Exploring economic structure and drivers of economic growth in Botswana

Abstract

This article set out to analyse the economic structure and main economic drivers in Botswana. Botswana, a country in sub-Saharan Africa, is a relatively small economy, hugely dependent on its diamond mineral wealth. Concerns have arisen in recent years that the diamond deposits will soon be depleted and the country therefore needs to embark on a diversification programme to broaden its economic base. In order to understand the Botswana economy, its economic structure and current domestic sectoral performance were evaluated, as well as its trends in imports and exports. An analysis of the data shows that, regardless of the awareness of the sensitivity to external shocks of commodity prices, as well as the obvious future depletion of diamond reserves, the Botswana economy continues to rely on diamonds, at the expense of attracting international capital flows to enhance and maintain sustainable economic growth, through investments in agriculture, manufacturing and tourism. It is therefore recommended that the Government of Botswana becomes proactive and implements recommended policies to diversify its economy, so that it can sustain or improve its economic growth by becoming a prime destination of international capital and domestic private sector investment, thereby increasing employment and trade opportunities.

Keywords: investment, imports, exports, policy, Botswana, Africa, diversification, economic growth, diamonds, FDI

Full text

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
671
JOURNAL OF GOVERNANCE AND
REGULATION
Postal Address:
Postal Box 136
Sumy 40000
Ukraine
Tel: +380-542-610360
e-mail: info@virtusinterpress.org
www.virtusinterpress.org
Journal of Governance and Regulation
is
published four times a year, in September-
November, December-February, March-May and
June-August, by Publishing House “Virtus
Interpress”, Gagarina Str. 9, office 311, Sumy,
40000, Ukraine.
Information for subscribers:
New orders
requests should be addressed to the Editor by e-
mail. See the section "Subscription details".
Back issues:
Single issues are available from the
Editor. Details, including prices, are available
upon request.
Advertising:
For details, please, contact the
Editor of the journal.
Copyright:
All rights reserved. No part of this
publication may be reproduced, stored or
transmitted in any form or by any means
without the prior permission in writing of the
Publisher.
Journal of Governance and Regulation
ISSN 2220-9352 (printed version)
ISSN 2306-6784 (online version)
Virtus Interpress. All rights reserved.

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
672
JOURNAL OF GOVERNANCE AND REGULATION
VOLUME 4, ISSUE 4, 2015, CONTINUED - 6
CONTENTS
EXPLORING ECONOMIC STRUCTURE AND DRIVERS
OF ECONOMIC GROWTH IN BOTSWANA 673
Patricia Lindelwa Makoni
COMPLIANCE AND ENFORCEMENT CHALLENGES: A CASE OF
THE NATIONAL BUILDING REGULATIONS’ PROCESES IN SOUTH AFRICA 679
Michael Twum-Darko, Patricia Ntombizodwa Mazibuko
A CONCEPTUAL COMPETITIVE INTELLIGENCE QUALITY ASSURANCE MODEL 685
Tshilidzi Eric Nenzhelele
TOWARDS A SUCCESSFUL CENTRALIZATION OF MUNICIPAL PROCUREMENT:
A CASE OF KWAZULU-NATAL PROVINCE 697
Zwelihle Wiseman Nzuza, Lawrence Mpele Lekhanya
THE DEPLETION OF NARRATIVE RESOURCES IN
THE KENYAN TRADE UNION MOVEMENT 704
Collins Ogutu Miruka
THE PRACTICE OF STRATEGIC PLANNING: MANAGERS’ PERCEPTION OF ITS
USAGE BY NON-PROFIT ORGANISATION IN THE WESTERN CAPE 714
Robertson K. Tengeh
AGE AND RACE DIFFERENCES ON CAREER ADAPTABILITY AND EMPLOYEE
ENGAGEMENT AMONGST EMPLOYEES IN AN INSURANCE COMPANY 720
Rebecca Tladinyane, Marna Van der Merwe
A CONCEPTUAL FRAMEWORK FOR DETECTING FINANCIAL CRIME
IN MOBILE MONEY TRANSACTIONS 727
Cross Gombiro, Mmaki Jantjies, Nehemiah Mavetera
LEGISLATIVE AND POLICY FRAMEWORKS FOR BASIC SERVICES:
A SOUTH AFRICAN COMPARATIVE STUDY 735
Hlako Choma, Peter Ramphabana
OCCUPATIONAL STRESS AND ORGANISATIONAL COMMITMENT
OF EMPLOYEES AT HIGHER EDUCATIONAL INSTITUTION 740
Zhuwao S, TS Setati, MP Rachidi, Wilfred I. Ukpere
IS EPA AN OBSCURE COERCION? A CRITICAL REFLECTION
FROM THE LITERATURE AND AGENDA FOR RESEARCH 747
Collins C Ngwakwe

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
673
EXPLORING ECONOMIC STRUCTURE AND DRIVERS OF
ECONOMIC GROWTH IN BOTSWANA
Patricia Lindelwa Makoni*
Abstract
This article set out to analyse the economic structure and main economic drivers in Botswana.
