The World Bank in Botswana

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 about 2.4 million (2021), have made it an upper middle-income country with an  agenda of becoming a high-income country by 2036. 

Political Context

Botswana’s stable political environment includes a multi-party democratic tradition, with general elections held every five years. The ruling Botswana Democratic Party (BDP) has been in power since 1966. In October 2019, Botswana held its 11^th general elections, with President Mokgweetsi Eric Masisi assuming the presidency. Peggy Serame was appointed Minister of Finance and Economic Development in April 2021.

Economic Overview

Botswana’s macroeconomic policy framework is anchored in prudent macroeconomic policies and good governance, but despite having maintained positive political and economic levels over the years, challenges remain. Botswana's reliance on diamonds and a public sector-driven model makes the economy vulnerable to external shocks, as diamonds contribute over 80%of total exports and are a major source of fiscal revenues. This vulnerability was evident during the COVID-19 pandemic when the economy contracted by 8.7% in 2020 and fiscal pressures rose.

Inequality in Botswana remains among the highest in the world, job creation lags, and unemployment is structurally high at 26% at the end of 2021. Economic growth rebounded to an estimated 12.1% in 2021.  As the base effects from the pandemic shock fade, the World Bank projects moderate  in 2022 of about 4.1%, driven by improvements in the global demand for diamonds, the easing of restrictions on mobility, and an expansionary fiscal stance, all supported by extensive rollout of COVID-19 vaccines.

As inflationary pressures mount, the Bank of Botswana has tightened monetary policy, raising the newly introduced Monetary Policy Rate three times since the beginning of 2022. The higher fiscal revenues driven by diamond exports are helping to replenish the Pula Fund. The fiscal deficit is set to increase, with higher government spending to cushion households against soaring higher inflation. Structural reforms, needed to boost competitiveness for more and better jobs, remain essential to tackling the unemployment rate of 26%.

Social Context

Botswana continues to face structural challenges, slow growth, and shock from the COVID-19 pandemic. The recent Botswana Multi-Topic Survey: Labour Force Module Report indicates the unemployment rate rose to 26% in 2021, with youth unemployment posing a critical challenge. Addressing this and other challenges will require improving the quality of infrastructure (water and electricity), essential basic services (education, health, and social safety nets), and accelerating reforms to the business environment and providing effective support for entrepreneurship and private-sector job creation. The  World Bank’s Human Capital Index (HCI)  scores  Botswana at 0.42. The purpose of the HCI is to bring attention and action to improving the level and quality of government investments in child health, nutrition, and education, given the strong links between them and labor productivity and economic competitiveness. Education expenditure in Botswana is among the highest in the world, and includes the provision of nearly universal free primary education,  but it has not created a skilled workforce.

Last Updated: Oct 07, 2022

The World Bank’s  Country Partnership Framework (CPF) for the period of FY16–FY21,  was closely aligned with the Government’s National Development Plan 11 (NDP 11) and Botswana’s Vision 2036 goals. The CPF supported Botswana’s development goals by focusing on three pillars: (i) promoting private sector-led, jobs intensive growth; (ii) strengthening human and physical assets; and (iii) supporting effective resource management. The CPF was informed by the Systematic Country Diagnostic (SCD), endorsed in March 2015, and developed in consultation with the Botswana government. An update of the SCD is under preparation and will be completed in the second quarter of FY23, followed by preparations of a new CPF in the last quarter of FY23.

The International Finance Corporation (IFC) supports the competitiveness agenda through selective investment technical assistance interventions. MIGA also supports the country’s competitiveness agenda through the provision of political risk insurance, when it is needed by foreign investors active in the country. 

