THE POTENTIAL BENEFITS OF LIVESTOCK PRODUCTIVITY INCREASE TO BOTSWANA ECONOMY- The Recursive Dynamic Computable General Equilibrium Modelling Application
University Of Bostwana
To determine the the potential impact of livestock productivity increase on Botswana economic growth; poverty and income inequality reduction, food security and; employment, the study utilized the Thurlow (2004) South African recursive dynamic CGE model. The model is an extension of the static standard CGE model developed by Lofgren et al., (2002) under the auspices of the International Food Policy Research Institute (IFPRI). The model was parameterized and initialized to the modified version of the 2011 Botswana economy EcoMod SAM with behavioural parameters and information set on exogenous variables and parameters of the dynamic sub-model. It was then solved in GAMS as a mixed complimentary problem (MCP) with PATH solver. The solution results were then exported from GAMS to excel spreadsheet for formal presentation of selected variables relevant to the study objectives. Three of simulations were undertaken, namely; the baseline scenario (referred to as the reference or business-as-usual (BAU) scenario); the counterfactual scenario and; the sensitivity tests simulations. Given an average Botswana economy growth rate of 4.3 percent, the baseline scenario gave an average annual increase of 4.37 percent in total GDP showing a close similitude of the model real GDP growth rates. This indicates that the model generates the BAU scenario that realistically approximates the evolution of the Botswana economy during eight-year time horizon, 2011-2019. The counterfactual results were analysed by a paired comparison of the values of selected indicators for the reference scenario. A 5 percent increase in Hick-neutral technological progress in livestock sector translates to a 0.40 percent rise in in the aggregate welfare of the Botswana economy. The livestock productivity increase is therefore capable of increasing the level of economic activity. Private consumption- used synonymously to household final consumption expenditure, increased by 0.36 percent demonstrating the households’ participation and gain from livestock GDP growth hence increase in food security and poverty reduction. Complimentary to 0.76 percent increase in investment, this increase in consumption due to price reductions improved food security (food availability and accessibility to the low income households with high food consumption shares) and their overall welfare. Moreover, the 5 percent increase in the livestock productivity caused an employment increase in all the labour skill types. The unskilled labour type skill increased the most and consequently leading increase in rural households’ income (as is agriculture specific an most of the rural people in Botswana generally have received no special training and has few specific skills, thus unskilled). The sensitivity analyses results showed both the quantitative and the qualitative results to be generally robust. These findings recommends that improve-livestock policy is a plausible and appealing choice for policy makers in promoting the country’s economic growth, reducing poverty, income inequality and rural unemployment. It is therefore suggested that, in implementing the improve-livestock policy, there is need to capture in the specification of the livestock stockflow linkages and recognize the livestock capital as a factor of production in production sectors. This is to trace the livestock production system external shocks to the economic flows and capture livestock capital vital role in other economic sectors particularly other agriculture and manufacturing.