Botswana, a country in sub-Saharan Africa, is a relatively small economy, hugely dependent on its
diamond mineral wealth. Concerns have arisen in recent years that the diamond deposits will soon be
depleted and the country therefore needs to embark on a diversification programme to broaden its
economic base. In order to understand the Botswana economy, its economic structure and current
domestic sectorial performance were evaluated, as well as its trends in imports and exports. An
analysis of the data shows that, regardless of the awareness of the sensitivity to external shocks of
commodity prices, as well as the obvious future depletion of diamond reserves, the Botswana economy
continues to rely on diamonds, at the expense of attracting international capital flows to enhance and
maintain sustainable economic growth, through investments in agriculture, manufacturing and
tourism. It is therefore recommended that the Government of Botswana becomes proactive and
implements recommended policies to diversify its economy, so that it can sustain or improve its
economic growth by becoming a prime destination of international capital and domestic private sector
investment, thereby increasing employment and trade opportunities.
Keywords: Trend Analysis, Investment, Imports, Exports, Policy, Botswana, Africa, Diversification,
Economic Growth, Diamonds, FDI
*Department of Finance, Banking and Risk Management, University of South Africa, P.O. Box 392, UNISA, 0003, South
Africa
Tel: +27767538234
1 Introduction
Botswana is a small, landlocked country located in
Sub-Saharan Africa, with a population of just over two
million. Previously colonized by Britain, it gained its
Independence in 1966, and was considered one of the
poorest nations with a per capita gross domestic
product (GDP) of only US$70 (World Bank, 2014);
growing to US$6500 in 2012 (African Economic
Outlook, 2012). Also, at independence, Botswana’s
economy was agro-based, with this sector contributing
approximately 43% of the country’s GDP, mainly
from its cattle rearing and beef production (Malema,
2013). The country’s fortunes however changed a few
years thereafter upon the discovery of diamonds.
Botswana experienced exceptionally high economic
growth, and was reclassified as an upper-middle
income country, as evidenced by the real GDP which
increased at an average annual rate of 4.6% between
1994 and 2011, based on the new constant 2006 prices
(World Bank, 2014). As a result of the diamond
mining, focus shifted from agriculture to mining, and
mining became the preponderate sector in terms of
GDP contribution to the economy of Botswana.
According to Siphambe (2006), agriculture shrunk
from 39% of the economy in 1966 to 2% of total
output by 2003; whereas mining went from 0% to a
peak of 47%, before declining to 35% during the same
period.
The recent global financial meltdown of 2008
exposed the vulnerability of Botswana’s
overdependence on its diamond mining as the
backbone of its economy. The low global demand for
minerals resulted in a sharp decline in commodity
prices, and diamonds were not spared either.
Diamonds contribute 50% of the Government’s
revenue, mainly through its 50:50 joint venture
shareholding structure with De Beers in Debswana
Diamond Company. During the crisis, jobs were shed,
and in some instances, mining operations were
suspended in order to preserve jobs as well as the
mineral wealth while waiting for the commodity
markets to recover so that decent prices can be earned
from the sale of diamonds.
