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MODULE 6; TOPIC 1
ECONOMIC DEVELOPMENT IN BOTSWANA
Introduction
The term development refers to a process of change and growth in societies and
countries. Development may imply changes in population conditions such as declining
birth rates, increasing life expectancies, increasing Gross National Product (GNP) and
Gross Domestic Products (GDP) as well as social improvements such as greater
equality for women, reduced voter apathy and improved human rights. Economic
development is the use of resources to improve people’s standard of living. It is about
creating wealth and improving aspects such as health, food, housing, education and
income levels of people.

Factors that contribute to economic development

For a country to attain economic development certain factors are a prerequisite. Without
those factors there can be no improvement in various sectors of the economy. These
factors include:
 Availability of natural resources: Natural resources are all materials from nature
that can be used to produce finished or semi-finished products. People cannot be
involved in production without the use of natural resources such as land, water
and veld products.
 Human resources: These are the people of a country. People need to have skills
and knowledge in order to turn raw materials into finished products and to
effectively use profits accumulated to develop other economic sectors.
 Entrepreneurship: For economic development to take place the country needs
people who are prepared to take the risk of investing money in business. The
government of Botswana encourages people to invest in business by providing
loans and grants through agencies such as CEDA, National Development Bank
and Culture & Youth.
 Availability of capital: Money is needed for buying raw materials, machinery,
pay for services such as water and electricity, for training workers and paying
their wages even facilitating the daily running of the industries. Most of the
businesses need money in order to start production.
 Technology: Technology includes many kinds of machines from cell phones, tiny
computers to large industrial machines. By using appropriate technology and
skills people can increase the production of goods and services and thus
contribute to economic development.
 Political stability: Good interrelationship and peaceful coexistence between
various government institutions, general public, NGOs, private sector and other
stakeholders in development promote a good environment for economic
development.
 Availability of market: A market is a basic requirement for any business. Market
is important because it is where finished or semi-finished goods are sold to make
profit. If businesses have a reliable market they are more likely to grow because
profits will always accumulate.
 Availability of infrastructure: For economic development to occur a country
needs to have good facilities such as roads, telecommunication networks,
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electricity and serviced land. For instance, good roads are vital as they make
various places accessible to each other.

Contributions of various economic sectors to economic development

Botswana’s major economic sectors are mining, agriculture, manufacturing, tourism and
trade and communication. The major contributors to Botswana’s economic development
are mining, tourism and agriculture respectively.
a. Contributions of Mining:
Mining involves the extraction of raw materials from underground. This sector is
important because it:
 Creates employment for thousands of Batswana employed in mines as miners,
engineers, artisans, doctors, nurses etc. This helps in upgrading the lives of
Batswana as they can afford to provide basic needs for their families.
 Generates revenue for government in foreign exchange as most of the minerals
are exported to European countries. Government also gains revenue in the form of
taxes, dividends and royalties.
 Leads to improvement in infrastructure such as roads, hospitals, schools and
entertainment facilities such as sporting complexes. People who work in the
mines are usually provided with social welfare facilities such as housing and
banking facilities.
 Improves the country’s manpower as mining companies often train people for
various professions locally and abroad. They sponsor them in the field of
engineering and science and when they graduate they work for these sectors
 Social responsibility e.g. donating money and other materials to the needy and
charity organisations. Mining companies can also sponsor sporting activities such
as football and volleyball tournaments.
 Promotes development of associated industries. When a mining industry sets up in
an area it attracts other businesses that provide services to the mine. For example,
the establishment of BCL Mine in Selibe Phikwe led to establishment of a railway
line, Shashe dam and a power station in the area.

b. Contributions of Agriculture:
Agriculture involves growing of crops and the rearing of animals for subsistence or
commercial purposes. This sector is important because it:
 Provides people with food such as beef, milk, sorghum etc.
 Source of income as farmers can sell some of their products
 Creates employment for people such as farm managers, herdboys, livestock
officers etc.
 Provides raw materials for other industries e.g. skins used to make leather
products such as bags and jackets and cotton used to make clothes.
 Increases government revenue through taxation of commercial farmers.
 Promotes economic diversification as it makes the country to be less dependent on
the mining sector.
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c. Contributions of Tourism:
Tourism refers to the business of providing travellers or people who are on holiday with
services such as accommodation and recreational facilities. Tourism is important because
it:
 Creates employment for people such as tour guides, hotel workers, game
managers, waiters etc.
 Provides a market for local craftsmen who sell traditional crafts like baskets,
sculptures, pottery and other artworks to tourists. It also provides a market for
those selling vegetables, fruits, beef and dairy products to hotels.
 Brings income to the country in foreign exchange since most tourists are
foreigners from countries such as South Africa, Zimbabwe, USA and United
Kingdom.
 Leads to improvement in infrastructure such as roads, hotels, airports and
telecommunication networks.
 Encourages conservation of natural and cultural resources such as wild animals,
pristine environments such as Okavango Delta and places of historical interests
such as Tsodilo Rock paintings.
 Promotes economic diversification as it makes Botswana to be less dependent on
the mining industry.

