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Economy & Trade

 

The Economy

Botswana is an upper middle income country with total Gross Domestic Product (GDP) of P91.212 billion in current prices, while per capita GDP is P51 973.20 (2008). The local currency, the Pula, is made up of 100 units of thebe. The Pula is relatively stable and on average 1US$ is equivalent to P1, while about P12 buys 1 British Pound. Inflation is also stable with challenges experienced in 2008 as a result of the high global food and fuel prices. Consequently, the average annual year-on-year inflation rate for 2008 was 12.6%.  Inflation has, however, been on a downward trend since the last quarter of 2008 and continuing in 2009, reaching 8.4% in May 2009.

The economy has grown at an average annual growth rate of over 8% since Independence in 1966. The economy is dominated by a few sectors; mining on average contributes about 40% of GDP. Government also plays a significant role in the economy, contributing on average over 15% to total GDP. Botswana is a very open economy with exports representing a large proportion of GDP. The economy has no exchange controls and is a member of a number of regional and international organisations. These include the Southern African Development Community, Southern African Customs Union, African Development Bank, the African Union, the International Monetary Fund, World Bank Group and the United Nations.

The Central Statistics Office (CSO) produces a number of statistics monthly and some quarterly, and publishes them on the CSO website. These include Statistics Update and Stats Briefs. The CSO also provides a summary of statistics in “Botswana in Figures". Sector specific statistics are also available at www.gov.cso.bw.

 

 

Economic Indicators

GDP per Capita Income

The GDP per capita income in nominal terms currently stands at some US$3500, which is one of the highest in Sub-Saharan Africa. This figure places Botswana within the world’s middle-income group of countries by the World Bank ratings.

Currency


The basic unit of currency is the Pula, which is denominated in P10, P20, P50, P100 and P200 notes. The Pula is convertible with major currencies. The currency is pegged against a basket of major currencies and is strongly tied to the South African Rand, with strong trading links between the two countries

Exchange Controls

Botswana operates a fully liberalised exchange control regime, which gives investors doing business in the country the option to operate foreign currency bank accounts for smooth facilitation of international transactions.

Foreign Reserves

Botswana’s foreign reserves stand at around US$5.3 billion (March 2003).

Corporate Income Tax


Corporate tax is 25%. There is however 15% tax for manufacturing companies and financial institutions that operate under the auspices of the Botswana International Financial Services Centre.

 

 

 

Trade

 

Botswana is strategically located in the centre of the southern Africa region with total market size of approximately 200 million people. The recently launched SADC Protocol on Trade is intended to liberalise regional trade by ensuring reciprocal market access among member countries. Botswana has preferential access to the European Community through the Cotonou Agreement. Botswana is also a member of the Southern Africa Customs Union (SACU), one of the oldest customs unions dating back to 1910, which includes South Africa, Botswana, Namibia, Lesotho and Swaziland. Currently SACU is negotiating several trade agreements with other regions; the most advanced being the SACU-USA Free Trade Area (FTA) negotiations. The SACU-USA negotiations are expected to conclude by the end of 2004 and will provide dependable and predictable market access to the largest world economy. The agreement is expected to stimulate increased USA investment into the SACU Region. SACU is also negotiating FTA arrangements with the European Free Trade Agreement (EFTA), MERCOSUR, India and China. All these agreements should create further market opportunities for investors wishing to set up in Botswana. Botswana is also a member of the World Trade Organisation.


 Citizen Entrepreneurial Development Agency (CEDA)


The Citizen Entrepreneurial Development Agency (CEDA) provides a holistic approach to the development and promotion of viable sustainable citizen-owned enterprises.

This is done through the provision of financial assistance in the form of loans at subsidised interest rates, and back-up business training and mentoring services to enhance the sustainability of these enterprises.

CEDA lends from P500 to P150 000 at 5% interest per annum payable over a period of five (5) years for the small scale category of enterprises.

CEDA lends from P150 001 to P2 million at 7.5% interest per annum payable over a period of 7 years for medium scale enterprises.
A Venture Capital fund has recently been established that is intended to facilitate funding of projects that could be both locally and foreign owned.

