Economy of Botswana

Mother Earth Travel > Country Index > Botswana Map Economy History

Since independence, Botswana has had the fastest growth in per capita income in the world. Economic growth averaged over 9% per year from 1966-99. The government has maintained budget surpluses for 12 of the last 13 years, has no domestic debt, an insignificant foreign debt, and has stockpiled foreign exchange reserves (over $6.3 billion in 2000) amounting to over 3 years of current imports.

Botswana's impressive economic record has been built on a foundation of diamond mining, prudent fiscal policies, and a cautious foreign policy.

Mining
Two large mining companies, Debswana (formed by the government and South Africa's DeBeers in equal partnership) and Bamangwato Concessions, Ltd. (BCL, also with substantial government equity participation) operate in the country.

Since the early 1980s, the country has been the world's largest producer of gem diamonds. Three large diamond mines have opened since independence. DeBeers 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 Lethlakane. What has become the single-richest diamond mine in the world opened in Jwaneng in 1982. Botswana produced a total of 21.3 million carats of diamonds from the three Debswana mines in 1999. The Orapa 2000 Expansion of the existing Orapa mine was opened in 2000.

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
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.

Agriculture
More than one-half of the population lives in rural areas and is largely dependent on subsistence crop and livestock farming. Agriculture meets only a small portion of food needs and contributes just 2.6% to GDP--primarily through beef exports--but it remains a social and cultural touchstone. Cattle-raising in particular dominated Botswana's social and economic life before independence. The national herd is between 2 and 3 million head.

Private Sector Development and Foreign Investment
Botswana seeks to further diversify its economy away from minerals, which account for a third of GDP (down from nearly half of GDP in the early 1990s). Foreign investment and management are welcomed in Botswana. 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 (6.6% in 2001).

With its proven record of good economic governance, Botswana was ranked as Africa's least corrupt country by Transparency International in 1999 and 2000, ahead of many European and Asian countries. The World Economic Forum rates Botswana as the third most economically competitive nation in Africa. In 2001 Botswana was assigned "A" grade credit ratings by Moody's Investors Service as well as Standard & Poor's. This ranks Botswana as by far the best credit risk in Africa, and puts it on par 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 Coca-Cola and H.J. Heinz, are present through direct investments, while others, such as Kentucky Fried Chicken, are via franchise. Recent 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 30-member American Business Council that accepts membership from American-affiliated companies.

Because of history and geography, Botswana has long had deep ties to the economy of South Africa. The Southern Africa Customs Union (SACU), comprised of Botswana, Namibia, Lesotho, Swaziland, and South Africa, dates from 1910. 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. 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 awaits formal ratification by the SACU member states). Following South Africa's accession to the World Trade Organization (WTO--Botswana also is a member), many of the SACU duties are declining, making American products more competitive in Botswana.

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 has eliminated all exchange controls.

Gaborone is host to the headquarters of the 14-nation Southern African Development Community (SADC). A successor to the Southern Africa 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 September 1, 2000, calls for the elimination of all tariff and nontariff 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.

Transportation and Communications
A sparsely populated, arid country about the size of Texas, Botswana has nonetheless managed to incorporate much of its interior into the national economy. An "inner circle" highway connecting all major towns and district capitals is completely paved, and the all-weather Trans-Kalahari Highway connects the country (and, through it, South Africa's commercially dominant Gauteng Province) to Walvis Bay in Namibia. A fiber-optic telecommunications network has been completed in Botswana connecting all major population centers.

In addition to the government-owned newspaper and national radio network, there is an active, independent press (seven weekly newspapers). Two privately owned radio stations began operations in 1999. In 2000, the government-owned Botswana Television (BTV) was launched, which is Botswana's first national television station. Foreign publications are sold without restriction in Botswana, and there are 11 commercial Internet service providers. Two cellular phone providers cover most of the country.
 

GDP: purchasing power parity - $10.4 billion (2000 est.)
GDP - real growth rate: 6% (2000 est.)
GDP - per capita: purchasing power parity - $6,600 (2000 est.)
GDP - composition by sector:
agriculture: 4%
industry: 46% (including 36% mining)
services: 50% (1998 est.)
Population below poverty line: 47% (2000 est.)
Inflation rate (consumer prices): 8.6% (2000 est.)
Labor force: 235,000 formal sector employees (1995)
Labor force - by occupation: 100,000 public sector; 135,000 private sector, including 14,300 who are employed in various mines in South Africa; most others engaged in cattle raising and subsistence agriculture (1995 est.)
Unemployment rate: 40% (2000 est.)
Budget:
revenues: $1.6 billion
expenditures: $1.8 billion, including capital expenditures of $560 million (FY96/97)
Industries: diamonds, copper, nickel, coal, salt, soda ash, potash; livestock processing
Industrial production growth rate: 6.2% (2000 est.)
Electricity - production: 610 million kWh (1999)
Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1999)
Electricity - consumption: 1.517 billion kWh (1999)
Electricity - exports: 0 kWh (1999)
Electricity - imports: 950 million kWh (1999)
Agriculture - products: sorghum, corn, millet, pulses, groundnuts (peanuts), beans, cowpeas, sunflower seed; livestock
Exports: $2.6 billion (f.o.b., 2000 est.)
Exports - commodities: diamonds 72%, vehicles, copper, nickel, meat (1998)
Exports - partners: EU 77%, Southern African Customs Union (SACU) 18%, Zimbabwe 3% (1998)
Imports: $2.2 billion (f.o.b., 2000 est.)
Imports - commodities: foodstuffs, machinery and transport equipment, textiles, petroleum products
Imports - partners: Southern African Customs Union (SACU) 76%, Europe 10%, South Korea 5% (1998)
Debt - external: $651 million (1998)
Economic aid - recipient: $73 million (1995)
Currency: 1 pula (P) = 100 thebe

SOURCES: The World Factbook, U.S. Department of State

Mother Earth Travel > Country Index > Botswana Map Economy History