Economy of Botswana
Encyclopedia
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. 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
.
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.
still provides a livelihood for more than 80% 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 2007-2008, then turned negative in 2009, contracting by 5.2%. This was due in part to a major resession in the industrial sector, which shrank by 30%, and contrasts with most other African nations who experienced continued growth through this period.
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.
) 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.
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.
(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.
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
.
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
. Debswana operates the nearby Morupule Colliery
to supply coal to it. 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
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.
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.
s, 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.
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.
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.
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.
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 September 1, 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.
Botswana
Botswana, officially the Republic of Botswana , is a landlocked country located in Southern Africa. The citizens are referred to as "Batswana" . Formerly the British protectorate of Bechuanaland, Botswana adopted its new name after becoming independent within the Commonwealth on 30 September 1966...
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. 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
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
.
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
Transparency International
Transparency International is a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide...
. By one estimate, it has the fourth highest gross national income
Gross National Income
The GNI consists of: the personal consumption expenditures, the gross private investment, the government consumption expenditures, the net income from assets abroad , and the gross exports of goods and services, after deducting two components: the gross imports of goods and services, and the...
at purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
in Africa, giving it a standard of living around that of Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
and Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
.
Trade unions
Trade unions in Botswana
Trade unions in Botswana operate within a longstanding democratic system in which the government of Botswana has ratified the International Labour Organization's core conventions, including Conventions 87 and 98 ....
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.
Overview
AgricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
still provides a livelihood for more than 80% of the population but supplies only about 50% of food needs and accounts for only 3% of GDP. Subsistence farming
Subsistence agriculture
Subsistence agriculture is self-sufficiency farming in which the farmers focus on growing enough food to feed their families. The typical subsistence farm has a range of crops and animals needed by the family to eat and clothe themselves during the year. Planting decisions are made with an eye...
and cattle raising predominate. The sector is plagued by erratic rainfall and poor soils. Tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
is also important to the economy. Substantial mineral
Mineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...
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
Diamond Mine
Diamond Mine is the second album by Blue Rodeo, released in 1989. It includes several instrumental interludes by Bob Wiseman between songs.-Track listing:All songs by Greg Keelor and Jim Cuddy.#"Swells"#"God and Country" – 3:32#"How Long" – 3:59...
from early 2000. This will be the main force behind continued economic expansion.
Economic growth slowed in 2007-2008, then turned negative in 2009, contracting by 5.2%. This was due in part to a major resession in the industrial sector, which shrank by 30%, and contrasts with most other African nations who experienced continued growth through this period.
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
Botswana is part of the Southern African Customs Union (SACUSacu
Sacu is a commune in Caraş-Severin County, western Romania with a population of 1681 people. It is composed of three villages: Sacu, Sălbăgelu Nou and Tincova.-References:...
) with South Africa, Lesotho, Swaziland, and Namibia. The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
reports that in 2001 (the most recent year for which World Bank data are available), the SACU had a weighted average common external tariff
Common external tariff
When a group of countries form a customs union they must introduce a common external tariff. The same customs duties, import quotas, preferences or other non-tariff barriers to trade apply to all goods entering the area, regardless of which country within the area they are entering...
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.
The main export of Botswana is diamonds. Jwaneng
Jwaneng
Jwaneng is a town located in the Southern District of Botswana, but it is not part of this, being a separate district, with its own Town Council. -History:...
, 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
Two large mining companies, DebswanaDebswana
Debswana Diamond Company Ltd, or simply Debswana, is a giant mining company located in Botswana, and is the world's leading producer of diamonds by value. Debswana is a joint venture between the government of Botswana and the South African diamond company De Beers; each party owns 50 percent of...
(formed by the government and South Africa's De Beers
De Beers
De Beers is a family of companies that dominate the diamond, diamond mining, diamond trading and industrial diamond manufacturing sectors. De Beers is active in every category of industrial diamond mining: open-pit, underground, large-scale alluvial, coastal and deep sea...
in equal partnership) and Bamangwato Concessions, Ltd. (BCL, also with substantial government equity participation) operate in the country.
