Gaolathe recommends formula for successful economic clusters
How do you develop a highly competitive national cluster system? The Gaborone Bonnington South MP, Ndaba Gaolathe, thinks he has an answer: use the simple formula that the British, Chinese, Americans, Italians and Dutch have used to elevate their industries to global excellence.
In effort to diversify the economy, the Botswana government is developing clusters in six key sectors: diamonds, other mining, cattle, tourism, finance and other services. Gaolathe said that while the most traction has been achieved in the diamond cluster (he mentioned the relocation of the Diamond Trading Centre from London as an example), other sectors have not taken off. He proposed that in order for these clusters to be successful, the government should emulate the example of financial centres in London, Hong Kong and New York, the Hollywood film industry, the Silicon Valley high-tech agglomeration, the Italian luxury-leather fashion cluster and the Dutch flower industry.
“Each of these successful clusters has specific foundational elements that help create scale and competitiveness,” he told Sunday Standard against the background of the parliamentary debate on a motion on National Development Plan 11.
The MP identified such elements as a large number of companies; suppliers of specialised inputs like machinery, components and services; downstream connections to channels and customers as well as lateral connections to manufacturers of complementary products or industries related by skills and inputs; governmental and other institutions – including universities, standards authorities, think tanks, and trade associations, to build capacity; and funding mechanisms like commercial banks, venture funds and government support agencies.
“Failure to provide these ingredients could lead to delayed or failed cluster development. It is imperative that the government provides these elements to ensure the fastest possible path to scale in each of the chosen clusters,” Gaolathe said.
In parliament, he said that it is as imperative to provide clear focus of what a sector is supposed to achieve.
“Let us take the diamond sector. You want to be able to say that as a country – given these 20 global diamond players in the world, we want to be, as an objective, in the top 10. We want to be in the top three in the European, Africa and Asian countries as an objective. Once we have achieved that objective in the Diamond Cluster, we need to be able to say, in terms of the specialised suppliers, we want to target these types of suppliers of this category, of these standards. In terms of downstream and lateral connections, you want to be able to say as a country, we do not have a trading platform – like Antwerp, which has four. We want to develop a trading platform but not only a trading platform; we want an electronic one as a country. We want to be able to do things like that. As a government, we want to be able to say that we want a mechanism to certify our diamonds and safeguard our reputation.”
An economic cluster is a dense network of companies and institutions in a certain geographic sphere that is composed of production companies, raw materials suppliers, services providers, companies in related fields, and public institutions such as research, training and standardization institutions. It contains three different types of connections. The first is vertical which is a connection between provider and manufacturer along the production line. The second is horizontal which is a connection between manufacturers of complementary products. The third is institutional which is a connection between companies and public institutions. This is the model that Wall Street, Hollywood and Silicon have successfully implemented.