Botswana's Investment Environment in 2023: Key Insights
Botswana's Economic Ratings and Stability
Standard & Poor’s financial services company has rated Botswana’s creditworthiness as BBB+/A-2 with a stable future, despite global economic challenges. Moody’s, another credit agency, gave Botswana a rating of A3 with a stable outlook in November 2021. These ratings largely reflect how the country’s economy relies on diamonds, which make up almost 90% of its income from abroad.
Botswana: Demographics and Economic Overview
Botswana has a relatively small population of 2.59 million people living in an area about the size of Texas. It is surrounded by South Africa, Namibia, Zimbabwe, and Zambia, which makes it a central hub for industries linked to the mining sector. Botswana is considered an upper middle-income nation by the World Bank, with an income per person of $6,805.20 as of 2021. The country aims to become a high-income nation by 2036.
Post-Pandemic Economic Recovery of Botswana
Following the COVID-19 pandemic, Botswana’s economy has been recovering well. In 2021, it had the highest GDP growth in Sub-Saharan Africa at 11.8%. By the end of 2022, the GDP growth was estimated at 6.7%. The rate of inflation, which was as high as 14.6% in August 2022, has decreased to 9.3% in January 2023, with a goal to reduce it to 3-6% by the third quarter of 2023. Unemployment has dropped slightly from 26% to 25.4% at the end of 2022.
Economic Development and Diversification Efforts
Development in Botswana is mainly driven by the diamond mining industry, which helps to fund infrastructure and social programs. In 2023, the government introduced a program that combines loans and grants to help citizens create jobs, build businesses, and fight poverty. Even though COVID-19 is now more controllable, the country’s economic growth faces risks, notably due to the war between Russia and Ukraine affecting global prices of food, fuel, and fertilizers. Additionally, Botswana has stopped importing certain fruits and vegetables to boost its own agricultural production, which has occasionally led to a shortage of staple vegetables. The government is looking into producing sunflower oil and exploring other sectors to reduce reliance on imports.
Labor and Investment Climate in Botswana
Labor issues are not a significant problem in Botswana, though there is a system in place to deal with labor-related disputes. Botswana participates in international agreements that help settle investment disputes. While corruption is less of a concern compared to other African nations, concerns about corrupt practices in public procurement have been rising, and the country has slightly improved its standing in the global corruption perception rankings.
Attracting Foreign Investment in Botswana
The Botswana Investment and Trade Centre (BITC) is the main body tasked with attracting outside investment to Botswana. The country offers a favorable tax environment and doesn’t control the exchange of foreign currencies. BITC evaluates support for foreign investors based on their potential to help diversify the economy, create jobs, and train local citizens.
Government Reforms and Business Processes
The government is actively improving its business processes, such as introducing electronic tax and customs operations and providing a more straightforward online business registration platform. Parliament has passed policies to use intellectual property effectively for economic growth. The government has also released a National Investment Strategy for 2023-2030, outlining ways to partner with the private sector to encourage investment and enhance productivity sustainably.
Trade Agreements and Business Environment
Botswana has participated in various international trade agreements, promoting trade with countries in Europe, South America, and other African nations. The country has transparent procedures for starting and maintaining a business, but businesses often criticize the efficiency and responsiveness of government staff. New laws have improved public procurement transparency, with online platforms available for submitting bids and tracking procurement.
Legal System and Property Rights in Botswana
Botswana’s legal system is considered fair, and both local and international investors have equal access to it. While there is no specialized commercial court, a specialized anti-corruption court exists to address corruption cases. There’s a competitive business environment in Botswana, and a government authority regulates mergers and acquisitions to ensure competition and consumer protection. Private property is well-protected in Botswana. Foreigners can lease but not own state and tribal land. Intellectual property rights are respected in Botswana, and the country has committed to enforcing them more effectively.
Financial Landscape and Sovereign Wealth Fund
The financial landscape in Botswana encourages foreign investment, and various financial institutions exist to support both local and international transactions. Foreign currency bank accounts and lending are permitted. The government permits the free transfer of investment-associated funds, and the currency, Pula, is managed against a basket of international currencies mainly revolving around the Rand and Special Drawing Rights. Botswana’s sovereign wealth fund, the Pula Fund, is managed with an aim to ensure stability for the nation’s finances.
Role of State-Owned Enterprises and Business Conduct
State-owned enterprises play a significant role in Botswana’s economy, some even operating as monopolies. The government has a plan to possibly privatize or merge some of these entities. The country values responsible business conduct, with many companies implementing programs to support local communities, although smaller firms are less involved. Lastly, Botswana keeps detailed investment records, showing significant investments from countries like the United Kingdom, South Africa, Mauritania, Cayman Islands, and Canada.
