Botswana Economy

Botswana Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

After a significant decline in economic activity of 8.5% in 2020, Botswana saw economic growth of 8.5% in 2021, mainly due to renewed demand for diamonds and generally increased mineral prices, further exacerbated by the war in Ukraine. In the coming two years, GDP growth in the range of 4-5% can be expected. The unemployment rate in Botswana has risen again in 2021 to 26%, with around 40% of the population out of work in the under-35 age group. Inflation rose to 6.7% in the past year, after a long-term low of 1.9% in 2020. The main causes of inflation include the higher price of oil, electricity and transport, but this is at the same time mitigated by lower aggregate demand. A slight increase in inflation in Botswana can also be expected in 2022, but this should stop at 7.1%. Check ebizdir for economical facts of Botswana.

The state budget is based on income from the mining and export of minerals, especially diamonds. Tourism is also a traditional part of the economy’s income, which is currently paralyzed by the pandemic, and the recovery of the sector will only be gradual. Botswana is also a major producer of beef and leather products. The government’s goal is to diversify the economy and attract investment in production, which, however, cannot be realized in the long term. State budget priorities are also investments in energy from renewable sources, water management, agriculture, construction and ICT.

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 3 -8.2 8.5 4.4 4.9
GDP/population (USD/PPP) 18,558.60 15,481.70 17,010.00 18,160.00 19,190.0
Inflation (%) 2.8 1.9 6,7 7.1 4.4
Unemployment (%) 22.6 24.9 26 ON ON
Export of goods (billion USD) 5.2 3 7 7.6 8.4
Import of goods (billion USD) 6.6 5.4 8.1 8.2 8.6
Trade Balance (Billion USD) -1.1 -2.1 -1 -0.4 0
Industrial production (% change) 0.2 -6.8 19.2 6.6 7.3
Population (millions) 2.3 2.4 2.4 2.4 2.5
Competitiveness ON ON 61/64 ON ON
OECD export risk 03.VII 03.VII 03.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -5.2
Public debt (% of GDP) 16.4
Current account balance (billion USD) -0.4
Taxes 2022
F.O 5-25%
VAT 14%

In the last two years, the globally increased price of mineral resources, especially diamonds, has had a significantly positive effect on the income of the Botswana treasury. This fact is further exacerbated by a series of embargoes imposed on Russia, which is also a major exporter of diamonds, which further affects their price upwards and it can be assumed that this trend will continue in 2021/22.

Botswana’s public budget deficit reached 5.2% of GDP in 2021, which is almost 3% less than in 2020, the year most affected by the pandemic. A positive trend can also be observed in the debt-to-GDP ratio, which also decreased slightly, to 16.4%. Debt service and interest payments amount to an acceptable $222 million per year (around 1% of GDP).

Botswana’s credit rating has been downgraded by leading credit rating agencies over the past two years, but Botswana remains one of the most stable economies in Africa in this respect. Moody’s last downgraded Botswana in April 2021, from A2 to A3, but revised its outlook from “negative” to “stable”. S&P last downgraded Botswana’s credit rating in March 2020 from A- to BBB+ with a “stable outlook”, with no change since then. Dramatic changes in this regard in the foreseeable future cannot therefore be legitimately assumed.

Banking system

Botswana’s banking sector is relatively developed, with a March 2020 Moody’s rating (A2 level) confirming the good health of the sector. A number of foreign commercial banks operate in the country. Relatively effective central management provides the necessary stability to the sector. The central bank last adjusted the interest rate in August 2020, cutting it by 50 basis points to 3.75% in response to COVID-19. During 2021, its amount is expected to remain unchanged. The financial services provided are at a good level. Money transfers abroad and capital withdrawals are not regulated.

Overview of the most important banks in Botswana:

  • ABSA Bank Botswana (formerly Barclays Bank of Botswana Ltd., a daughter of the British Barclays Bank, one of the most important banks)
  • Standard Chartered Bank Botswana Ltd (subsidiary of British Standard Chartered Bank)
  • First National Bank of Botswana Ltd (subsidiary of South Africa’s First National Bank, with significant market share)
  • First Capital Bank (controlled by Mauritius-based FMG Capital Holdings)
  • Stanbic Bank Botswana Ltd (a branch of South Africa’s Standard Bank)
  • Bank of Baroda (Botswana) Ltd (branch of Indian Bank of Baroda)
  • Bank Gaborone (owned by Capricorn Investment Holdings, a popular local bank)
  • BancABC (owned by ABC Holdings Limited based in Gaborone)

A number of non-bank financial institutions operate in Botswana such as:

  • National Development Bank (financing of commercial projects in agriculture)
  • Botswana Building Society (Home Mortgages)
  • Botswana Savings Bank (rural areas – uses postal networks)
  • Botswana Development Corporation (major investor in conjunction with foreign firms and local entrepreneurs)

Overview of selected insurance companies in Botswana:

  • Botswana Insurance Company (General and Commercial Insurance)
  • Botswana Life (life insurance)
  • Botswana Export Credit Insurance (BECI) (contract insurance)
  • FirstLife Assurance (Pty) Ltd (a general and health South African insurer)
  • General Insurance Botswana (Pty) Ltd (GIB) (various types of insurance including health)
  • Letshego Guard Insurance Company Ltd / Letshego Life Insurance Limited (various types of insurance)
  • Mutual & Federal Insurance Company of Botswana Limited (short term insurance)
  • Old Mutual Financial Services (Botswana) (Pty) Ltd. (life and investment insurance)

Tax system

The tax system is relatively transparent and stable, and the tax burden is relatively low. Also, the Botswanan government has not announced any tax increases in the future, and significant changes to the tax system cannot be expected in the near future. Personal income tax is progressive and ranges from 5-25%. The amount of value added tax is 14%, which is three percent less than in neighboring South Africa. Current tax rates are available on the website of the Botswana United Revenue Service (BURS). The corporate income tax of Botswana domiciled persons is 22%. Some industries (e.g. financial sector, manufacturing industry) have a reduced income tax rate of 15% for local companies, so it is more advantageous to establish a subsidiary in Botswana. The rate of withholding tax on dividends is 7.5%. In addition, there are so-called special economic zones (Special Economic Zones), in which the government tries to attract investments with the help of tax breaks. Investors in these zones have a favorable tax regime. More information is available on the website of the Botswana Investment and Trade Center (BITC). An agreement on the avoidance of double taxation has been concluded between the Czech Republic and Botswana.

Botswana Economy