New Economia

Botswana 2010

timothy corprewtimothy@neweconomia.comcomments: botswana@neweconomia.com©2010 by new economia

Botswana 2010: Table of Contents

Table of Contents

Executive Summary

Government History 04Branches 05Legal System 07

Social Health 09Education 10Languages & Ethnic Groups 12Religion 13

Economy History 14Current State 15Currency, Central Bank & Banking 18Trade 20Taxation 21Development Model 23

Infrastructure Transport 24Energy 25Communications 25

Business Environment Law 29Tax 31Doing Business Metrics 32Navigators 35

Select Bibliography 36

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Botswana’s model works because of the size of its population (rather small at approximately 1.8 million). Its high GDP per capita can be traced to the solid infrastructure created with diamond money, insightful engineering, and, above all else, good governance. At one point, Botswana spent more on the education of its population as a percentage of its GDP than did any other government in the world. Likewise, Botswana has labored to upgrade its diamond production capacities and processes. It has, over time, taken on a more involved role in diamond �nishing – an e�ort to diversify its economy outside of mining and include a value added aspect to its already spectacular diamond reputation. Further attempts by the government to diversify the economy include the recent modernization of its business laws and tax code (see Business Environment section).

�ese e�orts have produced sustained results. Botswana has been classi�ed as upper-middle-income country by the World Bank for over 14 years - a mighty accomplishment considering that at independence, there were only a few miles of paved road, as Botswana was one of the ten poorest nations in the world. Two decades of positive growth have erased those realities. Botswana has seen growth in all sectors. More importantly, however, the country has set the stage for massive growth in the �nancial sector.

Given its geographical location, the educational level of its citizens, and the proven record of �scal responsibility from the Bank of Botswana and the government, Botswana is prime for becoming the �nancial hub of Southern Africa. Much like Switzerland is centrally located within Europe, Botswana is in the middle of Southern Africa, allowing it to service all neighboring countries without infringing on other territories. Moreover, its proximity to each of the countries of Southern Africa allows it build a regional footprint more easily. �e University of Botswana graduates approximately 400 business majors and 35 business postgraduates each year - a signi�cant �gure considering the population is only 1.8 million. Graduates of UB have gone on to run the very sophisticated and world-class Bank of Botswana, work in government, run the mining sector and

local subsidiaries of foreign companies. Because of UB’s history (See Education), the alumni base is active in several sectors in all of the surrounding countries. Lastly, there is a trust of Botswana’s ability to manage the �nancial sector regionally and among the global community (See Banking).

Botswana does face challenges, however. �ese challenges come mostly from a social perspective as Botswana’s slow response to the HIV threat allowed the virus to reach close to epidemic levels in the 1990s. Botswana has since reversed the trend and now has some of the most proactive and innovative measures to decrease infection rates. Nevertheless, signi�cant damage has a�ected the population structure that will have lasting consequences.

1New Economia

Timeline

1852 – 1853 BaTswana-Boer War. BaTswana of Botswana preserve their independence. BaTloka, BaLete, BaHurutshe, Mmanaana Kgatla, BaRolong migrate into Botswana. 1857 BaTswana-Transvaal Boer relations improve. Lutheran missionaries arrive. 1864 BaKwena, BaNgwaketse, and BaRolong threaten South African Republic with renewed war if Transvaal Boers seize baHurutshe land. SAR backs down. 1867 German explorer Karl Mauch �nds gold at Tati. 1885 British proclaim the Bechuanaland Protectorate. 1889 Most BaTswana diKgosi object to colonial rule at Kopong Conference. 1890 Over local objections, British grant themselves right to exercise colonial control through the Foreign Jurisdictions Act.1891 Order-in-Council grants the high commissioner wide-ranging administrative powers. 1893 Bechuanaland Border Police and baNgwato help the British South Africa Company destroy the AmaNdebele kingdom in Zimbabwe. 1895 Bathoen I, Khama III, and Sechele I travel to Britain to oppose the transfer of their territories to British South Africa Company’s administrative control.

Botswana 2010: Executive Summary

Executive Summary

1899 �e boundaries of major BaTswana “reserves” demar-cated. Hut tax introduced. 1899 – 1902 BaTswana �ght in the South African War. 1901 Koranta ea Becoana, the �rst newspaper owed and run by BaTswana, appears. 1903 – 1905 �ousands of OvaHerero and Nama �ee to Botswana to escape German oppression and genocide in Namibia.1908 – 1910 BaTswana campaign against incorporation into the Union of South Africa commences. 1914 -1918 World War I; BaTswana soldiers serve in France, East Africa, and Namibia. 1931 British depose Sebele II, Kgosi of the BaKwena, and exile him to Ghanzi. 1933 Tshekedi Khama brie�y suspended as BaNgwato regent after having a European �ogged in the Serowe Kgotla for misconduct. British threaten to bomb Mosopa, forcing Kgosi Gobuamang to surrender. 1939 – 1945 World War II; more than 10,000 BaTswana serve in Europe, the Middle East, and North Africa.1947 Village of followers of John Nswazwi stormed by BaNgwato in presence of protectorate police. 1947 – 1949 BaTswana soldiers stationed in Middle East after WWII. 1949 Seretse Khama banished from Bangwato Reserve. 1950 �e Multiracial joint Advisory Council established. 1952 �ree police o�cers killed in protest against Seretse’s banishment. 1956 Seretse Khama returns to Botswana. 1957 Elected local councils introduced. 1959 Leetile Raditladi establishes the Federal Party. Tshekedi Khama and Roan Selection Trust create Bamangwato Conces-sions Limited to exploit copper deposits. 1960 Bechuanaland People’s Party (BPP) founded. 1961 Bechuanaland Democratic Party (BDP) founded. 1963 Independence talks lead to agreement based on one person, one vote constitution; construction of new capital at Gaborone begins.1965 BDP wins by a landslide in �rst National Assembly election. Seretse Khama becomes prime minister; self-rule begins. National Development Bank established. Radio Bechuanaland begins operation.

1966, September Independence. Seretse Khama sworn in as Botswana president. 1966, October Botswana admitted to the United Nations as its 120th member. 1967, April Discovery of diamonds announced. 1967, July Bushman Protection Bill passed. 1967, August British troops are withdrawn from the country. 1967, October Mineral Rights in Tribal territories Act cedes all mineral rights to the nation. 1968 Tribal Land Act established district land boards with the power to allocate land. 1969, August Bathoen resigns Ngwaketse chieftaincy and enters politics with Kenneth Koma to form the Botswana National Front. 1969, December Southern African Customs union agreement renegotiated, to the bene�t of Botswana. 1970 First diamond mine opened in Orapa. 1972 Botswana achieves budgetary independence.1974 Government announces plans to withdraw its currency from the Rand Monetary Act. 1975 Botswana government and the DeBeers Corporation form two joint companies, Debswana and the Botswana Diamond Valuing Company. 1976 Pula launched as the national currency, replacing the South African rand. New central bank, Bank of Botswana, is established. 1977 Botswana Defense Force formed. 1978 Pula revalued �ve percent above the South African rand. 1980, April Southern African Development Coordinating Conference launched in Lusaka, with Botswana as chair. 1980, July Seretse Khama dies; Quett Masire elected president by Parliament. 1980, November Pula currency pegged to a “pula basket” comprising of Special Drawing Rights and the rand. 1981 National Census conducted; size of the National Assembly increased to 34. International diamond market falls, beginning a two-year �nancial crisis. Voice of America opens southern African station in Selebi-Phikwe. 1983 Diamond market rebounds. Botswana economy begins an eight-year period of high growth.1984, October Parliamentary elections are held. Quett Masire returned as president.