Orapa diamond mine
The Orapa diamond mine is the world's largest diamond mine. The mine is located in Orapa, a town in the Boteti Sub-District of Botswana about west of the city of Francistown. Orapa is owned by Debswana, a partnership between the De Beers company and the government of Botswana...
in 1972, followed by the smaller mine at Letlhakane
Letlhakane diamond mine
The Letlhakane diamond mine is a diamond mine located in Botswana about west of the city of Francistown. Letlhakane, meaning "little reeds", is owned by Debswana, a partnership between the De Beers company and the government of Botswana. It is the second oldest of four mines operated by the...
. What has become the single-richest diamond mine in the world opened in Jwaneng
Jwaneng diamond mine
The Jwaneng diamond mine is the richest diamond mine in the world and is located in south-central Botswana about west of the city of Gaborone, in the Naledi river valley of the Kalahari. Jwaneng, meaning "a place of small stones", is owned by Debswana, a partnership between the De Beers company...
in 1982. In 2002, a fourth diamond mine, Damtshaa
Damtshaa diamond mine
The Damtshaa diamond mine is a diamond mine located in Botswana about west of the city of Francistown. Damtshaa, meaning "water for a tortoise", is owned by Debswana, a partnership between the De Beers company and the government of Botswana...
, 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
Lerala
Lerala is a village in Central District of Botswana. The village is located 30 km from the Limpopo River and the border with Zimbabwe and approximately 90 km east of Palapye. The population of Lerala was 5,747 in 2001 census....
.
Most (70%) of Botswana's electricity is imported from South Africa's Eskom
Eskom
Eskom is a South African electricity public utility, established in 1923 as the Electricity Supply Commission by the government of South Africa in terms of the Electricity Act . It was also known by its Afrikaans name Elektrisiteitsvoorsieningskommissie . The two acronyms were combined in 1986 and...
. 80% of domestic production is concentrated in one plant, Morupule Power Station
Morupule Power Station
Morupule Power Station is a coal-fired power station near Palapye, Botswana. Run by the Botswana Power Corporation , it comprises four 33 MW air-cooled units...
near Palapye
Palapye
Palapye is a large town in Botswana, situated about halfway between Francistown and Gaborone . Over the years its position has made it a convenient stopover on one of Southern Africa's principal north–south rail and road routes...
, operated by the Botswana Power Corporation
Botswana Power Corporation
Botswana Power Corporation is a state owned company for electrical power generation, transmission and distribution in Botswana. It was established in 1970 and is currently the only electricity supplier in the country. BPC produced an estimated 1,052 GWh in 2007, while demand was estimated to...
. Debswana operates the nearby Morupule Colliery
Morupule Colliery
The Morupule Colliery is a coal mine located in Palapye, Botswana, and owned and operated by Debswana, a partnership between the government of Botswana and De Beers...
to supply coal to it. 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
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
is an increasingly important industry in Botswana, accounting for almost 12% of GDP. One of the world's unique ecosystems, the Okavango Delta
Okavango Delta
The Okavango Delta , in Botswana, is the world's largest inland delta. It is formed where the Okavango River empties onto a swamp in an endorheic basin in the Kalahari Desert, where most of the water is lost to evaporation and transpiration instead of draining into the sea...
, 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
Central Kalahari Game Reserve
Central Kalahari Game Reserve is an extensive national park in the Kalahari desert of Botswana. Established in 1961 it covers an area of 52,800 km² making it the second largest game reserve in the world.The park contains wildlife such as giraffe, brown hyena, warthog, cheetah, wild dog,...
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
Safari
A safari is an overland journey, usually a trip by tourists to Africa. Traditionally, the term is used for a big-game hunt, but today the term often refers to a trip taken not for the purposes of hunting, but to observe and photograph animals and other wildlife.-Etymology:Entering the English...
destinations for tourism are Moremi Game Reserve in the Okavango Delta
Okavango Delta
The Okavango Delta , in Botswana, is the world's largest inland delta. It is formed where the Okavango River empties onto a swamp in an endorheic basin in the Kalahari Desert, where most of the water is lost to evaporation and transpiration instead of draining into the sea...
