Economy of Botswana

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Economy of Botswana

Masa Square Central Business District

Curren Pula (BWP, P)

cy

Fiscal 21 April - 32 March

year

Trade AU, AfCFTA (signed), SADC, SACU, WTO
organis
ations

Countr Developing/Emerging
[1]

y group Upper-middle income economy[2]

Statistics

Populat  2,397,240 (2021)[3]

ion

GDP  $16.90 billion (nominal, 2019 est.)[4]

 $43.907 billion (PPP, 2019 est.)[5]

GDP 114th (nominal, 2019)

rank 113th (PPP, 2019)

GDP 14.5% (2018) 3.0% (2019e)
growth
 −5.4% (2020e) 6.8% (2021e)[5]
GDP  $7,859 (nominal, 2019 est.)[4]
per
 $18,558 (PPP, 2019 est.)[4]
capita
GDP 78th (nominal, 2019)
per
75th (PPP, 2018)
capita
rank
GDP by agriculture: 1.8%
sector
industry: 27.5%

services: 70.6%

(2017 est.)[6]
Inflatio 2.1% (2020 est.)[5]
n (CPI)
Populat 16.3% (2016)[7]
ion
60.4% on less than $5.50/day (2015)[8]
below p
overty
line
Gini 53.3 high (2015)[9]
coefficie
nt
Human  0.693 medium (2021)[10] (117th)
Develop
N/A IHDI (2021)[11]
ment
Index
Labour  1,107,235 (2019)[12]
force
55.7% employment rate (2013)[13]

Unempl 17.7% (2017)[7]

oyment
Main diamonds, copper, nickel, salt, soda ash, potash, coal, iron
industri
ore, silver; beef processing; textiles
es
Ease-of-  87th (easy, 2020)[14]
doing-
business
rank

External

Exports  $5.934 billion (2017 est.) [6]

Export diamonds, copper, nickel, soda ash, beef, textiles

goods
Main  Belgium 20.3%
export
 India 12.6%
partner
s  United Arab Emirates 12.4%

 South Africa 11.9%

 Singapore 8.7%

 Israel 7%

 Hong Kong 4.1%

 Namibia 4.1%

(2017)[6]

Imports  $5.005 billion (2017 est.)[6]

Import foodstuffs, machinery, electrical goods, transport equipment, textiles, fuel an
goods
d petroleum products, wood and paper products, metal and metal products
Main  South Africa 66.1%
import
 Canada 8.3%
partner
s  Israel 5.3%

(2017)[6]
FDI sto  $5.319 billion (31 December 2017 est.)[6]
ck
 Abroad: $1.973 billion (31 December 2017 est.)[6]
Current  $2.146 billion (2017 est.)[6]
account
Gross e  $2.187 billion (31 December 2017 est.)[6]
xternal
debt

Public finances
Public  21.7% of GDP (2017 est.)[6][15]
debt
Budget −1% (of GDP) (2017 est.)[6]
balance

Revenu 5.305 billion (2017 est.)[6]

es

Expense 5.478 billion (2017 est.)[6]

Econom $73 million (1995)

ic aid
Credit Standard & Poor's:[16]
rating
A (Domestic)

A- (Foreign)
 A+ (T&C Assessment)
Foreign  $7.491 billion (31 December 2017 est.)[6]
reserves
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

The economy of Botswana is currently one of the world's fastest growing economies,