d. Contributions of Manufacturing:
Manufacturing is the process of turning raw materials into finished or semi-finished
products or the assembling of parts to make a complete product. Manufacturing is
important because it:
 Creates employment for people working in various manufacturing industries.
 Brings foreign exchange since some industries manufacture goods that are
exported e.g. textiles, hides, meat products etc.
 Generates revenue for government through taxation, rent and licenses.
 Manpower development through in-service training and workshops for people
such as managers, accountants, administrators etc.
 Provides manufactured goods and services to other industries and the public.

e. Contributions of Trade and Communication:

Trade and communication involves businesses that sell manufactured goods such as
wholesales and shops. It also involves moving goods from one place to another, sending
and receiving information. This sector is important because it:
 Creates employment for people providing services such as banking,
telecommunication, mail and transport.
 Provides revenue to government through taxation, licensing of trade, advertising
and from the process of trading.
 It contributes to development of infrastructure such as banks, post offices,
airports, roads and telecommunication networks.
 Facilitates quick, safe and cheap exchange of information and goods.
 Through international trade Botswana gains foreign exchange which can be used
to pay for imported goods.
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 Trade provides Batswana with raw materials and goods used by manufacturing
industries.

Challenges faced by each economic sector and possible solutions

a. Challenges faced by the Mining sector:
 Shortage of local skilled personnel resulting in recruitment of foreigners
especially in science related jobs.
 Lack of capital to buy expensive machinery used in the mining industry.
 Most of the mining companies are owned by foreigners which means they can
invest most of the profits back to their home countries.
 Fluctuation of prices in world markets resulting in low profits when selling at a
time when prices are low.
 Environmental problems e.g. air pollution in Selibe Phikwe and salt pan flooding
at Sowa.
 Lack of economic diversification as the country is hugely dependent on the
mining industry. This is risky because minerals are non-renewable resources and
once the mining sector collapses the country’s financial resources will be
crippled.
Possible solutions to challenges faced by the Mining sector:
 Lack of skilled personnel: Train more Batswana in specialised jobs such as
engineering, surveying, medicine etc.
 Lack of economic diversification: Invest profits from mining to develop other
economic sectors such as agriculture, manufacturing and tourism. This will also
help Botswana to attain economic diversification.
 Lack of capital: Getting loans from international banks and negotiating for low
interest rates.
 Environmental problems: Investment by companies in rehabilitating damaged
environment and penalties against companies that degrade the environment. This
problem can also be addressed through national planning and legislation for
protection of the environment such as compulsory EIA for all mining projects and
regular check-ups for compliance to stipulated environmental laws.
 Fluctuation of prices: Reserving minerals and selling them when world prices are
high (Stockpiling). Government can also intervene in negotiating with European
Union for a better deal on the prices of minerals.

b. Challenges faced by the Agricultural sector

 Batswana are not self-sufficient in food production and therefore import most
foodstuffs from South Africa.
 Unreliable, seasonal and unevenly distributed rainfall which often results in poor
yields which end up demoralising farmers.
 Poor soils which are mostly sandy and saline. These soils are not suitable for
arable farming. This indirectly affects pastoral farming because the soils cannot
support enough pasture for livestock.
 Poor methods of farming due to lack of farming skills e.g. ploughing along the
slope and overstocking.
 Pests and diseases such as quelea birds, locusts and foot & mouth.
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 Lack of capital to buy farm inputs such as fertilisers and pesticides. Also due to
financial constraints many farmers use traditional storages such as serala, sesigo
and sefalana which make crops vulnerable to destruction by extreme weather
conditions.
 Competing landuses e.g. agricultural land turned into residential areas.
 Inadequate markets or long distance to markets such as Botswana Agricultural
Marketing Board (BAMB) and Botswana Meat Commission (BMC).
 Competition for market with imported foodstuffs from South Africa.
Possible solutions to challenges faced by the Agricultural sector
 Poor farming methods: Provision of extension services to teach farmers modern
methods of farming such as row planting, contour ploughing and the use of good
quality seeds and breeds of animals.
 Lack of capital: Give loans and credit schemes to farmers to buy machinery,
fertilisers and pesticides.
 Lack of self-sufficiency in food production: Encourage more people to go into
commercial farming as they will provide enough food products to feed the nation.
This will reduce the amount of food imported from neighbouring countries and
hence save Botswana’s foreign exchange.
 Conduct seminars and workshops to teach farmers about good farming methods.
Also farmers can be educated through the media such as radio and TV
programmes like Molemi ithute, Pitso ye balemi and Setshwantsho.
 Shortage of market: Improve farmers’ access to markets such as BMC and BAMB
especially farmers in rural areas.
 Competition with imported foodstuffs: Protect local products by imposing tax and
quotas on imported foodstuffs.
 Unreliable rainfall: Build dams, boreholes and plant drought resistant crops.
Farmers can also irrigate their crops.
 Poor soils: Addition of fertilisers and other land augmenting inputs.