, and Chobe National Park
Chobe National Park
Chobe National Park, in northwest Botswana, has one of the largest concentrations of game in Africa. By size, it is the third largest park of the country, after the Central Kalahari Game Reserve and the Gemsbok National Park, and is the most diverse...
. 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
Khwai
Khwai a small village of approximately 400 BaBukakhwe or River Bushmen located just outside of Moremi Game Reserve in Northern Botswana. The people of Khwai are currently developing an eco-tourism and sustainable development program to conserve the area's unique environment.The Babukakhwae are a...
and its Khwai Development Trust.
Botswana was the setting for the 1980 movie The Gods Must Be Crazy
The Gods Must Be Crazy
The Gods Must Be Crazy is a 1980 film, written and directed by Jamie Uys. The film is the first in The Gods Must Be Crazy series of films. Set in Botswana and South Africa, it tells the story of Xi, a Sho of the Kalahari Desert whose band has no knowledge of the world beyond...
, 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
The No. 1 Ladies' Detective Agency
The No. 1 Ladies' Detective Agency is a series of twelve novels by Scottish author Alexander McCall Smith. The agency is located in Gaborone, capital of Botswana. Its founder is a Motswana woman, Mma Precious Ramotswe, who features as the stories' protagonist and main detective...
by Alexander McCall Smith
Alexander McCall Smith
Alexander "Sandy" McCall Smith, CBE, FRSE, is a Rhodesian-born Scottish writer and Emeritus Professor of Medical Law at the University of Edinburgh. In the late 20th century, McCall Smith became a respected expert on medical law and bioethics and served on British and international committees...
and the American dramatisation that followed them.
Agriculture
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 CommissionBotswana Meat Commission
The Botswana Meat Commission was established by the newly-independent Botswana government in 1967 to be solely responsible for the slaughter and marketing of all beef exports from Botswana....
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
Arable land
In geography and agriculture, arable land is land that can be used for growing crops. It includes all land under temporary crops , temporary meadows for mowing or pasture, land under market and kitchen gardens and land temporarily fallow...
. 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
Sorghum
Sorghum is a genus of numerous species of grasses, one of which is raised for grain and many of which are used as fodder plants either cultivated or as part of pasture. The plants are cultivated in warmer climates worldwide. Species are native to tropical and subtropical regions of all continents...
, corn
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
, and millet
Millet
The millets are a group of small-seeded species of cereal crops or grains, widely grown around the world for food and fodder. They do not form a taxonomic group, but rather a functional or agronomic one. Their essential similarities are that they are small-seeded grasses grown in difficult...
. 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
Botswana seeks to diversify its economy away from mineralMineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...
s, 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
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
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
H. J. Heinz Company
The H. J. Heinz Company , commonly known as Heinz and famous for its "57 Varieties" slogan and its ketchup, is an American food company with world headquarters in Pittsburgh, Pennsylvania.Perhaps best known for its ketchup, the H.J...
, 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
Hyundai
Hyundai ) is a global conglomerate company, part of the Korean chaebol, that was founded in South Korea by one of the most famous businessmen in Korean history: Chung Ju-yung...
operated a car assembly plant in Botswana from 1994 to 2000.
Foreign exchange controls
Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.Common foreign exchange controls include:...
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
Fischer-Tropsch process
The Fischer–Tropsch process is a set of chemical reactions that convert a mixture of carbon monoxide and hydrogen into liquid hydrocarbons. The process, a key component of gas to liquids technology, produces a petroleum substitute, typically from coal, natural gas, or biomass for use as synthetic...
) 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
Transparency International
Transparency International is a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide...
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
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
and Standard & Poor's
Standard & Poor's
Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...
. 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
Lesotho
Lesotho , officially the Kingdom of Lesotho, is a landlocked country and enclave, surrounded by the Republic of South Africa. It is just over in size with a population of approximately 2,067,000. Its capital and largest city is Maseru. Lesotho is a member of the Commonwealth of Nations. The name...