 

 

The CEDA Venture Capital Fund

In March 2002 a feasibility task force concluded that it had become necessary to establish a Venture Capital Fund under the control and monitoring of the Citizen Entrepreneurship Development Agency, but administered by an external fund management company. This fund was established in order to facilitate funding of projects that could be both locally and foreign owned.


 What is the Venture Capital Fund?
The CEDA Venture Capital Fund (CEDA - VCF) provides risk capital to financially viable start ups, expanding businesses owned by citizens and joint ventures between citizens and foreigners in all sectors of the economy. The CEDA-VCF helps to relieve the equity capital constraint, which affects most citizen investors. The Venture Capital Fund will usually not be involved in the day- to- day management of the business, but will seek to add value to a growing business by giving direction to the business venture it has invested in through regular contact and discussions with management.
External Link: www.ceda.co.bw.

 

 

Botswana’s Financial Environment - IFSC

The IFSC offers foreign investors a 15% corporate tax rate that is guaranteed until June 2020. Other benefits include exemption from withholding taxes, provision of credits for withholding taxes levied in foreign jurisdictions, access to Botswana's Double Taxation Treaty network and no foreign exchange or capital controls, which have been abolished since 1999. The aim of the IFSC is to attract companies that are currently operating or intend to operate in Africa to Botswana. Companies are invited to situate their administrative head office within the jurisdiction of the Botswana IFSC to enjoy the benefits outlined above. Botswana’s IFSC is one of three in the world and the only IFSC in Africa.
External Link:  www.botswanaifsc.com


 Commercial Banking

Botswana has seven licensed banks. There are five commercial banks, namely; Barclays, Standard Chartered, First National Bank, Bank of Baroda and Stanbic Bank. In addition there are two merchants’ banks; namely, Investec Bank and United Leasing Company (ULC).


 Botswana Stock Exchange (BSE)

The country’s Stock Market was established in 1995. Stockbrokers Botswana administers the Botswana Stock Exchange. The development of Botswana’s private sector- led economy has spawned a core of solid companies with good growth prospects, many of which are listed on the Stock Exchange. Currently there are seventeen domestic companies listed and six dual listed in the Johannesburg Stock Exchange.
External Link: www.bse.co.bw

 

 

Botswana Development Corporation (BDC)

BDC is a Government owned company that loans citizen and foreign owned entities funds over P5 Million and/or provides premises, in order to develop companies so that they can increase local skills development and local employment.
External Link: www.bdc.bw.

 

 

Infrastructure


Telecommunication Services

The Botswana Telecommunications Authority regulates and licenses all telecommunications activities in Botswana. The sector is currently undergoing further liberalization with a new Telecommunications Act and an independent regulatory body established to oversee the diversification of the industry. Botswana Telecommunication Corporation (BTC) has one of the best digital networks in Africa having achieved nearly 100 per cent digitalisation. The teledensity of 4.0 (exchange lines per 100 population) is one of the highest in Southern Africa. A satellite supported international access allows for direct dialing to at least 180 countries around the world.

External Link: Botswana Telecommunications Corporation (BTC)

Distance from Major Centers

Gaborone, the capital city is 380 km from Johannesburg; 1510 km from Cape Town; 990 km from Harare; 600 km from Bulawayo and 1365 from Lusaka.

Air Transport


The national carrier, Air Botswana, operates several scheduled flights within the country and in the region.
External Link: www.airbotswana.co.bw
Regional flights are also serviced by South African Express Airways and a number of smaller private charter air services operate throughout the country.

 

 

Rail Transport and Dry Port Facility

Botswana Railways (BR) forms part of a crucial link in the regional railway network system. Through Spoornet of the Republic of South Africa (RSA) in the south, and National Railways of Zimbabwe (NRZ) in the north, Botswana Railways (BR) provides a connection to Namibia and Swaziland and a continuous rail link to Zambia, Democratic Republic of Congo (DRC), Angola, Mozambique, Tanzania and Malawi. Botswana Railways operates containerised Dry Port facilities in the capital Gaborone, in north-eastern Botswana in Francistown and Selibe-Phikwe in the country’s centre. These serve as dry port facilities for locally based importers and exporters, offering containerised door-to-door delivery.