Last Updated: Oct 07, 2022

• Programmatic Economic Resilience and Green Recovery Development Policy Loan I (DPO) ($250 million): The World Bank Group (WBG) first ever budget support operation was approved at the end of FY21, following the economic crisis caused by the COVID-19 pandemic. The focus of the operation is to (i) support the government’s response to the pandemic; (ii) strengthen private sector development; and (iii) promote a resilient, green recovery.  The second DPO ($150 million) in the programmatic series will be presented to the World Bank Board by the end of June 2023.
• Emergency Water Security and Efficiency Project  ($145.5 million): The WBG is supporting Botswana in its efforts to increase the availability of water in drought vulnerable areas, develop wastewater management in selected systems, and strengthen capacity on drought risk management and resilience.
• Integrated Transport Project  ($186 million): The WBG is supporting the government in its efforts to improve transport infrastructure development by introducing methodologies on Output-and Performance-Based Road Contracting (OPRC) for an estimated 335km road network, improving Urban Infrastructure Investments in Greater Gaborone, and supporting technical studies on urban planning.
• Morupule B Generation and Transmission Project:  The WBG has provided a partial credit guarantee of $242 million under the Morupule B Generation and Transmission project to extend the maturity of the commercial loan to the government to 20-year period until 2030.

KNOWLEDGE ACTIVITIES

• Advisory Service- E Learning, Curriculum Development and Capacity Building ($1.95 million): The WBG is supporting the Botswana Public Sector College through an advisory service from November 2020. The support focuses on the design of an e-learning strategy, curricula development and rolling out and e-learning platform.
• Renewable Energy trust funded activities: Through the Energy Diversification and Electrification activity, the World Bank is supporting the development of the Renewable Energy Roadmap. The activity  ended in June 2022. In FY23 Botswana Renewable Energy Scale Up Support- a $3.5 million small RETF grant funded by ESMAP will be underway.
• Advisory Service - Roadmap for Sustainable Livestock Value Chain in Southern Africa (Botswana, Namibia and Eswatini). The objective of this advisory services is to develop a roadmap for investment in sustainable livestock value chains in Southern Africa. The assesment included: (i) sector analysis of animal-source food systems; (ii) market analysis for animal-source foods; (iii) and analysis of binding policy and investment constraints. The activity ended in June 2022.
• Analytical activity on Botswana Poverty Assessment is underway in FY23 and will be completed by June 2023.

The WBG’s private sector arm, the International Finance Corporation (IFC), also scaled up its support to Botswana:

• Country Private Sector Diagnostic (CPSD): In partnership with IBRD, IFC is currently conducting a CPSD. The CPSD will assess opportunities for, and constraints to private sector-led growth. The analysis and recommendations of this study are critical to inform IFC’s and the overall WBG country engagement. Highlighted sectors are energy, water, and tourism.
• IFC Kgalagadi Bond ($25 million):  In late 2017, the IFC became the first non-resident entity to issue AAA-rated local currency debt in Botswana. The Bond met with strong demand, leveraging approximately 258 million Pula (about $25 million) to promote financial inclusion through the Botswana Building Society (BBS). The Bond’s long-term financing will also support the transformation of BBS into a full-service, commercial bank financing underserved market segment, including SMEs.

In addition, past projects have contributed to Botswana’s development in the following areas:

• The Economic Diversification and Competitiveness Reimbursable Advisory Service Program ($3.6 million): The WBG provided support to encourage economic diversification through doing business reforms, entrepreneurship, secured transaction reform and analysis of labor market skills gap. The framework agreement ended in October 2021.
• Strengthening Public Sector Performance RAS ($5.05 million): Supported Botswana to strengthen public sector performance in certain areas and delivered selected outputs, such as implementing a monitoring and evaluation system linked to the government’s development plan, NDP 11, public investment management and procurement, and public service  analytical work.

Last Updated: Oct 07, 2022

Botswana joined the IBRD and IDA in 1968, the International Finance Corporation  (IFC) in 1979 and the Multilateral Investment Guarantee Agency  (MIGA) in 1990. The International Finance Corporation (IFC) supports the competitiveness agenda through selective investment technical assistance interventions. MIGA also supports the country’s competitiveness agenda through the provision of political risk insurance, when it is needed by foreign investors active in the country. 

Last Updated: Oct 07, 2022