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 slightly more than two million, have made it an upper middle-income country. The World Bank’s engagement is focused on helping it consolidate its progress while addressing a range of emerging challenges and notable declines in some key areas.
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 in the next general elections scheduled for October 23, 2019.
Economic Overview
Botswana has enjoyed strong and stable growth since independence, with sizable fiscal buffers and prudent policies playing a key role in shielding the economy despite diamond market weakness and volatility. Despite this, more recently, the limitations of Botswana’s diamond-led development model have become more apparent: growth is slower, inequality remains high and job creation is limited.
After achieving strong growth of 4.5% in 2018, growth is expected to slow to 4% in 2019 reflecting muted trends in global diamond mining and a less buoyant private sector. Economic growth is expected to remain stable in the medium-term, with the authorities’ ability to implement a new growth model focusing on export diversification strategy as outlined in the National Development Plan 11 (NPD 11) and much needed doing business reforms will play a key role in economic performance.
Botswana’s fiscal position has been under pressure in recent years and is likely to remain strained in the short-term as downward revisions in mining production lead to lower than expected mineral revenues. Along with feeble growth in Southern African Customs Union receipts and much needed spending in the priority areas outlined under the NDP 11, this is expected to push the fiscal deficit up towards 4% of GDP in 2019/2020. Financing needs are likely to be covered through the domestic markets, although overall debt levels are expected to remain adequate at less than 20% of GDP.
Social Context
While the economic model has delivered important results, the 2015/16 Multi-Topic Household Survey (MTHS) indicates that poverty and high levels of income inequality persist. Poverty has come down to approximately 16%, but some 30% of the population remains just above the poverty line and thus vulnerable to a range of shocks. Botswana’s level of income inequality, while declining, remains one of the world’s highest. With a Gini coefficient of 0.52, greater focus must be given to the inclusiveness of Botswana’s economic model while improving how public institutions manage the fiscal space. Because the model has generated strong state-dependence and limited private sector job creation, unemployment remains high (approximately 18%) with youth unemployment posing a critical challenge. Addressing these challenges will require improving the quality of infrastructure (water and electricity), essential basic services (education, health, and social safety nets), as well as accelerating reforms to the business environment and effective support for entrepreneurship.
While Botswana’s social sector expenditures have been generous, they have not yielded the impact one might expect. The World Bank’s Human Capital Index (HCI), launched at the 2018 Annual Meetings, scores Botswana at 0.42. The purpose of the HCI is to promote attention and action to improving the level and quality of government investments in child health, nutrition, and education given their strong links to labor productivity and economic competitiveness. Botswana’s HCI score suggests that a Motswana child born today will only be 42% as productive when she grows up as she could have been if she had enjoyed complete education and health. 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, with a Gini coefficient of 0.52, Botswana’s income inequality is one of the highest in the world.
Last Updated: Oct 13, 2019
