Economy of Botswana

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Economy of Botswana
Botswana 2-pula banknote (1980s).png
1980s 2 pula note
Currency Pula (BWP)
Statistics
GDP

$34.0 billion (PPP, 2013)[1]

$15.53 billion (nominal, 2013)
GDP rank 118th (nominal) / 108th (PPP)[2]
GDP growth
3.9% (2013)[3]
GDP per capita
Increase $16,400(PPP, 2013)[4]
GDP by sector
agriculture 1.9%, industry 35.7%, services 62.4% (2013 est.)[5]
8.1% (2009 est.)
Population below poverty line
20.0% (2011)[6]
Labour force
1.31 million (2013 est.)[7]
Unemployment 17.5% (2011)[8]
Main industries
diamonds, copper, nickel, salt, soda ash, potash, livestock processing, textiles
56th[9]
External
Exports $5.127 billion f.o.b. (2008 est.)
Export goods
diamonds, copper, nickel, soda ash, meat, textiles
Main export partners
European Free Trade Association (EFTA) 87%, Southern African Customs Union (SACU) 7%, Zimbabwe 4% (2000)
Imports $3.931 billion f.o.b. (2008 est.)
Import goods
foodstuffs, machinery, electrical goods, transport equipment, textiles, fuel and petroleum products, wood and paper products, metal and metal products
Public finances
5.1% of GDP (2008 est.)
Revenues $4.556 billion (2008 est.)
Expenses $4.127 billion (2008 est.)
Economic aid $73 million (1995)
A (Domestic)
A- (Foreign)
A+ (T&C Assessment)
(Standard & Poor's)[10]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

Since independence, Botswana has had the highest average economic growth rate in the world, averaging about 9% per year from 1966 to 1999. Growth in private sector employment has averaged about 10% per annum over the first 30 years of independence. At the start of the 21st century, however, the economy of Botswana stagnated up until the early 2010s when it registered for the first time since the economic boom a GDP growth up above the 6-7% target. Botswana is also commended for the site of Africa's longest and among the world's longest economic booms (which almost surpassed that in Asia's largest economies). The relatively high quality of the country's statistics means that these figures are likely to be quite accurate. The government has consistently maintained budget surpluses and has extensive foreign exchange reserves.

Botswana's impressive economic record has been built on a foundation of diamond mining, prudent fiscal policies, international financial and technical assistance, and a cautious foreign policy. It is rated the least corrupt country in Africa, according to an international corruption watchdog, Transparency International. By one estimate, it has the fourth highest gross national income at purchasing power parity in Africa, giving it a standard of living around that of Mexico and Turkey.[11]

Trade unions represent a minority of workers in the Botswana economy. In general they are loosely organized "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.[12][13]

Overview[edit]

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

Agriculture still provides a livelihood for more than 80%[citation needed] of the population but supplies only about 50% of food needs and accounts for only 3% of GDP. Subsistence farming and cattle raising predominate. The sector is plagued by erratic rainfall and poor soils. Tourism is also important to the economy. Substantial mineral deposits were found in the 1970s and the mining sector grew from 25% of GDP in 1980 to 38% in 1998. Unemployment officially is 21% but unofficial estimates place it closer to 40%. The Orapa 2000 project doubled the capacity of the country's main diamond mine from early 2000. This will be the main force behind continued economic expansion.

Economic growth slowed in 2005-2008, then turned Positive in 2008, contracting by 500.2%. This was due in part to a major recession in the industrial sector, which shrank by 30%,[14] and contrasts with most other African nations who experienced continued growth through this period.[15]

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 contend this is unnecessary, given the low likelihood of international conflict, but these troops are also used for multilateral operations and assistance efforts.

Trade[edit]

Botswana is part of the Southern African Customs Union (SACU) with South Africa, Lesotho, Swaziland, and Namibia. The World Bank reports that in 2001 (the most recent year for which World Bank data are available), the SACU had a weighted average common external tariff rate of 3.6 percent. 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.[16] The main export of Botswana is diamonds. Jwaneng, in Botswana, is the world's largest and richest diamond mine thus the demand of diamonds from Botswana is fairly high. The mine was discovered when termites looking for water brought grains of diamond to the surface. If the great demand of diamonds were to go into rapid decline, then the economy of Botswana would suffer greatly as they are highly dependent on this export. The diamond mine in Jwaneng provides many jobs for the unemployed in Botswana as people are needed to physically extract the diamonds, and to build the roads needed for their transport, for example. A source of foreign exchange is also introduced to the economy and it offers a potential basis for industrial development, and thus stimulates improvements within Botswana's infrastructure.