c. Challenges faced by the Tourism sector

 Needs expensive and well maintained facilities such as hotels and roads. For
instance, good roads are important as they make it easy and cost effective for
tourists to reach areas of attractions.
 Poaching often results in killing of endangered species which may lead to their
extinction.
 Disturbance of the ecosystem and environmental damage as too many vehicles
and tourists may scare away and even reduce wild animals in game reserves and
national parks. This may also lead to soil erosion and littering,
 Tourism is a seasonal business as most tourists come around winter time. In other
seasons the sector experiences a decline in business.
 Competition for tourists as there are many countries in Africa with more
developed tourist attractions e.g. Kenya, Zimbabwe and South Africa.
 Foreign ownership as most of the safaris and other travel and tour businesses are
owned by foreign nationals who often invest profits back to their home countries.
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Possible solutions to challenges faced by the tourism sector

 Need for well maintained facilities: Improve tourist accommodation and roads to
areas where there are tourist attractions.
 Disturbance of the ecosystem: Promote culture-based tourist attractions such as
traditional dancing, poetry and manufacturing of traditional crafts to shift
attention away from game reserves and national parks.
 Foreign ownership: Encourage more Batswana to be involved in the tourism
industry by providing them with loans, grants and education on tourism related
businesses.
 Competition with other countries: More advertisement of Botswana’s tourist
attractions locally and abroad.
 Poaching: Employ more personnel to guard against poaching. In Botswana the
Wildlife and National Parks Department works hand in hand with the Botswana
Defence Force to curb poaching.

d. Challenges faced by the Manufacturing sector

 Poor infrastructure e.g. poor roads that make it expensive to transport raw
materials and finished goods and a lack of railway line connecting the north and
west parts of the country to the more developed eastern side.
 Small domestic market as Botswana has a small population which does not
provide enough market for manufactured goods.
 Expensive utilities such as water and electricity and this increases production
costs and hence the prices of finished goods.
 Lack of skilled labour as few Batswana have managerial and entrepreneurial skills
and therefore most industries are owned by foreigners.
 Foreign competition as locally manufactured goods are often of low quality and
more expensive due to high production costs. This makes Batswana prefer goods
from neighbouring countries like South Africa.
 Lack of capital to establish industries and buy equipment to start operation.
 Landuse conflicts as some industries may be located on land reserved for
residential or agricultural purposes.
Possible solutions to challenges faced by the Manufacturing sector
 Small domestic market: Expanding the market by entering into some trade
agreements with other countries.
 Poor infrastructure: Improvement in infrastructure such as roads, provision of
serviced land and factory shells by government.
 Lack of skilled labour: Educating Batswana on courses related to business
management.
 Foreign competition: Protection of local products by imposing quotas and heavy
tax on imported goods.
 Land use conflicts: Consultation between concerned parties over the use of land
and enhance land use planning.
 Lack of capital: Establishment of more financial institutions that will give people
loans and grants to establish businesses.
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e. Challenges faced by the Trade and Communication sector:

 Small domestic market with a low buying power.
 Poor transport network in remote areas and this makes some potential markets
inaccessible.
 Lack of managerial or entrepreneurial skills for local people.
 Competition from goods produced in other countries.
 Crimes such as burglary and corruption.
Possible solutions to challenges faced by the Trade and Communication sector
 Lack of managerial or entrepreneurial skills: Training more personnel in business
management.
 Low purchasing power of locals: Creation of more employment opportunities to
increase purchasing power of Batswana.
 Poor transport networks: Development of the country’s infrastructure especially
roads and telecommunication to make remote areas more accessible.
 Small market: Widen market through more advertising locally and abroad.
Enforcing security and strict penalties against offenders.
 Crime: Enforcing security and strict penalties against offenders.