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Botswana 2010: Timeline

New Economia

Timeline, continued

1985 First HIV/AIDS death occurs. 1986 Sir Seretse Khama Memorial International Airport opens in Gaborone. 1988 Four Gaborone residents die in a night raid by the South African Defense Force. 1989, October Parliamentary elections. Botswana Democratic Party wins 31 of 34 seats. 1990 Opposition parties Botswana National Front (BNF) and Botswana People’s Party (BPP) form an electoral alliance. 1991, August Botswana signs Southern African Development Community Treaty. �e National Census and Delimitation Commission report creates four constituencies in the capital, Gaborone, increases National Assembly to 44 seats. 1992 Botswana placed among the “middle income” national economies of the world. 1992, August Southern African Development Coordination Conference is reconstituted as the Southern African Develop-ment Community (SADC) under a new treaty. Botswana and Namibia engage in a border dispute over Sedudu Island in the Chobe river. 1994 Botswana conducts seventh free and fair national election. Botswana National Front (BNF) captures 38 percent of the vote, the highest on record for an opposition party. Quett Masire reelected to third term as president. 1995, February University and secondary students storm Parliament, go on a rampage in downtown Gaborone leading to 45 students being arrested. 1997 National referendum approves constitutional amend-ments establishing Independent Electoral Commission, reduc-ing voting age from 21 to 18, limiting the presidency to two terms, and providing for automatic succession of the vice president in case of death or resignation of the president. 1998, March Quett Masire retires from presidency. 1998, April Festus Mogae inaugurated as president. Seretse Khama Ian Khama joins cabinet. 1998, September Botswana Defense Force (BDF) troops and the South African National Defense Force join in Operation BOLEAS, entering Lesotho to restore order following a military insurrection. 1999, March Japan grants Botswana P9.3 million in debt relief for development projects, raising its total contribution to Botswana since 1989 to P54.4 million.

1999, December the International Court of justice rules in Botswana’s favor in its dispute with Namibia over Sedudu Island. 2000, January Hyundai factory shuts down. 2000, February Botswana and Harvard University open HIV/AIDS Reference Laboratory in Gaborone. �e Economist rates Botswana’s economy the world’s second-fastest growing. 2001, January Botswana Stock Exchange ranks second in the world’s emerging markets for 2000. 2001, March Foreign reserves reach P34 billion. Botswana awarded highest credit rating in Africa. 2002, January Bushmen Central Kalahari Game Reserve (CKGR), assisted by Survival International and the �rst People of the Kalahari, challenge the government of Botswana in court to prevent the removal of the bushmen from the CKGR. 2002, February Relocation of Bushmen begins. 2002, July government introduces value added tax system and establishes the Public Procurement and Asset Disposal Board.2002, August Seventy-�ve percent of hospital beds occupied by HIV/AIDS patients. 2002, December Moody’s Investors Service gives Botswana an A2 rating for long-term foreign currency and A1 for domestic currency debt. 2003, January Release of Delimitation Commission report regarding the increase in Parliament seats to 57. 2004, May Government funds national polio vaccination campaign.2004, October Elections are held. Botswana Democratic Party wins 44 of the 57 seats with only 52 percent of the popular vote. Botswana National Front gains 12 seats, the Botswana Congress Party gains only 1 seat. BDP captures 333 of the 487 council wards. Festus mogae elected to his second and �nal term as president. Mogae appoints �ve women to his cabinet. 2005, January Large methane gas deposits found in Mmashoro and Lephephe coal basins. 2005, December House of Chiefs renamed Ntlo ya Dikgosi and enlarged from 15 members to 35, 30 of whom elected by tribal councils every �ve years.

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Botswana 2010: Timeline

New Economia

Government

HistoryInitially, the people of Botswana wanted to avoid the conse-quences of white minority rule that they had seen in territo-ries that now comprise South Africa, Namibia, Zimbabwe, and Zambia. In particular, after the British had declared Bechuanaland a protectorate, the leading Tswana diKgosi (or chiefs) worked to prevent the imposition of white minority rule with the tribal boundaries of Tswana people. �eir e�orts proved unsuccessful, however. Cecil Rhodes’s British South Africa Company (BSAC) was the recipient portions of the fertile eastern side extending to Zimbabwe for the construction of a railroad and telegraph line. Rhodes was given additional tracts of Bechuanaland, which he intended to dole out to white farmers. Expectations were that Rhodes would assume control of the whole protectorate. To the delight of the Tswana kings, Rhodes’s falling out with the British government over the Jameson raids into the Transvaal abruptly stopped the transfer of the protectorate over to the BSAC.

�ereafter, Britain ruled the protectorate. After the BSAC �asco, it was assumed that control would be transferred to the Union of South Africa at some point. Occasionally throughout the colonial period, e�orts to incorporate the protectorate were made, but all e�orts failed due to the Tswana cultivation of British public opinion and the growing rift between the British and Afrikaner nationalists in South Africa.

�is dynamic led to a relatively indirect rule, whereby the chiefs were given the power to administer the everyday a�airs of their tribes. Even with indirect rule, however, the colonial period was continuously disputatious, with the protectorate’s high commissioner and resident commissioner on one side and the leading voices of the Africans on the other. �e most active opponents of British rule were many of the chiefs. Some, such as Sebele II and Sekgoma Letsholathebe were deposed for their recalcitrance, and some prominent �gures, such as Bathoen II and Tshekedi Khmam, fought the protec-torate government through the courts (skillfully, it should be noted).

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�e protectorate administration was meagerly funded and supported mostly by taxes raised among the people of the protectorate. Little was invested in the country; devel-opments of note, namely schools and hospitals, came from the initiative of Africans and missionary societies. �is freedom gave the chiefs an uncommon amount of power and authority. �e tendency toward authoritarian-ism of chiefs, particularly in the later colonial period, was an important factor in the emergence of nationalism and antitribalism among younger, educated men prior to independence.

