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Country Commercial Guides FY 2000: Botswana Report prepared by U.S. Embassy Gaborone, Botswana, released July 1999 Note*

CHAPTER 1

Executive Summary

This Country Commercial Guide (CCG) offers a comprehensive look at Botswana's commercial environment, using economic, political and market analyses. The CCG's were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of several U.S. Government agencies.

The World Economic Forum ranks Botswana as the third best economic performer in Africa with uninterrupted economic growth since 1971 (when diamond mining began). In June, 1998, The New York Times reported that the World Bank had identified Botswana as the country with the greatest rate of economic growth in the world from 1966-97. Its average annual growth rate of 9.2% exceeded that of South Korea (7.3%) and China (6.7%). These impressive growth rates continued in 1997/98, with a real increase of 8.3% leading to a per capita GDP of about $3,300.

The country's positive response to the opportunities and challenges of globalization, which currently face every developing nation, is reflected by the following: (a) the continued strong performance of the stock exchange, (b) the approval of a new Industrial Development Policy to encourage productive and efficient export industries, and (c) the rigorous implementation of educational and training programs to raise the productivity and quality of the labor force.

Even so, the 1998/99 fiscal year was in many ways a troubling one for Botswana due in part to the East Asian economic recession, which caused a decline in diamond sales and earnings on the Bank of Botswana's investment portfolio, which together comprise 68% of government revenue. This led to a budget deficit of about $325 million, the country's first deficit since 1990. This downturn in government revenue led the Government to recommit itself to the country's National Development Plan 8 (launched in 1997), the theme of which is "Sustainable Economic Diversification." It is an effort to diversify the economy, reducing heavy economic dependence on minerals, particularly diamonds, while creating employment. The Government is actively encouraging private sector development through various investment incentives, an attractive taxation system, the elimination of exchange controls, and support for foreign direct investment, to improve non-mining sectors of the economy, principally manufacturing, tourism and financial services.

Official external trade statistics show direct U.S. exports to Botswana of $31.1 million in 1997, accounting for just 1.5% of the country's total imports. However, as most U.S. exports enter Botswana as re-exports from South Africa this figure is understated. Similarly, Botswana's exports to the U.S., recorded at $21.4 million in 1997, do not include diamonds, the nation's principal export, which enter the U.S. indirectly.

Export opportunities include hospital equipment and pharmaceuticals, computer hardware and software, heavy machinery for mining, solar energy equipment, telecommunications products, and water supply equipment. Sectors targeted by the Government for investment include tourism, light manufacturing and financial services. Due to Botswana's limited domestic market, export-led industries are encouraged, and foreign investors and exporters should look to market products throughout Southern Africa.

In early 1998, Botswana ratified the Southern African Development Community (SADC) Trade Protocol, which will lower trade barriers among the fourteen SADC member states. The Trade Protocol will come into force upon ratification by eight member states. A detailed tariff and non-tariff reduction schedule is under negotiation among the Trade Protocol's eleven signatories and should be in place some time in 2000. This will offer U.S. exporters and investors easy access to the regional market

Politically, democratic institutions are in place and functioning well. The President, Festus Mogae, succeeded to the Presidency from the Vice-President's office when the previous elected leader, Sir Ketumile Masire, retired in April 1998. The next general elections are scheduled for 1999. Botswana and the U.S. enjoy excellent bilateral relations.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact Stat-USA at 1-800-Stat-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.stat-usa.gov and http://1997-2001.state.gov/ and http://www.mac.doc.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRADE or by fax at (202) 482-4473.