Botswana: Economic and Political Overview
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Botswana has one of the strongest economies in Africa and, according to the IMF, GDP grew by an estimated 4.1% in 2022, mainly driven by diamond exports and domestic demand. In the coming years, the country's economy should continue to grow, with GDP growth expected to reach 4% in 2023 and 2024. Investment in the mining sector and the rebound of the prices of hard commodities (diamond, copper, and nickel) should contribute to this performance.
Botswana has always maintained a conservative fiscal policy and low levels of foreign debt and, although general government debt increased to an estimated 21.3% in 2022 following a large fiscal response to the COVID-19 pandemic, Botswana's debt is still substantially lower than its neighbours. In 2023, the debt-to-GDP ratio is expected to decrease to 19.6%, with the phase-out of pandemic measures, and decline further in 2024, to 17.9%. Furthermore, Botswana's current account balance stood at 2% in 2022, and it is expected to reach 2.5% in 2023 and 4.2% in 2024, mainly due to the recovery of diamond revenue and an increase in tourism. In 2022, inflation remained above the central bank’s 3 – 6% target range. According to the Central Bank of Botswana, the rise in inflation in 2022 mainly reflected broad-based increase in the annual price changes for most categories of goods and services and, particularly, the upward adjustment in domestic fuel prices. However, inflation should decrease in the coming years, reaching 5.8% and 4.6% in 2023 and 2024, respectively. Although the country's “Economic Recovery and Transformation” plan, which was implemented to fight the effect of the pandemic on the economy, created fiscal pressures on the short run, Botswana's recovery packages have been effective in boosting economic activity, which has been recovering in the past few years. The fiscal consolidation policy the government is implementing should contribute to reducing the deficit and rebuild buffers in the medium term. Despite these positive outlooks, the growth level will remain too low to achieve Botswana’s development objectives and create enough jobs to absorb the new entrants. The government’s priority is to diversify the economy, making it less dependent on a volatile mining sector, and rely more on agriculture, services, and manufacturing. Botswana is working to expand its services industry by creating 'hubs' in the health, education, innovation, financial services, and tourism sectors, which it hopes will also strengthen its regional integration. Public spending will continue to advance at a more rapid pace, prioritising areas identified in the National Development Plan 11 (NDP11) that focuses on three key objectives: tackling poverty, ensuring inclusive growth, and job creation.
Botswana is regularly ranked first among African countries regarding governance and transparency. Its primary assets are its robust regulatory framework and facilitated procedures for property registration. However, despite its relative prosperity, Botswana still has one of the highest levels of inequality in the world and suffers a high unemployment rate and a lack of skilled labour. According to the last available data, in 2021, the unemployment rate in the country was an estimated 24%, and it was especially high among young people. In September 2021, the country approved the The National Employment Policy for Botswana, a plan which aims to provide a comprehensive response to the challenge of unemployment facing the country.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 14.93 | 18.77 | 19.18 | 19.57 | 20.91 |
| GDP (Constant Prices, Annual % Change) | -8.7 | 11.8 | 6.4 | 3.7 | 4.3 |
| GDP per Capita (USD) | 5,863 | 7,235 | 7,257 | 7,271 | 7,627 |
| General Government Gross Debt (in % of GDP) | 18.7 | 19.0 | 19.9 | 20.6 | 19.3 |
| Inflation Rate (%) | 1.9 | 6.7 | 12.2 | 6.5 | 5.2 |
| Current Account (billions USD) | -1.29 | -0.09 | 0.60 | 0.65 | 1.13 |
| Current Account (in % of GDP) | -8.7 | -0.5 | 3.1 | 3.3 | 5.4 |
Source: IMF – World Economic Outlook Database, October 2021
Botswana is the world's second largest diamond producer and it possesses one of the largest coal reserves in Africa (an estimated 212 billion tonnes). Uranium, copper and shale gas are also abundant in the country. Agriculture contributes to only 1.7% of GDP and employs 19.9% of the population, according to the World Bank. However, it is an important source of income for many Botswanans who live in rural areas. Cattle raising dominates the sector and contributes to 80% to the agricultural GDP. Cattle population nearly equals human population, therefore most livestock production is export-oriented (towards the European Union and other destinations). As desert and poor soils cover more than 70% of the country, arable land is very scarce. Crop production is not too dynamic, mainly due to traditional farming methods, erratic rainfall, recurrent droughts and erosion. The crop sub-sector is dominated by the production of cereals, with sorghum accounting for 72% of national cereal production, followed by maize (17%) and millet (6%). In 2022, the agricultural sector greatly benefited from an expansion in the country's planted area and favourable weather, which lead to above-average cereal yields.
The industrial sector contributes to 29.7% of GDP and employs 17.6%, which is dominated by diamond processing, food processing (mostly beef), textiles and mining. Diamond mining and processing is also a major source of government revenue and foreign currency. Copper, gold, nickel and soda ash production also hold a significant place in the economy. While the diamond industry was particularly impacted by the pandemic, especially when it comes to diamond exports, the sector showed a steady growth in 2022 - a trend which should continue in the coming years.
The service sector is by far the largest component of GDP and accounts for 63.6% of the economy and employs 62.5% of the active population. The expanding sectors are tourism (notably ecotourism) and transportation. The total contribution of tourism to GDP stands at 11% whereas its total contribution to employment reaches 7.1% (World Travel & Tourism Council 2017). The country has some of the most unique ecosystems in the world and is a major safari destination. Botswana has a growing financial sector and the Botswana Stock Exchange (BSE) is among the best performing stock exchanges in Africa. Although the services sector was hit the hardest during the pandemic, particularly the tourism industry, it showed a significant recovery in 2022.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 19.9 | 17.6 | 62.5 |
| Value Added (in % of GDP) | 1.7 | 29.7 | 63.6 |
| Value Added (Annual % Change) | -2.9 | 19.4 | 7.8 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
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Source: Index of Economic Freedom, Heritage Foundation
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Latest Update: June 2023