[17]
 averaging about 5% per annum over the past decade. [17] Growth in private sector
employment averaged about 10% per annum during the first 30 years of the country's
independence. After a period of stagnation at the turn of the 21st century, Botswana's
economy registered strong levels of growth, with GDP growth exceeding 6-7% targets.
Botswana has been praised by the African Development Bank for sustaining one of the
world's longest economic booms.[18] Economic growth since the late 1960s has been on
par with some of Asia's largest economies. The government has consistently
maintained budget surpluses and has extensive foreign-exchange reserves.[19]
Botswana's impressive economic record compared to some of its neighbors has been
built on a foundation of diamond mining, prudent fiscal policies, and a cautious foreign
policy.[20] Botswana's economy is mostly dependent on diamond mining. Diamond mining
contributes to 50% of the government revenue mainly through its 50:50 joint venture
with De Beers in the Debswana Diamond Company.[21] It is rated as the least corrupt
country in Africa in the Corruption Perceptions Index by international corruption
watchdog Transparency International. It has the fourth highest gross national income
per capita in purchasing power in Africa and above the world average.[22]
Trade unions represent a minority of workers in the Botswana economy. In general they
are loosely organised "in-house" unions, although the Botswana Federation of Trade
Unions (BFTU) is consolidating its role as the sole national trade union centre in the
country.[23][24]
Although Botswana's economy is considered a model for countries in the region, its
heavy dependence on mining and its high rate of HIV/AIDS infection (one in every three
adults is seropositive) and unemployment could threaten its success in the future.

Contents

 1History
 2Trade
 3Mining
 4Tourism
 5Agriculture
 6Manufacturing
 7Science and technology
 8Private sector development and foreign investment
 9Financial sector
 10Main indicators
 11See also
 12References
 13External links

History[edit]

Man on donkey herding goats in a dry river bed

GDP per capita (current), compared to neighbouring countries (world average = 100)

Agriculture still provides a livelihood for 70% of the rural population but supplies only
about 50% of food needs and accounted for only 1.8% of GDP as of 2016. [25]
[26]
 Subsistence farming and cattle raising predominate.[26] The sector is plagued by erratic
rainfall and poor soils.[26] Diamond mining and tourism are also important to the
economy.[26] Substantial mineral deposits were found in the 1970s and the mining sector
grew from 25% of GDP in 1980 to 38% in 1998. [26] Unemployment officially stood at 21%
as of 2000 but unofficial estimates placed it closer to 40%. [26]
Economic growth slowed in 2005-2008 and turned negative in 2009 as a result of
the Great Recession, contracting by 5.2%. This was exacerbated by a major global
downturn in the industrial sector, which shrank by 30%, [27] Botswana's steep economic
downturn contrasted with most other African nations which experienced continued
growth through this period.[28]
Some of Botswana's budget deficits can be traced to relatively high military
expenditures (about 4% of GDP in 2004, according to the CIA World Factbook). Some
critics have criticized this level of military spending, given the low likelihood of
international conflict, but these troops are also used for multilateral operations and
assistance efforts.[29]

Trade[edit]

Graphical depiction of Botswana's product exports in 28 color-coded categories.

Botswana is part of the Southern African Customs Union (SACU) with South Africa,
Lesotho, Eswatini, and Namibia. The World Bank reports that in 2001 (the most recent
year for which World Bank data is available), the SACU had a weighted
average common external tariff rate of 3.6%. According to the U.S. Department of
Commerce, "there are very few tariff or non-tariff barriers to trade with Botswana, apart
from restrictions on licensing for some business operations, which are reserved for
[Botswana] companies." Based on the revised trade factor methodology, Botswana's
trade policy score is unchanged.[30]
The main export of Botswana is diamonds. As of 2017 it is the world's second largest
producer of diamonds after Russia.[31][32] Due to Botswana's heavy reliance on diamonds,
strong global demand is vital to the health of the economy. Diamond exports provide
Botswana's economy with strong supplies of foreign exchange and have offered a basis
for industrial development and stimulated improvements in Botswana's infrastructure.
However, despite their preeminent role in Botswana's economy, there are concerns that
diamond mines are not labour-intensive enough to provide sufficient employment for
Botswana's workforce, and this mismatch has been cited as a factor in the country's
structurally high unemployment rate. [33][34]

Mining[edit]
Main article: Mining in Botswana
Two large mining companies, Debswana (formed by the government and South
Africa's De Beers in equal partnership) and Bamangwato Concessions, Ltd. (BCL, also
with substantial government equity participation) operate in the country. [20] BCL was
placed in provisional liquidation in late 2016, following years of loss-making operations,
and was placed into final liquidation by the High Court in June 2017. [35]

The Jwaneng diamond mine is the richest in the world today.

