The quality of Botswana’s overall infrastructure has declined badly over the past five years, making the country one of Africa’s “Top 5 Deteriorators” in the latest edition of the Rand Merchant Bank Where to Invest in Africa report. The other part of the bad news is that Botswana languishes at the bottom of a least that includes Benin, Libya, Tunisia and Egypt.
For investors this is bad news because poor infrastructure increases the cost of doing business.
“In many cases, we find that our clients are more concerned about the challenges of doing business than growth and market size, and therefore they place greater emphasis on the risks associated with the different operating environments Africa offers,” RMB says.
Interestingly though, Botswana emerges as one of the 10 countries on the continent that are most attractive for infrastructure investment. Investors aside, the Botswana government is one of the 10 in Sub-Saharan Africa which have surpassed the threshold for domestic financing for infrastructure. In terms of domestic financing for infrastructure, 5-6 percent of GDP is generally considered sufficient. Alongside the Central Republic of Africa, Rwanda, South Africa, Uganda and Rwanda, Botswana allocates between 7.1 and 8 percent of its GDP to infrastructure. In Sub-Saharan Africa, national governments are the main single source of infrastructure financing, and that role is increasing. However, the level of public finance is still insufficient to cover the large infrastructure needs. According to Brookings Institute, a think tank in the United States, these governments spend most of their resources on two sectors: transport and energy.
Increasingly nowadays, China is playing a major role in Sub-Saharan African infrastructure financing by filling the gaps that are not met by either the private sector or official development finance. The largest support has been for resource-rich countries like Botswana. Brookings says that the Asian nation is especially targeting the transport sector, particularly railways and roads.