As a result of this dependence of the entire
economy on mining, and specifically the mining of
diamonds, there have been calls for the Government to
encourage investment in other sectors of the economy.
This call for diversification is as a result of the limited
lifespan of the diamond mines. Diamonds are a natural
resource which will run out in due course. Experts
have estimated that the current diamond deposits in
Botswana will be depleted in 2029 (Basdevant, 2008).
What then will become of the country and its economy

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
674
then, should the main economic driver be depleted?
Does Botswana have the capacity to attract foreign
investors to augment its endeavors to establish and
sustain alternative economic sectors?
The primary objective of this paper is to examine
the economic structure and the main economic drivers
in Botswana. In order to understand the dynamics of
the Botswana economy, this article will seek to
undertake a comparison of FDI to trends in imports
and exports, as a percentage of GDP, as these tend to
substitute inward international capital. The country’s
investment attraction policies will also be studied with
the view of understanding what structures the
Government has put in place in order to diversify its
economy. The remainder of this article is set out as
follows: the first section gives a general overview of
the economic structure of Botswana, followed by an
examination of the domestic sectorial economic
performance. The third section is an analysis of import
and export trends in Botswana. Lessons learned from
the diamond dependency syndrome, as well as
recommendations on Government’s investment and
economic diversification policies will be considered in
the fourth section. The paper ends with a concluding
summary to the study.
2 Overview of the structure of the
economy of Botswana
Botswana is renowned world over for its diamond
production. Little was known about this small country
until the discovery of diamonds. At Independence
from British rule in 1966, Botswana had a
predominantly agriculture-based economy, mainly
cattle rearing and beef production. However, the
country is semi-arid with the Kalahari Desert covering
almost 70% of Botswana’s land surface. As a result,
the country is naturally prone to droughts, which occur
every second year. The high prevalence of droughts
poses a huge threat to the agricultural sector as the
absence of reliable rainfall affects crop production.
The rural population also depends on livestock herds,
which due to overgrazing, adds to the country’s woes.
In drought years, many cattle die off. Due to diamond
exploitation, the Botswana economy has structurally
reformed from agro-based to mining based. Within the
mining sector itself, the focus is on the lucrative
diamond extraction than other minerals such as
copper-nickel, soda ash and gold (Bank of Botswana,
2013).
The Government of Botswana (GoB) is a major
player in the diamond mining sector. In order to attract
foreign investment, Botswana in 1969 entered a joint
venture shareholding structure with De Beers of South
Africa, wherein the Government would hold 15% of
the shares, while De Beers held the lion’s share of
85% in Debswana, a company established to exploit
diamonds in Botswana. With rising demand for
diamonds, and therefore an increase in prices and
hence improved profitability, the GoB in 1975 revised
the Debswana shareholding structure as follows:
 The GoB received equity shares of 15% of
diamond mining proceeds;
 The GoB exercised its option to purchase an
additional 20% of the shares, effectively earning itself
the right to have direct representative sitting on the
Board of Debswana Mining Company, the Botswana-
based subsidiary of De Beers Mining Company;
 The GoB was also to receive royalties
equivalent to 15% of the shares.
The above arrangement effectively gave the
Government a 50% equity in its diamonds sector, and
this has tremendously boosted Government coffers
over the years (Siphambe, 2006). According to
Mahembe and Odhiambo (2013), diamond revenue
accounts for at least 55% of Government income.
Although the mining sector as a whole is dominant in
the economy in terms of output and exports, this does
not translate to much as far as employment is
concerned because the sector only contributed
employment of 5% (Siphambe, 2006).
