Although recent mineral discoveries have aroused business interest in Botswana, little published material is available on the structure of the country’s economy and on its development prospects. This article presents a survey of the economy with particular emphasis on recent developments in the areas of production, investment, government finance, and monetary and trade arrangements.1
The Republic of Botswana, the former British Protectorate of Bechuanaland, is a vast arid land of some 220,000 square miles, situated in southern Africa (see map on p. 128). It is entirely landlocked, bordering the Republic of South Africa on the east and south, South-West Africa on the west and north, and Zambia and Rhodesia on the northeast. The eastern area of Botswana is mainly a high plateau and comprises the lands between the central watershed and the Limpopo River, which forms the eastern boundary with South Africa. This is the most fertile part of the country and with about 20 inches of average annual rainfall is suitable for the growing of food crops and for cattle raising. Nearly 80 per cent of the population lives in this area, which is also traversed by the railroad running north and south between Rhodesia and South Africa. Most of the western portion of the country, about three fourths of the total area, forms part of the Kalahari Desert, a scrubgrass area of somewhat erratic rainfall. In the north the Kalahari gives way to belts of forest and dense bushland. In the northwest the Okavango River forms a swampy area covering 6,500 square miles. The climate of the country is generally subtropical but varies considerably according to altitude and latitude; summers (October-April) are hot and coincide with the rainy season, and winters are dry with wide diurnal temperature variations.
A census taken in 1964 revealed a population of 543,000, comprising 535,000 Africans, 4,000 Europeans, and 4,000 others. With an estimated annual rate of increase of between 2 per cent and 3 per cent, the population is believed to have reached 600,000 in 1969, giving an average density of about 2.7 persons a square mile. The African population, apart from some 25,000 Bushmen, is essentially made up of eight principal and closely related Bantu tribes known collectively as Batswana. By far the largest of these tribes is the Bamangwato, which comprises over 200,000 people, living in the eastern region of Serowe. The principal business centers are the new capital of Gaborone (estimated population 15,000), Lobatsi (about 10,000), and Francis-town (about 14,000), all situated in the eastern part along the railroad line. A large part of the population is Christian, the remainder follows traditional beliefs. English is the official language of Botswana, and Tswana is the main African language.
Upon independence on September 30, 1966, Botswana adopted a republican form of constitution. The President is both the head of state and leader of the Government. Legislative authority is vested in Parliament, consisting of the President and the National Assembly, which has 36 members. The Cabinet consists of the President, the Vice President, and eight ministers drawn from the National Assembly. The Constitution also provides for a 15-member House of Chiefs, to which must be referred bills and motions relating to tribal interests, as well as any proposal to alter the Constitution, before they are proceeded with in the National Assembly. Sir Seretse Khama, K.B.E., is President of Botswana.
Botswana’s economy is still at an early stage of development. Although only rough estimates exist on national income and output, gross domestic product appears to be of the order of $50–55 million, giving a per capita income of less than $100. A sizable cattle population provides the principal source of income and employment, with subsistence agriculture the other main economic activity. A chronic shortage of water, coupled with frequent and extended periods of drought, has seriously handicapped the growth of the economy. Botswana does not produce enough food to meet domestic requirements, and, in recent years of serious drought, widespread famine has been avoided only by the availability of emergency supplies of food from abroad.
The prospects for economic growth have improved with the recent discovery of important mineral deposits. At present, efforts are being concentrated on the development of diamond and copper-nickel deposits involving considerable private investment in production facilities and public investment in basic infrastructure. Production of diamonds is expected to commence in 1971, and, subject to early completion of negotiations for financing, production of copper-nickel could start in 1973. The development of other mineral deposits is planned at a later stage.
The limited capacity of the economy to generate income is imposing serious constraints on government finances. In recent years, current budgetary expenditure has increased rapidly, following the construction of primary infrastructure and the creation of a government administration. Domestic revenue has also been increasing, but at a less rapid rate. Consequently, the Government has relied heavily on grants-in-aid from the United Kingdom to finance its current budget. These grants increased to the equivalent of more than $8 million in 1967/68, when they financed almost 50 per cent of current expenditure. Development expenditure has been determined largely by the amount of resources made available from abroad. Grants and loans from the United Kingdom for both the current and capital budgets have been averaging some $12 million annually in recent years.
Although government revenue is expected to increase as a result of the new Customs Union Agreement with South Africa signed in December 1969, the Government’s financial situation is likely to remain tight in the immediate future. The development of mining is expected to bring about a sizable increase in government revenue after 1973; this increase, in addition to improving the budgetary situation, could assist in the development of agriculture and livestock, the major sources of income and employment in Botswana. It is this sequence that underlies the present development plan of the Government.
Botswana is a member of the South African monetary and customs area and uses the South African rand as its currency. Funds and goods can move freely within the area, and current payments may be made to other countries virtually without restriction.
Mr. Dini, Senior Advisor in the African Department, was educated at the University of Florence, Italy, and did graduate studies at the Universities of Minnesota and Michigan. He was formerly Assistant Professor at the University of Rome and a member of the Research Department of the Banca del Lavoro in Rome. He is the author of several articles in matters relating to taxation and fiscal policy.
Mr. Quinn, economist in the African Department, received his graduate and postgraduate degrees from the Universities of Glasgow and Manchester and from Cornell University.
Mr. Wohlgemuth, economist in the African Department, is a graduate of the Stockholm School of Economics, where he also did postgraduate work. He was formerly an economist in the Swedish International Development Authority.
The article is based on information collected in the summer of 1969; it surveys therefore essentially developments in the economy up to that time.
Bamangwato Concession Ltd. is to be reorganized into a mining company in which the Government of Botswana will have a 15 per cent interest.
On December 17, 1969, the IDA approved a credit of $2.5 million to finance the costs of engineering design and preliminary works for infrastructure (electric power, water, transport, and a township) required for the development of the copper-nickel deposits at Selibe-Pikwe.
The shares of Botswana, Lesotho, and Swaziland of the resources of the pool for any financial year are calculated by expressing the c.i.f. value of their imports plus the value of excisable and sales duty goods that they produce and consume during the year plus the excise and sales duties paid on these goods as a percentage of the c.i.f. value of the total imports of the Common Customs Area during the financial year plus the customs and sales duties realized from these goods during the year plus the value of excisable and sales duty goods produced and consumed during the year in the Common Customs Area plus the excise and sales duties collected from these goods during the year. The percentage so derived, multiplied by a factor of 1.42, will represent each country’s share of the common revenue pool for any given financial year.