The 2019 Index of Economic Freedom puts Botswana’s score at 70%, making its economy the 36th freest in the 2019 Index. Its overall score has decreased by 0.4 point, with declines in judicial effectiveness, government integrity, and fiscal health exceeding improvements in the score for tax burden, labor freedom, and government spending.
Botswana is ranked 3rd among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional and world averages. Through fiscal discipline and sound management, Botswana has transformed itself from one of the world’s poorest countries to a middle-income country. Economic policy is guided by the government’s efforts to diversify the economy away from dependence on the volatile mining sector and towards agriculture, services, and manufacturing. The regulatory environment encourages growth, and openness to foreign investment and trade promotes competitiveness and resilience. The independent judiciary provides strong protection of property rights.
Sparsely populated Botswana has a land area larger than Spain and is dominated by the vast Kalahari Dessert. Botswana has abundant diamond and other natural resources, a market oriented economy, and one of Africa’s highest sovereign credit ratings, and ecotourism in its extensive nature preserves is helping to diversify the economy.
The 2019 Index further says increase in Botswana’s property rights and intellectual property rights scores caused its overall score in the Property Rights Alliance’s 2017 International Property Rights to improve as well. Courts enforce commercial contracts. Botswana remain rated the African continent’s least corrupt country, but there are almost no restrictions on the private business activities of public servants, and an increase in tender-related corruption has been reported.
The top personal income tax rate is 25 percent, and the top corporate tax rate is 22 percent. Other taxes include property, inheritance, and value-added taxes. The overall tax burden equals 24.9% of total domestic income. Over the past three years, government spending has amounted to 33.7 percent of the country’s output, and budget deficits have averaged 1.8% of GDP. Public debt is equivalent to 15.6% of GDP
The regulatory environment protects the overall freedom to establish and run a business relatively well. A one-stop shop for entrepreneurs is in place, and the process for business closings has become easy and straightforward. Employment regulations are relatively flexible, maize, diesel, and petroleum are subject to price controls, and the government continues other subsidies through state-owned enterprises.
The combined value of exports and imports is equal to 97.1% of GDP. The average applied tariff rate if 0.6%. As of June 30 2018, according to WTO, Botswana had 21 nontariff measures in force. Foreign investment in some sectors is restricted. Generally, adhering to global standards in the transparency of banking supervision, the financial sector provides considerable access to credit and has expanded.
Meanwhile, Botswana recorded a trade gap of P339.5 Million in May 2019 compared to P2.5 Million surpluses in the same month a year ago. Imports soared 56% of P6,5 Million, boosted by acquisitions of diamonds at 425%. Main imports partners were South Africa at the value of 53% of total imports, followed by Canada 20.1%, France 5.8% and Russia 5.6%. In contrast, exports declined 9.6% to P6 Million, amid lower sales of diamonds (-8.3%); machinery and electrical equipment (-26.8) and vehicles and transport equipment (-49.9%).
Main export partners were Belgium at 24% of total sales, India 20%, the UAE 17.4% and South Africa 8.4%. Balance of Trade averaged P-96.72 Million from 2005 until 2019, reaching an all-time high of P4102.21 Million in March 2017 and a record low of P-6683 Million in July of 2012.
Balance of Trade in Botswana is expected to be -116.59 Million Pula by the end of this quarter, according to the Trading Economics Global Macro Models and analyst’s expectations. Looking forward, Balance of Trade in Botswana is estimated to stand at -91.10 in 12 months’ time. In long-term the Botswana Balance of Trade is projected to trend around P255 Million in 2020, according to Trading Economics models.
Money supply in Botswana decreased to P170 Million in April from P175 Million in March 2019. Money supply averaged P121 Million from 2008 until 2019, reaching an all-time of P181 Million in October of 2018 and a record low of P652 Million in October 2009.
Central Bank Balance Sheet in Botswana increased to P77275 Million in April from P74225 Million in March 2019. Central Bank Balance Sheet in Botswana averaged P68852.80 Million from 2007 until 2019, reaching an all-time high of P89975 Million in April 2015 and a record low of P50627 Million in January 2007.
Bank Lending Rate in Botswana remained unchanged at 6.5% in May from 6.5% in April 2019. It averaged 9.4% from 2009 until 2019, reaching an all-time high of 17% in January 2009 and a record low of 6.5% in October 2017. The Bank Lending Rate is expected to be 6.8% by the end of this quarter, according to Trading Economic Global Macro Models and Analysts expectations. Looking forward, analysts estimate Bank Lending Rate in Botswana to stand at 6% in 12 months’ time. In the long-term, the Botswana Bank Lending rate is projected to trend around 6.8% in 2010.