As can be noted from Table 1 above, there has
been a consistent improvement in the GDP per capita,
ranging from the captured period of 1995 to end of
2013. The real GDP growth rate itself recovered
significantly shortly after the 2008 global financial
crisis from a negative 7.84% in 2009 to a positive
8.59% in 2010. In terms of imports and exports of
goods and services, measured as a proportion of GDP,
Botswana receives a significant amount of its income
from exports of diamonds and copper-nickel, although
more than 50% of this still leaves the country as
payment for the importation of various products such
as fuel, food and machinery. Agriculture and
manufacturing contribute less than 8% apiece towards
the economy, a very precarious situation which needs
to be urgently remedied, because mining cannot and
will not continue to sustain this economy beyond the
economic lifespan of the diamond deposits. The
scenario is even worse when examining the minimal
contribution to GDP from net FDI inflows, yet
Botswana has some lucrative investment opportunities
for foreign capital, but clearly fails to capitalize on
this. According to the Bank of Botswana (2013), the
country’s upward trend in trade continues to be
buoyed by the relocation of De Beers Diamond
Trading Company from London in the United
Kingdom to Gaborone, the capital city of Botswana.
Aggregation of rough diamonds has occurred in
Botswana since July 2012, resulting in re-export trade
since local production is pooled with that of De Beers’
mines in Canada, Namibia and South Africa.
Besides having an open economy, Botswana is
also fortunate to have a mature democracy, which
creates political stability in the country; a requirement
for FDI attraction to its economy. On the labor front –
the Government has invested significantly in basic
education by offering free primary school education.
This has however not translated to a large enough

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
675
supply of skilled labor, as the country continues to
have to employ a substantial number of expatriates for
high level positions particularly in mining. The
country further faces an unemployment rate of
approximately 20%, as well as the world’s second
highest prevalence of adult HIV/ AIDS, which results
in a lower life expectancy.
Table 1. Key macroeconomic indicators in Botswana
Indicator
Measure
1995
2005
2009
2010
2011
2012
2013
GDP
US$ billions
4.730
9.931
10.107
13.747
15.365
14.537
14.785
GDP per capita
Current US$
2,988
5,294
5,178
6,980
7,734
7,255
7,315
GDP growth rate
%
7.03
4.56
(7.84)
8.59
6.18
4.31
5.83
Real interest rate
%
6.78
0.23
9.98
(6.28)
4.76
9.84
4.00
Exports of goods and services
% of GDP
50.84
52.92
35.35
35.84
45.32
43.48
55.12
Imports of goods and service
% of GDP
43.76
35.58
52.71
46.24
52.40
59.43
59.90
Net FDI inflows
% of GDP
1.49
2.81
1.27
0.99
7.11
1.01
1.28
Agriculture , value added
% of GDP
4.91
2.03
3.27
3.22
2.75
2.93
2.54
Industry, value added
% of GDP
46.47
47.63
30.83
40.14
40.04
35.33
36.92
Manufacturing, value added
% of GDP
5.64
5.50
7.36
6.58
6.34
6.43
5.68
Services, value added
% of GDP
48.62
50.33
65.90
56.64
57.21
61.74
60.54
Trade
% of GDP
94.60
88.51
88.06
82.08
97.73
102.91
115.02
Population
Millions
1.583
1.876
1.952
1.969
1.987
2.004
2.021
Source: World Bank (2014)
3 Domestic sectorial performance
According to the Bank of Botswana (2013), there was
an improvement in the country’s economic
performance in 2013. The country’s real GDP grew
from 4.2% in 2012 to 5.9% in 2013, attributable to the
lucrative mining sector which grew by 11%, after the
7% contraction in 2012; and despite a severe drought
which led to water shortages and electricity outages.
Non-mining GDP however grew by 5.1%, a
deceleration from 6.2% in 2012. Continuing with its
trend for decades now – mining retained its position as
the local economy’s largest contributor, accounting for
22.1% of total output at current market prices,
compared to the 2012 level.
Table 2. GDP by sector (percentage)
Sector
2008
2012
Agriculture
2.8
2.9
Mining
29.2
21.9
Manufacturing
6.3
6.4
Water and electricity
1.0
(0.5)
Construction
5.5
7.4
Retail trade, hotels and restaurants
14.8
16.6
Transport and communication
4.9
6.2
Finance and business services
13.8
15.9
Public administration
16.1
16.4
Other services
5.7
6.8
GDP at basic prices/ factor cost
100
100
Source: African Economic Outlook (2014)
Looking at the sectorial contributions made, as
presented in Table 2 above, only mining; retail trade,
hotels and restaurants; and finance and business
services are noteworthy of paying attention to.
