Botswana has a population of 2.2 million. Its central location in Southern Africa enables Botswana to serve as a gateway to the region. Botswana has historically enjoyed high economic growth rates and its export-driven economy is highly correlated with global economic trends. Development has been driven mainly by revenue from diamond mining, which has enabled Botswana to develop infrastructure and to provide social services. The economy grew by 2.3 percent in 2019, down from its growth of 4.5 percent in 2018, driven by performance of the mining sector (GDP 2019 report – Statistics Botswana). COVID-19 has had a detrimental impact on Botswana’s economy. The economic activity in the second quarter of 2020 (March to June) was 24 percent lower than it was in the same period in 2019 and Statistics Botswana projects a 7.7 percent contraction in 2020. Statistics Botswana’s figure is below the World Bank prediction of a 9.9 percent contraction. Both predictions are driven largely by diamond sales, with mineral revenues dropping by 67.2 percent. In the first quarter of 2021, diamond revenues recovered, but international tourism revenues did not. In recent years, inflation has remained at the bottom end of the central bank’s 3 to 6 percent spectrum, with headline inflation recorded at 2.2 percent in December 2020. According to the United Nations Conference on Trade and Development (UNCTAD), the total stock of foreign direct investment (FDI) in Botswana fell from USD 4.82 billion in 2018 to USD 260 million in 2019. The World Bank classifies Botswana as an upper middle-income country based on its per capita income of USD 7,961.
Botswana is a stable, democratic country with an independent judiciary system. It maintains a sound macroeconomic environment, fiscal discipline, a well-capitalized banking system, and a crawling peg exchange rate system. In March 2020, Standard & Poor’s (S&P) downgraded Botswana’s sovereign credit rating for long-term foreign and domestic currency bonds from “A-” to “BBB+” and in May 2020, Moody’s set its credit rating for Botswana to A2 with a negative outlook. Botswana has minimal labor strife. It is a member state to both the International Centre for Settlement of Investment Disputes (ICSID) Convention and the 1958 New York Convention. Corruption in Botswana remains less pervasive than in other parts of Africa; nevertheless, foreign and national companies have noted increasing tender-related corruption. In 2020, the World Bank ranked Botswana 87 out of 190 economies on its Ease of Doing Business index, with Botswana’s rank falling by one place from 86 in 2019. Botswana also fell in the 2019 World Economic Forum’s Global Competitiveness Index to 91 out of 141, from 90 out of 140 in 2018.
The Government of Botswana (GoB) created the Botswana Investment and Trade Centre (BITC) to assist foreign investors. It offers low tax rates and has no foreign exchange controls. The BITC’s topline economic goals are to promote export-led growth, ensure efficient government spending and financing, build human capital, and ensure the provision of appropriate infrastructure. GoB entities, including BITC, use these criteria to determine the level of support to give foreign investors. The GoB has committed to streamline business-related procedures, and remove bureaucratic impediments based on World Bank recommendations in a business reform roadmap. Under this framework, the GoB introduced electronic tax and customs processes in 2016 and 2017. The Companies and Intellectual Property Authority (CIPA) built and successfully integrated the Online Business Registration System (OBRS) with Botswana Unified Revenue Services (BURS) and the Immigration Office. OBRS is designed to reduce the business registration process by more than 10 days. The Public Procurement and Asset Disposal Board (PPADB) has developed and is piloting an online bidding system to allow companies to bid for government projects regardless of where they are. The GoB also established the Special Economic Zones Authority (SEZA) to streamline sector-targeted investment in Botswana’s different geographic areas.
Due to COVID-19-related economic shortfalls, Botswana drew down heavily on its foreign exchange reserves and government savings. Sectors such as mining, tourism, trade, hotels and restaurants, construction, and manufacturing suffered significantly; however, rough diamond sales recovered somewhat in the second half of 2020. The government seeks to raise revenues through a Value Added Tax (VAT) increase form 12 percent to 14 percent effective April 1, 2021. In addition, the Withholding Tax on dividend income will increase from 7.5 percent to 10 percent, and several fees and levies charged for government services will also increase.
|TI Corruption Perceptions Index||2020||35 of 176||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||87 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||89 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD -24||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||USD 7,650||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|