Botswana is an upper-middle income country. Botswana that has achieved fastest sustained economic growth averaging 5% per annum over the past decade. However, heavy reliance on commodities renders the country vulnerable to international market fluctuations. Prolonged uncertainty in global markets and the slow pace of economic recovery in advanced countries continue to act as a drag on Botswana’s economic outlook. In 2015, the economy contracted by 0.3%, compared to a growth of 3.2% in 2014, mainly due to a decline in mining production, owing to weak global demand for diamonds. Extended drought also adversely affected the performance of agriculture. In addition, electricity and water supply disruptions had unfavourable impact on manufacturing, trade, tourism, and transport and communications sectors. The fiscal balance swung from a surplus of 3.7% of gross domestic product (GDP) in FY2014/15 to an estimated deficit of 4.5% of GDP in FY2015/16, largely due to much lower than expected revenue. The government relies mainly on two volatile sources of revenue inflows, mineral revenues (which accounts for almost 40% of total revenue) and Southern African Customs Union (SACU) revenues (over one-quarter of total revenue). Expenditures increased by 2.2% of GDP due to counter-cyclical fiscal stimulus including the start of the Economic Stimulus Program. The economy is expected to rebound with projected GDP growth rates of 3.5% and 4.1% respectively in 2016 and 2017, driven mainly by an expected improvement in the mining sector as demand from developed economies stabilizes. Continued fiscal stimulus is expected to drive the non-mining activity thus contributing to the positive performance. The combination of expenditure growth and lower revenue is expected to keep the fiscal balance in the red for the next few years. The current account will continue narrowing further in 2016 and 2017 on continued softness in the mining sector before gradual improvement.
Why invest in Botswana?
- The country has achieved political stability for about 50 years;
- Botswana is ranked among the world’s least corrupt countries, a reputation fortified both by public, private and civic anti-corruption institutions and by a deeply ingrained anti-corruption culture in the country’s economic sectors;
- Botswana does not have foreign exchange controls or restrictions on capital outflows from financial institutions, thereby facilitating investor activity;
- The country has attained a low, stable and predictable level of inflation;
- Botswana has invested heavily in the nationwide development of primary and secondary infrastructure, constructing and implementing world class roads, dams, electricity and ICT installations to urban, rural and tourist areas and
- The country has developed significant human resource skills in the mining, construction, financial services, tourism and travel sectors.
The country has for over a half-century experienced political stability, good governance and prudent economic and natural resource management that has helped it to achieve robust economic growth. The political system is open, which factor has led to the country being stable. The country has many political parties. But the Botswana Democratic Party has won all of the 10 consecutive uninterrupted elections held every five years since 1965. The president of the country is nominated from the presidential candidate whose party wins most seats in the general elections. The current President, Lieutenant General Seretse Khama Ian Khama, is the fourth President and first born son of Botswana’s founder President, the late Sir Seretse Khama.
The 2011 Botswana Population and Housing Census confirmed the population of Botswana as 2,024,787 showing an increase of 20.5% increase in population when compared with earlier census of 2001. Botswana is one of the world’s most sparsely populated countries with a population density of just 3 people per square kilometre. Botswana is one of the hardest hit in the world by the HIV/AIDS epidemic. About 25% of Botswana’s population is estimated to be infected.
About 61 % of the population of Botswana live in urban areas and the majority of the population of Botswana live within 100 kilometres of Gaborone. Botswana has an urbanisation rate of 2.3%.
Doing business in Botswana
The highlights of World Bank score of doing business in Botswana is summarised as follows;
|Topics||World Bank 2017 Rank||World Bank 2016 Rank||Change in Rank|
|Starting a Business||153||143||
|Dealing with Construction Permits||50||53||
|Protecting Minority Investors||145||145||–|
|Trading across Borders||55||52||-3|
The government is the in process of creating conducive environment for doing business in all the above topics considered by World Bank in the evaluation.
