The economy of Botswana is one of the strongest in the African continent and, even though it was adversely affected by the COVID-19 pandemic, it was already not doing very well, however, its economy showed a significant recovery in 2021 after restrictions were eased such as GDP expanding by 12.5% in 2021 from a contraction of 8.7% in 2020. In the coming years, the economy of the country should continue to grow although it will be at a slower pace. According to IMF, investment in the mining sector and the rebound of the prices of hard commodities (diamond, copper and nickel) should contribute to the growth of the economy.

The annual inflation rate in the country is decreasing. It went from 12.4% in December 2022 to 9.3% in January 2023 recording a drop of 3.1%. Botswana has always maintained a conservative fiscal policy and low levels of foreign debt and, although general government debt increased to an estimated 22.8% in 2022 following a large fiscal response to the COVID-19 pandemic, Botswana's debt is still substantially lower than its neighbors.

The government's priority is to diversify the economy, making it less dependent on a volatile mining sector, and rely more on agriculture, services, and manufacturing. Botswana is working to expand its services industry by creating 'hubs' in the health, education, innovation, financial services, and tourism sectors, which it hopes will also strengthen its regional integration. Public spending will continue to advance at a more rapid pace, prioritizing areas identified in the National Development Plan 11 (NDP11) that focuses on three key objectives: tackling poverty, ensuring inclusive growth, and job creation.

Botswana still has one of the highest levels of inequality in the world and suffers a high unemployment rate and a lack of skilled labor. In 2022, the unemployment rate in the country was an estimated 26%, and it was especially high among young people. In September 2021, the country approved The National Employment Policy for Botswana, a plan which aims to provide a comprehensive response to the challenge of unemployment facing the country.

The diamond-rich economy should continue to benefit from improved terms of trade: demand and prices for diamonds are expected to increase, largely because of trade sanctions against Russia, the world's largest producer of rough diamonds. As the COVID-19 restrictions become less severe, the tourism sector, which accounted for 15% of GDP before the crisis, will gain further momentum. Moreover, the year 2023 will see the implementation of the "Reset Agenda" led by President Masisi, which aims to diversify the economy by developing financial services, manufacturing and tourism. More generally, this agenda seeks to prioritize the civil service reform, digitization and the development of value chains (notably by working on diamonds to increase their value added). This should increase the resilience of the economy and enable job creation.

SWOT Analysis

Strengths

• Botswana has abundant natural resources (diamonds, copper, silver, nickel and soda ash)
• Lower debt burden
• Low corruption (Corruption Perceptions Index in 2020)
• Political stability and the level of governance place the country among the top performers in sub-Saharan Africa in international business environment rankings

Weaknesses

• Dependence on the diamond sector (over 90% exports)
• High inequality and unemployment, poverty maintained at a relatively high level
• Lack of skilled labor, small domestic market
• Its heavy dependence on mining and high rate of HIV/AIDS infections and unemployment could threaten its success in the future

Opportunities

• The young population often unemployed but literate gives a good labour reserve
• In the manufacturing sector, downstream opportunities exist in the beef, leather, minerals and glass industries
• The processing of cattle hides, provision of recycled grey water for irrigation, and rollout of agricultural finance and insurance products and services, are areas requiring investment and expansion. The agricultural sector itself is operating below capacity. The production of small stock, pork, fruit, vegetables and honey are potentially lucrative business initiatives.

Threats

• Local outbreaks (foot and mouth) lead to export bans to key markets like the European Union, with loss of revenue to the country.
• Due to the country's small population and low supply of skilled workers, Botswana does not have enough experienced managers and technical experts to run many of the companies that would otherwise invest in the country.
• Market challenges include regulatory constraints in certain sectors that have little or no public protection function, excessive red tape relating to licenses and permits, limited access to finance, expensive and poor performing internet, poor customer service, and low worker productivity.