Since independence, Botswana has had one of the fastest growth rates in per capita income in the world. Botswana has transformed itself from one of the poorest countries in the world to a middle-income country.
Although Botswana was resource-abundant, a good institutional framework allowed the country to reinvest resource-income in order to generate stable future income. By one estimate, it has the fourth highest gross national income at purchasing power parity in Africa, giving it a standard of living around that of Mexico.
The Ministry of Trade and Industry of Botswana is responsible for promoting business development throughout the country. According to the International Monetary Fund, economic growth averaged over 9% per year from 1966 to 1999. Botswana has a high level of economic freedom compared to other African countries.
The government has maintained a sound fiscal policy, despite consecutive budget deficits in 2002 and 2003, and a negligible level of foreign debt. It earned the highest sovereign credit rating in Africa and has stockpiled foreign exchange reserves (over $7 billion in 2005/2006) amounting to almost two and a half years of current imports.
An array of financial institutions populates the country’s financial system, with pension funds and commercial banks being the two most important segments by asset size. Banks remain profitable, well capitalized, and liquid, as a result of growing national resources and high interest rates.
The Bank of Botswana serves as a central bank. The country’s currency is the Botswana pula.
Botswana’s competitive banking system is one of Africa’s most advanced. Generally adhering to global standards in the transparency of financial policies and banking supervision, the financial sector provides ample access to credit for entrepreneurs.
The Capital Bank opened in 2008. As of August 2015, there are a dozen licensed banks in the country. The government is involved in banking through state-owned financial institutions and a special financial incentives program that is aimed at increasing Botswana’s status as a financial centre.
Credit is allocated on market terms, although the government provides subsidised loans. Reform of non-bank financial institutions has continued in recent years, notably through the establishment of a single financial regulatory agency that provides more effective supervision.
The government has abolished exchange controls, and with the resulting creation of new portfolio investment options, the Botswana Stock Exchange is growing.
The constitution provides for an independent judiciary, and the government respects this in practice. The legal system is sufficient to conduct secure commercial dealings, although a serious and growing backlog of cases prevents timely trials.
The protection of intellectual property rights has improved significantly. Botswana is ranked second only to South Africa among sub-Saharan Africa countries in the 2014 International Property Rights Index.
While generally open to foreign participation in its economy, Botswana reserves some sectors for citizens. Increased foreign investment plays a significant role in the privatisation of state-owned enterprises.
Investment regulations are transparent, and bureaucratic procedures are streamlined and open, although somewhat slow. Investment returns such as profits and dividends, debt service, capital gains, returns on intellectual property, royalties, franchise’s fees, and service fees can be repatriated without limits.
Botswana imports refined petroleum products and electricity from South Africa. There is some domestic production of electricity from coal.
Gemstones and precious metals
In Botswana, the Department of Mines and Mineral Resources, Green Technology and Energy Security led by Hon Sadique Kebonang in Gaborone, maintains data regarding mining throughout the country. Debswana, the largest diamond mining company operating in Botswana, is 50% owned by the government.
The mineral industry provides about 40% of all government revenues. In 2007, significant quantities of uranium were discovered, and mining was projected to begin by 2010.
Several international mining corporations have established regional headquarters in Botswana, and prospected for diamonds, gold, uranium, copper, and even oil, many coming back with positive results.
Government announced in early 2009 that they would try to shift their economic dependence on diamonds, over serious concern that diamonds are predicted to dry out in Botswana over the next twenty years.
Botswana’s Orapa mine is the largest diamond mine in the world in terms of value and quantity of carats produced annually. Estimated to have produced over 11 million carats in 2013, with an average price of $145/carat, the Orapa mine was estimated to produce over $1.6 billion worth of diamonds in 2013.