Botswana: Economic and Political Overview

Economic Indicators

Botswana has one of the strongest economies in Africa, and according to the IMF, GDP grew by an estimated 3.8% in 2023, following a 5.8% growth rate one year earlier. The deceleration was due to weaker demand for rough diamonds. The IMF forecast indicates a gradual rebound in growth for 2024 and 2025, surpassing 4%, driven by increased prices and quantities of diamonds produced. Diamond mining, constituting about 95% of the mining sector, and diamond exports are poised to rise due to increasing demand, notably from the eurozone, its second-largest market, amid a stronger global economy. Furthermore, a new agreement between the Botswana government and De Beers, as part of their 50/50 Debswana diamond mining joint venture, ensures a greater allocation of production to Botswana (30%, increasing to 50% by 2033 from the previous 25%).

Botswana has always maintained a conservative fiscal policy and low levels of foreign debt, and although general government debt increased to an estimated 18.7% in 2023 (from 18% one year earlier), by 2025, the debt-to-GDP ratio is expected to decrease to around 17%, as per the IMF projections. The majority of the budget from the 12th National Development Plan, ratified in March 2023, was directed towards the Ministry of Lands and Water. This allocation aims to fund extensive projects aimed at rehabilitating and expanding existing water networks. Authorities implemented a fiscal expansion in FY2023, which should be succeeded by two years of significant fiscal adjustments, aiming to achieve a minor fiscal surplus by FY2025. Alongside a gradual rebound in diamond production and prices, foreign exchange (FX) reserves are expected to stabilize at around 5 ½ months of imports over the medium term. However, the outlook hinges largely on the demand for diamonds and the trajectory of the global economic cycle. Despite these positive outlooks, the growth level will remain too low to achieve Botswana’s development objectives and create enough jobs to absorb the new entrants. The government’s priority is to diversify the economy, making it less dependent on a volatile mining sector, and rely more on agriculture, services, and manufacturing. Botswana is working to expand its services industry by creating 'hubs' in the health, education, innovation, financial services, and tourism sectors, which it hopes will also strengthen its regional integration. Inflation has declined since August 2022 and is currently below the lower threshold of the central bank's target range. According to the IMF, it stood at an estimated 5.9% in 2023 and should decline to 4.5% by 2025.

Botswana is regularly ranked first among African countries regarding governance and transparency. Its primary assets are its robust regulatory framework and facilitated procedures for property registration. However, despite its relative prosperity, Botswana still has one of the highest levels of inequality in the world (Gini index of 53.3) and suffers from a high unemployment rate and a lack of skilled labor. According to the last available data, in 2022, the unemployment rate remained elevated, at around 25% (IMF), and it was especially high among young people. The country’s GDP per capita (PPP) was estimated at USD 18,329 in 2022 by the World Bank.

Main Sectors of Industry

Botswana is the world's second-largest diamond producer, and it possesses one of the largest coal reserves in Africa (an estimated 212 billion tonnes). Uranium, copper, and shale gas are also abundant in the country. Agriculture contributes to only 1.8% of GDP and employs 18% of the population, according to the World Bank. However, it is an important source of income for many Batswana who live in rural areas. Cattle raising dominates the sector and contributes 80% to the agricultural GDP. The cattle population nearly equals the human population, and most livestock production is export-oriented (towards the European Union and other destinations). As desert and poor soils cover more than 70% of the country, arable land is very scarce. Crop production is not too dynamic, mainly due to traditional farming methods, erratic rainfall, recurrent droughts, and erosion. According to FAO, in 2023, cereal production totaled 73,000 tonnes, marking a 15% decrease from the five-year average due to below-average rainfall and irregular distribution. Additionally, elevated temperatures during the cropping season worsened the impact of reduced rainfall on crop yields.

The industrial sector contributes to 37.4% of GDP and employs 16%, which is dominated by diamond processing, food processing (mostly beef), textiles, and mining. Botswana ranks as the top diamond producer globally in terms of value and second in volume. The country also mines various other minerals, including nickel, copper, coal, soda ash, gold, silver, semiprecious stones, and granite. Recent exploration efforts have expanded to include minerals like uranium, graphite, and lithium. The mining sector contributes about one-third of total revenues and about 80 percent of foreign exchange earnings. The manufacturing sector is still underdeveloped and only accounts for 5% of GDP (World Bank).

The service sector is by far the largest component of GDP and accounts for 55.9% of the economy and employs 67% of the active population. The expanding sectors are tourism (notably ecotourism) and transportation. The country has some of the most unique ecosystems in the world and is a major safari destination. Botswana has a growing financial sector, and the Botswana Stock Exchange (BSE) is among the best-performing stock exchanges in Africa. As per the banking sector, all commercial banks are either majority or wholly foreign-owned.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	18.0	15.8	66.2
Value Added (in % of GDP)	1.6	34.3	59.4
Value Added (Annual % Change)	1.3	2.3	3.0

Source: World Bank - Latest available data.

 

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Monetary Indicators	2016	2017	2018	2019	2020
Botswana Pula (BWP) - Average Annual Exchange Rate For 1 MUR	0.31	0.30	0.30	0.30	0.29

Source: World Bank - Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

67,6/100

World Rank:

51

Regional Rank:

3

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Foreign Trade in Figures

Botswana has made significant efforts to open up to international trade and strengthen its integration in the region, despite its geographical position. According to the World Bank, international trade accounts for around 85% of the country's GDP. Diamonds represented 87.3% of the country’s total exports in 2022, while other significant exports included copper (3.8%), insulated wires (1.8%), and bovine animals (1.2%). Conversely, imports were led by diamonds (27.7%), petroleum oils (16.7%), motor cars (1.8%), cane or beet sugar and chemically pure sucrose (1.7%), and motor vehicles for the transport of goods (1.7% - data from Comtrade). The country is heavily dependent on electricity imports, as it only produces 60% of its needs domestically. Moreover, Botswana’s trade balance is highly dependent on global prices and demand for diamonds.

In terms of countries, the main export partners in 2022 were the United Arab Emirates (27.1%), Belgium (19.0%), India (15.2%), South Africa (10.1%), and Hong Kong (6.5%), whereas imports came chiefly from South Africa (62.7%), Namibia (7.1%), Belgium (5.8%), India (4.5%), and Canada (3.6% - data from Comtrade). The country is a member of several regional and foreign trade organizations like the WTO, the SACU (Southern African Customs Union), and the SADC (Southern African Development Community), and has signed trade agreements with the European Union and the United States. Botswana is among the freest economies in Sub-Saharan Africa.

According to the last available data from the WTO, Botswana exported USD 8.3 billion worth of goods in 2022, while its goods imports reached almost USD 8.1 billion. Overall, imports decreased by 3.6% compared to the previous year, while exports grew by 12.1%, amid a higher global demand for diamonds. As for services, the country imported USD 943 million and exported USD 588 million. The country’s trade balance fluctuates according to diamond prices and was estimated to be positive by 1.5% of GDP in 2022 by the World Bank (compared to a deficit of 4.9% one year earlier).

Sources of General Economic Information

Ministries

Official list of ministries
Ministry of Finance and Economic Development
Ministry of International Affairs and Cooperation
Ministry of Infrastructure and Housing Development
Ministry of Investment, Trade and Industry
Ministry of Environment, Natural Resources Conservation and Tourism

Statistical Office

Central Statistics Office

Central Bank

Central Bank

Stock Exchange

Botswana Stock Exchange

Search Engines

Google Botswana
Yellow Pages Botswana
Local Botswana - Botswana Business Directory

Economic Portals

Botswana Trade Portal

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