Ironically, it was Seretse Khama, heir to the powerful Ngwato chieftaincy, who became the voice of nontribal-ism and a leader of the Democratic Party, which domi-nated the elections leading to independence on Septem-ber 30, 1966. Although Botswana was one of the world’s poorest countries at independence, the discovery of rare diamond kimberlites in the Kalahari gave it a rare oppor-tunity. Unlike other ex-colonies in Africa and around the world where natural resources were under the �rm control of ex-colonial interests, Botswana’s newfound resources were to be controlled by the people and for the people. Khama’s government made two choices with long-term consequences when the minerals were discov-ered. First, Botswana declared that all rights of ownership to minerals, whether located in districts previously known as tribal reserves, on freehold land, in national parks, or other state land, were vested to the Republic as a whole. Second, the government of Botswana was to decide the method by which these resources would be explored and exploited. Lacking in expertise and short on capital, Botswana accepted a bid from South African DeBeers Corporation to develop Botswana’s diamond deposits. Production began in 1971. Renegotiations in 1975 led to government-company partnerships between Debotswana and Botswana Diamond Valuing Company.

At independence, Botswana was a vulnerable state. It did not allow liberation organizations from regional states to create bases within its borders. However, sympathetic to the cause of the movements in neighboring countries, it

Botswana 2010: Government

New Economia

did open its borders to refugees from white-ruled South Africa, Rhodesia (Zimbabwe), and South West Africa (Namibia). In 1974 it became part of the “Front Line States” (with Angola, Mozambique, Tanzania, and Zambia) to assist Zimbawean liberation movements. Although Botswana’s independence was compromised on several occasions by incursions from Rhodesian and South African military groups, it managed to steer clear of open con�ict.

�e party led by Khama at independence, the Botswana Democratic Party (BDP), has remained in power for over 40 years and has shown no signs of losing its dominant hold on the presidency and National Assembly. As a result, Botswana may be characterized as a one-party state. Although, in contrast to other similar states in Africa and around the world, it has always faced a lively and in�uential, though divided, opposition and dealt with it in the public arena without the use of threats, violence, or imprisonment of it opposition. Moreover, privately owned newspapers, on balance, have been pro-opposition and critical of the BDP government.

Khama led the government for 14 years from 1966 until his death in 1980 of cardiac arrest. Khama gave Botswana its national identity more so than any other �gure. �e accom-plishments mentioned above helped shape Botswana’s legacy for future generations to follow (in 1974 the budget was free of donor assistance).

Quett Masire took over the government in 1980. Masire was quick to action. His cabinet put its stamp on policies attempting to diversify the diamond-dependent economy. Himself a career farmer, Masire backed plans to increase cattle production and access to overseas markets and to improve crop production. Masire’s government also intro-duced attractive terms for foreign businesses, eliminated foreign exchange controls, and expanded training and educa-tional opportunities in agriculture, technology, and science.

Despite the progress Masire made on the economic front, his weakness was that he neglected the growing threat from HIV. By the time Masire retired, Botswana’s HIV rate had reached

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epidemic levels, and a major governmental response was only beginning to get under way. His successor, Festus Mogae, made certain not to slip into the same mistake. Mogae was Masire’s vice president from 1992 until 1998, when he took over as president. Under Mogae, Botswana developed a large-scale, multidimensional approach for combating the epidemic. Mogae led the country by having himself tested for the virus and appointing Joyce Phumaphi as Minister of Health in 1999. From this point, Botswana developed a comprehensive national AIDS strategy and put in place the means to implement it. International partner-ships, government-provided anti-retroviral therapies and male and female condoms, statistical gathering, and other components of prevention and treatment policies, were initiated.

Mogae was not lacking in the economic development side either. Mogae cut his teeth in the Ministry of Finance and Development. A trained economist, the intellectual Mogae built on Masire’s tradition of developing policies aimed at diversifying the economy while expanding it. Mogae had more success than previous administration in tackling economic diversi�cation within the mineral sphere by promoting exploration. In addition to diamonds, the extent of which is still undetermined in the country (and likely to be substantial), Botswana’s ample reserves of gold, copper, high grade coal, soda ash, natural gas, and other resources are on the threshold of signi�cant development.

Ian Khama, the son of Seretse Khama, took over as interim president in April of 2008. He was later elected to the presi-dency in October of 2009.

Branches of GovernmentSince independence, Botswana has maintained a remarkably stable constitutional parliamentary democratic system. �e constitution separates the government into three branches: the executive, legislative, and the judicature. Since it is a true parliamentary system, the president is the leader of the National Assembly and can be removed with a vote of no con�dence, forcing new elections. By the same token, the

History, continued

New Economia

Botswana 2010: Government

Quick Facts

Type True Parliamentary Republic

President Ian Khama

Vice President Mompati Merafhe

Presidential Term Five

Parliamentary Term Five

Capital Gaborone

Administrative Divisions Nine

English, Tswana

October, 2009

O�cial Languages

Last Election

president may dissolve Parliament at any time and call for new elections. Since 1999, the o�ce of the president has been subject to a maximum of 10 years.

Executive �e executive branch is composed of the President, the vice president, the attorney-general and a cabinet. Members of the cabinet are appointed by the president from among the National Assembly to be endorsed by the elected members of the National Assembly. �e president is the head of state and government.

Presidential elections are held on the occasion of either the dissolving of the National Assembly, by the president or the National Assembly itself, or by the expiration of the �ve-year term that the National Assembly enjoys.

Upon the dissolving of parliament, a general election of the National Assembly elected members and the president shall be held within 60 days of dissolution. Elections are by national su�rage (citizens over the age of 18). Presidential candidates must be nominated with his or her consent by not less than 10 members of the National Assembly.

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Botswana 2010: Government

Legislative Parliament consists of the president and the National Assembly. �e president is ex-o�cio a member of the National Assembly and is entitled to speak and vote in all proceedings of the National Assembly. �e National Assembly consists of 57 elected members who are elected in accordance with the constitution and four specially elected members (plus the speaker of the National Assem-bly, if somehow elected by the National Assembly to that post without �rst being a member of the National Assem-bly).

Ntlo Ya Dikgosi (House of Chiefs)�e House of Chiefs consists of between 33 and 35 mem-bers. Its membership comes from several sources: one “Kgosi” (or chief ) is sent from each of 12 constituencies; �ve persons are appointed by the president; and, in 20 regions, elections are held (the areas of Ghanzi and Kgala-gadi have the option of election to the House of Chiefs or selection as a constituency, but not both). Members serve for �ve-year terms or until the dissolution of Parliament. House of Chiefs members are not allowed to participate in party politics.

�e House of Chiefs has no legislative power and serves only an advisory role, mainly, on bills concerning cultural and social matters. �ey may also consult ministers and issue reports.

Judicial�e judicial branch is made up of a two-tier court system that is complemented by the parallel, special jurisdiction industrial court, and the inferior magistrate and custom-ary courts meant to relieve congestion. �e court of �rst instance in Botswana is the High Court. �e High Court also has discretionary appellate jurisdiction to hear cases appealed from the magistrate courts that serve the petty claims function. Customary courts serve the function of allowing traditional matters to be settled in a traditional manner.

