Economy of Botswana
Country group |
|
---|---|
Statistics | |
Population | 2,397,240 (2021)[3] |
GDP | |
GDP rank | |
GDP growth |
|
GDP per capita | |
GDP per capita rank | |
GDP by sector |
|
2.1% (2020 est.)[5] | |
Population below poverty line | |
53.3 high (2015)[9] | |
Labour force | |
Unemployment | 17.7% (2017[update]) textiles |
Main export partners |
|
Imports | $5.005 billion (2017 est.) products |
Main import partners |
|
FDI stock | |
$2.146 billion (2017 est.)[6] | |
Gross external debt | $2.187 billion (31 December 2017 est.)[6] |
Public finances | |
21.7% of GDP (2017 est.)[6][14] | |
−1% (of GDP) (2017 est.)[6] | |
Revenues | 5.305 billion (2017 est.)[6] |
Expenses | 5.478 billion (2017 est.)[6] |
Economic aid | $68.86 million (2019[update]) [15] |
| |
$7.491 billion (31 December 2017 est.)[6] | |
The economy of Botswana is currently one of the world's fastest growing economies,
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]
Although Botswana's economy is considered a model for countries in the region, its overreliance on mining and its high rate of HIV/AIDS infection (one in every three adults is seropositive) and unemployment may threaten its future success.
History
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
Trade
Botswana is crossed by the trans-African automobile route - the
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
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]
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
Botswana also produces
Tourism
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
More than half of Botswana's population lives in rural areas and depends on subsistence crops and livestock farming.
Botswana produced, in 2018:
- 102 thousand tons of 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
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
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
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.
Hyundai operated a car assembly plant in Botswana from 1994 to 2000.[56]
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
U.S. investment in Botswana remains at relatively low levels but continues to grow. Major U.S. corporations, such as
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.
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
Financial sector
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
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$117 million in 2007, a figure that is higher than the total net value of official development assistance.[61]
Gaborone is host to the headquarters of the 14-nation Southern African Development Community (SADC).[20] A successor to the Southern African Development Coordination Conference (SADCC), which focused its efforts on freeing regional economic development from dependence on apartheid in South Africa, SADC embraced the newly democratic South Africa as a member in 1994 and has a broad mandate to encourage growth, development, and economic integration in Southern Africa.[20] SADC's Trade Protocol, which was launched on 1 September 2000, calls for the elimination of all tariff and non-tariff barriers to trade by 2012 among the 11 signatory countries.[20] If successful, it will give Botswana companies free access to the far larger regional market.[20] The Regional Centre for Southern Africa (RCSA), which implements the U.S. Agency for International Development's (USAID) Initiative for Southern Africa (ISA), is headquartered in Gaborone as well.[20]
Main indicators
The following table shows the main economic indicators in 1980–2017.[62]
Year | GDP (in bil. US$ PPP) |
GDP per capita (in US$ PPP) |
GDP
(in bil. US$ nominal) |
GDP growth (real) |
Government debt (Percentage of GDP) |
---|---|---|---|---|---|
1980 | 1.80 | 1,832 | 1.17 | 12.0% | ... |
1985 | 3.69 | 3,197 | 1.12 | 7.7% | ... |
1990 | 7.55 | 5,460 | 3.80 | 8.8% | ... |
1995 | 9.97 | 6,288 | 4.81 | 7.0% | ... |
2000 | 13.96 | 7,942 | 5.68 | 2.0% | 8% |
2005 | 18.73 | 9,989 | 9.83 | 7.4% | 7% |
2006 | 20.92 | 11,009 | 9.92 | 6.2% | 6% |
2007 | 23.26 | 12,069 | 10.57 | 8.3% | 8% |
2008 | 25.20 | 12,891 | 10.73 | 6.2% | 8% |
2009 | 23.45 | 11,833 | 10.12 | −7.7% | 18% |
2010 | 25.77 | 12,839 | 12.64 | 8.6% | 20% |
2011 | 27.89 | 13,734 | 15.11 | 6.0% | 19% |
2012 | 29.67 | 14,439 | 13.91 | 4.5% | 19% |
2013 | 33.57 | 16,145 | 14.27 | 11.3% | 17% |
2014 | 35.59 | 16,916 | 15.47 | 4.1% | 17% |
2015 | 35.36 | 16,613 | 13.53 | −1.7% | 16% |
2016 | 37.36 | 17,345 | 15.08 | 4.3% | 15% |
2017 | 38.86 | 17,828 | 16.11 | 2.2% | 16% |
See also
- Botswana
- Education in Botswana
- List of Botswana companies
- Science and technology in Botswana
- United Nations Economic Commission for Africa
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Further reading
- Beaulier, Scott A.; Subrick, J. Robert (2006). "The Political Foundations of Development: The Case of Botswana". Constitutional Political Economy. 17 (2): 103–115. ISSN 1043-4062.
- Gulbrandsen, Ørnulf (2012). The State and the Social: State Formation in Botswana and its Precolonial and Colonial Genealogies. Berghahn Books. ISBN 978-0-85745-298-6.
- Hillbom, Ellen; Bolt, Jutta (2018). Botswana – A Modern Economic History. Palgrave Macmillan. ISBN 978-3-319-73144-5.
- Hjort, Jonas (2009). "Pre-Colonial Culture, Post-Colonial Economic Success? The Tswana and the African Economic Miracle". The Economic History Review. 63 (3): 688–709. PMID 20617585.
- Leith, James Clark (2005). Why Botswana Prospered. McGill-Queen's University Press. ISBN 978-0-7735-2821-5.