Economy of Botswana

Since independence, Botswana has had the highest average economic growth rate in the world at about 9% per year from 1966 through 1999. Growth in formal sector employment has averaged about 10% per annum over Botswana's first 30 years of independence. The government has consistently maintained budget surpluses and has substantial foreign exchange reserves totaling about $6.2 billion in 1999.

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.

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 2.8% to GDP--primarily through beef exports--but it remains a social and cultural touchstone. Cattleraising in particular dominated Botswana's social and economic life before independence. The national herd was about 2.5 million in the mid-1990s, though the government-ordered slaughter of the entire herd in Botswana's northwest 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.

Private Sector Development and Foreign Investment
Botswana seeks to diversify its economy away from minerals, the earnings from which have leveled off. In 1998-99, nonmineral 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.

U.S. investment in Botswana is growing. 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.

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 decisionmaking authority over duties--held, until at least 1996, exclusively by the Government of South Africa--have been increasingly controversial, and the members began renegotiating the arrangement in 1995. 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.

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.

Economy - overview: Agriculture 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. Diamond mining and tourism also are 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, which will double the capacity of the country's main diamond mine, will be finished in early 2000. This will be the main force behind continued economic expansion.

GDP: purchasing power parity - $5.7 billion (1999 est.)

GDP - real growth rate: 6.5% (1999 est.)

GDP - per capita: purchasing power parity - $3,900 (1999 est.)

GDP - composition by sector:
agriculture: 4%
industry: 46% (including 36% mining)
services: 50% (1998 est.)

Population below poverty line: 47% (1999 est.)

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 7.7% (1999 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: 20%-40% (1999 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: 4.6% (FY92/93)

Electricity - production: 1 billion kWh (1998)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 1.619 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 689 million kWh (1998)

Agriculture - products: sorghum, maize, millet, pulses, groundnuts (peanuts), beans, cowpeas[?], sunflower seed; livestock

Exports: $2.36 billion (f.o.b., 1999 est.)

Exports - commodities: diamonds 72%, vehicles, copper, nickel, meat (1998)

Exports - partners: EU 74%, Southern African Customs Union (SACU) 21%, Zimbabwe 3% (1996)

Imports: $2.05 billion (f.o.b., 1999 est.)

Imports - commodities: foodstuffs, machinery and transport equipment, textiles, petroleum products

Imports - partners: Southern African Customs Union (SACU) 78%, Europe 8%, Zimbabwe 6% (1996)

Debt - external: $651 million (1998)

Economic aid - recipient: $73 million (1995)

Currency: 1 pula (P) = 100 thebe

Exchange rates: pulas (P) per US$1 - 4.6168 (January 2000), 4.6244 (1999), 4.2259 (1998), 3.6508 (1997), 3.3242 (1996), 2.7722 (1995)

Fiscal year: 1 April - 31 March

See also : Botswana