Botswana Economic Outlook

  • In 2012, Botswana’s economy was adversely affected by the global slowdown, which led to a decline in the country’s major export commodity, diamonds; real GDP registered lower growth at 5.8%; and short-term prospects indicated a further slowdown with growth expected to decelerate to 5.6% in 2013 and to 5.5% in 2014.
  • On the political front, the focus in 2013 is on the 2014 elections, which are expected to be free and fair, reflecting Botswana’s mature democracy and entrenched political stability.
  • While Botswana has made remarkable progress in social and human development, as reflected by impressive education and health indicators, the level of poverty remains a major concern for an upper-middle-income country, with 20.7% of the population classified as extremely poor.

Botswana’s economy grew by 8% in 2011, continuing the recovery that had begun in 2010 after the global economic downturn of 2009 and had been aided by improved global demand for diamonds, the country’s major export commodity. Estimates for 2012, however, indicate that the recovery has been difficult to sustain, with the growth rate declining to 5.8%. Deceleration in real gross domestic product (GDP) was due mainly to the mining sector, which declined by 8.0% while the non-mining sectors grew by 9.7%. Projections in the medium term indicate moderate economic growth of around 6% per annum through to 2014, predicated on gloomy global prospects and the associated slow recovery of the mining sector.

In addition to these slack prospects, the country continues to face challenges related to its overdependence on the mining sector. Amongst other major challenges confronting the government are the national unemployment rate of 17.5% and a poverty rate higher than 20%, combined with high income inequality. As part of the country’s National Development Plan (NDP-10), the government is addressing these challenges through a number of initiatives including the adoption of a new National Economic Diversification Strategy, which focuses on private-sector-led economic diversification.

Botswana’s prudent management of its vast diamond resources stands out in Africa as an exemplary case of harnessing natural resources effectively and efficiently for human development, a case that can be emulated in other countries. At independence, Botswana was one of the poorest countries in the continent, ranking amongst the least developed countries of the world, with a per capita GDP of about USD 70. Within about four decades, the country transformed itself into an upper-middle-income country, thanks in part to its mineral (diamond) discoveries and an effective use of the revenues from them. It has avoided the “resource curse” that tends to characterise other countries endowed with natural resources and has had one of the fastest growing economies in the world, with, in the first three decades of independence from 1966 to 1999, an average annual growth rate of about 9%. More importantly, it is commendable that the government has recognised that its diamond resources cannot last forever, and has thus, since 1968, endeavoured to put in place appropriate policies to prepare for the depletion of its mineral base. To this end, main actions have involved accumulating funds for the future, building infrastructure, and investing in health and education. These policies have left the government in a relatively strong position to facilitate a soft landing once the diamond reserves are depleted, possibly by 2029.


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