In Botswana, the bank lending rate is weighted average rate of interest charged on loans by commercial banks to private individuals and companies. Consumer Credit in Botswana increased to P361 Million in May from P355 Million in April 2019. It averaged P202 Million from 2007 until 2019, reaching an all-time high of P361 Million in May 2019 and a record low of P632 Million in January 2007.
Loans to Private Sector in Botswana decreased to P228 31,20 Million in May from P228 61,39 Million in April 2019. The sector is averaged P144 Million from 2007 until 2019, reaching an all-time high of P232 Million in November 2018 and a record low of P437 Million in January 2007. Foreign Direct Investment in Botswana increased by P745 Million in the first quarter of 2019. It is averaged P886 Million from 2004 until 2019, reaching an all-time high of P363 Million in the fourth quarter of 2015 and a record low of P-143 Million in the first quarter of 2016.
FaR Property Company (FPC) Limited, a property investment company listed on the Botswana Stock Exchange, has recently announced its exceptional financial results for the year 2023. The company’s property asset value has risen to P1.47 billion, up from P1.42 billion in the previous year.
FPC has a diverse portfolio of properties, including retail, commercial, industrial, and residential properties in Botswana, South Africa, and Zambia. The company owns a total of 186 properties, generating rental revenues from various sectors. In 2023, the company recorded rental revenues of P11 million from residential properties, P62 million from industrial properties, and P89 million from commercial properties. Overall, the company’s total revenues increased by 9% to P153 million, while profit before tax increased by 22% to P136 million, and operating profit increased by 11% to P139 million.
One notable achievement for FPC is the low vacancy rate across its properties, which stands at only 6%. This is particularly impressive considering the challenging trading environment. The company attributes this success to effective lease management and the leasing of previously vacant properties in South Africa. FPC’s management expressed satisfaction with the results, highlighting the resilience of the company in the face of ongoing macroeconomic challenges.
The increase in profit before tax can be attributed to both an increase in income and effective control of operating expenses. FPC managed to achieve these results with fewer employees, demonstrating the company’s efficiency. The headline earnings per linked unit also saw an improvement, reaching 26.92 thebe, higher than the previous year.
Looking ahead, FPC remains confident in its competitiveness and growth prospects. The company possesses a substantial land bank, which it plans to develop strategically as opportunities arise. FPC aims for managed growth, focusing on consumer-driven developments and ensuring the presence of supportive tenants. By maintaining this approach, the company believes it can sustainably grow its property portfolio and remain competitive in the market.
In terms of the macroeconomic environment, FPC noted that inflation rates are decreasing towards the 3% to 6% range approved by the Bank of Botswana. This is positive news for the company, as it hopes for further decreases in interest rates. However, the fluctuating fuel prices, influenced by global events such as the war in Ukraine and oil output reductions by Russia and other Middle Eastern countries, continue to impact businesses, including some of FPC’s tenants.
FPC’s property portfolio includes notable assets such as a shopping mall in Francistown with Choppies Hyper as the anchor tenant, Borogo Mall located on the A33 main road near the Kazungula ferry crossing, and various industrial and commercial properties in Gaborone leased to Choppies, Senn Foods, and Clover Botswana. The company also owns a shopping mall in Mafikeng and Rustenburg in South Africa.
The majority of FPC’s properties, 85%, are located in Botswana, followed by 12% in South Africa and 3% in Zambia. With its strong financial performance, competitive position, and strategic land bank, FPC is well-positioned for continued growth and success in the property market.
The Botswana Power Corporation (BPC) has taken a significant step towards diversifying its energy mix by signing a power purchase agreement with Sekaname Energy for the production of power from coal bed methane in Mmashoro village. This agreement marks a major milestone for the energy sector in Botswana as the country transitions from a coal-fired power generation system to a new energy mix comprising coal, gas, solar, and wind.
The CEO of BPC, David Kgoboko, explained that the Power Purchase Agreement is for a 6MW coal bed methane proof of concept project to be developed around Mmashoro village. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy in the energy mix. The use of coal bed methane for power generation is an exciting development as it provides a hybrid solution with non-dispatchable sources of generation like solar PV. Without flexible base-load generation, the deployment of non-dispatchable solar PV generation would be limited.
Kgoboko emphasized that BPC is committed to enabling the development of a gas supply industry in Botswana. Sekaname Energy, along with other players in the coal bed methane exploration business, is a key and strategic partner for BPC. The successful development of a gas supply industry will enable the realization of a secure and sustainable energy mix for the country.
The Minister of Minerals & Energy, Lefoko Moagi, expressed his support for the initiative by the private sector to develop a gas industry in Botswana. The country has abundant coal reserves, and the government fully supports the commercial extraction of coal bed methane gas for power generation. The government guarantees that BPC will purchase the generated electricity at reasonable tariffs, providing cash flow to the developers and enabling them to raise equity and debt funding for gas extraction development.
