounds test for cointegration indicate that services and other industries services, agriculture, industry, mining, and investment impact GDP over the short and long run. These variables impacted GDP and converged to equilibrium at the speed of 46.89 percent, with a percent change in services in the short and long run impacting GDP by 0.328 and 0.241 percentages, respectively, and the outcome of the Wald test indicated causality from services to GDP growth. The services sectors have contributed over 40 percent to the country’s GDP from 1995 to the present, though the sectors have not gone without challenges with limitations such as limited infrastructure development; poverty and inequality; unemployment of over 20 percent; disease, which has dampened productivity; and lack of proper governance and accountability, which has created a habitat for an increase in cases of corruption in state and private entities. The findings of the study with the lessons learned from other studies with similar findings recommend that the government of Botswana should formulate suitable policies and strategies for services diversification. This is by expanding the market for the sector in areas such as tourism that were impacted by the COVID-19 pandemic, escalating investments by instituting strategies to attract and grow domestic and foreign investments, and improve on management of institutions and resources.

Keywords: services; economic development; GDP; ARDL Bounds test; Wald test; Botswana (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2022
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