Since early 1980s, the country has been one of the world's largest producers of gem
diamonds.[20] Four large diamond mines have opened since independence. [20] De Beers
prospectors discovered diamonds in northern Botswana in the early 1970s. [20] The first
mine began production at Orapa in 1972, followed by a smaller mine at Letlhakane.
[20]
 What has become the single richest diamond mine in the world opened in Jwaneng in
1982.[20] The mine was discovered when termites looking for water brought grains of
diamond to the surface.[36] Botswana produced a total of 21.3 million carats of diamonds
from the three Debswana mines in 1999, [20] and is the highest producer of diamonds by
value in the world.[36] The Orapa 2000 Expansion of the existing Orapa mine was opened
in 2000.[20] According to Debswana, the Orapa 2000 Expansion project increase the
Orapa's mine annual output from 6 million carats to 12 million carats and raised total
production to 26 million carats.[37] In 2003, Debswana opened the Damtshaa diamond
mine about 220 kilometers (140 mi) west of the city of Francistown. The mine was
placed into care and maintenance in December 2015 due to weak global demand but
was scheduled to reopen in January 2018.[38][39]
In 2008, Australia's Kimberley Diamond Company opened a mine in Lerala, Botswana's
fifth mine and the first not operated by Debswana. [40] However, Kimberley shut down the
mine in May 2017, citing weak market conditions.[41]
Most (70%) of Botswana's electricity is imported from South Africa's Eskom. 80% of
domestic production is concentrated in one plant, Morupule Power
Station near Palapye, operated by the Botswana Power Corporation.[42] Debswana
operates the nearby Morupule Colliery to supply coal to it.[43] The Morupule mine exports
coal to Zimbabwe, Zambia and the Democratic Republic of the Congo. In early 2008,
the entire southern African region was hit hard by massive shortages of power, since
the region works to share its power resources through the Southern African Power Pool,
with most of its capacity coming from South Africa. Botswana has in turn put in place
plans to become a net exporter of power to the regional pool, through governmental
expansion of the Morupule power station, as well as encouraging private investment in
the form of a 4 gigawatt power station by the Canadian greenfield company CIC Energy.
In 2012, CIC Energy was acquired by India's Jindal Steel and Power. Jindal Africa
currently aims to operate three surface mines in the coalfields of Mmamabula, as well
as a power plant. According to the company, "the mine’s development will meet the
demands of 600MW power stations and export region coal markets, with the potential to
employ more than 2,000 people."[44][45]
Botswana also produces soda ash through Botash, a joint venture between the
government and South Africa's Chlor-Alkali Holdings (CAH) Group. Botash has been
operating in the Sua Pan in northeastern Botswana since April 1991. Production of soda
ash is estimated at around 300,000 tonnes per annum and is exported to South Africa,
Zambia, Zimbabwe, Malawi and the Democratic Republic of the Congo. [46]

Tourism[edit]
Main article: Tourism in Botswana
A giraffe in the Kalahari

Tourism is an increasingly important industry in Botswana, accounting for almost 12% of

GDP.[20] One of the world's unique ecosystems, the Okavango Delta, is located in
Botswana.[20] The country offers excellent game viewing and birding both in the Delta
and in the Chobe National Park—home to one of the largest herds of free-ranging
elephants in the world.[20] Botswana's Central Kalahari Game Reserve also offers good
game viewing and some of the remotest and most unspoiled wilderness in southern
Africa.[20]
A number of national parks and game reserves, with their abundant wildlife and
wetlands, are major tourist attractions.
The main safari destinations for tourism are Moremi Game Reserve in the Okavango
Delta, and Chobe National Park. Botswana is also participating in community-based
natural resource management projects by trying to involve villagers in tourism. One
example is the village of Khwai and its Khwai Development Trust.
Botswana was the setting for the 1980 movie The Gods Must Be Crazy, although the
movie was mostly filmed in South Africa. The seventh season of The Amazing
Race visited Botswana. Tourism has been stimulated by the series of detective
novels by Alexander McCall Smith and the American dramatisation that followed them.

