Working Paper
Economic Proximity and Technology Flows

South Africa’s Influence and the Role of Technological Interaction in Botswana’s Diversification Effort

In less than a decade after the end of the apartheid, South Africa has intensified its economic ties with its African neighbours to become one of the top-ten investors and trading partners of many African countries, displacing companies from the former colonial powers in Europe. Among such South Africa’s closest trade partners, Botswana has enjoyed one of the highest growth rates in the world for several decades, thanks to its rich mineral reserves, but its diamonds-dominated export structure has barely changed over this growth period. In a national endeavour to reduce its dependence on diamond exports, Botswana recognizes the importance of adopting foreign technologies and deploys sustained efforts to move to high value-added activities in other industries. Since the successful adoption of new technologies requires active technological learning, this paper takes the national innovation systems (NIS) approach and uses industry level panel data to analyse the role played by the proximity and interactions between the economies of South Africa and Botswana in the process of technological learning within Botswana’s manufacturing sector. Our analysis of the learning attributes based on three categories of technology flows reveals that Botswana’s technological learning process has been an increasing function of the extent of trade and investment linkages to the SA economy and the intensity of their interactions.