– Like many countries, Botswana’s economy was negatively impacted by Covid-19
– The government launched a recovery plan designed to accelerate business reforms
– Aims include increasing private sector participation and boosting exports
– Special economic zones and tax incentives feature heavily in Botswana’s plans
On the back of the economic fallout of the Covid-19 pandemic, Botswana is seeking to accelerate economic transformation plans, with a focus on private sector investment and diversification.
As in most countries the world over, Covid-19 had a significant impact on Botswana’s economy. In a country where diamonds made up 80-85% of export earnings before the pandemic, factors such as border closures, disrupted supply chains and the global economic downturn led to a 30% decline in rough diamond sales at the Debswana Diamond Company, the entity that controls diamond production at the country’s four mines, which had knock-on effects on the broader economy.
Furthermore, with trade, hotels and restaurants accounting for nearly 20% of GDP before the pandemic, movement restrictions had a substantial cooling effect.
The economy contracted by 8.7% in real terms in 2020, according to the IMF, as Covid-19-related spending placed pressure on fiscal reserves; the budget deficit that year reached BWP16bn ($1.3bn), equivalent to 5.6% of GDP.
While the country had already launched a number of long-term plans aimed at economic transformation, the government accelerated its approach in response to the pandemic.
In September 2020 the Parliament approved the BWP14.5bn ($1.2bn) Economic Recovery and Transformation Plan (ERTP), a blueprint for the country’s emergence from the pandemic and further economic recovery.
Building on longer-term strategies like Vision 2036, launched in 2016, and the National Development Plan 11 (NDP11), which runs from 2017 through to 2023, the ERTP lays out plans to move the economy towards a more diversified and private sector-led growth model, while also responding to the more immediate impacts of the pandemic.
Cognisant of fiscal constraints, the broad tenants of the policy aim to accelerate privatisation, boost the private sector’s contribution to the economy and increase export-led growth, while also improving efficiency, and developing research and innovation capacity.
The ERTP is being backed by a $250m loan from the World Bank, granted in June 2020. The loan will support reforms to strengthen private sector development and facilitate a green recovery from the pandemic.
Promoting export growth
Another key element of Botswana’s long-term economic strategy is to diversify and develop its exports beyond diamonds.
Central to this is the development of a series of special economic zones (SEZs). Established in 2015, the Special Economic Zones Authority is responsible for the management of eight SEZs across the country.
Focusing on a range of sectors, including agri-business, financial services, applied ICT, health and manufacturing, the sites offer investors technical and administrative support, as well as a range of tax incentives and duty waivers.
SEZ development is being underpinned by ongoing efforts to improve export arrangements with other countries.
For example, in late April more than 30 Botswana-based companies took part in an investment and trade conference with Rwandan officials in the hope of establishing business collaborations and export opportunities.
A number of other initiatives have sought to incentivise foreign investment in recent years. The government-established Botswana Investment and Trade Centre, launched in 2012, is tasked with attracting foreign direct investment and boosting exports.
It also contains the Botswana One Stop Service Centre (BOSSC). Opened in October 2017, BOSSC provides assistance to investors for company and business registration, entry visas, work and residence permits, and tax registration, among other needs.
Botswana is considered one of the more attractive investment destinations in Africa, with strong institutions and rule of law encouraging potential investors.
Indeed, Botswana placed fourth in the region and 51st out of 139 countries in the World Justice Project’s 2021 Rule of Law Index, and ranked the highest in southern Africa in Transparency International’s 2021 Corruption Perceptions Index, at 45th out of 180 countries.
With these foundations, Botswana hopes that its new incentives and reforms can help attract greater foreign investment to support the post-pandemic recovery and future growth.