Botswana: Leading from the South

Botswana was named the most attractive investment destination in Africa, according to the latest Africa Investment index for 2016 by Quantum Global’s independent research arm.

Out of the 54 African countries that participated in the survey, Botswana took the first position followed by Morrocco in second spot, with Egypt third while the neighbouring South Africa took  fourth spot followed by Zambia. Other countries that made it in the top ten include Cote d’Ivoire, Algeria, Tanzania, Namibia and Burkina Faso respectively.

“The annual research is aimed at providing investors in Africa with a guide to which countries and markets are most attractive for investment in the short to medium term. The multidimensional barometer was based on six clusters of factors namely growth factors, risk factors, liquidity factors, business environment factors, social capital factors and demographics,” read part of the report.

Still on the same research, last year Botswana took the fifth position, while the year before the country obtained the third spot and fourth in 2013. According to the index, Botswana was scored the first position in the credit ranking category, the second position in the import cover, current access 

ratio as well as the fourth position in the ease of doing business.

In the global rankings, Botswana is ranked position 71 out of 190 economies in the ease of doing business, according to the World Bank’s latest Doing Business rankings that was released late last year.

Botswana is due to continue benefiting from cooperation with the European Union (EU) despite uncertainty from the United Kingdom's decision to exit the European common market.

Botswana and Mauritius have investment-level ratings but no Eurobonds. In the past two years, African economies have gone from being among the most buoyant globally to being stifled by plunging commodity prices, rising debt levels and political crises.

The discovery of the gems nearly half a century ago transformed the southern African nation from a dusty farming backwater into one of the continent’s wealthiest societies. Thousands of miles of dirt roads were paved and schools and clinics built in every town. The capital, Gaborone, once a rural village, is now dotted with office blocks and malls occupied by South African chains like Shoprite Holdings Ltd. The country’s finances were in such good shape that Botswana earned the highest credit rating in Africa.

Botswana’s savior has been its diamond industry, the backbone of the economy since the first deposits were discovered in 1967. The gems are expected to generate 27 percent more revenue this year than in 2015, thanks to a rebound in prices and global demand, President Ian Khama told lawmakers in Gaborone, the capital, on Dec. 5.

Botswana, a small landlocked country of two million people, is celebrating 50 years of independence in October 2016. Over the past half-century political stability, good governance and prudent economic and natural resource management helped to secure robust economic growth, supported by the discovery of diamonds. Botswana is now an upper-middle income countries, after being one of the poorest countries in Africa.  

Botswana’s sustained economic growth averaging 5% per annum over the past decade, has been the fastest in the world. However, heavy reliance on commodities renders the country vulnerable to international market fluctuations. Prolonged uncertainty in global markets and the slow pace of economic recovery in advanced countries continue to act as a drag on Botswana's economic outlook. In 2015, the economy contracted by 0.3%, compared to a growth of 3.2% in 2014, mainly due to a decline in mining production, owing to weak global demand for diamonds. Extended drought further exacerbated economic performance, adversely effecting agriculture. In addition, electricity and water supply disruptions had unfavorable impact on manufacturing, trade, tourism, and transport and communications sectors.

Education expenditure is among the highest in the world, at around 9% of GDP, and includes the provision of nearly universal and free primary education, however, the sector has not created the skilled workforce Botswana needs to diversify its economy.

Botswana’s growth opportunities and poverty reduction would only be achievable over the long term if sustainable sources of energy are made available. Acute shortages of and energy threaten agricultural, industrial, and tourism sectors.