Country Profiles

Botswana Transformation Profile

Ambitions to diversify

With strong institutions, a flourishing democracy, and noted for prudent management of its diamond revenues, small, landlocked Botswana has achieved impressive economic growth. From one of the poorest countries in Africa in the 1960s, Botswana, through good management of its diamond mining and exports, has progressed to become an upper middle-income country, with an average GDP per capita during 2009–11 of more than $12,000 (PPP 2005 US$). Real GDP per capita in 2010 was more than eight times what it was in 1971—an achievement unequaled on the continent, with only Mauritius coming close. But most of the impressive growth was between 1970 and 1990; since then growth has significantly faltered.

Botswana has not been able to leverage its high income from diamonds to transform the economy, despite the impressive growth. The export base remains narrow. Diamonds account for more than 70% of total exports, followed by copper, nickel matte, textiles, and beef products (in that order). With growth slowing in the past two decades, pursuing transformation while the diamond income lasts should be a foremost concern of policymakers.

Transformation platform

Botswana’s political stability has provided continuity for the government to develop policies and programs and build strong institutions that can ensure effective implementation. Recognizing its reliance on a few nonrenewable resources and the mining industry’s weak labor absorptive capacity and weak links with the rest of the economy, Botswana has recently embarked on ambitious initiatives to diversify its economy, including diamond polishing. But these initiatives have yet to produce sustainable, productive, and competitive sectors that would ensure future growth. Its transformation will demand not just creative and vigorous diversification, but also deeper partnerships with the private sector and stronger foundations for competitiveness, mostly in developing the skills and knowledge capabilities of the workforce. Despite its favorable rankings on human well-being, expansions in education and health, infrastructure, and other welfare-enhancing programs that target vulnerable groups would strengthen the country’s transformation effort.

Transformation prospects

Sectors that can boost transformation include services, manufacturing, and tourism. Very important in current diversification initiatives are the six hubs for diamonds, transportation, agriculture, health, education, and innovation—identified in Vision 2016 and coordinated by the National Strategy Office.

Tin products are the fastest growing export. Botswana has a high revealed comparative advantage in pearls and precious and semiprecious stones, unworked and worked ores and concentrates of base metals, and meat and edible meat offal, fresh, chilled, or frozen. Other areas with good prospects for boosting exports include financial services, mining and minerals value addition, glass manufacturing, health services, ICT and data processing, tourism, and manufacturing.

In addition to the recent initiative to upgrade part of diamond exports into polished stones, diversification priorities could focus in the short to medium term on garments and textiles, packaging food and beverages, packaging materials, leather, ceramics, jewelry, tourism, and financial services. Attention will need to be paid to improving transportation and power generation, including solar power in rural areas.

Source: ACET research.

Source: ACET research.

Botswana’s growth with depth

  • Transformation—10th of 21. Botswana moved from 5th in 2000 (1999–2001) to 10th in 2010 (2009–11) on the overall transformation ranking. The overall ranking is not as high as its GDP per capita ranking due to the economy’s lack of diversity, low productivity (in manufacturing and agriculture), and low level of formal employment, compared with other relatively high GDP per capita countries such as Mauritius and South Africa. The drop in rank between 2000 and 2010 mainly reflects a loss of export competitiveness (in nonextractives).
  • Growth. GDP growth averaged an impressive 11.7% a year from 1971 to 1980, followed by another decade of high growth in 1981 to 1990, when the growth rate averaged 9.5%. GDP per capita grew robustly over those two decades at 8.4% and 6.5%, respectively. Since then growth has significantly slowed, averaging 4.8% in 1991–2000 and 3.7% in 2001–10, with corresponding per capita growth of 2.7% and 2.5%. Much of Botswana’s growth has come from mining and exporting diamonds.
  • Diversification—20th. Botswana was 20th of the 21 countries on diversification in 2010, a slight deterioration from its 19th position in 2000. The share of manufacturing in GDP stayed around 4%, the share of the top five exports dropped from 92% to 86% (an improvement), and the share of manufactures and services in exports fell from 24% to 18%.
  • Export competitiveness—17th. Botswana’s export competitiveness deteriorated markedly over the decade, falling from 9th in 2000 to 17th in 2010. Export competitiveness is measured as the share of a country’s exports of goods and services in GDP divided by the corresponding share for the world, with extractives (including raw diamond exports) excluded (as explained in chapter 1 and in annex 1). This ratio fell from 1.35 in 1999–2001 to 0.44 in 2009–11. This means, from being able to export about 35% more of its nonextractive GDP than the world average in 1999–2001, Botswana was exporting less than half the world average by 2009–11.
  • Productivity—21st. Manufacturing value added per worker (in 2005 US$) rose from $10,638 in 2000 to $12,887 in 2010, and agricultural productivity (cereal yield) rose from 303 kilograms per hectare to 375. The levels in both manufacturing and agriculture are so low relative to other African countries that Botswana comes at the bottom of the productivity index in 2010. It ranked 20th in 2000.
  • Technology—5th. Botswana does relatively well on technology, ranking 5th in 2010, up from 6th in 2000. Botswana’s rank is largely attributable to the level of technology in production but not in exports.
  • Human well-being—2nd. Botswana’s average GDP per capita was around $12,462 (PPP 2005 US$) during 2009–11—up from $9,470 a decade earlier. Although Botswana’s per capita GDP was higher, it came 2nd to Mauritius on the human well-being index because of its lower level of formal employment.

One thought on “Botswana Transformation Profile

  1. Pingback: 2014 African Transformation Index | African Transformation Report

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