Branches of Government, continued

New Economia

�e High Court has unlimited original jurisdiction over all civil and criminal matters. �e characteristics of this “unlim-ited jurisdiction” was clari�ed in two very import cases. �e �rst, Botswana Railways’ Organization v. Setsoga and Others, Amissah JP, pointed out that it meant parties could bring their dispute to the High Court if they so desire and if they think the dispute is of a nature which is susceptible to settle-ment by the processes of the High Court. �e fact that a subordinate court had concurrent jurisdiction does not mean that the High Court’s jurisdiction had been thereby curtailed. In Mafokate v. Mafokate, the sole question that the court had to decide was whether the High Court had jurisdiction to entertain an action and dissolve a marriage contracted under customary law and, if it had jurisdiction, whether it should indeed exercise the jurisdiction. �e High Court held that as a result of its unlimited jurisdiction, it had the authority to hear the case that would ordinarily be heard by a customary court. �e court noted, however, that the dissolution of customary marriages were better left to the customary courts who were better equipped to manage and interpret the customary laws.

�e court also has the power to supervise proceeding in prog-ress in any subordinate court. It exercises this general supervi-sory jurisdiction over subordinate courts and court-martial through the use of the orders of mandamus, prohibition, and certiorari. �is supervisory jurisdiction and the procedure whereby it is invoked and exercised are referred to as judicial review. By a writ of prohibition, a subordinate court or administrative body could be prohibited from acting in excess of its jurisdiction. �rough the order of mandamus, a subordinate court could be ordered to exercise jurisdiction where it had been previously refusing to or an o�cial ordered to perform a duty she is obligated by law to perform. �e order of certiorari can be used by the High Court to request the record of a subordinate court to be brought before it and the proceedings of such subordinate court could be quashed on grounds of abuse of process.

Lastly, the high Court has appellate jurisdiction over decisions of the magistrates’ courts and the Customary Court of Appeal.

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Botswana 2010: Government

�e Court of Appeal is the highest court of the land and o�cially has the power, authority, and jurisdiction of the High Court. It is essentially an appellate court; that is, it mainly hears appeals from lower courts. It has no original jurisdiction although certain matters may be reserved for it. �is is provided for in section 15 of the Court of Appeal Act, which states that a “judge of the High Court may reserve for consideration by the Court of Appeal any question of which may arise during civil or criminal matters before him.” �e Court of Appeal functions as the court of �nal appeal and accepts appeals as a matter of right: 1) from any �nal decision in any proceeding before the High Court sitting at �rst instance 2) from any decision of the High Court in exercise of its powers or duties in enforcing the fundamental rights granted under the constitution 3) by a convicted person from any order of the High Court in the exercise of its jurisdiction altering a conviction or sentence or 4) in any case where express provision for such appeal is made under any written law. All other appeals would be by leave.

Legal System Background�e British formally declared a protectorate over Botswana, then known as Bechuanaland in 1885. �is was done to prevent the Boers from using the territory for the reinforcement of their troops in their war against the British as well as to prevent the Germans from having a “coast-to-coast” presence in the region. Almost as soon as the territory came under British protection, the British passed their administration on, into the hands of the government of the Cape of Good Hope (or the Cape Colony as it was then known). �is association, which ended in 1909, has had a profound and lasting e�ect on the legal system of Botswana.

Roman-Dutch law, or the law of Holland, was intro-duced to the Cape Colony in 1652 by the Dutch East India Company when they established a post there for their traders en route to theeast. �is Dutch law was an amalgamation of Roman law, canon law, law merchant,

Judicial, continued

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Legal System, continued

and Germanic law as found in Holland. �e law was applied in the Cape Colony until 1795 when, as a result of the Napo-leonic wars, the government of the Cape Colony was taken over by the British. �e British retained the Roman-Dutch law as the general law of the Colony and thus the Bechuana-land protectorate. �e British did gradually introduce English law through legislation.

Because the British had little interest in administering Botswana, they interfered as little as possible with the inter-nal administration of the country. As a result of this indirect rule, the British decided to make use of the existing tradi-tional dispute mechanisms they found in place in Botswana. �e policy worked out well, as Tswana tribes (who make up 90 percent of the population) had already developed what was a highly sophisticated and e�ective judicial system.

�e British were able to incorporate this system into the new court structure they introduced with little di�culty. �e dual system of customary courts alongside legal courts has been in place from the period of the protectorate, through indepen-dence and is still working today (however, the customary court’s role has been progressively reduced over time).

Today�e Botswana legal system is in transition. �ere appears to be a shift toward the more regionally-established English system. Botswana’s constitution stands at top of the legal authority hierarchy. It is followed – as is the hybrid tradition – by legislation and common law. Law reports and legal writings hold little in�uence and are used mostly for policy arguments when legislation, common law and the constitu-tion have failed to address an issue.

Acts of Parliament or statutes are the principal source of modern legislation in Botswana. All acts of Parliament must conform to the constitution. �e courts have not hesitated to invalidate legislation that was found to be inconsistent with the Constitution. For instance, in Attorney General v. Dow, the Court of Appeal declared section 4(1) of the Citizenship Act void for violating the constitutional prohibition of discrimination in sections three and 15, because it denied citizenship to the o�spring of Batswana women married to

foreigners, but granted citizenship to o�spring of men married to foreigners.

Acts of Parliament may be referred to as primary legisla-tion whereas the bulk of modern Botswana legislation consists of delegated or subsidiary legislation, which is created at the direction of subordinate bodies under speci�c powers delegated to them by Parliament. Section 49 of the Interpretation Act, after stating that “subsidiary legislation” has the same meaning as “statutory instru-ment,” de�nes a statutory instrument as, “any proclama-tion, regulation, rule, order, or other instrument made, directly or indirectly, under any enactment and having legislative e�ect.” However, because such legislation further removes the ordinary citizens from the lawmaking process, subsidiary legislation in Botswana must be approved by Parliament. According to section nine of the statutory Instruments Act, all statutory instruments must be brought before Parliament, and Parliament may, within 21 days, pass a resolution nullifying any of them (in practice this proves to be impractical).

Judicial precedent serves as the next most authoritative source of law in Botswana. Insofar as Botswana is concerned, the doctrine of precedent or stare decisis (“to stand by decided matters”) may be considered to have been received in the country as part of the general recep-tion of Roman-Dutch and English law via South Africa during the colonial period. �e doctrine of binding precedence is founded on the traditional view of the function of a judge in the English system, which is to say that he does not make law but only applies existing law to the facts of a particular case. Judges refer to earlier similar court cases not only because they provide guidance, but because the judge is bound by those decisions – especially if it has come from a higher court. In the course applying the law to new fact sets, they sometimes widen and extend a rule of law or devise a rule by analogy with exist-ing rules or even create an entirely new principle. In declaring and applying the law in this way, judges thereby develop the law. To this extent, judicial precedents, or case law, as they are often referred to, constitute an important source of law.

New Economia

Botswana 2010: Government

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Botswana 2010: Social

Social

HealthAccessBotswana has an extensive network of health facilities (hospitals, clinics, health posts, mobile stops) clustered in the 24 health districts. Health services are under the manage-ment of both the Ministry of Health (MOH) which oversees all hospitals (referral, districts, and primary) and the Ministry of Local Government, which is in charge of clinics, health posts, and mobile stops.