 

 

Road Transport

Botswana is at the centre of the Southern African region and easily accessible by roads from all major regional centres.
The Trans-Kalahari Highway is a 595-kilometre corridor which links the capitals of Namibia (Windhoek) and Botswana (Gaborone), and serves as a strategic link in the Maputo-Walvis Bay Economic Corridor. It plays an international role as it provides cheaper access routes to the Democratic Republic of Congo and Zimbabwe as well as making game reserves and other tourist attractions more accessible. A Corridor Planning Committee, involving Botswana, Namibia and South Africa, has been established to promote the utilisation of the Trans-Kalahari Highway and Walvis Bay Port. Botswana also has signed a Memorandum of Understanding (MoU) with members of the Southern African Customs Union (SACU) with the objective of ensuring equitable distribution of cross-border traffic to achieve parity among member States.

 

 

Investment – Fact Sheet

Botswana is a stable democracy with an excellent track record of governance since independence in 1966.

Botswana has topped the list of the world's fastest growing economies since 1965:

Botswana 9.2%

South Korea 7.3%

China 6.7%

Singapore 6.3%

Hong Kong 5.6% (Source; World Bank, 1998)

There are no foreign exchange controls in Botswana.

Botswana is a member of the Southern African Customs Union (SACU), an economic grouping free of tariffs that also includes South Africa, Namibia, Lesotho and Swaziland. It is also a member of the Southern African Development Community (SADC), and serves as the headquarters of the regional organisation which has a market of 200 million people.

There is a well-developed legal system based on Common Law, which facilitates business and commercial activities.

Standard and Poor’s and Moody’s in 2003 have given Botswana an investment grade sovereign credit rating higher than any other sub-Saharan African country. Botswana has consistently invested a high proportion of its budget on education and skills training. The country has a thriving domestic financial sector, which includes banks, insurance companies and a growing stock market. Botswana has acceded to international conventions and is strictly observing internationally accepted guidelines on combating money laundering and financial crime.
Transparency International, in its Corruption Perceptions Index of 2009, rated Botswana to be the least corrupt country in Africa, and the 37th least corrupt in the world. Botswana is also ranked 34 in the Global Peace by the Institute for Economics thus being the most peaceful country in Africa. There are 8 daily flights in either direction between Gaborone and Johannesburg – the major aviation hub on the continent. Travelling time is 1 hour. Botswana has invested in a world-class multi-service telecommunications system that facilitates provision of services remotely.
External Link: www.bedia.co.bw

 

 

Budget 2009

Every year the Minister responsible for finance presents budget proposals to Parliament which are later debated and subsequently approved before the start of the next financial year. In this regard, the 2009/10 Budget was presented to the National Assembly on 2nd February 2009. The total expenditure and net lending for 2009/10 is P37.79 billion, which is an increase of 5.3% over the revised estimates of the 2008/09 financial year. Out of this budget, total development budget is P10.56 billion while recurrent spending is P27.36. With total revenues and grants estimated at P24.39 billion, the overall budget balance is a deficit of P13.4 billion.
More details on the 2009 Budget are available on the government website: www.gov.bw and www.finance.gov.bw

In his speech, the Minister of Finance and Development Planning indicated that the preparation of the budget for the 2009/10 financial year was made very difficult by the rapidly evolving international financial and economic crisis. He also noted that there may be need for reprioritization and cut back on Government expenditure as the impact of the crisis becomes clearer. In April 2009, a number of initiatives were introduced to reduce expenditure in response to declining expected revenue. Development spending was reduced by 5%, while recurrent expenditure was cut by 7%.

 

 

Overview of NDP 10

Since Independence in 1966, Botswana adopted an approach of development planning. Government has since then produced a series of National Development Plans (NDPs) starting with Botswana’s Transitional Plan for Social and Economic Development prepared in 1965. National Development Plan 10 or NDP 10, is the tenth in the series of NDPs. National Development Plans guide the overall development of the country. NDPs contain Government strategies planned to be undertaken over the Plan period. Programmes and projects to be implemented to achieve such strategies are also included in the Plan. The Plan contains estimates of revenue expected over the entire period as well as expenditure and manpower growth projections.  

