Economy of Botswana

Theeconomy of Botswanais currently one of the world's fastest growing economies,averaging about 5% per annum over the past decade.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 theAfrican Development Bankfor sustaining one of the world's longest economic booms.Economic growth since the late 1960s has been on par with some ofAsia's largest economies.The government has consistently maintained budget surpluses and has extensiveforeign-exchange reserves.
Botswana's impressive economic record compared to some of its neighbors has been built on a foundation ofdiamond mining, prudent fiscal policies, and a cautious foreign policy.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 withDe Beersin theDebswana Diamond Company.As of 2020, it is rated as the third least corrupt country in Africa in theCorruption Perceptions Indexby international corruption watchdogTransparency International. It has the fourth highestgross national income per capita in purchasing powerin Africa and above the world average.
Trade unionsrepresent a minority of workers in the Botswana economy. In general they are loosely organised "in-house" unions, although theBotswana Federation of Trade Unions(BFTU) is consolidating its role as the solenational trade union centrein the country.
Although Botswana's economy is considered a model for countries in the region, its overreliance onminingand its high rate ofHIV/AIDSinfection (one in every three adults is seropositive) and unemployment may threaten its future success.Botswana has become the first high-burden country to be certified for achieving an important milestone on the path to eliminating mother-to-child transmission of HIV by the World Health Organization (WHO).
Agriculturestill 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.Subsistence farmingand cattle raising predominate.The sector is plagued by erratic rainfall and poor soils.Diamond mining andtourismare also important to the economy.Substantialmineraldeposits were found in the 1970s and the mining sector grew from 25% of GDP in 1980 to 38% in 1998.
Economic growth slowed in 2005–2008 and turned negative in 2009 as a result of theGreat Recession, contracting by 5.2%.This was exacerbated by a major global downturn in the industrial sector, which shrank by 30%,Botswana's steep economic downturn contrasted with most other African nations which experienced continued growth through this period.
Botswana is crossed by the trans-African automobile route - theCairo-Cape Town Highwayand theTrans-Kalahari Corridor. Botswana is part of the Southern African Customs Union (SACU) with South Africa, Lesotho, Eswatini, and Namibia. TheWorld Bankreports that in 2001 (the most recent year for which World Bank data is available), the SACU had a weighted averagecommon external tariffrate of 3.6%. According to theU.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.
The main export of Botswana is diamonds.As of 2024 it is the world's second largest diamond exporter.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.
Two large mining companies,Debswana(formed by the government and South Africa'sDe Beersin equal partnership) and Bamangwato Concessions, Ltd. (BCL, also with substantial government equity participation) operate in the country.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.
Since early 1980s, the country has been one of the world's largest producers of gem diamonds.Eight large diamond mines have opened since independence.De Beers prospectors discovered diamonds in northern Botswana in the early 1970s.The first mine began production atOrapain 1972, followed by a smaller mine atLetlhakane.What has become the single richest diamond mine in the world opened inJwanengin 1982.The mine was discovered when termites looking for water brought grains of diamond to the surface.Botswana produced a total of 24 million carats of diamonds from Debswana in 2022,and is the highest producer of diamonds by value in the world as of 2023.The Orapa 2000 Expansion of the existing Orapa mine was opened in 2000.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.In 2003, Debswana opened theDamtshaa diamond mineabout 220 kilometers (140 mi) west of the city ofFrancistown. The mine was placed into care and maintenance in December 2015 due to weak global demand but was scheduled to reopen in January 2018.In 2008, Australia's Kimberley Diamond Company opened a mine inLerala, Botswana's fifth mine and the first not operated by Debswana.However, Kimberley shut down the mine in May 2017, citing weak market conditions.
Most of Botswana's electricity is imported from South Africa'sEskom.Debswana operates the nearbyMorupule Collieryto supply coal to it.Botswana exported $3.12k worth of electricity from 2021 to 2022, all going to Zimbabwe.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 theSouthern 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'sJindal Steel and Power. Jindal Africa currently aims to operate three surface mines in the coalfields ofMmamabula, 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."
Botswana also producessoda ashthrough Botash, a joint venture between the government and South Africa's Chlor-Alkali Holdings (CAH) Group. Botash has been operating in theSua Panin northeastern Botswana since April 1991.
Tourismis an increasingly important industry in Botswana, accounting for approximately 13.1% of GDP in 2019.However, As of February 2024, it was reported to be less than 10%.One of the world's unique ecosystems, theOkavango Delta, is located in Botswana.The country offers game viewing and birding both in the Delta and in theChobe National Park—home to one of the largest herds of free-ranging elephants in the world.Botswana'sCentral Kalahari Game Reservealso offers game viewing and some of the remotest and most unspoiled wilderness in southern Africa.
A number of national parks and game reserves, with their abundant wildlife and wetlands, are major tourist attractions.