On the whole, 84 percent of the population is within a �ve km radius from the nearest health facility. Eleven percent of the population has to travel eight km to the nearest facility. �ere is a sharp disparity between urban and rural access, as 96 percent of urban residents are within a �ve km radius from

the nearest Health facility compared to 72 percent of rural residents. Only four percent of urban residents live within an eight km radius from the nearest health facility. �e four percent is found in the Palapye and Jwaneng areas. In Rural areas, 72 and 17 percent of the population are within �ve and eight km radius from the nearest health facility, respectively, giving a total of 89 percent within an eight km radius in rural areas versus 95 percent for the country. �e North East, Southern and Kgalagadi South provinces each have all of their inhabitants within a 5km radius from a health facility, while Serowe, Bobirwa, Mahalapye and Gomare each have all of their inhabitants within an eight km radius. Kweneng West has the lowest proportion of its population within a �ve km radius at �ve percent, followed by South East with 14 percent.

Indicator 2001 - 2006 2006 - 2011 2011 - 2016 2016 - 2021 2021 - 2026 2026 - 2031

Birth Rate 25.4 25.8 24.8 23.4 21.7 19.9

Death Rate 13.7 13.9 11.9 10.1 8.7 7.6

Natural Increase

1.17 1.19 1.29 1.33 1.29 1.23

Total Fertility

3.040 2.791 2.689 2.591 2.496 2.405

Growth 1.17 1.2 1.29 1.33 1.29 1.23

Net Reproduction Rate

1.144 1.121 1.131 1.128 1.115 1.101

e (0)

e (15)

Infant Mortality Rate

q (5)

50.02 51.01 55.62 60.33 64.35 68.04

40.12 40.41 43.97 47.80 51.15 54.3

54.5 24.7 30.8 22.3 16.1 11.2

.0807 .0668 .0455 .0222 16.1 .0150

New Economia

10

HIVBotswana is experiencing one of the most severe HIV/AIDS epidemics in the world. �e national HIV prevalence rate among adults ages 15 to 49 is 23.9 percent, which is among the highest in Sub-Saharan Africa. �e primary mode of transmission is heterosexual contact, with the military and young women at a higher risk of HIV infection than other populations. Young men ages 15 to 24 experience an HIV prevalence rate of 5.1 percent, while young women in the same age group experience prevalence rates of 15.3 percent. HIV infection rates also vary by geographical region and are highest in towns, lower in cities, and lowest in villages. �e United Nations Development Program estimates that by 2010, more than 20 percent of all children in Botswana will be orphaned. Extended families and communities have exhibited resourcefulness and generosity in their willingness to absorb and care for these orphaned children, but this capacity is being exhausted, especially as the current genera-tion of grandparents begins to die.

Education History In the colonial period, responsibility for developing educa-tion was left up to the Batswana merafe and missionaries. Achievements were made at the primary level, but parents remained dependent on secondary schools in South Africa and Rhodesia (Zimbabwe). At independence, Botswana had only one government secondary school and was a decade away from building its own university (although there were at least seven nongovernment secondary schools).

Since independence, universal primary education has been the goal of every National Development Plan, and since 1985 the share of children aged six to 12 attending schools has risen steadily, reaching 87 percent in 2004. Since 1987, the government has guaranteed access to 10 years of schooling. In 2006, nominal school fees were introduced at the second-ary level for the �rst time, but they have been unpopular and unenforceable.

Tertiary education in Botswana began in 1964 with the establishment of the University of Basutoland, Bechuana-land, and Swaziland, which was subsequently renamed University of Botswana, Lesotho, and Swaziland (UBLS) with its campus in Roma, Lesotho. Following the breakup of UBLS in 1975, Botswana and Swaziland established the University of Botswana and Swaziland (UBS) and built university colleges in Gaborone and Kwaluseni. In 1983, UBS was dissolved, and the University of Botswana was established (as was the University of Swaziland). �e University of Botswana o�ers certi�cates, diplomas, and undergraduate and graduate degrees.

Admission into all governmental senior secondary and tertiary institutions is through competitive examination and earns national students a full bursary (though, in recent years, a bursary has not been guaranteed). �e percentage of students passing through each level of the government school system continues to rise. In 1991, only 25 percent of Botswana’s students were admitted into senior secondary schools, while the number of university students represented 4.3 percent of the total number of students in senior secondary schools. By 2005, progression rates from junior secondary schools to senior secondary schools had risen to 63 percent.

CurrentEducation in Botswana is not compulsory. �e educational structure mirrors the United Kingdom system in that there is universal access to primary and junior secondary school, while a process of academic selectivity reduces entrance to the senior secondary school and university education.

Primary education in Botswana begins at age six and lasts for seven years (with each level called a “Standard”), leading to the Primary School Leaving Certi�cate (PSLE). Secondary education lasts for �ve years (with each level called a “Form”), and is divided into two cycles. �e �rst is a three-year cycle leading to the Junior Certi�cate Exami-nation (JCE). Completing the JCE may lead to admission to the senior secondary school program. Only those

Botswana 2010: Social

New Economia

11

ary structure relates to the University of Botswana degree programs and to determine how the two programs may best be reconciled; and to advise on the organization and diversi-�cation of the secondary school curricula to prepare students who do not continue with higher education.

Enrollment At the beginning of 2009, there were 330,775 students enrolled in primary schools, with female enrollment accounting for 48.8 percent. �ere has been an increase of half a percent on the previous year’s enrollment. Enrollment in private schools was 5.8 percent (19,239) of the total primary school enrollment. In the same year, there were 171,986 students in all secondary schools in the country. Sixty percent of those students were female students.

Curriculum Basic education consists of several components designed to prepare students for the varying life paths that they may face upon graduation. Foundation skills are meant to give students skills applicable to work situations, such as decision-making and problem-solving, communication, team work, and computing. Most academic subjects are taught with a vocation orientation. Teachers are asked to demonstrate to students the practical application of concepts. �ese measures are meant to graduate classes that are “ready for the world of work.” Curricular and

Botswana 2010: Social

New Economia

students whose grades are high enough on the JCE are admitted to the second cycle, the senior secondary program. �e senior secondary program is a two-year cycle preparing students for the Botswana General Certi�cate of Secondary Education (CSE), which determines a student’s aptitude for higher education. Botswana is in the process of building uni�ed secondary schools, Form I to Form V, in the remote areas of the country to increase access to a senior secondary education.

One central objective of primary education is for children to be literate �rst in Setswana and then in English. Other goals are for children to become knowledgeable in mathematics and to have a command of science and social studies. From 1991 to 1997, the number of students completing the primary level and entering junior secondary increased from 65.0 percent to 98.5 percent. It has remained around this level through to 2010.

Education has been given priority in the national budget. �e Ministry of Education averages 10 percent of the national budget. �e Department of Secondary Education and Teacher Training and Development shares approxi-mately 64 percent, and the ministry headquarters, which is responsible for University of Botswana among other projects, receives approximately 25 percent. �e 11 percent balance is usually spent on improving facilities and functions under the technical education, non-formal education, curriculum development (the ministry writes most of the textbooks), and evaluation and special education depart-ments. �e Ministry of Education expanded from a small unit of government at independence to one that looks after the educational needs of hundreds of thousands students from primary to tertiary levels.