How corruption undermines economic development

Corruption is the process of acting dishonestly or illegally in return for money or personal
gain by people with authority or power. It implies the use of one’s official position for a
personal or group gain. Common forms of corruption include fraud, bribery and
embezzlement. Corruption can undermine economic development in the following ways:
 Investors are scared away by corrupt practices and by so doing less jobs are
created for the local people. In addition, the image of the country is tarnished and
the country will be ranked amongst the most corrupt countries in the world.
 Corruption inflates or prolongs the actual time spent on projects. This in turn
increases the money that is spent on these projects because the more time is spent
on a project the more expensive the project becomes.
 Through corruption, a lot of money is used for wrong reasons by corrupt officials;
this means that not all the money is going to be used for its intended purpose.
 Corruption undermines government’s efforts of developing the people. Through
nepotism and favoritism incompetent and unqualified people are given posts and
this will bring government’s projects to a standstill because such people do not
have adequate knowledge about implementation of particular projects. This in
turn hampers the effective delivery of public goods and services.
 Corruption widens the gap between the rich and the poor because some people
easily get rich through some illegal means. Those people who have no access to
money and resources will remain forever poor.
 If the tendering process is full of corrupt practices the projects are not going to be
completed in time or are going to be below standard because the projects have
been given to undeserving contractors by corrupt officials.
 Delays economic growth as economic sectors or businesses that are ravaged by
corruption are unlikely to grow because their profits are not invested back into the
sectors.
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 Demoralises the workforce as competent employees may be denied benefits such

as salary increment and promotion. Due to corruption some undeserving people
may be promoted based on their personal relations with their supervisors instead
of basing promotion on merit or hardwork.
 Undermines the rule of law because corruption is against constitutional law. It
also undermines social values because people find it easier and more lucrative to
engage in corruption than to seek legitimate employment.

Ways of sustaining economic diversification

Economic diversification is the addition of new or different activities to an economy to
make it less dependent on one economic sector. Dependence on one sector is risky
because if the sector collapses the whole national economy collapses and this will lead to
economic, social and even political problems. Economic diversification can be achieved
through:
 Promotion of corrupt free practices: People should be encouraged to abstain
from corruption and other economic crimes so that businesses can make
maximum profits.
 Investment in other industries: The government can invest in promoting other
industries like manufacturing and those based on tourism so as to shift attention
away from the mining industry.
 Import substitution: Batswana should locally produce those goods that they
mostly import. This will create more jobs for Batswana and save the country’s
foreign exchange.
 Training more personnel: People need to be trained in the latest technological
skills so that they can be readily available to companies or institutions that need
skilled manpower.
 Improved work ethics: There should be sufficient dialogue between employer
and employees. Those employees who excel in their work should be rewarded
accordingly.
 Provision of loans and grants: This will help to address the problem of lack of
capital which often prevents people from venturing into new businesses. If funds
are available people will be able to buy the necessary business inputs.
 Protection of local industries: Government can protect local industries through
legislation and policies to prevent competition with foreign industries e.g.
imposing quotas on imports that are also manufactured locally and reserving some
businesses for Batswana only.
 Foreign direct investment: Government can create a conducive investment
climate so that foreign investors can be attracted into the country e.g. free market
economy and protection of property rights. Foreign investors can also be attracted
through bilateral and multi-lateral trade agreements.

The role of stakeholders in promoting economic development

a. Government
 Provision of finance: Government provides financial support in the form of loans
and grants through agencies such as CEDA so that people can get capital to set up
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industries. Investors are normally attracted to places where they have access to
financial assistance.
 Provision of basic infrastructure: In order to attract investors government has
provided serviced land to reduce expenses of establishing new industries. In some
new industrial areas government has already provided water, electricity,
telecommunication networks and sewage services. This makes it easy and cheap
for new industries to setup businesses.
 Promoted a stable political climate: When a country’s political climate is stable
different investors will setup different industries because they will be free to run
their businesses without any interference from the government and other
organisations.
 International advertising: The government (through the Ministry of Foreign
Affairs and International Cooperation) and its agencies such as BEDIA advertise
the country to foreign investors so that they can come and setup industries in this
country.
 Encouraging locals to set up industries: The government is encouraging local
people to set up their own industries so that the country can have a diversified
economy.
 Provision of technical support: The government provides technical support to
potential investors through CEDA and LEA so that people can know how to set-
up and sustain their businesses.
 Government policy and incentives: The legislators have formulated suitable
polices for those sectors which can reduce the country’s dependency on the
mining industry. The government is giving incentives such as tax holidays for
some foreign owned industries and infant industries.
 Protection of local industries: Locally produced goods have been given a market
advantage over imported commodities by imposing heavy tariffs and quotas on
imported goods.
 Provision of relevant education: The government has setup local schools that
provide education especially on those professions or jobs that are currently
dominated by foreigners. Government has also introduced scarce skill allowance
for those jobs that are in high demand such as engineering, accountancy, medical
and legal practioners.