Agriculture[edit]
More than half of Botswana's population lives in rural areas and depends on
subsistence crops and livestock farming.[20] Agriculture meets only a small portion of food
needs and contributes just 2.6% to GDP as of 2002—primarily through beef exports—
but it remains a social and cultural touchstone. [20] Cattle raising dominated Botswana's
social and economic life before independence. [20] The Botswana Meat
Commission (BMC) has a monopoly on beef production. The national herd was about
2.5 million in the mid-1990s, though the government-ordered slaughter of the entire
herd in Botswana's north-west Ngamiland District in 1995 has reduced the number by at
least 200,000. The slaughter was ordered to prevent the spread of "cattle lung disease"
to other parts of the country. Unfortunately, their currency is Pula so money is hard to
come by.
Botswana produced, in 2018:

 102 thousand tons of root and tubers;

 46 thousand tons of vegetables;
 17 thousand tons of sorghum;
 13 thousand tons of maize;
 8 thousand tons of cabbage;
 6 thousand tons of onion;
 5 thousand tons of tomato;
In addition to smaller productions of other agricultural products. [47]

Manufacturing[edit]
Manufacturing industries in Botswana include food processing, predominantly beef
processing, diamond processing, textile and garment manufacturing, beverage making,
jewellery making, metals and metal products, soap making, construction materials
manufacturing, and glass production.[48][49][50][51]

Science and technology[edit]

Main article: Science and technology in Botswana
There is a growing science sector in Botswana. The number of publications by
Botswanan scientists catalogued in international databases increased from 133 in 2009
to 210 in 2014. In 2018, Botswana produced 281 scientific and technical journal articles.
The country has one of the highest levels of scientific productivity in Sub-Saharan
Africa.[52][53] The country also has a high-tech industry, being home to a number of
information technology companies.[54] In 2020, Botswana's high-tech exports were worth
about $16.2 million.[55]

Private sector development and foreign investment[edit]

Botswana seeks to diversify its economy away from minerals,[20] the earnings from which
have levelled off. In 1998–99, non-mineral sectors of the economy grew at 8.9%,
partially offsetting a slight 4.4% decline in the minerals sector. Foreign investment and
management have been welcomed in Botswana.
External investment in Botswana has grown fitfully. In the early 1990s, two American
companies, Owens Corning and H.J. Heinz, made major investments in production
facilities in Botswana. In 1997, the St. Paul Group purchased Botswana Insurance, one
of the country's leading short-term insurance providers. An American Business Council
(ABC), with over 30 member companies, was inaugurated in 1995.
Hyundai operated a car assembly plant in Botswana from 1994 to 2000. [56]
Tourist resort at Kasane

