Botswana: Risk Assessment

Country Rating1

Rating: A4

Business Climate Rating1

Rating: A3

Risk Assessment2

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 of174 in the 2012 Transparency International corruption index.


  • Abundant and diversified natural resources (diamonds, copper, uranium, coal)
  • Number one African destination for foreign direct investments in the mining sector
  • Sustainable public and external debt


  • Dependence on the diamond sector (79% of exports, 30% of fiscal revenues)
  • Great poverty and inequality 
  • HIV aids rate among the highest in the world (23.4% among 15-49 year-old in 2011)

1Country and Business Climate Ratings courtesy of Coface (10/2015)
2Risk Assessment and methodology courtesy of Coface (10/2015).