Recently the ministry undertook to reevaluate its priorities and strategy in the context of Botswana's changing and complex economy; to advise on ways to ensure the education system is sensitive and responsive to the people's wishes and the country's manpower requirements; to study the various methods of streaming into vocational and academic groups at the senior secondary level; to study how the senior second-

Central South 137 7 144

Central North 112 8 120

West 85 6 91

Central North 112 8 120

North 71 5 76

South 161 6 167

South Central 176 29 205

Total 742 61 803

Region Council (public) Private Total

12

co-curricular activities are developed to provide students with an awareness and understanding and appreciation of the values of all types of work. �is includes knowledge about the economy, the process and organization of production, and the demands of the working life.

Lower primary education consists of: Setswana, Mathematics, Environmental Sciences, English, Creative and Performance Arts, and Cultural Studies. Upper primary education consists of: Agriculture, Religious and Moral Education, Setswana, Social Studies, English, and Science. Secondary education consists of a Serswana, Mathematics, English and a host of elective subjects that students take classes in to create a concentration.

University Higher Education is provided by 27 tertiary institutions within the country. �ere is currently only one public univer-sity. �ere is a second public university under construction – �e Botswana International University of Science and Tech-nology – that is scheduled to accept its �rst students in 2011.

�e University of Botswana is divided into six faculties: business, education, engineering and technology, humanities, science, and social sciences. Between these six faculties, the university o�ers over 75 areas of concentration, with majors ranging from African Studies to Industrial Design.

Languages & Ethnic Groups

Although Botswana is often times – presumably because of its peaceful history – represented as ethnically homogenous (that is, as a Tswana nation), Botswana is actually made up of several distinct peoples. �ere are at least ten languages spoken by 10,000 people or more and several other languages and dialects spoken by smaller groups. What has distin-guished Botswana among other African countries is not that it lacks ethnic diversity (and thus con�ict), but rather that its independent government has consciously opposed policies that entitle any of its ethnic groups to power. Moreover, the Ntlo ya DiKgosi (House of Chiefs) represents the eight

Botswana 2010: Social

New Economia

Curriculum, continued

Gaborone

Francistown

Lobatse

Selebi-Phikwe

Orapa

Jwaneng

Sowa Town

Kanye/Moshopa

Barolong

Ngwaketse West

South East

Kweneng East

Kweneng West

Kgatleng

Serowe/Palapye

Mahalapye

Bobonong

Boteti

Tutume

North East

Ngamiland East

Ngamiland West

Chobe

Ghanzi

Kgalagadi South

Kgalagadi North

228,166

98,963

30,734

51,514

9,196

17,262

3,257

104,517

57,296

11,634

68,477

214,142

43,948

78,419

161,767

106,976

67,408

52,776

129,562

48,557

72,358

63,302

21,412

35,678

27,538

17,995

Botswana 1,822,858

Population

13

largest ethnic Tswana ethnic groups. �e body is only ceremonial, but does wield some in�uence as the mem-bers of this group were selected, elected, or appointed to represent the interest of their people who popularly elect the National Assembly and the president.

�e overwhelming majority of the people in Botswana speak SeTswana. SeTswana is the national language of Botswana and one of two o�cial languages, the other being English. According to the 2001 census, 1,253,000 persons, or 78 percent of the population, spoke SeTswana as their �rst language.

Historically, �e Kalanga live primarily in northeastern Botswana and adjacent western Zimbabwe and speak Ikalanga. �e Kalanga constitute the largest non-SeTswana-speaking peoples in Botswana.

�e Kgalagadi are the people who live either in or near the Kalahari desert or who speak a dialect of SeKgalagadi, a language related to but separate from SeTswana. Kalahari,

Botswana 2010: Social

Languages & Ethnic Groups, continued

New Economia

or more approprietly Kgalagadi, is also used to refer to the vast desert region of central and western Botswana. A signi�cant number of SeKgalagadi live in the Southern and Kweneng districts.

Religion

Historically, Botswana has been an area of diverse religious institutionalization, and it currently ranks among the world’s most tolerant societies in terms of religious freedoms. Indigenous religious beliefs vary widely. Botswana has felt the impress of Christian missionary activity since the mid-19th century.

In the 2001 census, approximately 72 percent of those above age 12 identi�ed themselves as Christian. Only six percent classi�ed themselves as adhering to traditional (badimo) faiths. �e majority of the country’s Christian population belongs to Pentecostal or other independent evangelical sects. However, the United Congregational Church of South Africa, the Dutch Reformed Church and the Anglican church have had much in�uence in practice.

Female 2016Female 2011Female 2006Male 2016Male 2011Male 2006

0 20,000 40,000 60,000 80,000 100,000

65 to 69

60 to 64

55 to 59

50 to 54

45 to 49

40 to 44

35 to 39

30 to 34

25 to 29

20 to 24

15 to 19

10 to 14

5 to 9

0 to 4

Age

Age Distribution75 plus

70 to 74

120,000

History

Botswana’s economy has been one of the strongest in Africa. �e government has managed the country's resources prudently and has kept its recurrent expenditure within its revenue, allowing for investment in human and physical capital. �e strategy of national development has been based on the opening up of mining by private multinational capital, with government equity participation to increase state revenues, and on the encouragement of local private enterprise through livestock exports and the licensing of smaller scale commerce and manufacturing.

�e result has been an economy that grew thirty-fold between the 1960s and 1980s, with a gross domestic product estimate to have grown from less than $80 per capita to more than $1,000 per capita in that period.

However, it is doubtful that much more than half the popu-lation has signi�cantly bene�tted from increased income and standard of living - beyond the general and widespread provision of schools, clinics, clean water and improved roads.

14

Botswana 2010: Economy

Less than a quarter of the adult work force is in formal paid employment. National development plans since 1970 have identi�ed rural development and employment creation as the two major goals of public policy. State revenues reaped from mining development have been spent on basic rural infrastructure and welfare services, and on schemes to subsi-dize the development of cattle and crop production - which have bene�tted richer rural households.

Employment creation, to keep up with the increasing supply of secondary school graduates, has been largely left to private enterprise with government �scal incentives. Some success has been achieved in expanding formal wage employment with a signi�cant expansion of manufacturing industries in the 1990s. Botswana remains heavily dependent on its diamond sector, accounting for more than one-third of GDP and 70% of export earnings.

Botswana's economic growth rate – averaging slightly over 7 percent over the past two decades – has been among the highest in the developing world. �e mining industry, particularly diamonds, has historically contributed about 35 percent of Botswana's GDP. At independence, mining contributed only one percent of GDP. Manufacturing, construction, and agriculture each have historically contrib-uted about three to six percent of GDP, and there has been growth in �nancial and government services in recent years. �is windfall in pro�ts of diamond production, and sound national �nancial management since the later 1960s have combined to make the Botswana pula one of the 'hardest' currencies in Africa.

