Recent Developments & Prospects
Economic Cooperation, Regional Integration & Trade
Economic & Political Governance
Public Sector Management, Institutions & Reform
Natural Resource Management & Environment
Thematic analysis: Structural transformation and natural resources
Authors: Peninah Kariuki, Fitsum Abraha, Sennye Obuseng
- Botswana’s economic performance improved in 2013, with real GDP growth estimated to have increased to 5.4% from 4.2% in 2012, with short-term forecasts through to 2015 remaining sound, premised on improved prospects in the predominant diamond industry.
- On the political front, the focus is currently centred on the general elections due to be held in 2014 that are expected to be conducted peacefully, in line with the country’s track record of political maturity exhibited in past elections.
- Despite its middle-income status, Botswana continues to grapple with significant social challenges including unequal distribution of wealth, high levels of poverty, unemployment and HIV/AIDS prevalence.
Botswana’s economic performance improved in 2013, continuing the recovery that set in after the 2008/09 global economic crisis. Real GDP growth is estimated to have increased to 5.4% in 2013 from 4.2% in 2012, mainly driven by service-oriented sectors, notably trade, transport and communication, public and financial services. In addition, the country’s predominant mining sector registered are bound in spite of the impact of the sluggish global prospects. These positive developments were, however, somehow counteracted by water shortages and electricity outages arising from a severe drought. The sound performance of the non-mining sectors is laudable as it suggests nascent steps towards economic diversification. Short-term prospects are robust with economic growth expected to remain at around 5% per annum through to 2015, mainly premised on downstream manufacturing due to the recent relocation of De Beers’ diamond-sorting and sales activity from London to Gaborone, as well as the attraction of a range of complementary activities.
Despite its middle-income status, Botswana has to contend with challenges emanating from its narrow economic structure and the attendant over-dependence on the mining sector, in particular diamonds. While the government has a reputation for the prudent management of mining revenues and also boasts a good governance record and stable democracy, the need for diversification remains critical. On the social front, the distribution of resources and level of development remain major concerns. With a Gini coefficient of 0.61, Botswana portrays a relatively unequal distribution of wealth. The incidence of poverty is also high, with 18.4% of the population living below the poverty line. Other challenges include a high unemployment rate of 17.8%, and relatively low Human Development Index (HDI) ranking and score mainly due to the high HIV/AIDS prevalence of 23.4% that drags down life expectancy.
With regard to global value chains (GVCs), official data reveal that by value, the sectors most engaged in these are mining (diamonds, copper nickel, soda ash and gold), vehicles, textiles, beef and tourism, with the diamond subsector playing the most visible role. The relocation of the Diamond Training Company from London to Botswana in 2013 and the government’s decision to reserve a proportion of Botswana’s diamonds for local processing are expected to consolidate the country’s role as a major player in the diamond GVC. With regard to the other commodities and services, there is significant scope for Botswana to enhance its positioning within other mineral, beef and tourism value chains in view of ongoing reforms to address the existing challenges. These are articulated in a number of strategies to enhance private sector competitiveness and growth such as the Excellence Strategy, the Economic Diversification Drive, the National Export Strategy and the Private Sector Development Strategy. In addition, other efficiency-enhancing measures that are in place include investment in broadband width and the modernisation of the payment system.
Table 1: Macroeconomic indicators
|Real GDP growth||4.2||5.4||5.1||5|
|Real GDP per capita growth||3.3||4.5||4.3||4.1|
|Budget balance % GDP||-0.4||-0.2||0.5||1.1|
|Current account balance % GDP||0.2||1.8||2.2||-0.9|
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.