Diamond production in 2012 increased on the back of
higher demand from the United States of America
(USA) and China. There were also positive
contributions made in the production of copper-nickel;
although operational challenges impacted negatively
on coal output (Bank of Botswana, 2013). Retail trade,
hotels and restaurants benefitted primarily from a rise
in retail trade activity, finance and business services
was boosted by a surge in real estate dealings.
Interestingly, the Government contributed over 16%
towards its own GDP. This was not raised from the
typical taxes and other public funds, but rather from
realized diamond mining revenues. As already alluded
to above, Botswana experiences perennial droughts,
and the 2012/ 2013 agricultural period was affected,
hence no real contribution was made by the sector.
The manufacturing sector also posted disappointing
results, especially in the textile sub-sector which
shrunk by 59.6%.

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
676
4 Import and export trends in Botswana
Like most economies in the world, Botswana is
engaged in the business of importing goods and
services that it cannot produce for itself at an
economic advantage, while exporting those goods and
services which can earn it much needed foreign
currency. Figure 1 below shows the interrelationship
and trends between imports and exports. It is noted
that imports and exports closely mimic each other in
terms of peaks and troughs over the period 1990 to
2013. Export levels were generally higher than
imports during the period under review, except from
2008 to 2013 when imports became slightly more than
exports. This was due to the impact of the global
financial crisis on the economy.
Figure 1. Botswana Exports vs Imports, 1990-2013
Source: Author’s calculations derived from World Bank data (2014)
It can be further assessed from Tables 3 and 4
below that Botswana’s total exports rose by 36%
compared to a mere 2% rise in imports in 2013.
Contributing to this rise in exports were diamonds,
copper-nickel and beef, whose exports rose by 46%,
36% and 90%, respectively, between 2012 and 2013.
Diamond exports were enhanced by larger volumes
and higher prices, which came about as a result of the
local currency (Pula) depreciating against the
American dollar. On the other end of the spectrum,
exports of vehicles, textiles and gold, which declined
by 33%, 41% and 27%, respectively, during the same
period (Bank of Botswana, 2013). The leading
destinations of exports from Botswana in 2013 were
Belgium, India and Israel, which were impacted on by
the relocation of diamond sales from the UK to
Botswana.
Table 3. Exports from Botswana, 2012-2013
2012
Pula million
2013
Pula million
2012
%
2013
%
%
change
Total exports
45 861
63 859
39
Of which:
Diamonds
Copper-nickel
Beef
Soda ash
Gold
Textiles
Vehicles
Other goods
36 143
3 393
523
645
618
613
989
2 937
52 768
4 604
996
723
451
362
658
3 297
78.8
7.4
1.1
1.4
1.3
1.3
2.2
6.4
82.6
7.2
1.6
1.1
0.7
0.6
1.0
5.2
46.0
35.7
90.5
12.2
(27.1)
(40.9)
(33.5)
12.2
Source: Bank of Botswana (2013)
With regard to imports, the top four commodities
imported were fuel, chemicals and rubber products,
diamonds and food. Botswana does not have oil
reserves, nor the capacity to generate its own
electricity and hence has to source fuel from outside
the country. Due to the regular droughts experienced
in the country, food also has to be imported. Most of
Botswana’s imports are sourced from neighboring
South Africa and the United Kingdom which in 2012
accounted for approximately 63% and 17% of all
imports, respectively; as well as China, Israel,
Namibia and Zimbabwe (African Economic Outlook,
2014).