Standard & Poor’s credit rating for Botswana stands at A- with negative outlook. Moody’s credit rating for Botswana was last set at A2 with stable outlook.
Botswana has abolished all foreign exchange controls.
The Constitution of Botswana provides for an independent judiciary. The civil law is based on the Roman-Dutch system. The courts readily enforce legal agreements related to commercial dealings. Foreign and domestic business people have equal access to the judicial system. Botswana courts will therefore enforce decisions of a foreign court found to have jurisdiction in a given case. Botswana is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA), and therefore accepts binding international arbitration of investment disputes.
Key development challenges
- The country faces high levels of poverty and inequality especially in the rural areas;
- Low human development despite the education expenditure being among the highest in the world, at around 9% of GDP. The provision of nearly universal and free primary education has not created the skilled workforce Botswana needs to diversify its economy.
- Unemployment has remained persistent at nearly 17.8%
- The HIV/AIDS adult prevalence rate remains at 22%, contributing to education and health outcomes that are below those of countries in the same income group.
- Lack of adequate supply of water presents a significant challenge to sustaining economic growth;
- Overdependence on diamond for generation of revenue. Projections of future diamond revenues are uncertain.
Botswana is number 35 least corrupt nation out of 175 countries and scored 60 points out of 100 according to the 2016 Corruption Perceptions Index reported by Transparency International.
Botswana is one of the most secure and safe countries in Africa and compares well worldwide for low crime rates and the rule of law. The country has little or no exposure to large scale security concerns, such as terrorism, cybercrime, and money laundering.
Unemployment and skilled labour
The unemployment has remained persistent at nearly 17.8%, and as a consequence, income inequality in Botswana is among one of the highest in the world.
Attitude to Foreign Direct Investment
Botswana government makes good efforts in attracting foreign investors despite some regulatory barriers. It has launched initiatives to promote economic activity and foreign investment in specific areas, including the establishment of “hubs” to promote economic growth through agriculture, innovation, diamonds, education, health and transport. It has abolished all foreign exchange controls and instituted low corporate tax rates (15% for manufacturing enterprises). It has convened a government-wide task force to improve scores in specific areas of the World Bank’s Doing Business report. The government also makes grants available to investors who partner with citizens and will extend credit to investors presenting business proposals that have undergone appropriate due diligence. The Botswana Export Development and Investment Authority (BEDIA) serve as the main point of contact for foreign investors and have expressed eagerness for working with established businesses seeking to expand their operations to Botswana. BEDIA will assist those investors seeking to establish export-oriented manufacturing enterprises to obtain clearances, residence permits, work permits, factory space, and land they need with minimal delays. After company start up, BEDIA continues to provide services addressing any problems encountered.
Restrictions on Foreign investment
Botswana reserves some licenses solely for citizens, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excludes chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying.
Intellectual Property (IP) Rights.
Botswana’s legal Intellectual Property Rights (IPR) structure is adequate, although some improvements are needed. The key challenge facing the country is more of effective implementation. The Companies and Intellectual Property Authority (CIPA) was established in 2014 in order to strengthen Botswana’s IPR regime, and has established improved interagency cooperation and implementation as a priority. IPR infringement does occur in Botswana, primarily through the sale of counterfeit items in low-end sales outlets. In June 2014 government authorities worked with Namibian authorities and Interpol to seize 644,000 counterfeit items valued over $3 million in Botswana and Namibia. IPR are protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge, and geographic indicators. The 2000 Copyright & Neighboring Rights Act also protects art and literary works and the 1975 Registration of Business Names Act oversees corporate name and registration procedures. Other IPR-related laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act. Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property. Intellectual Property is registered through CIPA. This Authority comprises of three offices: the Companies and Business Office, the Industrial Property Office and the Copyright Office.
Diamond, copper, nickel, gold, and coal.
Investment Climate in Botswana has been summarized to include the following;
Sources of information