Botswana is located at the centre 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 with a transformation agenda of becoming a high-income country by 2036.
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 23, 2019 Botswana held its 11th general elections, with His Excellency President Mokgweetsi Eric Masisi assuming the presidency. The new cabinet was announced on Nov 6, 2019 and Honorable Dr. Thapelo Matsheka was appointed the Minister of Finance and Economic Development.
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. More recently, however, the limitations of Botswana’s diamond-led development model have become more apparent: growth is slower, inequality remains high and job creation is limited.
Having achieved strong growth of 4.5% in 2018, growth is estimated to have slowed to 3.5% in 2019, reflecting the effects of weakened global demand for diamonds alongside severe droughts affecting the region.
The global slowdown in demand and increased trade restrictions in light of the COVID-19 (coronavirus) pandemic is expected to have a profound impact on Botswana’s economy, particularly on the diamond industry and tourism.
With the diamond industry still an important driver of growth, being the single largest contributor to government revenues and accounting 80% of export earning, the expected reduction in activity is estimated to result in a 1.2% growth contraction in 2020. Growth is predicted to stabilize at just over 4% by 2022 as global demand recovers and thus create conditions for a reduction in extreme poverty levels. 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 critical role in Botswana’s economic performance.
Living conditions have improved for the Botswana people, and poverty has fallen significantly. In fact, the share of the population living on less than $1.90 a day at the 2011 Purchasing Power Parity declined steadily from 29.8% to 18.2% between 2002–03 and 2009–10, and to 16.1% in 2015-16. This rapid poverty reduction can be attributed mainly to a combination of increasing agricultural incomes, including subsidies, and demographic changes.
Progress in reducing poverty has been accompanied by improvements in shared prosperity. The growth rate of consumption per capita between 2009–10 and 2015-16 for the bottom 40 percentile of the population was 0.42% annually, higher than the growth rate of the top 60 percentile. However, Botswana’s performance was only in the middle of the worldwide shared-prosperity distribution.
Inequality has fallen as well, albeit still being high. Between 2010 and 2015, inequality, measured by the Gini index, fell from 60.5% to 53.3%. Among factors associated with Botswana’s declining income inequality, the key one is regional convergence due to fast growth in rural areas and demographic changes. However, Botswana remains one of the world’s most unequal countries.
The recent Botswana Multi-Topic Survey: Labour Force Module Report indicates that the unemployment rate has gone up by 3.1 percentage points from 17.6% to 20.7% 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.
The World Bank’s Human Capital Index (HCI) 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 and includes the provision of nearly universal free primary education but has not created a skilled workforce.
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