Botswana: Risk Assessment

Country Risk Rating

A4 A somewhat shaky political and economic outlook and a relatively volatile business environment can affect corporate payment behavior. Corporate default probability is still acceptable on average.

Business Climate Rating

A3 The business environment is relatively good. Although not always available, corporate financial information is usually reliable. Debt collection and the institutional framework may have some shortcomings. Intercompany transactions may run into occasional difficulties in the otherwise secure environments rated A3.
Color Palette


  • Abundant and diversified natural resources (diamonds, copper, uranium, coal)
  • Sustainable public and external debt
  • Political stability with a governance score that puts Botswana at the top of the list of Africa's Sub-Saharan countries


  • Dependence on the diamond sector (80% of exports, 30% of fiscal revenues)
  • Inadequate infrastructures (production and distribution of water and electricity)
  • High levels of poverty, inequality, and unemployment (18%)

Current Trends

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Growth largely dependent on diamonds despite diversification process

Although growth continued to slow in 2013, impeded by the sluggish diamond market, it was nonetheless still close to 4% thanks to the strength of the non-mining sectors, in particular services and construction. With activity picking up in the advanced economies, which should spur demand for diamonds, the economy is expected to rebound in 2014.Botswana’s economy is particularly dependent on the mining sector, which represents nearly 80% of its exports and 30% of GDP, so it is vulnerable to external shocks and accordingly relatively volatile. Accounting for 40% of formal employment, the public sector plays a predominant role in the economy. The distortions engendered by this dominance hinder the emergence of the private sector. The government has therefore begun to privatize and diversify the economy, especially via the NDP (National Development Plan) 10 and EDD (Economic Diversion Drive) program. The unveiling of the Lethlakane uranium mine development plan in October 2013 fits into this context. In parallel, several coal mining development projects are currently being studied and the government is about to launch a construction project for a railway line linking the country with the sea via Namibia to support the export of coal.

Inflation remains high due to the rise in the price of the raw materials that the country imports. It is, however, expected to converge towards the medium term targets set by the central bank (between 3% and 6%) in 2014.

Rising fiscal surplus and a favorable external position

For the 2013/2014 fiscal year, the government has introduced a program of fiscal consolidation, aimed particularly at reducing unproductive public spending and controlling the rise in civil service salaries.  Spending on wages, transfers and subsidies, which accounted for 53.4% of total spending in the 2012/2013 fiscal year, will thus see their share of spending sharply reduced. By thus stabilizing the public accounts, Botswana should achieve a distinctly higher fiscal surplus. In this context, public debt will continue to trend downward.

As in the previous five years, the county again posted a trade balance deficit in 2013. This trend is mainly explained by slower diamond exports and increased electricity imports, with the country producing only 20% of its needs. However, thanks to the increase in official transfers and particularly substantial revenues from the South African Customs Union (SACU), the current account deficit narrowed to some extent. Botswana’s external position is therefore favorable, with official reserves covering 11 months of goods imports. Nevertheless, the country remains perilously dependent on diamond exports and SACU revenues. The current account deficit will continue to shrink in 2014. The diamond export rebound combined with the curb on household debt, and the start of operations at the Moropule B power station, leading to a slowdown in energy imports, will reduce the country’s trade deficit.

The banking sector is relatively efficient, profitable and well capitalized and non-performing loan levels portfolio are fairly low. These represented only 1.2% in March 2013 [C1], distinctly less than in 2010, despite growing household debt.

Political and social stability

Botswana is relatively stable politically. There is no real opposition to current President of the republic and head of government, Ian Kham, so he is likely to remain in power until the October 2014 parliamentary elections. This is because the Botswana Congress Party (BCP) and the Umbrella for Democratic Change (UDC), a coalition of three opposition parties formed in November 2012, have failed to unite. Persistently high levels of inequality, high unemployment (17.5% in 2012 [C2]) and a poverty rate above 20% could become sources of tension.

In terms of governance, the country has the best indicators in the region and is the least corrupt country in Africa, ranked 30th out of 174 in the 2012 Transparency International corruption index.


Coface (01/2016)