The mainsafaridestinations for tourism areMoremi Game Reservein the Okavango Delta, andChobe 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 ofKhwaiand its Khwai Development Trust.
Botswana was the setting for the 1980 movieThe Gods Must Be Crazy, although the movie was mostly filmed in South Africa.
Theseventh seasonofThe Amazing Racevisited Botswana. Tourism has been stimulated by theseries of detective novelsbyAlexander McCall Smithand the American dramatisation that followed them.
More than half of Botswana's population lives in rural areas and depends on subsistence crops and livestock farming.Agriculture meets only a small portion of food needs and contributes just 1.8% of Botswana's GDP as of 2017, according to the CIA World Factbook.2024 estimates stated that it was still less than 2% of Botswana's GDP.Cattle raising dominated Botswana's social and economic life before independence.TheBotswana Meat Commission(BMC) has a monopoly on beef production, however in late 2023, it ended.The national herd was about 2.5 million in the mid-1990s, though the 1995 government-ordered slaughter of the entire herd in Botswana's north-westNgamilandDistrict, to prevent the spread of "cattle lung disease" to other parts of the country, reduced the number by at least 200,000.
Botswana produced, in 2018:
In addition to smaller productions of other agricultural products.
Manufacturing industries in Botswanainclude food processing, predominantly beef processing, diamond processing, textile and garment manufacturing, beverage making, jewellery making, metals and metal products, soap making, construction materials manufacturing, andglass production.
Manufacturing has potential growth, however,accounting for roughly 5% of the nation'sgross domestic product.Over the years, there has been a notable decline in the role of the manufacturing sector in the national economy. The reason for this can be pinned to a number of factors, the main ones being lack of skills, failing to keep up with the latest technology, lack of competitiveness along with bad marketing techniques.
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.The country also has a high-tech industry, being home to a number of information technology companies.In 2022, Botswana's high-tech exports were worth about $38 million.
Botswana seeks to diversify its economy away fromminerals,the earnings from which have levelled off.
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.Hyundaioperated a car assembly plant in Botswana from 1994 to 2000.
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 Botswanaand, as a result, the financial and services sectors have increased at an exponential rate in the 2000s to replace mining as the leading industry.Botswana abolishedforeign exchange controlsin 1999, has a low corporate tax rate (15%), no prohibitions on foreign ownership of companies, and as of January 2024 it is roughly 4%
The government considers private-sector participation as being critical to the success of the country'sTenth National Development Plan(2009–2016) and enhancing therole of research and developmentas 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.
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 theFischer–Tropsch process) to produce synthetic automotive fuel have been planned.
With its proven record of good economic governance, Botswana was ranked as Africa's third least corrupt country in theCorruption Perceptions Indexin 2020, ahead of many European and Asian countries.The World Economic Forum rated Botswana as the third most economically competitive nation in Africa in 2002.However, Botswana is not a member of the WEF anymore.In 2001 Botswana was once again assigned "A" grade credit ratings byMoody'sandStandard & 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.However, as of 2024, Botswana has been ranked BBB+ in S&P's rating, while being ranked A3 in Moody's grade credit rating.
U.S. investment in Botswana remains at relatively low levels but continues to grow. Major U.S. corporations, such asCoca-ColaandH.J. Heinz, are present through direct investments, while others, such asKentucky Fried Chicken, 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.
Due to its history and geography, Botswana has long and deep ties to the economy of South Africa.TheSouthern Africa Customs Union(SACU), presently comprisingNamibia, Botswana,Lesotho,Eswatini, and South Africa, dates from 1910.Under this arrangement, South Africa has collectedleviesfrom customs, sales, and excise duties for all five members, sharing out proceeds based on each country's 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 inWindhoek, Namibia.Following South Africa's accession to theWorld 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 withMercosurand an Economic Partnership Agreement with theEuropean Unionas part of SADC.
Gaborone is host to the headquarters of the fourteen-nationSouthern African Development Community(SADC), a successor to theSouthern 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 2012 among the 11 signatory countries.If successful, it will give Botswana companies free access to the far larger regional market.
Botswana has successfully carried an Action Programme on the Elimination ofChild Labour, which was adopted in the period 2006–2007.Free the Childrendelisted Botswana as a nation harbouring child-labour facilities in 2008.
Botswana has a growing financial sector, and the country's national stock market, theBotswana 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.
Botswana's currency, thepula, is fully convertible and is valued against a basket of currencies heavily weighted toward the South AfricanRand.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 1 year later in 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 2020, about 82% of Botswana's population had access to formal or informal financial services.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.
Gaboroneis host to the headquarters of the 14-nationSouthern African Development Community(SADC).A successor to theSouthern 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 Centre for Southern Africa (RCSA), which implements the U.S. Agency for International Development's (USAID) Initiative for Southern Africa (ISA), is headquartered inGaboroneas well.