Botswana

In-depth country-focused analysis on Botswana's economic, political and operational risk environment, complemented by detailed sector insight

Botswana

Botswana is one of Africa's most stable countries, attracting the business of many of our clients. It has one of the longest running multi-party democratic systems on the continent. The country also possesses one of the world's highest economic growth rates since its independence in 1966. Botswana boasts the lowest corruption levels in Africa and supplies good quality statistics. Our coverage – using our unique Total Analysis model – ensures that our clients make risk-assessed decisions in Botswana. We keep them informed of the latest market moves and political developments supported by our interactive data and forecasting. They also benefit from in-depth analysis of 11 of Botswana's most important industries as part of our 'top-down' and 'bottom-up' perspective. Our research teams make it easy for you, as our client, to get the results you strive for in Botswana.

Country Risk

Botswana Country Risk

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Core Views:

  • Economic growth in Botswana will remain relatively healthy over the coming years, averaging around 4.5% annually. Even so, growth will continue to be dominated by the mining sector, as economic diversification efforts continue to bear little fruit .

  • Lower fuel and food prices and continued slack within the economy will allow the Bank of Botswana to keep monetary policy accommodative through the remainder of 2015.

  • In the continued absence of meaningful economic diversification, the mining sector s set to remain a key engine of growth. While nickel, copper and particularly coal will become more prominent in the country's export base, as well as driving investment, diamonds will retain their primacy.

  • We expect a return to the political status quo in Botswana in 2015...

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Botswana Operational Risk Coverage (9)

Botswana Operational Risk

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BMI View: Botswana is a generally safe place for foreign business travellers, expatriates, and tourists, but lately foreigners have been experiencing elevated risks of crime to property and to the person. Overall the security situation is much safer than in other states in the region due to political stability and an established democracy. The police are approachable and relatively free from corruption; all this contributes to making Botswana an attractive investment destination. Overall, the country performs well in the BMI Crime and Security Index, placing third place out of 44 Sub-Saharan African countries, with a score of 63.6 out of 100...

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Botswana Crime & Security

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BMI View: Botswana is a generally safe place for foreign business travellers, expatriates and tourists, however lately foreigners are experiencing elevated risks of crime to property and to the person. Overall the security situation is much more positive than in other states in the region due to political stability and an established democracy, with a low threat level from terrorism or war. The police are approachable and relatively free from corruption; all this makes Botswana a safer investment destination. This contributes to the country's regional outperformance in the BMI Crime and Security Index, in third place out of 44 SSA countries, with a...

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Botswana Labour Market

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Major investment into education since the country's independence in 1966 has transformed Botswana's population from a largely illiterate one into one of the most developed in the region. However persistent social issues such as HIV/AIDS and poverty permeate society, reducing both life expectancy and the average length of time workers are in the labour force. Overall Botswana is a regional outperformer in the Labour Risk pillar of the BMI Operational Risk Index, with a score of 43, placing the country sixth in Sub Saharan Africa (SSA), behind South Africa.

Botswana boasts a sizeable labour force, with a large percentage of the population available to work. Although low life expectancy, of just 47.6 years due to the widespread prevalence of HIV/AIDS, impedes long-term labour force participation and therefore the development of specialist trade wisdom, birth rates are above replacement level, thereby keeping the...

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Botswana Logistics

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BMI View: Botswana is strategically placed within the Southern African Development Community (SADC), facilitating regional trade flows through its efficient and well-connected road and railways. However, the country's status as a landlocked country, its unreliable utilities provision, and its lengthy bureaucratic procedures detract from its attractiveness as a logistics hub, increasing transport and operational costs for businesses. Taking these factors into account, Botswana receives a score of 37.5 out of 100, ranking 15 thout of 44 sub-Saharan African countries in the BMI Logistics Risk Index.

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Botswana Trade & Investment

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Botswana is a mature democracy with an established rule of law and the lowest rate of corruption in Africa. Investors benefit from a relatively open economy with attractive tax regulations and incentives for foreign investment. However, Botswana also faces the same drawbacks as many of its regional peers, such as a limited access to credit, poor contract enforceability and cumbersome bureaucratic procedures that increase market entry costs. Overall, Botswana scores 55.7 in the Trade and Investment Risks Index, placing fourth in the region after the Seychelles and 65th in the world.

Botswana is a relatively open country for economic activity due to its market-oriented economy and stable political situation. The government offers generous financial incentives for foreign investors in the shape of tax breaks, low tax rates (corporate tax is 22%), and opportunities for public-private partnerships. In addition, prudent financial planning has...

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Botswana Industry Coverage (11)

Agribusiness

Botswana Agribusiness

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BMI View: We expect food security in South West Africa to improve over the short term, as we expect higher corn production from Zambia in 2014/15. Over the medium term, we see downside risks to sugar production in the region owing a global glut of the sweetener. Even with reduced production incentives, we expect Zambia to easily remain the region's largest corn producer and exporter, while other countries in the region will struggle to maintain production surpluses. We believe that the potential in the Angolan sugar sector due to recent investments coming on...

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Autos

Botswana Autos

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The latest data released by the Central Statistics Office in Q114 show that total vehicle sales, comprising both new and used vehicles, declined 14.3% year-on-year in Q114 to 7,985 units. The decrease highlights the impact of the government's import ban of aged vehicles, by reducing the supply of affordable vehicles in an economy where incomes per capita remain low. This coupled with slower economic growth in 2014 leads us to estimate a 8.7% decline in total auto sales in 2014.