0,00
10,00
20,00
30,00
40,00
50,00
60,00
70,00
80,00
90,00
100,00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Botswana Exports of goods
and services (% of GDP)
Botswana Imports of goods
and services (% of GDP)

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
677
Table 4. Imports to Botswana, 2013-2013
2012
Pula million
2013
Pula million
2012
%
2013
%
%
change
Total imports
60 633
61 823
2.0
Of which:
Diamonds
Fuel
Food
Machinery & elec. equipment
Chemicals & rubber products
Metals & metal products
Textile & footwear
Vehicle/ transport equip
Other
16 512
10 005
6 125
9 091
5 432
2 915
1 893
5 505
4 480
17 655
10 833
6 377
7 535
5 812
2 936
1 895
5 148
4 972
27.2
16.5
10.1
15.0
9.0
4.8
3.1
9.1
7.4
28.6
17.5
10.3
12.2
9.4
4.7
3.1
8.3
8.0
6.9
8.3
4.1
(17.1)
7.0
0.7
0.1
(6.9)
11.0
Source: Bank of Botswana (2013)
5 Conclusion: lessons learned and policy
recommendations
The primary objective of this paper was to examine
the economic structure and the main economic drivers
in Botswana. It emerged that despite being an open
economy, the country is largely dependent on a single
commodity – diamonds. The problem with diamonds
is that as a natural resource, the deposits will soon be
all mined out, and the country will have limited or no
alternatives to sustain its economy. Also, the value of
diamonds fluctuates as commodity prices are subject
to global external shocks. In addition to the above,
despite being the biggest economic driver, the
diamond mining sector actually only contributes 5% to
the country’s employment. In the 2012/ 2013 period,
diamonds accounted for 46% of total exports, and over
55% of the Government’s income through its various
shareholding arrangements in Debswana.
Figure 2 below shows the concerning gap
between imports, exports and FDI inflows to
Botswana between 1990 and 2013. It is clear that FDI
is not considered an alternative source of funding for
long term projects which could free up Government
income sources for use in social development agendas.
The highest level of FDI received by Botswana (as a
% of GDP) was 13.46% in 2002. Thereafter, the trend
of FDI inflows actually declined to almost non-
existent levels. Other challenges that Botswana faces
is that the Government’s high contribution to total
output has effectively crowded out private sector
investments, hence FDI is required to fill this gap. The
country has also been affected by the high scourge and
prevalence of adult HIV/ AIDS, hence reducing the
pool of labor. In line with providing basic human
rights to the affected population, those infected with
the disease are able to work until such time that their
illness affects productivity. The Government however
tries to ensure that once infected, the disease sufferers
have access to adequate health facilities.
Figure 2. Botswana Imports, Exports and FDI, 1990-2013
Source: Author’s calculations derived from World Bank data (2014)
Given Botswana’s mature democracy, an
impressive track record of good governance and
economic growth backed by sound macroeconomic
and fiscal policies, the IMF (2011) advises that the
country should in fact push for the diversification of
its economy in sectors such as tourism, agriculture,
-20,00
0,00
20,00
40,00
60,00
80,00
100,00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Botswana Exports of
goods and services
(% of GDP)
Botswana Imports of
goods and services
(% of GDP)

Journal of Governance and Regulation / Volume 4, Issue 4, 2015, Continued - 6
678
manufacturing, trade and telecommunication.
Botswana’s other investment attraction factors besides
the diamond mines; include vast tracts of desert sands
in the Kalahari Desert and the Chobe River, both of
which have the potential to bring in high tourism
receipts. Also, there are several opportunities available
in commercial cattle rearing and beef production.
Botswana beef is exported in carcass form to
neighboring countries, as well as the European Union.
The Botswana Investment and Trade Centre (BITC,
2015) also lists additional investment incentives as
follows:
 The country offers tax holidays and low
corporate rates of tax, e.g. 15% for manufacturing
firms, 22% on capital gains, 15% on foreign
dividends;
 Infrastructure-wise, the railway links Botswana
to Zimbabwe and South Africa; while the road
network connects Botswana to South Africa,
Zimbabwe, Zambia, Namibia;
 Access to markets due to regional trade
membership agreements such as SADC and SACU;
 A stable and competitive exchange rate, no
exchange controls, low incidence of crime, good labor
relations, and a pool of labor with basic primary
education.
In 2013, a reimbursable advisory services (RAS)
agreement was entered into between the GoB and the
World Bank, for the purposes of initiating and
pursuing an economic diversification and
competitiveness agenda leaning on five pillars – doing
business, industrial and trade policies, infrastructure,
access to finance and skills development (World
Bank, 2014). However for this programme to be
successful, it requires a political commitment from the
Botswana Government itself. The diversification
agenda can also be funded using international capital
flows in the form of foreign direct investment (FDI).
