How are businesses in Botswana

Hope for a quick recovery

Economic development: real upturn only from 2022

When Botswana extended the state of emergency imposed due to the corona pandemic in the summer of 2020 until March 2021 and left certain restrictions in force, there was definitely criticism. The second wave of diseases, which is much more pronounced in some neighboring countries, seems to agree with the government in Gaborone. Botswana continues to come through the crisis with low case numbers and without a collapse of the health system.

Economically, however, the country, whose main sources of income are mining and tourism, is all the more affected. The demand for diamonds fell sharply in 2020 and several sales rounds were suspended. The worldwide travel restrictions have practically brought tourism to a standstill. Botswana must therefore expect a real decline in gross domestic product (GDP) of around 8 percent for the past year.

In its country analysis of October 2020, the International Monetary Fund (IMF) expects a decline of 9.6 percent, while the Economist Intelligence Unit (EIU) expects GDP to shrink by 8.2 percent from the beginning of 2021. With regard to the point in time at which Botswana’s economic engine starts up again, the assessments differ from one another. In the medium term, however, the analyzes see growth rates of around 5 percent per year.

The corona crisis has exacerbated the problem of unemployment. The official unemployment rate remains unchanged at around 20 percent. The informal sector that has not been recorded is particularly suffering from lockdown measures. Botswana strives to reduce its dependence on raw material exports by promoting knowledge-based and mediating areas such as tourism and financial services or logistics.

Economic key data Botswana

indicator

2018

2019

Comparative data Germany 2019

GDP (nominal, billion US $)

18,7

18,4

3.854,4

GDP per capita (US $)

8.168

7.914

46.385

Population (million)

2,30

2,37

83,1

Exchange rate (annual average 2019, 1 euro = 12.03369 Pula)

-

 

Investments: energy, water and even more mining

Mining will remain Botswana’s most important industry in the near future. In addition to diamonds, however, other raw materials should put exports on a broader basis. Therefore, extensive investments will be made in the development of new deposits in the next few years. With prices rising rapidly, copper in particular is currently attracting a lot of attention.

The mining and transport of mineral raw materials will also increase the demand for energy in the years to come. Botswana traditionally covers this with the abundant coal. In the future, however, solar energy in particular is to receive a larger share of electricity production. The state water utility Water Utilities Corporation (WUC) has launched a large investment package with 20 major projects with a total value of around 380 million euros.

 

Selected major projects in Botswana

Project name

Investment amount (million US $)

Project status

Note / contact person

Molopo Farms Complex

0,5

exploration

Nickel Sulphate Mining / Power Metal Resources

The Fields Mall, Gaborone

27,4

Start of construction, completion April 2022

26,000 square meter shopping center with 70 shops / Smart Partnership Enterprises

Gaborone Public Transport

228

planning

New bus network, vehicles, P&R systems as a public-private partnership (PPP) / submission by the Ministry of Transport

Mmamabula Coal Project

45 (1st phase)

License granted, construction will start in June 2021

1st phase mining 100,000 tons / month; Later expansion to 250,000 tons / month possible / Maatla Resources

T3 Motheo copper mine, Kalahari Copper Belt

259

Development

Proximity to the Khoemacau mine, 3.2 million tons per year; Processing, planning Lycopodium / Sandfire Resources (Australia)

Kitlanya Project, Kalahari Copper Belt

3,5

exploration

Three prospecting sites for copper / Cobre (Australia)

Tati Solar Project, 100 megawatts

n / a

Approval granted

Plant at Francistown / Shumba Energy

Karowe Diamond Mine, expansion of underground production

514

License granted in January 2021 for an additional 25 years; Start of funding 2026

Extension of the mining period to 2046 / Lucara Diamond Corp.

Lesedi Coal Bed Methane Project

28

Tender

Gas-to-power plant with 100 megawatts / developed by Tlou Energy (Australia)

Jwaneng Diamond Mine, Cut 9

1.300

implementation

Extending the life of Botswana’s largest diamond mine to 2035; Contract with Thies (Australia) terminated in January 2021; now own implementation / Debswana

Information on current donor-financed projects can be found at www.gtai.de/botsuana, "Tenders" and "Development Projects".

Consumption: decline due to corona crisis

Lower diamond exports also mean lower public revenues in Botswana. In addition, there are tax losses as a result of the slowdown in economic activity during the lockdown. In its budget for 2021/22, the traditionally conservative government in Gaborone plans to increase some taxes moderately. These include an increase in VAT from 12 to 14 percent, a mineral oil tax of 1 pula per liter and a new tax on sugared drinks. Electricity prices had already been increased by 22 percent in April 2020.

Together with the loss of income in the wake of the corona crisis, this results in a lower disposable income and restrictions on consumption for many consumers. The recovery in private consumption will therefore lag somewhat behind the macroeconomic upturn in the next few years. Inflation was just under 2 percent in 2020, but could accelerate slightly to 3 to 4 percent by 2023 with rising oil prices and stronger domestic demand again.

Foreign trade: exports collapse

The sharp fall in demand for Botswana’s main export product, diamonds, is affecting the trade balance. Total exports in 2020 were more than a fifth below the previous year's level. The trend is likely to reverse significantly as early as 2021. Imports also suffered from the economic slump in 2020. Around half of these come from South Africa, which is of central importance for the supply of Botswana. This is followed by Belgium, the United Arab Emirates (UAE) and Namibia, which mainly deliver diamonds to Botswana for sorting and processing.

The most important destination countries for Botswana exports are the diamond trading centers of the UAE, India and Belgium. Industrial intermediate products can be sold in South Africa in particular. Germany mainly purchases beef from Botswana. Total imports from the country in southern Africa, at around 1.5 million euros in the crisis year 2020, halved compared to 2019. The corresponding exports of Germany fell from around 66 million to only around 40 million euros.

Foreign trade of Botswana (in million euros; change in percent)

2019

2020

Change 2020/2019

Imports

5.867,2

5.661,4

-3,5

Exports

4.680,7

3.681,0

-21,4

Trade balance

-1.186,4

-1.980,4

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