Botswana - Economy

Overview: Botswana has benefited from a stable social structure and a wealth of natural mineral resources; it has an unbroken record of parliamentary democracy and one of Africa’s highest sustained records of economic growth since independence. However, the economy is dependent on mining and agriculture, and has had to cope with the vagaries of the diamond market and frequent droughts. During 1999–2003, only the year 2000 was free of drought. It is also strongly influenced by economic trends in South Africa, the economic giant of the region.

Mining started near Orapa in 1967 only a year after independence. The country is among the world’s largest producers of diamonds. Minerals – notably diamonds, copper and nickel – generate most of the government’s revenue and provided the financial base for welfare projects and the development of manufacturing. Since the 1990s the government has encouraged foreign investment in export-oriented industries, especially in manufacturing, and notably car assembly (which started in 1994, boosted exports for the rest of the decade and then ceased production in 2000 when the South African investor company went into liquidation) and textiles.

The economy grew well in the 2000s – 4.9% in 2005, 3.4% in 2006 and 3.8% in 2007 – while inflation was kept under control. The fiscal surplus rose to 12% of GDP in 2006/07, as a result of higher revenues from minerals and exports. The country is consistently ranked as a middle income country by international financial institutions. Despite this remarkable progress levels of poverty, unemployment and HIV/AIDS remain high.

Trade: Exports of goods and services account for 40% of GDP (2004). Main commodities exported are diamonds (by far the largest export), copper, nickel, beef, soda-ash and textiles/clothing. Main imports are machinery and electrical goods, food and consumer goods, vehicles and chemicals. Main trading partners for exports are the UK (76%) and countries of the Southern African Customs Union (SACU), while SACU countries, notably South Africa, are the main sources of imports (85%).

Botswana signed an interim Economic Partnership Agreement on trade with the European Union in late 2007. It therefore enjoys reciprocal duty- and quota-free access to the European market.