PESA

PESA Editorial on Botswana: 2H2022/23

Botswana’s exports have continued recovering from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports continued recovering to USD 7.5 billion in 2021. Botswana has an extremely concentrated export profile and earnings from diamonds have continued increasing to USD 6.7 billion (approx. 89.5% of total exports) in 2021. Other top exports from Botswana include electrical distribution equipment and live game. These exports contributed USD 0.2 billion (approx. 2.8% of total exports). Botswana’s export earnings from electrical distribution equipment have continued increasing to USD 120.1 million in 2021; and earnings from live game have continued increasing to USD 86.5 million in the same period. Hence, Botswana’s trade balance has begun recovering despite being below the medium-term average from an annual average of -USD 1.6 billion for 2018 to 2020, to -USD 1.9 billion in 2021.

PESA Editorial on Botswana: 2H2022/23
PESA Editorial on Botswana: 2H2022/23

Total merchandise export earnings have continued increasing which ameliorates the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Botswana has had net FDI inflows which decreased to USD 55.1 million in 2021. Hence, Botswana’s FDI stock has seemingly had a delayed impact of COVID-19 and begun decreasing from an annual average of USD 5.5 billion for 2018 to 2020 to USD 5.1 billion in 2021. This does not bode well for Botswana as a country that is aiming to attract more foreign investment to diversify its economy away from the reliance on diamond exports. However, this could also signify the limited economic opportunities in sectors outside mining which has traditionally attracted foreign capital in the economy. This signifies little progress in achieving the national economic diversification strategy.

PESA Editorial on Botswana: 2H2022/23
PESA Editorial on Botswana: 2H2022/23

Remittances receipts have grown significantly over the period. Personal remittances received have begun recovering from COVID-19 from an annual average of USD 46.4 million for 2018 to 2020 to USD 57.6 million in 2021. Personal remittance payments to foreign nationals have not moderated since the COVID-19 pandemic and continue increasing from an annual average of USD 108.8 million for 2018 to 2020 to USD 236.6 million in 2021. Botswana has had net remittance outflows (net remittance payment to foreign nationals) which increased to USD 179.0 million in 2021. This has affected the current account balance and strength of the BWP over the period.

PESA Editorial on Botswana: 2H2022/23
PESA Editorial on Botswana: 2H2022/23

The BWP has continued depreciating albeit it relatively small. In nominal terms, the BWP depreciated by an annual average of -4.0% against the USD for 2018 to 2020. The BWP depreciated by -6.7% to an annual average of BWP 11.1 per USD in 2021. Botswana’s current account balance seems to have begun recovering from COVID-19 and widened the surplus. In 2022, Botswana’s current account balance continued widening beyond its historical medium-term average. In particular, Botswana has benefited from the higher diamond prices which continued appreciating due to lower global supply following the sanctions against Russian (the leading diamond exporter globally) after its military exercises in Ukraine. This is also reflected in the projections for Botswana’s current account balance.

PESA Editorial on Botswana: 2H2022/23
PESA Editorial on Botswana: 2H2022/23

In 2023, Botswana’s current account surplus is projected to continue widening beyond its historical medium-term average (USD 0.5 billion; approx. 2.5% of GDP). In the medium-term from 2024 to 2026, Botswana’s current account surplus is projected to continue improving beyond its historical medium-term performance to an annual average of USD 963.7 million (approx. 4.5% of GDP). This illustrates the sustained improvement in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia on global diamond supplies. Diamond prices should remain relatively elevated in 2023 and in the forward-looking medium-term. Therefore, Batswana authorities will have to take advantage of the expected windfall in diamond export earnings to invest in further diversification of the country’s exports away from the continued reliance on diamonds.

The issue of diversifying the Angolan economy remains an elusive obstacle for the country. Botswana still has a significant potential to grow its exports from electrical distribution equipment and live game. These represent the highest growth potential towards diversifying the Botswana’s economy and export earnings. Apart from this, Botswana should also deepen its integration in the SACU and SADC regions to increase its intra-regional trade. This will provide an opportunity for Botswana’s exports to compete against goods and services of comparable quality from the local regions. Moreover, Botswana can offset the risks with its traditional export markets by increasing its dependence on the SACU and SADC regions for its exports.

Siyaduma Biniza

Siya is the Executive Director at PESA.

Siyaduma Biniza

Advertisement

Advertisement

Advertisement

Popular Regional Integration

Advertisement

Popular Policy Dialogues

Advertisement

Follow PESA Online

Advertisement

Follow PESA Online

Follow us on some of your favourite social media.

Contact Us

Please complete the General Enquiry form and submit it to us for a response. Please use the subject “Media” for all media-related requests.

 

    By continuing to use the site, you agree to the use of cookies. Click here for more information.

    The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

    Close