Botswana’s economy took an unexpected nosedive from 2017 until last year when it rebounded in 2021 amid Covid-19 fears.
According to the Economic Freedom of the World: 2022 Annual Report, the rule of law and a modest tax burden are Botswana’s relative strengths, but its “fiscal health has fallen to a dangerous level.”
The report reveals that Botswana’s economic growth slowed from 2017 through 2019, turned sharply negative in 2020, and rebounded in 2021.
Dragged down by poor fiscal health, the country has lost economic freedom since 2017 and is in the middle ranks of “moderately unfree” countries.
“A five-year trend of declining economic freedom has continued. Dragged down by a deep plunge in its fiscal health score, Botswana has recorded a 5.3-point overall loss of economic freedom since 2017 and has fallen from the top half of the “Moderately Free” category to the lower half,” the report says.
The report states that Botswana’s economic freedom score is 64.8, making its economy the 61st freest in the 2022 Index. Botswana is ranked 3rd among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional and world averages.
Regarding the impact of Covid-19, the report shows that as of December 1, 2021, 2,418 deaths had been attributed to the pandemic in Botswana, and the government’s response to the crisis ranked 163rd among the countries included in this Index in terms of its stringency. The report shows that 177 countries were ranked. The economy contracted by 8.3 percent in 2020.
Whether property rights are enforced, the report says the judiciary is generally independent and free from interference.
“Botswana is sub-Saharan Africa’s least corrupt country, but nepotism and patronage pervade the government sector, which makes corruption a very high risk for public tenders,” the report says.
The report expressed concern that regulatory efficiency bureaucratic procedures mandated for running a business are time-consuming.
“Regulatory procedures are inefficient. The difficulty involved in securing work permits, low labour productivity, and skill deficiencies at the local level are hurdles for business and labour freedom,” the report says.
It shows that in 2021, the government increased subsidies to the tourism and agriculture sectors.
The report further stated that Botswana has six preferential trade agreements in force. The trade-weighted average tariff rate is 6.4 percent, and 44 nontariff measures are in effect. “Investment regulations are transparent but slow in execution. Foreign investment has played a significant role in the privatization of state-owned enterprises,” the report says.
But it says country’s banking sector is one of Africa’s most advanced, and the Botswana Stock Exchange has been growing.
Touching on the political landscape, the report says the Botswana Democratic Party (BDP) has governed this multiparty democracy since independence from the United Kingdom in 1966.
“Despite a challenge from a party led by former President Ian Khama and other opposition groups, the BDP expanded its share of the vote in 2019 elections, securing the continued tenure of President Mokgweetsi Masisi. Risks to political stability remain low,” the report says.
The report acknowledged that Botswana has abundant diamonds and other natural resources, a market-oriented economy, and one of Africa’s highest sovereign credit ratings adding that ecotourism in the country’s extensive nature preserves is helping to diversify the economy.