South Africa and Botswana

Abstract

Abstract Chapter 4 traces annual fiscal and borrowing policymaking processes in South Africa and Botswana. These countries are helpful initial comparative tests of the theory presented in Chapter 2 because their annual external borrowings defy disciplinary expectations—there is variation on the dependent variable, and not in the manner than each country’s economic characteristics would lead one to expect. Despite junk credit ratings, high interest rates, and left-leaning governments, South Africa has historically used bond markets rather than official creditors when meeting annual external borrowing needs. In contrast, despite investment grade credit ratings, repeated encouragement by investors to issue bonds, and a conservative government, Botswana has almost strictly used official credit when borrowing abroad each year. The chapter illustrates how these different annual borrowings and subsequently divergent debt structures can only be explained by understanding the role of government partisanship in sovereign debt accumulation. South Africa’s left-leaning government uses markets as an exit option from conditional official creditors that would constrain their policies, even though markets are more expensive than official creditors. Meanwhile, Botswana’s conservative government implements policies that official creditors prefer in the first place, meaning Botswana does not seek to avoid conditionality and uses official creditors’ cheaper and longer-term credit without risking immediate political backlash for loss of policy autonomy.