After the sharp decline in 2014, we anticipate a mild recovery in 2015 and forecast sales to grow 4.2% for the full year. Over the 2015-2019 period, we forecast growth in vehicle sales to average 10.3% to hit 57,133 units by 2019.

Owing to growth in key industrial sectors including mining and construction, commercial vehicles (CVs) will continue to outperform the car segment, representing an increasing percentage of total vehicle sales. Over the...

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Commercial Banking

Botswana Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Botswana Food & Drink

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BMI View: Botswana, like many of its Sub-Saharan African neighbours, has a promising food and drink sector held back by high risks. The relative appeal of the country is undermined by a poor demographic profile, with a smaller population, especially the all-important youth population, than many of its peers. Premiumisation is therefore likely to be a key target for industry players in Botswana. The country also benefits from a good business environment, a relatively well-developed food retail sector and an even distribution of incomes. Economic headwinds will temper per capita consumption growth.

Consumer Outlook

Botswana's economic growth prospects will remain sub-optimal during 2015 despite improved production and exports of diamonds - the country's underperforming power sector and...

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Infrastructure

Botswana Infrastructure

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BMI View: The infrastructure and construction sector of Botswana is heading into a strong recovery from previous growth rates below expectations. For 2015, we expect the sector by a stable 5.7% before surpassing the 9% mark in 2016. Crucial for the increase in growth is the energy and power development plans and growing investments in the mining industries.

The sector is set to return to increased growth in 2015, with BMI forecasting year-on-year (y-o-y) growth of 5.7%.We believe growth will remain robust over our 10-year forecast period (2014-2023), averaging about 7.8% per year between 2015 and 2024, based on a substantial pipeline of projects. Growth will remain above 9% between 2016 and 2018, before settling around the 9% mark.

The biggest source of value creation is likely to remain electricity and water investments. The country is working...

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Insurance

Botswana Insurance

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BMI View: The life sector, already far larger than the non-life sector, will drive growth over the next five years. An increasing challenge to the dominant market leader will boost product diversification and help deliver average annual growth of around 8% to around USD500mn by 2019. The non-life sector will struggle in comparison, with growth closer to 4% largely delivered by property insurance, already the largest line in the non-life sector.

Life insurance in Botswana is dominated by Botswana Life, boasting over 75% of all premiums each year from 2009 to 2012, equating to over USD250mn in gross premiums in 2012. Approximately one in every two Pula spent on insurance in Botswana is received by Botswana Life. We expect this market share to remain elevated in the next five years, with the insurer capturing much of the USD160mn growth in premiums between 2015 and 2019....

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Mining

Botswana Mining

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BMI View: Botswana will remain one of the best regulated and strongest performing mining sectors in Africa over the coming years. The sector will largely be driven by the diamond industry, though other metals and minerals will see increasing prominence, including coal, copper, and nickel. Additionally, uranium mining is likely to take off over the next decade.

We maintain a constructive outlook for Botswana's mining sector over our forecast period to 2019. Diamonds will remain the mainstay of Botswana's mining sector, boosted by new projects planned by Debswana, Gem Diamonds and Lucara Diamond Corp. Yet we expect coal will become an increasingly prominent component of the wider mining sector and forecast production...

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Pharmaceuticals & Healthcare

Botswana Pharmaceuticals & Healthcare

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BMI View: With Botswana's plans to manufacture drugs locally stalling, the country will remain reliant on importing its pharmaceutical needs for the foreseeable future. The government's commitment to healthcare sector development will continue driving import growth to outperform exports. Botswana makes an attractive manufacturing destination, though its small market size is a deterrent to investment.

Headline Expenditure Projections

  • Pharmaceuticals: BWP1.82bn (USD203mn) in 2014 to BWP1.99bn (USD210mn) in 2015; +9.4% in local currency terms and +3.7% in US dollar terms. Forecast broadly in line with Q115.

  • Healthcare: BWP6.84bn (USD762mn) in 2014 to BWP7.37bn (USD779mn) in 2015; +7.9% in local currency terms and +2.2%...

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Power

Botswana Power

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BMI View: The outlook for Botswana's power sector is broadly positive. Between 2015 and 2024, overall power generation will more than double, to 5.5 terawatt hours (TWh), boosted by the inception of the thermal Mmashoro power station and the long-delayed Morupule B station. Consumption will rise steadily, underpinned by the development of industry and household consumption, which is benefiting from a rapid expansion of the electricity grid. However, risks remain. A lack of regulatory reform and the continued domination of the state-owned Botswana Power Corporation means the market remains inefficient and overly dependent on a single source of energy, namely coal, while the absence of a strong regulatory...

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Telecommunications

Botswana Telecommunications

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BMI View : BMI's Q215 Southern Africa report analyses the latest industry, regulatory and macroeconomic developments in the telecoms markets in Angola, Botswana, Mozambique, Mauritius and Namibia. It also contains our estimate of the market data relating to the end of 2014 and an update of our five-year forecasts to 2019 for the mobile, fixed-line and internet sectors.

Key...

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Tourism

Botswana Tourism

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BMI View: Botswana offers enormous potential as a tourism destination. The country boasts a wider range of unspoiled eco-tourism attractions and could potentially grow to rival better established safari destinations such as Kenya and South Africa. Hampering this growth potential, however, is an underdeveloped transport and utilities sector and a hotel and accommodation market that is failing to cater to all potential visitors.

The Ebola Crisis which struck several countries in West Africa in 2014 also impacted upon tourism arrivals to Botswana - despite the lack of any instances of the disease in the country or any of its immediate neighbours. With local tour operators reporting a 30% to 50% decline in bookings in the first quarter of 2015, we expect arrivals to stagnate this year as many visitors from Western Europe and North...

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