Economic Performance

During 2000/2001, the Gross Domestic Product increased by 13.8% in nominal terms. In real terms, in 1993/94 constant prices, the GDP grew by 9.1% in 2000/2001, compared to a growth rate of 8.1% in 1999/2000. The improved performance of the economy during 2000/2001 is a consequence of a very high real growth rate of 19.6% in the mining sector, compared to 12.1% in 1999/2000, due mainly to realization of the full year effect of the Orapa Diamond Mine expansion project. The non-mining sectors, on the other hand, experienced a slowdown from a real growth rate of 6.2% in 1999/2000 to 3.9% in 2000/2001. This was due to slower growth rates recorded by major non-mining sectors, such as manufacturing, construction, finance and business services, and social and personal services.

The annual inflation rate has declined from an average of 8.5% in 2000 to 6.6% in 2001, due to a downward trend in all categories of inflation. This was partly a result of lower oil prices in the international markets towards the end of 2001, and an easing of domestic demand pressures resulting from slower rates of growth of domestic credit and the Government spending.

The 12-month period ending in December 2001 was characterized by significant changes in the exchange rate of the Pula against currencies of Botswana's major trading partners (P1.00 = US$0.1432, December 2001). During this period, the Pula appreciated by 23.5% against the Rand and depreciated by 22.7% against the SDR, 25.3% against the US dollar, 23.3% against Euro and 23.0% against the British Pound. These movements were a reflection of the Rand against major currencies, rather than of changes in domestic economic fundamentals.

A somewhat lower current account surplus of P2.6 billion is anticipated for 2001, compared to a surplus of P2.8 billion realized in 2000. This is mainly a result of a fall in diamond exports due to the global economic slowdown, coupled with a decrease in copper and nickel prices. The merchandise trade component of the current account is estimated to have recorded a surplus of P4.1 billion in 2001, as opposed to P4.6 billion recorded in 2000. The services account is also anticipated to have registered a slightly larger deficit in 2001 than in the previous year due to, among others, increased expenditure on Batswana students studying abroad, particularly in South Africa. The capital and financial accounts are also anticipated to have deteriorated in 2001 over the previous year.

The overall balance of payments is expected to have reduced from a surplus of P1.9 billion to a lower surplus of P1 billion in 2001, which is still a relatively healthy situation for the country.

As at the end of December 2001, foreign exchange reserves were estimated at P41.2 billion compared to P33.9 billion in 2000, representing about 39 months cover of imports of goods and services. In SDR and US dollar terms, the reserve were more or less unchanged over this period at SDR4.7 billion and US$5.9 billion, which means that there has been no increase in Botswana's purchasing power in hard currency market.

For more statistical information, visit Central Statistics Office website: http://www.cso.gov.bw

Sovereign Credit Rating

Botswana was assigned sovereign ratings in the "A" grades by Moody's rating agency in March 2001 and by Standard and Poor's rating agency in April of the same year. These ratings are, by far, the most favourable awarded to any country in Africa. These high investment grade rating should be of assistance in attracting both portfolio and direct foreign investment. Subsequent to the publication of these ratings, a strong positive sentiment has been generated in financial markets in the region and abroad about Botswana.

International Financial Services Centre

The Botswana International Financial Services Centre (IFSC) is aimed at providing an enabling environment for the operations of companies to be incorporated in Botswana, and also making the necessary provisions for the registration of exempt companies. Such companies will provide services and undertake transactions on behalf of other companies and individuals domiciled in other countries.

The project the IFSC has made substantial progress in the past year. To date several companies have been approved under the IFSC and accordingly issued with tax certificates. The IFSC's marketing programme has so far resulted in further business proposals which are currently being processed and a number of projects are expected to be approved in the area of international banking, funds administration, corporate treasury management, and captive insurance operations.