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.

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

Since the early 1980s, the country has been the world's largest producer of gem diamonds. Four large diamond mines have opened since independence. De Beers prospectors discovered diamonds in northern Botswana in the early 1970s. The first mine began production at Orapa in 1972, followed by the smaller mine at Letlhakane. What has become the single-richest diamond mine in the world opened in Jwaneng in 1982. In 2002, a fourth diamond mine, Damtshaa, began operations. Botswana produced a total over 30 million carats (6,000 kg) of diamonds (about 25% of worldwide production) from the three Debswana mines in 1999, and is the highest producer of diamonds by value in the world. The Orapa 2000 Expansion of the existing Orapa mine was opened in 2000. A fifth diamond mine and the first not operated by Debswana is scheduled to have begun operations in 2008 in Lerala.[17]

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.[18] Debswana operates the nearby Morupule Colliery to supply coal to it.[19] In early 2008, the entire southern African region was hit hard by massive shortages in power, since the region works to share its power resources through the Southern African Power Pool, with most of the capacity coming from South Africa. Botswana has in turn put in place plans through governmental expansion of the Morupule power station, as well as encouraging private investment in the form of a 4,000 megawatt power station by the Canadian Greenfield company CIC Energy to become a net exporter of power to the regional pool.

BCL, which operates a copper-nickel mine at Selebi-Phikwe, has had a troubled financial history but remains an important employer. The soda ash operation at Sua Pan, opened in 1991 and supported by substantial government investment, has begun making a profit following significant restructuring.

Tourism[edit]

Main article: Tourism in Botswana
A giraffe in the Central Kalahari Game Reserve

Tourism is an increasingly important industry in Botswana, accounting for almost 12% of GDP. One of the world's unique ecosystems, the Okavango Delta, is located in Botswana. The country offers excellent game viewing and birding both in the Delta and in the Chobe Game Reserve—home to one of the largest herds of free-ranging elephants in the world. Botswana's Central Kalahari Game Reserve also offers good game viewing and some of the most remote and unspoiled wilderness in southern Africa.

Tourism plays a large role in the Botswana economy. A number of national parks and game reserves, with their abundant wildlife and wetlands, are major tourist attractions. The wildlife, including lions, brown hyenas, cheetahs, leopards, wild dogs and antelope, were described in great detail in the best-selling book "Cry of the Kalahari" by Mark and Delia Owens.

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 Batswana (preferred address of the Botswana people) live in rural areas and are dependent on subsistence crop and livestock farming, together with money sent home by relatives in urban areas. Agriculture meets only a small portion of food needs and contributes just 2.8% to GDP—primarily through beef exports—but it remains a social and cultural touchstone. Cattle raising dominated Botswana's social and economic life before independence. The Botswana Meat Commission 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 Kgamiland 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.

Only about 0.7% of total land area is arable. Crop production is hampered by traditional farming methods, recurrent drought, erosion, and disease. Most of the land under cultivation is in the eastern region. The principal crops for domestic use are sorghum, corn, and millet. Sorghum and corn production in 2004 were 32,000 tons and 10,000 tons, respectively. The sorghum and corn harvests comprise less than 10% of the annual requirement of 250,000 tons. In 2004, Botswana’s agricultural imports (primarily cereals) exceeded agricultural exports by $102.5 million. Grain is often imported from South Africa. Smaller quantities of cowpeas, beans, and other pulses are also grown. The 2004 output of all these crops was about 20,000 tons; in addition, 16,000 tons of vegetables and 10,000 tons of fruit were grown.

Agricultural research has been devoted to soil conservation, grazing experiments, and developing and distributing improved strains of grain. The construction of dams and the drilling of boreholes to tap underground water are continuing government programs. In early 1990, the government changed its official agricultural policy to emphasize the production only of those foodstuffs that can be raised economically. The Arable Lands Development Program and the Tribal Grazing Land Policy are government programs designed to help farmers in communal areas.