Botswana seeks to further diversify its economy away from minerals, [20] which account
for a quarter of GDP,[57] down from nearly half of GDP in the early 1990s. [20] Foreign
investment and management are welcomed in Botswana [20] and, as a result, the financial
and services sectors have increased at an exponential rate in the 2000s to replace
mining as the leading industry.[36] Botswana abolished foreign exchange controls in 1999,
has a low corporate tax rate (15%), no prohibitions on foreign ownership of companies,
and as of 2001 had a moderate inflation rate (6.6%). [20]
The government considers private-sector participation as being critical to the success of
the country's Tenth National Development Plan (2009–2016) and enhancing the role of
research and development as being the most effective way to nurture entrepreneurship
and private-sector growth. The government is considering additional policies to enhance
competitiveness, including a new Foreign Direct Investment Strategy, Competition
Policy, Privatisation Master Plan and National Export Development Strategy. [58][59]
Botswana is known to have vast coal deposits making it possibly one of the most coal-
rich countries in the world. Large coal mines, massive coal-fired power plants, as well
as a coals to liquid plant (through the Fischer–Tropsch process) to produce synthetic
automotive fuel have been planned.
With its proven record of good economic governance, Botswana was ranked as Africa's
least corrupt country in the Corruption Perceptions Index in 2020, ahead of many
European and Asian countries.[20][60] The World Economic Forum rated Botswana as the
third most economically competitive nation in Africa as of 2002. [20][needs update] In 2001
Botswana was once again assigned "A" grade credit ratings by Moody's and Standard &
Poor's.[20] This ranks Botswana as by far the best credit risk in Africa and puts it on par
with or above many countries in central Europe, East Asia, and Latin America. [20]
U.S. investment in Botswana remains at relatively low levels but continues to grow.
Major U.S. corporations, such as Coca-Cola and H.J. Heinz, are present through direct
investments, while others, such as Kentucky Fried Chicken, are present via franchise.
[20]
 The sovereign credit ratings by Moody's and Standard & Poor's clearly indicate that,
despite continued challenges such as small market size, landlocked location, and
cumbersome bureaucratic processes, Botswana remains one of the best investment
opportunities in the developing world.[20]
Due to its history and geography, Botswana has long and deep ties to the economy of
South Africa.[20] The Southern Africa Customs Union (SACU), presently
comprising Namibia, Botswana, Lesotho, Eswatini, and South Africa, dates from 1910.
[20]
 Under this arrangement, South Africa has collected levies from customs, sales, and
excise duties for all five members, sharing out proceeds based on each country's
portion of imports.[20] The exact formula for sharing revenues and the decision-making
authority over duties—held exclusively by the Government of South Africa—became
increasingly controversial, and the members renegotiated the arrangement in 2001.
[20]
 The new structure has now been formally ratified and a SACU Secretariat has been
established in Windhoek, Namibia.[citation needed] Following South Africa's accession to
the World Trade Organization (WTO), Botswana also joined; many of the SACU duties
are thus declining, making products from outside the area more competitive in
Botswana.[20] Currently, the SACU countries and the U.S. are negotiating a free trade
agreement. Botswana is currently also negotiating a free trade agreement
with Mercosur and an Economic Partnership Agreement with the European Union as
part of SADC.

Aerial view over Okavango Delta

Gaborone is host to the headquarters of the fourteen-nation Southern African

Development Community (SADC), a successor to the Southern African Development
Coordination Conference (SADCC, established in 1980), which focused its efforts on
freeing regional economic development from dependence on apartheid South Africa.
[20]
 SADC embraced the newly democratic South Africa as a member in 1994 and has a
broad mandate to encourage growth, development, and economic integration in
Southern Africa.[20] SADC's Trade Protocol, which was launched on 1 September 2000,
calls for the elimination of all tariff and non-tariff barriers to trade by 2012 among the 11
signatory countries.[20] If successful, it will give Botswana companies free access to the
far larger regional market.[20] SADC's failure to distance itself from
the Mugabe government in Zimbabwe has diminished the number of opportunities for
cooperation between the U.S. and SADC.
Botswana has successfully carried an Action Programme on the Elimination of Child
Labour, which was adopted in the period 2006–2007. Free the Children delisted
Botswana as a nation harbouring child-labour facilities in 2008.