�e economy has been hit by several negative shocks, however, including a temporary decline in global diamond demand and the near 40 percent depreciation in the South African rand in 2001. Botswana also has had the unusual problems of enormous foreign exchange reserves, a govern-ment budget surplus sometimes running into billions of dollars, and excess liquidity of capital lying unutilized in private banks. Partly this was a matter of expediency - capital held back for the rainy days of world diamond price slump or deliberate destabilization by the apartheid regime in

Economy

Quick Facts

GDP Nominal $10.8 Billion

GDP Purchasing Power Parity $25.5 Billion

Per Capita (PPP) $13,992

Real Growth -6.7

In�ation 8.4

Currency Pula

Versus Dollar (one-year average) 6.91

11.17

9.75

Versus Pound

Versus Euro

National savings as Percent of GDP 38% (2008)

New Economia

South Africa. But it also re�ected an ideological bias againstdirect state investment in productive enterprise, and state dependence on the initiative of private enterprise.

�e budget surplus and bank liquidity were partially depleted by being diverted into a late 1980s and early 1990s construction boom, including infrastructure for new mines and military airports. A private stock exchange was set up to sop up bank liquidity, but local equity participation has been limited to a few fast-growing shares in large corporations.

Industrial development in Botswana has been limited by high power and water costs, lack of appropriate management and labor skills, and the small domestic market. Manufac-turing industry up to the 1980s largely consisted of meat processing at Lobatse in the south. �e early 1980s saw the transfer of capital and textile production from Zimbabwe to nearby Francistown in Botswana, and the growth of diamond sorting and service industries in the booming capital city, Gaborone. �e late 1980s saw the peak of a construction boom, driven by increased urbanization and urban land price in�ation, and expansion of the formal waged sector of the economy. Light manufacturing industry grew rapidly but still constituted less than 15 percent of gross national product.

�e 1990s, however, saw the rapid growth of manufacturing of vehicles (Hyundai, Volvo) and other commodities (e.g., spaghetti, etc.) for the South African market. Such exports cut Botswana's trade de�cit with South Africa by a quarter, but are always threatened by South African protectionist measures.

Current State

Botswana is classi�ed as an “upper middle-income country” by the World Bank. Botswana had a nominal gross national product per capita of US $6,406 in 2009 and a purchasing power parity per capita GDP of $13,992. Diamonds continue to maintain Botswana’s economy. It promotes its diamond output as “diamonds for development,” as opposed to the “con�ict diamonds,” as much of the country’s diamond revenue has funded and continues to fund its

15

development (although as a result of the recent global economic downturn, Botswana has had to rely more heavily on other sectors of the economy, as demand for diamonds decreased sharply causing Botswana’s mining sector to contract by nearly 40 percent.).

Overall, the target for real GDP growth of 5.5 percent per year over the 2003 to 2009 National Development Plan 9 was exceeded, with the growth rate reaching its highest point of 9.2 percent in the 2005. During that same period, annual in�ation oscillated within a band of about 13 (2008) percent and six percent. �e rise of in�ation can be attributed to the increased cost of food and petroleum, which Botswana must import. To help control in�ation, the government has insisted that the parastatals exercise restraint in pricing and to achieve their revenue targets through improved produc-tivity and e�ciency rather than price increases.

�e Bank of Botswana, the country’s central bank, for many years struggled with the delicate balancing act in setting the value of the pula. On the one hand, its value against the dollar was crucial, as global diamond sales are denominated in dollars; on the other hand, the pula’s value against the South African rand is also important, because South Africa is Botswana’s main import partner. After several years during which the trends of the rand and the dollar were at odds, the Bank of Botswana instituted a new exchange-rate regime in May 2005, termed the “crawling band.” �is broadened the margins between the buy rate and the sell rate of the pula by the Bank of Botswana, the e�ect of which was to spur a signi�cant increase in interbank trading and fostered consid-erably more competition among banks in the foreign-exchange market. In November of 2008, Botswana’s foreign-exchange reserves stood at $9.2 billion – the equiva-lent of 24 months of import cover, and the longest forward import cover in the world by a wide margin.

In the global context, Botswana’s reputation for sound economic management is evidenced in a number of ways, not least the country’s A-grade rating for �ve successive years by both Moody’s and Standard and Poor’s. �e World Bank’s Worldwide Governance Indicators 1996-2006 ranked

History, continued

Botswana 2010: Economy

New Economia

Botswana �rst in Africa in terms of control of corruption and 16th worldwide out of 212 countries in terms of stabil-ity and absence of violence.

Agriculture Botswana’s agricultural sector employed about 45 percent of the economically active population in December of 2008 (a level that has not changed much in more than a decade) yet contributed no more than 1.4 percent of the total GDP. Most of these workers are actually subsistence farmers and grow little excess crops. It is therefore necessary for the coun-try to import foodstu�s to feed the urban populations.

Composed partly of semi-desert and partly of a savannah area, with erratic rainfall and relatively poor soils, the coun-try is more suited to grazing than arable production. Attempts were made to compensate for this shortage of arable land by developing the country’s irrigation potential, but agricultural remained largely dominated by the livestock sector, and by the cattle industry in particular.

Botswana’s cattle sector is strongly focused on beef produc-tion rather than dairy output, and milk has to be imported. Meat and meat products are fourth largest in terms of export receipts.

MiningIn 2007 Botswana was Africa’s third largest mineral producer by value. �e mining industry accounted for 43 percent of GDP in 2007. Besides diamonds, Botswana also mines signi�cant amounts of hard coal, copper ore, nickel ore, gold, cobalt, salt, and soda ash. Plans to exploit Botswana coal reserves have been restricted by the level of international prices and by the great distance to major coal markets. Around 17,000 million metric tons of steam coal suitable for power-plant use have been identi�ed in the east. Coal is currently extracted from the Morupule Colienry (a subsid-iary of Debswana). �e government has encouraged domes-tic coal use to cut back on wood fuel as a power source, but currently most coal production is used to power plants in the mining industry, including the soda ash plant at Sua Pan.

16

Botswana 2010: Economy

Political Climate, continued

Diamonds Diamonds are a crystalline form of carbon, and are the hardest naturally occurring substance. �ey are of two categories: gem quality, which are superior in terms of color and quality, and industrial, which are used for high precision machining or are crushed into an abrasive powder called boart. �e primary source of diamonds is a rock called kiberlite, occurring in volcanic pipes and �ssures. �ere are four methods of diamond mining, of which open cast mining is the most common. Diamonds are also recovered by underground, alluvial, and o�shore mining. �e diamond is separated from it or by careful crushing and gravity concentration. �e size of diamonds and other precious stones is measured in carats. One metric carat is equal to .2 grams, so one ounce avoirdupois equals 141.75 carats.

In terms of volume, Botswana ranks as the world’s largest producer of diamonds, which is the country’s principal source of export earning, normally accounting for about three-quarters of export receipts and as much as 50 percent of government revenues. In 2007, the diamond sector alone accounted for 27 percent of the country’s GDP. �e mines are all open-cast, but the feasibility of underground mining at Jwaneng was to be explored in 2009.

