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A Diamond In The Rough

Published 9 years ago
By Forbes Africa

With an 18% unemployment rate, Botswana is the largest producer—by value—of diamonds, the country’s main source of income, and one of Africa’s fastest growing economies. It has come a long way since its independence in 1966.

Botswana has recently been commended by the African Development Bank (AFDB) for maintaining good economic growth and healthy foreign reserves. The country’s fiscal discipline has raised it to middle income status.

With a GDP of $14.4 million, the International Monetary Fund (IMF) has projected GDP and inflation growth at 3.9% and 6.8%, respectively, for 2013 and 4.1% and 5.8% for 2014.

The country’s main exports are diamonds, copper, nickel and beef. The discovery of alluvial diamonds in the late 1950s has played a large role in the country’s development. Botswana has achieved what many countries in Africa have longed to with their natural resources; ensuring its citizens benefit from their country’s riches.

Debswana, an equal partnership between the government and diamond company De Beers, began in 1978. De Beers has moved its operations and $6 billion-a-year worth of sales to the country. De Beers’ sites have been moved to Gaborone and a new 10-year sorting, valuing and sales contract was secured. The government is looking to turn Botswana into a major international center. The subprime crisis that rocked the world shrunk the country’s diamond revenue.

The country’s rule for new mining investments is that 15% of the company needs to be offered to local investors on the same terms as foreign ones. If the locals do not take up the offer, the companies are free to commence with business as usual.

Pangolin Diamonds recently announced it had discovered one of the largest known kimberlite pipes—a rock formation in which diamonds are formed—in the world at its Tsabong North project.

Botswana cites low inflation, low corruption, a stable economy and investment protection as some of its attractive qualities when courting investors. Investment opportunities lie in manufacturing, information technology and tourism.

It takes 61 days and 10 procedures to start a business in Botswana, and ranks at 56 on the ease of doing business index. The country has increased the profit tax rate; corporate tax is 15%, value added tax (VAT) is 10% and the country has no foreign exchange controls.

Botswana was number 59 on FORBES’ ‘Best Countries for Business’ 2012 list. Credit ratings are stable, with an A- from Standard & Poor’s and an A2 from Moody’s.

Botswana is a member of the Southern African Customs Union (SACU), Southern African Development Community (SADC), enjoys the benefits of the African Growth and Opportunity Act (AGOA) and the Interim Economic Partnership Agreement (IEPA) between SADC and the EU.

Near the Sir Seretse Khama International Airport lies the Botswana Innovation Hub. The country is hoping to attract domestic, regional and global companies. The hub will focus on the biotechnology, energy and environment, information and communications technology and ICT enabled services, as well as the mining technologies sectors.

With a history of having one of the highest infection rates in the world, and one of the most advanced HIV/Aids treatment programmes on the continent, a study by Botswana’s National AIDS Coordinating Agency has recorded a 71% decline in new HIV infections since 2001, thanks to increased knowledge and condom use.

Amid all the advances that Botswana has made, it is currently facing some controversy. A court battle against the government began in 2003 after the government began relocating the Kalahari Bushmen population to settlements.

London-based Survival International has called for a boycott on Botswana tourism as a stance against how the Bushmen are being treated by the government. There is concern over Spain’s king, Juan Carlos, being allowed to shoot elephants in the country while the Bushmen are prevented from hunting, a way of life for them. They are also prevented from digging for water in the reserve, but Wilderness Safaris was granted permission to dig boreholes for water, supplying a swimming pool. Botswana is facing a severe water shortage due to receding dam levels caused by drought.

The British lawyer defending the Bushmen’s rights has been barred from returning to Botswana.

On a governance front, the 2013 Ibrahim Index of African governance, compiled and published by the Mo Ibrahim Foundation, ranked Botswana second out of 52 countries.

The president is selected by the party that wins 29 of the 57 parliamentary seats through proportional representation system. Parliament rejected a call for the people to vote for the president in 2008. The ruling party, the Botswana Democratic Party, has been in power for the last 46 years.

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Related Topics: #African Development Bank, #Botswana, #December 2013, #Economic Growth, #GDP, #Inflation, #natural resources, #unemployment.