Botswana is located at the center of southern Africa, positioned between South Africa, Namibia, Zambia, and Zimbabwe. One of the world’s poorest countries at independence in 1966, it rapidly became one of the world’s development success stories. Significant mineral (diamond) wealth, good governance, prudent economic management and a relatively small population of more than two million have made it an upper middle-income country.
The World Bank’s engagement is focused on helping the country consolidate its progress while addressing a range of persistent and emerging challenges.
Political Context
Botswana has a stable political environment with a multi-party democratic tradition. General elections are held every five years. The ruling Botswana Democratic Party (BDP) has been in power since 1966. With the end of his second five-year term, President Ian Khama stepped down and, as per convention, the Vice-President (Mokgweetsi Eric Masisi) assumed the Presidency on April 1, 2018 and will stand for the presidency in the next general elections in 2019.
Economic Overview
Since gaining independence from Britain, Botswana has been one of the world’s fastest growing economies, averaging 5% per annum over the past decade. Its reliance on commodities renders it vulnerable to international market fluctuations. Economic activity is expected to intensify to 4.5% in 2017, up to 4.8% by 2019. Economic growth will be driven by the mining activity, construction, services sector and intensified public investments.
The National Budget for 2018/19 was passed. Presented to Parliament on February 5, 2018, the new budget puts total expenditure and net lending at P67.87 billion (33.4% of gross domestic product (GDP), an increase of P8.3 billion (1.3%) compared to the previous fiscal year. The (capital) budget is P19.31 billion, up by P2.4 billion (16.6%) over the previous fiscal year. A budget deficit of P3.59 billion (1.8% of GDP) is expected despite the positive domestic economic outlook.
Fiscal spending will continue to advance at today’s more-rapid pace, with priority for areas identified in the National Development Plan 11 (NDP11) that focuses in three key areas:(i) tackling poverty, (ii) inclusive growth, and (iii) job creation
Social Context
Despite Botswana’s economic growth, the country faces high levels of poverty and inequality, especially in rural areas and the southern part of the country. It is expected to make slow progress on poverty reduction over the medium-term, with poverty falling to approximately 16% according to the 2015/16 Multi-Topic Household Survey. Accelerating poverty reduction will require bold decisions that encourage greater private sector job creation, higher value-added agricultural production and services, credit expansion, and lower household debt. While Botswana’s social sector expenditures have been generous, they have not yielded the impact one might expect. Education expenditure is among the highest in the world —about 9% of GDP — and includes the provision of nearly universal free primary education but has not created a skilled workforce. Unemployment has remained stubbornly high at 17.7% and Botswana’s income inequality is one of the highest in the world.
Key Development Challenges
Botswana’s extraordinarily high inequality is holding the country back, making it difficult for sustained growth to lead to rapid poverty reduction.
The current economic model has delivered important results, but it has also generated strong state-dependence (as both the main investor and employer) and little in the way of innovative value-added manufacturing or services in the economy. More importantly, the model has not facilitated private sector-led job creation, which in turn has exacerbated national inequality. Policies designed to support improvements to the national investment climate, more efficient social sector spending, and stronger human and physical assets are essential if Botswana’s future development is to be more inclusive and avoid the “upper middle-income trap.”
Last Updated: Nov 01, 2018