Attracting FDI to Botswana will enhance and
encourage greater private sector development and
participation, create employment and free up
Government funds. According to Malema (2013), the
private sector remains subdued, and still looks to
Government to create jobs and other entrepreneurial
opportunities. Domestic financial markets are not
adequately developed as yet to be able to facilitate the
raising of significant amounts of capital for long term
investment and growth. The Botswana Stock
Exchange is relatively small in comparison to other
African stock exchanges in Kenya, Nigeria, Uganda,
Zimbabwe and South Africa; with only eighteen (18)
listed counters, and a mere market capitalization of
US$4,588m in 2012 (World Bank, 2014). Financial
market development in Botswana is not reflective of
the country’s GDP and economic growth rates which
have resulted in it being classified a middle-income
country.
In conclusion, it is recommended that the
incumbent Government seizes existing opportunities
offered by the World Bank and IMF, as well as take
the advice rendered insofar as the promotion of
economic diversification and harnessing of FDI is
concerned. In this way, the economy will not halt to a
complete standstill when diamond mining and
production hits a plateau and declines due to depleted
mineral resources. The country has been found to be
the 36th freest in terms of the economic freedom score
by Heritage Foundation (2015), putting it at a greater
advantage than most other countries in the Sub-
Saharan region. It therefore remains to be seen
whether the economic diversification programmes will
be pursued and implemented, and how soon.
References
1. African Economic Outlook (2014) Botswana Country
Report, retrieved on 8 May 2015 from
http://www.africaneconomicoutlook.org/en/countries/s
outhern-africa/botswana/
2. African Economic Outlook (2012) Botswana Country
Report, retrieved on 11 May 2015 from
http://www.africaneconomicoutlook.org/en/countries/s
outhern-africa/botswana/
3. Bank of Botswana (2013) Annual Report 2013,
retrieved on 9 May 2015 from
http://www.bankofbotswana.bw/content/20140604140
57-bank-of-botswana-releases-2013-annual-report
4. Basdevant, O. (2008) Are Diamonds Forever? Using
the Permanent Income Hypothesis to Analyse
Botswana’s Reliance on Diamond Revenue, IMF
Working Paper Series WP/08/80, available from
https://www.imf.org/external/pubs/ft/wp/2008/wp0880
.pdf
5. Botswana Investment Trade Centre (BITC) (2015)
“Investment Climate: Ease of Doing Business”
available from http://www.bitc.co.bw/investment-
climate-ease-doing-business
6. Heritage Foundation. (2015). 2015 Index of Economic
Freedom, retrieved on 8 May 2015 from
http://www.heritage.org/index/country/botswana
7. IMF (2011) Natural Resources and Development:
Confronting Emerging Challenges in Botswana; public
lecture at the Bank of Botswana by Mr Naoyuki
Shinohara, Deputy Managing Director; retrieved on 8
May 2015 from www.imf.org/external/np/speeches/
2011/033011.htm
8. Mahembe, E. and Odhiambo, N. M. (2013). The
dynamics of foreign direct investment in SADC
countries: Experiences from five middle-income
economies. Problems and Perspectives in
Management, 11(4), pp. 35-45.
9. Malema, B. W. (2013). Botswana's formal economic
structure as a possible source of poverty: Are there
policies out of this economic impasse? Pula:
Botswana Journal of African Studies, 26(1), pp. 51-70.
10. Siphambe, H. K. (2006). Foreign direct investment in
Africa: Botswana case study. Foreign Direct
Investment in Sub-Saharan Africa: Origins, Targets,
Impact and Potential, Edited by: S. Ibi Ajayi,
Published by African Economic Research Consortium,
pp. 57-74
11. World Bank (2014) World Bank Country: Botswana
Overview, retrieved on 8 May 2015 from:
http://www.worldbank.org/en/country/botswana/overv
iew.print
12. World Bank (2014) World Development Indicators
2014, retrieved on 16 December 2014 from
http://data.worldbank.org/country/botswana