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Botswana
About Botswana
Botswana is an independent, land-locked African nation located in south central Africa, bordered by South Africa, Namibia, Zambia, Angola, and Zimbabwe (Figure 1). The country, formerly known as Bechuanaland during colonial times, was originally made a protectorate of Great Britain in 1885, and began an independence movement that led to formation of a constitutional democracy and full independence in 1966. On October 16, 2009, the country elected President Lt. General Seretse Khama Ian Khama as President for a 4 year term, as Botswana's fourth President.
Figure 1. Location of Botswana
Key country statistics are as follows (Source: CIA World Factbook):- Population: 2.07 million (July 2011 est.) (workforce est. 2009 @ 1.225 million)
- Land Area: 581,730 square kilometres (approximately the same size as France)
- GDP: $28.5 Bn (2010 est.) (Exports: $4.7 billion---Imports:$4.8 billion)
- Annual Real GDP Growth: 8.6% (2010 est.) (decreased by 4.9% in 2009 but averaged 9% from 1967 to 2006) (similar to the GDP growth of South Africa over the same period of time)
- Per Capita GDP: $14,000 (2010). (For comparison, the Per Capita GDP for South Africa was $10,700 in 2010)
- Official Language: English (literacy 81%)
- Ethnic Distribution: 79% Tswanga, 11% Kalanga, 10% all others
Economy. Approximately 40% of the population lives in rural areas, where farming and cattle grazing are of prime importance. Much of this population is dependent upon subsistence farming, while agriculture represents only 2.1% of GDP (2010 est.), mining is by far the most important industry, representing about 40% of GDP, with diamonds representing approximately one-third of that figure.
The largest diamond producer in Botswana, which is the world's largest producer of gem-quality diamonds, is Debswana, a 50/50 joint venture between DeBeers and the government of Botswana. Debswana consists of four mining operations which produced 22.2 million carats and approximately $2.68 billion in revenue in 2010. In addition, there are several operating copper-nickel producers (BCL, Tati Nickel ), existing soda ash producers, and recently discovered coal and coal-bed methane resources under consideration for future development. While diamond mining is of huge financial importance to the country, it employs only 5% of the total workforce.
The local currency of Botswana is the Pula. It is fully convertible and is valued against a basket of currencies heavily weighted toward the South African Rand. The Central Bank devalued the Pula by 12.5% in May 2005 and restructured the exchange rate mechanism to a crawling peg system to ensure against future large-scale devaluations.
Foreign Investment. Botswana has no foreign exchange controls (removed in 1999) and both corporate profits and capital can be repatriated without restriction. The corporate tax rate varies between 25-55% depending on the profit margin of the business. Foreign investors, investment, and management are welcomed.
The country is typically ranked as the best investment climate in Africa, based in large part on the fact that it is one of the freest economies on that continent. Rankings by various organizations and rating agencies also compare favorably in a global context:
- The Fraser Institute Survey of Mining Companies for 2010/2011 ranked Botswana 14th globally, out of 79 jurisdictions giving the country the highest score of any African nation, and second only to Chile in Latin America.*
- Transparency International ranked Botswana as Africa's least corrupt country in its 2010 review (33rd worldwide, ahead of many European and Asian countries),
- The Economic Freedom of the World Report ranked Botswana 6rd in Africa, 68th globally,
- Heritage Foundation's 2009 Index of Economic Freedom ranked Botswana second in sub-Saharan Africa and 40th globally.
- Standard & Poor's assigned Botswana an "A/Stable/A-1" grade credit rating in 2010, one of the few countries rated in Africa, and ahead of many countries in central Europe, East Asia, and Latin America.
Regional Economic Cooperation. Botswana plays an important leadership role in promoting free trade and commerce in Africa and with key trading nations. Botswana has been a longstanding member of The Southern Africa Customs Union (SACU), although this regional customs structure has become less important now that both South Africa and Botswana are members of the World Trade Organization (WTO). SACU has remained active in seeking and concluding other important agreements on behalf of Botswana (and its other members) however, including:
- Signing a preferential trade agreement with Mercosur (South American free trade association that includes Brazil and Argentina) in 2004,
- Signing a Trade, Investment and Development Cooperation Agreement (TIDCA) with the United States (2008), and
Botswana signed an Economic Partnership Agreement with the European Union (2007), and as a member of the 14-nation Southern African Development Community (SADC), the country participates in SADC's broad mandate to encourage growth, development, and economic integration in Southern Africa.
1 Currently on care and maintenance
*NOTE: The Fraser Institute Annual Survey of Mining Companies ("Fraser Survey") is an independent survey sent annually to approximately 3,000 exploration, development, and other mining-related companies around the world. The survey represents responses from 658 of those companies. The rankings, formed from mineral resource company responses to specific questions, consider the full range of risk profiles for various countries, including existing business and environmental regulations, mineral rights, regulatory duplication and inconsistencies, taxation, uncertainty concerning native land claims and protected areas, infrastructure, socioeconomic agreements, political stability, labor issues, geological database, and security. The Fraser Survey has become the standard by which foreign investment risk is assessed in the minerals industry, because it is tailored and focused specifically on exploration, mining activity and policy, and because it is assembled from mineral resource company inputs.
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