08 Aug 2016

Botswana’s economy has transformed since it attained independence in 1966, from a poor country to an upper middle income status.  

According to Econsult, Botswana at independence was in a precarious macroeconomic position with substantial balance of payments and fiscal deficits and heavily relied on foreign aid.

Gross Domestic Product (GDP) at independence was US$84 (then R60 as Botswana was part of the South African Monetary Union) making Botswana one of the poorest countries in the world at the time.

At independence, Botswana had experienced many years of drought and international community thought the new state was bound to fail.

Econsult in a quarterly economic commentary penned by Dr Keith Jeffries and Ms Sethunya Sejoe note that per capita income in Botswana increased 13 fold in real terms (from $483 in 1966 to $7080 in 2015, measured in constant 2010 US dollars). Only China and South Korea had larger increases over this period.

The economy, had in the process, transformed from being a predominantly farming to mining, with agriculture being the exception.

At independence, agriculture accounted for 39 per cent of GDP but had since been stagnant.

Dr Jeffries noted that the sector had since independence grew by an average of 2.1 per cent a year, far below the overall economic growth rate and hence its share of GDP has fallen to only 2.4 percent in 2015.

“This stagnation can be seen in terms of crop yields; cereal yields per hectare averaged 354kg per hectare in the five years to 1966, and were virtually unchanged at 362 kg nearly fifty years later,” he writes.

Cattle numbers have also stagnated and Econsult notes that in 1966, meat and other livestock products made up over 90 percent of goods exports but by 2015, accounted for only three percent of the total.

Mining played a major role in transforming the economy, from nothing to 51 percent at its peak during 1988/89 and has since dropped to 20 percent in 2015.

“This has been largely driven by diamond mining, although copper-nickel mining had also played a significant role,” Econsult said. 

Econsult notes that while the diamond mining industry played a role in transforming the economy, the first significant development was the renegotiation of the Southern African Customs Union (SACU) Agreement.

It was treated as a high priority by the government of the new republic, and the re-negotiated revenue-sharing agreement was more favourable to Botswana, Lesotho and Swaziland than the old agreement had been.

“The revenues received under the government budget made a huge contribution to transforming the government budget and balance of payments during the 1970s,” it is said.

Econsult notes that the diamond industry took off during the 1970s but mineral revenues exceeded SACU revenues in 1983/84. Ends