Figure 1: Merchandise Trade Balance in Botswana (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to Botswana have moderated to USD 6.2 billion in 2018, from an annual average of USD 6.3 billion from 2015 to 2017[1]. Exports increased to USD 6.6 billion in 2018 from an annual average of USD 6.5 billion from 2015 to 2017[2]. The stable exports have assisted to improve Botswana’s narrow merchandise trade surplus to USD 404.1 million in 2018 from an average of USD 175.0 million from 2015 to 2017[3]. The steady export earnings have also sustained steady growth of gross official reserves in spite of the volatility in import demand.
Figure 2: Gross Official Reserves in Botswana (2016-2022)
Source: IMF 2018, Botswana 2018 Article IV Report. Note: (*) Figures from 2018 onwards are projections from the IMF, 2018.
Gross official foreign exchange reserves increased to USD 7.9 billion in 2018 from an annual average of USD 7.4 billion from 2015 to 2017[4]. During this period, the BWP appreciated by 0.5% in 2018 to BWP 10.2 per USD (2017: 5.2%)[5]. The appreciation in the currency has driven the growth in imports following the significant depreciation in 2015. The BWP depreciated by an annual average of -7.7% in 2015 and 2016 from BWP 9.2 per USD in 2014 to BWP 10.8 per USD in 2016[6]. Gross official reserves are projected to increase to USD 8.2 billion in 2019, which is equivalent to 12.7 months’ import cover[7]. In the forward-looking medium-term from 2020 to 2022, gross official reserves are projected to increase to an annual average of USD 9.7 billion (approx. 13.2 months’ import cover)[8]. Due to the stable exports and GDP growth, the volatility in import demand has not affected Botswana’s current account balance.
Botswana’s current account balance improved to a surplus of USD 1.8 billion in 2018, from a surplus averaging USD 1.7 billion from 2015 to 2017[9]. In addition to the sustainable exports, which sustained the current account surplus, diamond imports have been declining to further improve the merchandise trade surplus. Diamond imports decreased persistently to USD 1.3 billion in 2017 from USD 2.5 billion in 2015 before increasing to USD 1.7 billion in 2018[10]. The current account balance is projected to deteriorate to a surplus of USD 1.7 billion (approx. 8.8% of GDP) in 2019[11]. In the forward-looking medium-term from 2020 to 2022, the current account balance is projected to improve to a surplus averaging USD 2.1 billion (approx. 9.2% of GDP)[12].
Figure 3: Current Account Balance in Botswana (2016-2022)
Source: IMF 2018, Botswana 2018 Article IV Report. Note: (*) Figures from 2018 onwards are projections from the IMF, 2018.
However, Botswana is still heavily dependent on diamond exports which requires more concerted and coordinated effort by the government to redirect investment toward selected export-orientated sectors and value-chains in order to diversify the economy and exports. Diamonds contributed 89.8% of Botswana’s total export earnings in 2018 which has increased from the average of 86.6% from 2015 to 2017 (2014: 83.7% of exports)[13]. In spite of this concentration of exports, Botswana is highly integrated in terms of regional trade with neighbouring countries in SADC but its trade is unbalanced.
The top export from Botswana to SADC is also diamonds, which constituted 6.8% of total exports in 2018 (2015-‘17: 10.9% of total exports)[14]. The value of diamond exports from Botswana to SADC decreased to USD 449.1 million in 2018 from an annual average of USD 725.4 million from 2015 to 2017[15]. The other top-four exports from Botswana to SADC are electrical distributors (1.7%), organic chemicals (0.7%), beef (0.6%) and crude mineral stones (0.6%) which contributed an additional 3.6% of total exports in 2018. Therefore, the top-five exports constituted 10.4% of total exports from Botswana in 2018 (2015-‘17: 14.2% of total exports)[16]. The value of the top-five exports from Botswana to SADC decreased to USD 683.7 million in 2018 from an average of USD 941.2 million from 2015 to 2017[17].
The value of total exports from Botswana to SADC decreased to USD 958.6 million (approx. 14.6% of total exports) in 2018 from an average of USD 1.2 billion (approx. 19.1% of total exports) from 2015 to 2017[18]. These are poor or below-average levels of intra-regional trade given that the SADC average intra-regional exports level was 17.9% of total exports in 2018. The SADC intra-regional exports, meaning total exports amongst SADC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[19]. Botswana’s exports to SADC are still concentrated in diamonds and they have been declining during this period. Hence, there is significant room for Botswana to increase and diversify its exports to SADC countries.
Figure 4: Nominal Exchange Rate in Botswana (2015-2018)
Sources: IMF 2018, Botswana 2018 Article IV Report; BoB 2019, 2018 Annual Report.
Botswana’s top-five imports from SADC are diamonds (14.2%), petroleum (13.0%), commercial vehicles (2.4%), passenger vehicles (1.8%) and construction equipment (1.8%). These imports are moderately diversified and they constituted 33.2% of total imports to Botswana in 2018 (2015-‘17: 34.2% of total imports)[20]. The value of the top-five imports from SADC to Botswana decreased to USD 2.1 billion in 2018 from an annual average of USD 2.2 billion from 2015 to 2017[21]. Botswana’s imports from SADC are diversified and the country has a significant merchandise trade deficit in the region.
The value of Botswana’s total imports from SADC decreased to USD 4.7 billion (approx. 76.3% of total imports) in 2018 from an annual average of USD 5.0 billion (approx. 78.3% of total exports) from 2015 to 2017[22]. These are very high levels of intra-regional trade given that the SADC average intra-regional imports level was 20.9% of total imports in 2018[23]. The SADC intra-regional imports, meaning total imports amongst SADC countries, as a share of total imports from the world increased only from an average of 20.7% from 2015 to 2017[24].
Table 1: SADC Regional Trade for Botswana (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
The reliance on SADC diamond imports may be beneficial for Botswana given its strategic position as a net diamond exporter. This might also be a function of Botswana’s landlock geographic position which forces it to rely on its SADC neighbours. Botswana seems over-reliant on SADC countries for critical resources like petroleum and diamonds. Therefore, in addition to the room to significantly increase and diversify Botswana exports to SADC, there is room to rebalance Botswana’s imports from SADC. This would also make Botswana’s intra-regional trade balance more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2018. Botswana 2018 Article IV Report; International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 26 September 2019].
[5] IMF 2018. Botswana 2018 Article IV Report; ibid.; BoB 2019. 2018 Annual Report, Bank of Botswana: Gaborone. Available At: http://www.bankofbotswana.bw/ [Last Accessed: 26 September 2019].
[6] IMF 2018. Botswana 2018 Article IV Report; ibid.; BoB 2019. 2018 Annual Report, ibid.
[7] IMF 2018. Botswana 2018 Article IV Report; ibid.
[8] IMF 2018. Botswana 2018 Article IV Report; ibid.
[9] IMF 2018. Botswana 2018 Article IV Report; ibid.
[10] IMF 2018. Botswana 2018 Article IV Report; ibid.
[11] IMF 2018. Botswana 2018 Article IV Report; ibid.
[12] IMF 2018. Botswana 2018 Article IV Report; ibid.
[13] UNCTAD 2019. UNCTADStat Database, ibid.
[14] UNCTAD 2019. UNCTADStat Database, ibid.
[15] UNCTAD 2019. UNCTADStat Database, ibid.
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