Private sector development and foreign investment[edit]

Botswana seeks to diversify its economy away from minerals, 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.[20]

Tourist resort at Kasane

Botswana seeks to further diversify its economy away from minerals, which account for a quarter of GDP, down from nearly half of GDP in the early 1990s. Foreign investment and management are welcomed in Botswana, and as a result, financial and services sectors have increased at an exponential rate in the 2000s to replace mining as the leading industry. Botswana abolished foreign exchange controls in 1999, has a low corporate tax rate (15%), no prohibitions on foreign ownership of companies, and a moderate inflation rate (7.6% November 2004). The Government of Botswana is currently considering additional policies to enhance competitiveness, including a new Foreign Direct Investment Strategy, Competition Policy, Privatisation Master Plan, and National Export Development Strategy.

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 by Transparency International in 2004, ahead of many European and Asian countries. The World Economic Forum rates Botswana as one of the two most economically competitive nations in Africa. In 2004 Botswana was once again assigned "A" grade credit ratings by Moody's and Standard & Poor's. 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.

U.S. investment in Botswana remains at relatively low levels, but continues to grow. Major U.S. corporations, such as H.J. Heinz and AON Corporation, are present through direct investments, while others, such as Kentucky Fried Chicken and Remax, are present via franchise. 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. Botswana has a 90-member American Business Council that accepts membership from American-affiliated companies.

Due to its history and geography, Botswana has long had deep ties to the economy of South Africa. The Southern Africa Customs Union (SACU), comprising Botswana, Lesotho, Swaziland, and South Africa, dates from 1910, and is the world’s oldest customs union. Namibia joined in 1990. Under this arrangement, South Africa has collected levies from customs, sales, and excise duties for all five members, sharing out proceeds based on each countries portion of imports. 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. The new structure has now been formally ratified and a SACU Secretariat has been established in Windhoek, Namibia. 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. 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. 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. 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 2008 among the 11 signatory countries. If successful, it will give Botswana companies free access to the far larger regional market. 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 capitalization, 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. Profits and direct investment can be repatriated without restriction from Botswana. The Botswana Government eliminated all exchange controls in 1999. 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. There was a further 12% devaluation in May 2005 and the policy of a "Crawling peg" was adopted.

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 percent of Botswana’s population had access to formal or informal financial services, and 43 percent 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 USD 117 million in 2007, a figure that is higher than the total net value of official development assistance.[21]

Gaborone is host to the headquarters of the 14-nation Southern African Development Community (SADC). 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. 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. If successful, it will give Botswana companies free access to the far larger regional market. The Regional Center 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.

See also[edit]

References[edit]

  1. ^ https://www.cia.gov/library/publications/the-world-factbook/geos/bc.html. Retrieved 24 March 2014.  Missing or empty |title= (help)
  2. ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html?countryname=Botswana&countrycode=bc&regionCode=afr&rank=111#bc. Retrieved 24 March 2014.  Missing or empty |title= (help)
  3. ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html?countryname=Botswana&countrycode=bc&regionCode=afr&rank=80#bc. Retrieved 24 March 2014.  Missing or empty |title= (help)
  4. ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html?countryname=Botswana&countrycode=bc&regionCode=afr&rank=82#bc. Retrieved 24 March 2014.  Missing or empty |title= (help)
  5. ^ https://www.cia.gov/library/publications/the-world-factbook/geos/bc.html. Retrieved 24 March 2014.  Missing or empty |title= (help)
  6. ^ http://www.afdb.org/en/countries/southern-africa/botswana/botswana-economic-outlook/
  7. ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2095rank.html?countryname=Botswana&countrycode=bc. Retrieved 24 March 2014.  Missing or empty |title= (help)
  8. ^ http://www.afdb.org/en/countries/southern-africa/botswana/botswana-economic-outlook/
  9. ^ http://www.doingbusiness.org/rankings. Retrieved 24 March 2014.  Missing or empty |title= (help)
  10. ^ "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011. 
  11. ^ GNI PPP table
  12. ^ ICTUR et al.,, ed. (2005). Trade Unions of the World (6th ed.). London, UK: John Harper Publishing. ISBN 0-9543811-5-7. 
  13. ^ "Policy position paper on globalization – 2007". Botswana Federation of Trade Unions: 25. 
  14. ^ https://www.cia.gov/library/publications/the-world-factbook/geos/bc.html
  15. ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html, see also File:GDP Real Growth.svg
  16. ^ Botswana and WTO
  17. ^ "Diamonex Limited Acquires Kimberlite Pipes In USA". ABN Newswire. Retrieved 20 January 2008. 
  18. ^ Archived February 17, 2006 at the Wayback Machine
  19. ^ [1]
  20. ^ The Government of Botswana - Economic Snapshot
  21. ^ MFW4A)

External links[edit]