Governance in the mineral dependent economy : the case of Botswana

While the governance challenges associated with mineral dependency are well established in the literature, most recent studies are cross-country analyses and not much country-specific empirical analysis has been done on the relationship between mineral dominance and governance, especially in Africa. This paper uses time-series cointegration methodology and a dynamic error-correction model to investigate this relationship in Botswana, a mineral dependent African economy. The results establish that mining dominance in Botswana has indeed had a long-term influence on government effectiveness, such that the effectiveness of governance systems has in part been predicated on strong mining sector receipts. The error correction model shows that the influence from mineral dependency feeds back into current changes in government effectiveness on an annual basis as the system adjusts towards the long-run level of government effectiveness. In addition, scaled up improvements in the control of corruption and in citizen participation (represented by voice and accountability data) both have a significant and positive impact, generating larger improvements in the current year’s government effectiveness.