IFSC web-site: http://www.ifsc.co.bw

Economic Outlook for 2001/2002 and 2002/2003

The real GDP growth rate is expected to be around 5% during 2001/2002 and 2002/2003. The main reason for this decline from the 9.1% growth registered in 2000/2001 is the expected fall in the mining sector growth from 19.6% in 2000/2001 to around 2% in 2001/2002 and 2002/2003. This indicates that, despite some progress made in the diversification of the economy in the past, the need remains to push the diversification process further and accelerate the growth rates of non-mining sectors, if Botswana is to achieve the Vision 2016 goals. During 2001/2002 and 2002/2003, growth in non-mining sectors of the economy is expected to recover from their relatively weak performance in 2000/2001. Overall, the non-mining sectors are expected to register average growth rates of between 6% and 7% during 2001/2002 and 2002/2003, compared to 3.9% in 2000/2001.

The economic outlook shows that the expected average inflation rate to be between 6.5% and 7.0% in both 2001/2002 and 2002/2003, down from an average of 8.1% recorded in 2000/2001. This is due to the continuing low inflation in the industrialised economies, coupled with expected decline in the inflation rate in South Africa.

Agriculture

Despite the shortcomings of the agricultural sector, such as low levels of income and high risks, ageing farming community and inadequate marketing facilities, the National Master Plan for Agricultural Development (NAMPAD), which was tabled in Parliament in November 2001 with intention to start the implementation during 2002/2003, offers great potential for agricultural reform to diversify the economy by improving productivity in the sector and ensuring sustainable use of the country's natural resources. NAMPAD proposes major changes in the traditional farming methods in order to reduce uncertainty associated with natural conditions in Botswana through the adoption of more modern cultivation techniques, which can ensure higher productivity even under unfavourable conditions, diversification of agricultural products and development of markets for agricultural production.

The adoption of NAMPAD will bring about a major transformation of the agricultural sector in terms of creating investment opportunities and institutional reform. The Master Plan is expected to provide several economically viable business opportunities for the private sector, while Government, on its part, will create necessary enabling environment by ensuring inter alia, the availability and access to land for investors, the supply of agricultural inputs, post-harvesting services and facilities and professional services to farmers.

Tourism Development

Tourism is one of the areas with potential for economic diversification as well as creation of employment opportunities. The recent Government tourism development programme study has reviewed that cultural, archaeological and historical attractions can be important components of the tourism product. As part of efforts in this regard, an eco-tourism strategy is currently being developed, with a view to opening up new tourism avenues, involving rural communities. It is expected that the Eco-Tourism strategy will be completed in 2002.

The Botswana Tourism Board (BTB), which is expected to be operational before the end of 2002 in collaboration with the private sector and other stakeholders, and autonomous organisation will be commercially oriented for the promotion and marketing of tourism in Botswana. The BTB will go a long way in reforming the management of the tourism sector and assisting to tap the potential offered by the sector to achieve the objective of sustainable economic diversification. Meanwhile, Government is developing a national tourism marketing and promotion strategy aimed at promoting both domestic and international tourism aggressively.

Tourism website: http://www.gov.bw/tourism

HIV/AIDS

The spread of HIV/AIDS is frustrating the country's social and economic development efforts, causing deterioration in most social indicators. Following the signing of an agreement between Government and the African Comprehensive HIV/AIDS Partnerships Incorporated (ACHAP) in October 2001, the Anti-Retroviral Therapy Drugs programme has started in the capital city, Gaborone, and the programme will be spread to other pilot areas during 2002/2003. ACHAP is a joint agreement between Merck Company Foundation and the Bill and Melinda Gates Foundation, whose main objectives include, among others, improving access to comprehensive HIV prevention, care and support; prevention and treatment of opportunistic infections; and, implementation of Anti-Retroviral therapy in the public sector. Initially, the programme will be piloted in the main population centres such as Gaborone, Francistown, Serowe and Maun, with the intention to roll it out to the rest of the country over a period of five years.