Moagi highlighted the benefits of developing a gas supply industry, including diversified primary energy sources, economic diversification, import substitution, and employment creation. He commended Sekaname Energy for undertaking a pilot project to prove the commercial viability of extracting coal bed methane for power generation. If successful, this initiative would unlock the potential of a gas production industry in Botswana.
Sekaname Energy CEO, Peter Mmusi, emphasized the multiple uses of natural gas and its potential to uplift Botswana’s economy. In addition to power generation, natural gas can be used for gas-to-liquids, compressed natural gas, and fertilizer production. Mmusi revealed that Sekaname has already invested $57 million in exploration and infrastructure throughout its resource area. The company plans to spend another $10-15 million for the initial 6MW project and aims to invest over $500 million in the future for a 90MW power plant. Sekaname’s goal is to assist BPC in becoming a net exporter of power within the region and to contribute to Botswana’s transition to cleaner energy production.
In conclusion, the power purchase agreement between BPC and Sekaname Energy for the production of power from coal bed methane in Mmashoro village is a significant step towards diversifying Botswana’s energy mix. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy. The government’s support for the development of a gas supply industry and the commercial extraction of coal bed methane will bring numerous benefits to the country, including economic diversification, import substitution, and employment creation. With the potential to become a net exporter of power and a cleaner energy producer, Botswana is poised to make significant strides in its energy sector.
It is not clear as to when, but before taking a festive break in few weeks’ time UDC leaders would have convened to address the ongoing deadlock surrounding constituency allocation in the negotiations for the 2024 elections. The leaders, Duma Boko of the UDC, Mephato Reggie Reatile of the BPF, and Ndaba Gaolathe of the AP, are expected to meet and discuss critical matters and engage in dialogue regarding the contested constituencies.
The negotiations hit a stalemate when it came to allocating constituencies, prompting the need for the leaders to intervene. Representatives from the UDC, AP, and BPF were tasked with negotiating the allocation, with Dr. Patrick Molotsi and Dr. Philip Bulawa representing the UDC, and Dr. Phenyo Butale and Wynter Mmolotsi representing the AP.
The leaders’ meeting is crucial in resolving the contentious issue of constituency allocation, which has caused tension among UDC members and potential candidates for the 2024 elections. After reaching an agreement, the leaders will engage with the members of each constituency to gauge their opinions and ensure that the decisions made are favored by the rank and file. This approach aims to avoid unnecessary costs and conflicts during the general elections.
One of the main points of contention is the allocation of Molepolole South, which the BNF is adamant about obtaining. In the 2019 elections, the UDC was the runner-up in Molepolole South, securing the second position in seven out of eight wards. Other contested constituencies include Metsimotlhabe, Kgatleng East and West, Mmadinare, Francistown East, Shashe West, Boteti East, and Lerala Maunatlala.
The criteria used for constituency allocation have also become a point of dispute among the UDC member parties. The issue of incumbency is particularly contentious, as the criterion for constituency allocation suggests that current holders of UDC’s council and parliamentary seats should be given priority for re-election without undergoing primary elections. Disadvantaged parties argue that this approach limits democratic competition and hinders the emergence of potentially more capable candidates.
Another disputed criterion is the allocation based on the strength and popularity of a party in specific areas. Parties argue that this is a subjective criterion that leads to disputes and favoritism, as clear metrics for strength and visibility cannot be defined. The BNF, in particular, questions the demands of the new entrants, the BPF and AP, as they lack a traceable track record to support their high expectations.
The unity and cohesion of the UDC are at stake, with the BPF and AP expressing dissatisfaction and considering withdrawing from the negotiations. Therefore, it is crucial for the leaders to expedite their meeting and find a resolution to these disputes.
In the midst of these negotiations, the BNF has already secured 15 constituencies within the UDC coalition. While the negotiations are still ongoing, BNF Chairman Dr. Molotsi revealed that they have traditionally held these constituencies and are expecting to add more to their tally. The constituencies include Gantsi North, Gantsi South, Kgalagadi North, Kgalagadi South, Good Hope – Mmathethe, Kanye North, Kanye South, Lobatse, Molepolole North, Gaborone South, Gaborone North, Gaborone Bonnignton North, Takatokwane, Letlhakeng, and Tlokweng.
The resolution of the contested constituencies will test the ability of the UDC to present a united front in the 2024 National Elections will depend on the decisions made by the three leaders. It is essential for them to demonstrate maturity and astuteness in resolving the constituency allocation deadlock and ensuring the cohesion of the UDC.