, 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
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
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
Windhoek
Windhoek is the capital and largest city of the Republic of Namibia. It is located in central Namibia in the Khomas Highland plateau area, at around above sea level. The 2001 census determined Windhoek's population was 233,529...
, Namibia. Following South Africa's accession to the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
(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
Mercosur
Mercosur or Mercosul is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people,...
and an Economic Partnership Agreement with the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
as part of SADC.
Southern African Development Community
The Southern African Development Community is an inter-governmental organization headquartered in Gaborone, Botswana. Its goal is to further socio-economic cooperation and integration as well as political and security cooperation among 15 southern African states...
(SADC), a successor to the Southern African Development Coordination Conference
Southern African Development Coordination Conference
The Southern African Development Coordination Conference , which was the forerunner of the Southern African Development Community , was formed in Lusaka, Zambia, on 1 April 1980, following the adoption of the Lusaka Declaration by the nine founding member states The Southern African Development...
(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
Robert Mugabe
Robert Gabriel Mugabe is the President of Zimbabwe. As one of the leaders of the liberation movement against white-minority rule, he was elected into power in 1980...
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
Child labour in Botswana
Little is known about the nature and extent of child labour in Botswana, although recent studies have shown that the phenomenon does occur in the country....
, which was adopted in the period 2006-2007. Free the Children
Free The Children
Free The Children is an international charity and youth movement founded in 1995 by children's rights advocate Craig Kielburger. The organization is largely youth-funded, based on the concept of "children helping children." It specializes in sustainable development in countries of Kenya, Ecuador,...
delisted Botswana as a nation harbouring child-labour facilities in 2008.
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 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
Botswana pula
The pula is the currency of Botswana. It has the ISO 4217 code BWP and is subdivided into 100 thebe. Pula literally means "rain" in Setswana, because rain is very scarce in Botswana - home to much of the Kalahari Desert - and therefore valuable. Pula also means "blessing" as rain is considered a...
, 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
Crawling peg
Crawling peg is an exchange rate regime usually seen as a part of fixed exchange rate regimes which allows depreciation or appreciation in an exchange rate gradually...
" 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.
Gaborone
Gaborone
' is the capital and largest city of Botswana with a population of 191,776 based on a 2006 survey, about 10% of the total population of Botswana....
is host to the headquarters of the 14-nation Southern African Development Community
Southern African Development Community
The Southern African Development Community is an inter-governmental organization headquartered in Gaborone, Botswana. Its goal is to further socio-economic cooperation and integration as well as political and security cooperation among 15 southern African states...
(SADC). A successor to the Southern African Development Coordination Conference
Southern African Development Coordination Conference
The Southern African Development Coordination Conference , which was the forerunner of the Southern African Development Community , was formed in Lusaka, Zambia, on 1 April 1980, following the adoption of the Lusaka Declaration by the nine founding member states The Southern African Development...
(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 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
Gaborone
' is the capital and largest city of Botswana with a population of 191,776 based on a 2006 survey, about 10% of the total population of Botswana....
as well.
See also
- BotswanaBotswanaBotswana, officially the Republic of Botswana , is a landlocked country located in Southern Africa. The citizens are referred to as "Batswana" . Formerly the British protectorate of Bechuanaland, Botswana adopted its new name after becoming independent within the Commonwealth on 30 September 1966...
- Economy of AfricaEconomy of AfricaThe economy of Africa consists of the trade, industry, and resources of the people of Africa. , approximately 922 million people were living in 54 different countries. Africa is by far the world's poorest inhabited continent...
- Economy of South AfricaEconomy of South AfricaThe economy of South Africa is the largest in Africa, accounts for 24% of its Gross Domestic Product in terms of PPP, and is ranked as an upper-middle income economy by the World Bank, which makes the country one of only four countries in Africa represented in this category...
- List of Botswana companies
- List of South African companies
- South AfricaSouth AfricaThe Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...