b. Youth
 Setting up own businesses and companies: Some youth have formed their own
companies and businesses so that they can be self-employed and contribute
towards diversifying the country’s economy.
 Formation of clubs: The youth can form clubs which can educate and inspire
other youths to be involved in business ventures instead of indulging in anti-social
activities such as smoking, drinking and crime.
 Being professional sports men and women: The youth of today should take
sports seriously and turn professional so that they can earn a living from sports.
 Forming entertaining groups: Drama groups and musical groups have been
formed by the young people so that they can earn their living from an economic
sector which is not common.
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c. Private Sector
 Setting up industries: They have set up industries since they have the financial
and technical potential to do so. These industries have employed a large number
of people. The industries also generate revenue for government through taxation.
 Provision of financial assistance: The private sector assists potential investors
with loans in order for them to set up industries that will promote economic
diversification.
 Providing scholarships: The private sector often trains more personnel by giving
them bursaries to go and learn technical skills. These young people can be sent to
institutions locally and abroad.
 Human resource development: Employees in the private sector are often trained
through in-service workshops or going for further education in some institutions
in or outside the country in order to improve their productivity.
 Building schools for training: Some of these private businesses like Barclays
and Debswana have established their own training institutions in order to improve
the manpower.

d. Non-Governmental Organisations
 Creation of employment: Some people have been hired by some NGOs to do
some. They are employed to work as researchers, administrators and policy
makers. This helps to reduce shortage of employment in the country.
 Education on business: Some NGOs teach people to be innovative and form
their own companies in order to improve their standards of living.
e. AID Agencies
 Provide finance: Some Aid agencies provide financial assistance to developing
countries such as Botswana to improve basic infrastructure.
 Humanitarian assistance: They help in times of natural disasters such as floods
and drought.
 Create employment: Some of these Aid agencies have some offices based in the
country and as such they have employed some locals.

Importance of global economic forces for economic development in Botswana

Financial institutions
a. European Union (EU)
As discussed in Chapter 7 the EU is an organisation made up of European countries with
the aim of removing all trade barriers between member-states. Members of EU have a
common market and currency. EU provides development funds to members of
Commonwealth and Botswana as a member of Commonwealth does benefit from EU.
The EU is the main market for Botswana’s exports such as diamonds and beef.
Botswana’s exports enjoy duty free and quota free access to EU markets under the
Cotonou Agreement.

b. World Bank
The World Bank was formed in 1947 to provide aid to developing countries in the form
of loans and technical assistance. The World Bank operates primarily with funds
borrowed from rich nations of the world. Botswana can acquire loans from World Bank
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for reconstruction and development purposes such as construction of dams, roads,

schools and other basic infrastructure. The World Bank can also offer help (under certain
conditions) in case of balance of payment difficulties.

c. International Monetary Fund (IMF)

The main purpose of IMF is to regulate international monetary exchange. It controls
fluctuations in exchange rates of world currencies on order to address problems of
balance of payment. Member-states contribute money to a central fund according to their
wealth. The money can then be lent to other countries like Botswana to help cover
balance of payment difficulties. Botswana has used funds from IMF for development of
infrastructure and alleviation of problems such as poverty. The IMF also offers technical
advice to countries that borrow its money.

Other factors influencing Botswana’s economic development

 Devaluation of currency: This means reducing the value of the local currency so
that exports become cheaper for other countries to buy. At the same time imports
will become more expensive and people will not want to import more.
 Global inflation/recession: This is a rise in prices and wages caused by an
increase in the money supply and demand for goods resulting in a fall in the value
of money. Global inflation can negatively affect Botswana’s economic growth as
it can lead to reduced purchasing power of those countries’ whose currencies have
lost more value. This may encourage dependency syndrome.
 Fluctuation of world prices: Terms of trade for developing countries are falling
due to unstable prices. When Botswana sells her products at a time when prices
are low it means that less profit is made and hence less revenue is accumulated for
economic development.