Doing Business in Botswana

Market Overview

Botswana is an African success story. It has progressed from one of the poorest countries in the world at the time of independence in 1966, to a middle-income country with nominal GDP per capita of US$ 7,343.54 as of November 2008. It is now attempting to diversify the country’s economy and promote sustainable development against the backdrop of an emerging global market and a severe HIV/AIDS challenge. Several international rankings and economic indicators highlight Botswana’s successes and challenges:

The World Economic Forum report has ranked Botswana 60th on the Global Competitiveness Index of 2009/10, which makes it the second-best country in sub-Saharan Africa, .Botswana scores well in institutions and macro economy but needs to improve in health, education and training, efficiency, business sophistication, and innovation according to the report.

In February 2010, Moody’s and Standard & Poor’s downgraded Botswana’s investment grade credit rating from “A” to “A-”. The downgrading was due to Botswana’s decision to set out plans to boost public spending until March 2012.Transparency International ranked Botswana 37th out of 180 countries, on its 2009 corruption perception index, the best amongst sub-Saharan African countries.

The U.N.‟s Human Development Index ranked Botswana 125th, placing it among the Medium Human Development group.

The fight against HIV/AIDS consumes a large portion of government spending and is a factor in low productivity.

The Bank of Botswana’s target inflation rate is 3-6% although it has rarely been within the target since the pula devaluation in May 2005. However, as of December 2009, inflation was 5.8%.

Botswana enjoyed budget surpluses for several years, but is estimated to have a budget deficit of approximately 7% of estimated GDP in 2008-9 and a deficit of approximately 15% of estimated GDP in 2009-10. The past surpluses were due in part to poor implementation of projects. The deficit spending in the 08-09 and 09-10 budget years is the result of a GOB decision to maintain spending levels to stimulate the economy despite significant losses of revenue due to the global economic downturn. The budget shortfalls will be covered by borrowing from the domestic capital market, a $ 1.5 billion loan from African Development Bank and drawing down its significant foreign reserves.