Financial sector[edit]
Botswana has a growing financial sector, and the country's national stock market,
the Botswana Stock Exchange (BSE), based in Gaborone, is given the responsibility to
operate and regulate the equities and fixed interest securities market. Formally
established in 1989, the BSE continues to be pivotal to Botswana's financial system,
and in particular the capital market, as an avenue on which government, quasi-
government and the private sector can raise debt and equity capital. Although the BSE
has just under 40 companies listed, it plays host to the most pre-eminent companies
doing business in Botswana. These companies represent a spectrum of industries and
commerce, from Banking and financial services to Wholesaling and Retailing, Tourism
and Information Technology.
To date, the BSE is one of Africa's best performing stock exchanges, averaging 24%
aggregate return in the past decade. This has allowed the BSE to be the third largest
stock exchange, in terms of market capitalisation, in Southern Africa.
Given Botswana's lack of exchange controls, stable currency and exceptionally
performing stock market, the financial sector has attracted a host of global investors
seeking better returns.
Botswana's currency, the pula, is fully convertible and is valued against a basket of
currencies heavily weighted toward the South African Rand.[20] Profits and direct
investment can be repatriated without restriction from Botswana. [20] The Botswana
Government eliminated all exchange controls in 1999. [20] The Central Bank devalued the
Pula by 7.5% in February 2004 in a bid to maintain export competitiveness against the
real appreciation of the Pula.[20] There was a further 12% devaluation in May 2005 and
the policy of a "Crawling peg" was adopted.[20]
The recently established Non-Bank Financial Institutions Regulatory Authority (NBFIRA)
is responsible for the oversight of all non-banking financial services entities in the
country. As of 2005, about 54% of Botswana's population had access to formal or
informal financial services, and 43% is banked (with access to at least one formal
banking product). The overall access ratio is still low, especially in rural areas, where
there are 3.8 branches and 73 ATMs per 100,000 people. Mobile banking services have
just started to be offered. In recent years the government and Central Bank have
undertaken serious steps to modernize the country's payment system infrastructure.
These efforts included the establishment of a code-line clearing system for the
exchange of cheques and electronic funds as well as a Real Time Gross Settlement
(RTGS) system, including SWIFT connection. The stock exchange implemented a
Central Securities Depository in 2007. Remittance Flows for Botswana amounted to
US$117 million in 2007, a figure that is higher than the total net value of official
development assistance.[61]
Gaborone is host to the headquarters of the 14-nation Southern African Development
Community (SADC).[20] A successor to the Southern African Development Coordination
Conference (SADCC), which focused its efforts on freeing regional economic
development from dependence on apartheid in South Africa, SADC embraced the newly
democratic South Africa as a member in 1994 and has a broad mandate to encourage
growth, development, and economic integration in Southern Africa. [20] SADC's Trade
Protocol, which was launched on 1 September 2000, calls for the elimination of all tariff
and non-tariff barriers to trade by 2012 among the 11 signatory countries. [20] If
successful, it will give Botswana companies free access to the far larger regional
market.[20] The Regional Centre for Southern Africa (RCSA), which implements the U.S.
Agency for International Development's (USAID) Initiative for Southern Africa (ISA), is
headquartered in Gaborone as well.[20]

Main indicators[edit]
The following table shows the main economic indicators in 1980–2017. [62]

Year[6 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20
3]
80 85 90 95 00 05 06 07 08 09 10 11 12 13 14 15 16 17

13 18
3. 7. 9.
GDP 1.8 .9 .7 20. 23. 25. 23. 25. 27. 29. 33. 35. 35. 37. 38.
69 55 97
in $ 0 6 3 92 26 20 45 77 89 67 57 59 36 36 86
bil bil bil
(PPP) bil. bil bil bil. bil. bil. bil. bil. bil. bil. bil. bil. bil. bil. bil.
. . .
. .

GDP
per 3, 5, 6, 7, 9, 11, 12, 12, 11, 12, 13, 14, 16, 16, 16, 17, 17,
1,8
capita 19 46 28 94 98 00 06 89 83 83 73 43 14 91 61 34 82
32
in $ 7 0 8 2 9 9 9 1 3 9 4 9 5 6 3 5 8
(PPP)

GDP 7. 8. 7. 2. 7.
growt 12. 6.2 8.3 6.2 −7. 8.6 6.0 4.5 11. 4.1 −1. 4.3 2.2
7 8 0 0 4
h 0% % % % 7% % % % 3% % 7% % %
% % % % %
(real)

Gover
nment
debt 8 7 18 20 19 19 17 17 16 15 16
... ... ... ... 6% 8% 8%
(Percen % % % % % % % % % % %
tage of
GDP)

See also[edit]
 Botswana
 Education in Botswana
 List of Botswana companies
 Science and technology in Botswana
 United Nations Economic Commission for Africa