Private Sector Development
Botswana compares favourably on a variety of competitiveness indicators, key for private sector investment. In the World BankÃ¢â‚¬â„¢s 2011Ã‚Â Ease of Doing BusinessÃ‚Â report Botswana was ranked 52 out of 183 countries, the third highest in Africa after Mauritius at 17 and South Africa at 34. Botswana could rank much higher had it not been for the costs of being a land-locked country.5In terms of governance, Botswana leads in most aspects of combating corruption. The country was ranked 33Ã‚Â out of 178 countries in the Transparency International 2010 Corruption Perception index, ahead of all its sub-Saharan African peers. According to the Mo Ibrahim FoundationÃ¢â‚¬â„¢s Index of African Governance, Botswana was ranked third out of 53 African countries in 2010 behind Mauritius and the Seychelles. Moreover, in the 2010 Global Peace Index, Botswana is among the worldÃ¢â‚¬â„¢s peaceful countries, ranking 33 out of 149, just behind Singapore, France and Great Britain.
The government has established special programmes to develop the productive capacity of the private sector. The Citizen Economic Empowerment (CEE) programme is among such initiatives that aim at creating and promoting an educated and healthy nation. It also aims to create economic opportunities for the private sector through large projects and building up capacity. The programme is implemented by two major non-governmental bodies Ã¢â‚¬â€œ the Citizen Entrepreneurial Development Agency (CEDA) and Local Enterprise Authority (LEA), which offer funds, training and mentoring services to individuals wishing to venture into businesses. The governmentÃ¢â‚¬â„¢s move to outsource most of its services from local groups is also aimed at stimulating local production and promotion of small and medium-sized enterprises.
Financial System Development
The financial sector is a key element for growth and diversification of BotswanaÃ¢â‚¬â„¢s economy. The financial sector proved resilient to the global financial crisis because of the robust supervisory standards set down by the Bank of Botswana. No bailouts were required.
The Botswana banking sector is well developed. By end 2010, there were eight commercial banks, with ABN Amro Bank establishing a presence in 2010 to service the diamond industry, building on its traditional role in the industry. Botswana non-banking financial institutions are also making headway, following the establishment of a regulator Ã¢â‚¬â€œ The Non-Banking Financial Institutions Regulatory Authority (NBFIRA) in 2008.Ã‚Â Ã‚Â By end-2009, there were 103 pension funds with total assets valued atÃ‚Â 32.4 billion pula (BWP) or some 39% of GDP.6 Pension funds in Botswana are, however, constrained by limited domestic investment opportunities, leading to over 60% of its financial resources being invested offshore. The insurance industry is also significant, generating gross premiums of around 3.15% of GDP by end-2009.
The Botswana International Financial Service Centre (IFSC) established in 2003, promotes cross-border investments in the financial sector. The IFSC aims to make Botswana a world class hub for cross-border financial and business services. The IFSC attracted 45 companies by 2010 with cumulative capital of over BWP 6 billion and employing around 600 workers in specialised professions. Besides existing preferential treatment in processing of employment permits for its foreign employees, further changes in 2010 made it quicker to process residence permits for the IFSCÃ¢â‚¬â„¢s accredited companies.7
The Botswana Stock Exchange (BSE), formally established in 1989, is an important part of the countryÃ¢â‚¬â„¢s financial services sector. The BSE is one of the best performing stock exchanges in southern Africa with average aggregate returns of 24% in the past 10 years and is the third largest in terms of market capitalisation.8Ã‚Â In 2010, the BSE introduced trading of an Exchange Trade Fund Ã¢â‚¬â€œ a basket of shares that trade as a single security. It is hoped this initiativeÃ‚Â will boost liquidity on the BSE, which is currently very low. Market gains reflect the performance of the banking sector, which accounts for more than 60% of BSE listed shares.
Other Recent Developments
BotswanaÃ¢â‚¬â„¢s central policy objective, as identified by National Development Plan 10 (2009-16), is to diversify the economy away from mining, a move seen as even more important following the global financial crisis and economic slump. To this end, the government has identified six areas for special attention Ã¢â‚¬â€œ diamonds, transport and logistics, innovation, agriculture, education and health. The financial services and tourism sectors, led by the International Financial Services Centre (IFSC) and Tourism Commission, aim to transform Botswana into a global financial centre and a South African tourist destination.
Tourism has significant potential for foreign earnings in Botswana as over 17% of the land is reserved as parks characterised by unique attractions. Among these are the Okavango Delta Ã¢â‚¬â€œ the largest inland delta in the world Ã¢â‚¬â€œ and Chobe National Park, home to a large elephant population. Although the contribution of the tourism sector to the overall economy is low, at around 4.2% of GDP, the sector generates about 11,000 jobs. Initiatives underway to promote tourism include building up air services into the capital Gaberone and the upgrading of other airports around the country. A major challenge facing the tourism sector is lack of local experts.9
To move up the value-added ladder in the diamond industry, cutting and polishing factories have been established, with 16 factories and some 3Ã‚Â 000Ã‚Â jobs created by September 2010. In the regions, for example Selebi-Phikwe, diversification is another strategy that looks beyond the closure of copper and nickel mining operations there.10Ã‚Â The aim is to develop resources in the region, focusing on agriculture, manufacturing and tourism by using the infrastructure put in place.
Agriculture is important for both food security, meeting about 40%Ã‚Â of domestic demand, and exports. Significant attention is paid to livestock production, BotswanaÃ¢â‚¬â„¢s main agricultural export. The establishment of a new Foot and Mouth Disease (FMD) laboratory by the Botswana Vaccine Institute is among measures taken to guarantee quality and competitiveness of its beef exports. The current construction of three large dams will significantly boost water supply for agricultural production.11
The economic diversification drive also rests on the good performance of public enterprises, among which counts the Botswana Development Corporation (BDC), the leading investor and lender with a portfolio covering diverse sectors of the economy. According to its 2009 Annual Report, the BDC seems to have performed well and is currently implementing a number of projects, including glass and steel manufacturing which were expected to have created over 500 direct new jobs by end-2010. Privatisation of public enterprises has been slow since its inception in 2005 but has recently gained momentum with the naming of Botswana Telecommunication Corporation and the National Development Bank as the next candidates for sale. In an effort to promote Public-Private Partnership (PPP) for infrastructure development, the government is establishing a PPP co-ordinating unit with the Ministry of Finance.