The preparation of NDP 10 started in July 2007 with the preparation of the Macroeconomic Outline by the Ministry of Finance and Development Planning. The process was guided by a Reference Group comprising Government Ministries/Departments, private sector, non-governmental organisations, labour unions, academia and think tanks. One notable departure from the previous Plans is the adoption of an Integrated Results Based Management planning approach to ensure that projects and programmes for driving economic development are results oriented. In addition, Thematic Working Groups were set up as a way to bring all the development partners to discuss and consolidate contributions to the NDP 10 process.
The Macroeconomic Outline contained major issues that have come up during the implementation of NDP 9 and new challenges which ought to be taken into consideration in formulating strategies for the next Plan. This was followed by preparation of Sectoral Key Issues Papers (SKIPs) by different sectors.  The Macroeconomic Outline formed the basis of the macro chapters of the Plan, while the SKIPs are the basis for the sectoral chapters.
External Link: www.finance.gov.bw

 

 

NATIONAL ACCOUNTS STATISTICS –
QUARTERLY GROSS DOMESTIC PRODUCT – THIRD QUARTER 2009


Introduction

This Statistical release contains preliminary estimates of gross domestic product and components of final demand for the third quarter of 2009. These estimates are provisional and subject to change.

 

Gross Domestic Product


Current Price

The estimated gross domestic product at current prices for the third quarter of 2009 was P21, 564.9 million compared to the level of P22, 300.9 million registered in the second quarter of 2009, a decrease of 2.9%.

Quarterly Real GDP growth rates

Real gross domestic product decreased by 3.1% in September 2009 as compared with the 3.8% increase registered during the third quarter of 2008. Compared to June 2009, real GDP went up by 4.1% in September 2009.

Contribution of industry to real GDP growth

The main contributor to the 4.1% quarter-to-quarter growth in GDP was General Government (10.5 percentage points). The increase in General Government is due to the scarce skills programme that was introduced in 2008. Its implementation has been throughout the course of the year with majority of payments occurring in June 2008.

General Government, Agriculture and Construction were the major contributors to the year on year real GDP growth (1.8 percentage points, 0.9 and 0.8 of percentage point respectively).

Mining continues to be the major detractor by 10.9 percentage points year on year but there is recovery in this sector as seen by the quarter-to-quarter growth of 2.3%. It continues to be a significant contributor to growth on a quarter-to-quarter basis.

Gross Domestic Expenditure


Annual aggregate real gross domestic expenditure increased at a relatively brisk pace in the third quarter of 2009 compared with the second quarter of 2009. The increase was attributed to strong growth in real consumption demand, i.e., final consumption expenditure by general government and households and the rise in real gross fixed capital formation. Real exports of goods and services decreased at a rate of 37.5% in September 2009 compared to a decrease of 8.4% registered in September 2008. Real imports of goods and services decreased by 10.6% in the corresponding period.

 

 

Agriculture Hub

The agricultural sector has been identified as one of the areas that has a good potential to diversify the economy and create employment, especially in rural areas. The Ministry of Agriculture is currently implementing several projects and initiatives which are intended to commercialize and diversify the sector.

The Agricultural Hub has been established to be the driving force for the commercialization and diversification of the Agricultural Sector in Botswana. Its aim is to develop an environment that will encourage, facilitate and support a viable and economically sustainable agricultural sector.

Operation

The Hub operates in conjunction with the Ministry of Agriculture and is in a position to fully interact with the other Hubs, Ministries, Parastatals, the private sector and other organisations. The Hub has been empowered to recommend, negotiate, intervene - and where needed cut red tape - to enable the timely implementation of the projects and initiatives that it is responsible for.

In implementing its mandate, the Hub, which will be staffed by a relatively small number of specialists, will operate at different levels with the various stakeholders to support their projects and initiatives. In so doing, the Hub will involve most, if not all, the different departments and sections of the Ministry of Agriculture.

Projects and Initiatives currently forming part of the Hub

  •     National Agricultural Master Plan for Arable Agriculture and Dairy Development (NAMPAADD)
  •     Zambezi Integrated Agro-Commercial Development Project (ZIACDP)
  •     Agricultural Infrastructural Development Initiative (AIDI)
  •     Agricultural Service Centres (ASC as part of ISPAAD and NAMPAADD)
  •     Botswana Contributory Agricultural Insurance Scheme (BCAIS)
  •     State Farms around dams and sewage ponds (arable and horticultural)
  •     Botswana Meat Commission (GMR partnership)
  •     Banyana Ranch and other state owned ranches (cattle sector)