According to the U.S. Geological Survey, output from Botswana Orapa mine reached its maximum of 13 million carats in 2000 and will be able to maintain that output for another 26 years. Other mines include: the Damtshaa mine, which has a life-of-mine expectancy of 32 years at 700,000 carats per year; the Jwaneng mine which has a life-of-mine expectancy of 36 years at 12 million carats per year (considered the world’s richest diamond mine); and the Lethakane mine which is expected to produce for the next 13 years at a rate of one million carats per year.

Manufacturing �e annual rate of growth of the manufacturing section of Botswana’s economy was 2.4 percent per year from 1996 to 2006. �e government hopes to increase this rate of

New Economia

growth, as the manufacturing section is seen as the catalyst for job creation. �e main hindrances to faster growth have been the small size of Botswana’s market and the trade barri-ers that prevent Botswana-based manufacturers from operat-ing in larger markets, such as South Africa.

Government �nanceIn 2002 Botswana added a value-added tax (VAT), which replaced the old sales tax. �e 2010 budget unusually called for de�cit spending (total grants and revenue were forecast at P24,390 million, while total expenditure was forecast at P37,920 million, of which P27,370 million was recurring and P10,560 million was for development). �e de�cit was P13,530 million equivalent to $1.9 billion. After many years of balanced budgeting, the 2008-2009 budget had also carried a de�cit; the shortfall had been forecast as a small one, of just P331 million, equivalent to .4 percent of GDP. �e de�cit turned out to be P6,200 million, equivalent to seven percent of GDP. Botswana is not a debtor to the IMF. �e government possesses the ability to �nance 100 percent of the P12,530 million 2010 de�cit by simply drawing down some of its foreign reserves which amount to P72,400 million.

BondsUnder Section 13 of the Stocks, Bonds and Treasury Bills Act of 2006 the Bank of Botswana is the sole agent for Govern-ment in the issuance of bonds and related securities. �is also gives the Bank the responsibility of appointing primary dealers and conducting auctions of government bonds.

Also in its capacity as the agent for the government, the Bank appoints and enters into agreements with institutions setting out the rules established by the Bank regarding the role of custodians, transfer and settlement agents. �is is meant to ensure that the ownership of Government bonds is protected, including the accurate and timely recording of any transfers, and that settlement of payments is e�ected on time in order to develop a secure and robust market in such debt instru-ments. �e agreement, among other things, outlines: the obligations of agents, criteria for determining an agent, the role of agents in the settlement and transfer of notes, and the

17

sub-custodian agreement between an agent and its client.

Upon issuing the bond, prior to the auction, the Bank prepares a prospectus (see Business Environment section for more information prospectuses) describing the instru-ment (the bond or Treasury Bill), the coupon rate if any, the maturity of the instrument, etc. After the auction, the auction results are published, including on the Bank of Botswana website.

Due to many years of sustained, substantial budget surpluses that commenced in the early 1980s, the Botswana Government did not need to borrow to �nance budget shortfalls. As a result, the market for domestic government bonds has been dormant. However, recog-nizing that this could undermine broader capital market development, in March of 2003 the government initiated a limited series of bond issues in order to establish a risk-free yield curve that would, in turn, facilitate wider bond issuance by both parastatals and the private sector. In total, P2.5 billion was issued under three separate bonds with maturities ranging from 2 to 12 years.

In March 2008, the Government commenced a new note program that provided for the issuance of up to P5 billion of additional domestic government debt. While this coincided with a period when the government budget was about to move into substantial de�cit owing to the global economic crisis, this new program was primarily aimed at supporting market development rather than government borrowing. It also helped alleviate the cost to the Bank of Botswana of absorbing surplus liquidity in the economy. As well as additional bonds, the program has included the issuance of six-month treasury bills. As of March 2010, the amount of outstanding debt under the program was P4.5 billion.

Manufacturing, continued

New Economia

Botswana 2010: Economy

Currency, Central Bank, & Banking

Currency�e currency in Botswana is made up of the pula and thebe, where 100 thebes equal one pula. �e banknote family includes �ve notes in a denomination structure comprising: P10, P20, P50, P100, and P200. Coins are issued in denominations of: t5, t10p, t25, t50, P1, P2 and P5. �e current family of banknotes was launched on August 21, 2009, Pula Day. �e previous family of banknotes was formally withdrawn from circulation as of March 2010.

�e new banknotes were introduced to help prevent coun-terfeiting and contain several of the latest security devices available for currency. All notes feature a zebra watermark. Each note also uses micro-lettering, a windowed security thread, enhanced intaglio, and tactility. Notes P50 and above use a holographic strip. To add to the sophistication of the currency (a sophistication that truly does exceed that of most industrialized countries) each note features a blind recognition system consisting of a varying number of holes punched on the notes.

Bank of Botswana · Monetary Policy�e Bank of Botswana Act gives the Bank of Botswana (the central bank) the principal objective of maintaining mon-etary stability. A secondary objective, insofar as it is consis-tent with the primary objective, is for the Bank to use its available policy instruments in support of orderly, balanced, and sustained economic development in Botswana.

Despite this primary objective, the Bank does not yet formally target in�ation (due to its reliance on imported energy – see Infrastructure section – and other factors), as some of the essential prerequisites are not in place. Monetary policy in Botswana, instead, focuses on price stability, which is closely related to in�ation. Price stability preserves the value of money. Notwithstanding the similarity with the in�ation targeting framework, implementation of monetary policy decisions is principally through open market opera-tions conducted by the Financial Markets Department.

Semiannually, the policy stance in regard to the Bank’s goals

18

is announced: once in the annual Monetary Policy State-ment (MPS), which is released in February each year; and second in the Mid-Term Review of the MPS conducted mid-year. Discussion and data relating to recent monetary policy developments are also included in other Bank publi-cations, including annual and quarterly reports.

To implement its goals, the main policy instrument by the Bank is open market operations (OMOs) which in�uence the availability of commercial banks' loanable funds, and thereby maintain market rates at a level that is consistent with the monetary policy stance. Other monetary policy instruments, including reserve requirements and standby facilities, can also play a supportive role.

�e operational implementation of monetary policy is undertaken through trading various money market instru-ments with the domestic banks. �e aim of OMOs is to maintain liquidity and short-term interest rates at levels that are supportive of monetary policy.

�e banking sector in Botswana has maintained a net positive position relative to the Bank over many years; conse-quently, the main instrument used in  OMOs is weekly auctions of Bank of Botswana Certi�cates (BoBCs). �rough the sale of BoBCs, the Bank is able to in�uence liquidity conditions in the domestic money market which, in turn, maintains short-term market interest rates in line with the monetary policy stance as indicated by the Bank Rate (policy rate, or the rate at which the Bank lends to commercial banks through the discount window).

OMOs are centered upon weekly sales by auction of 14-day BoBCs and monthly sales of 91-day BoBCs. Since these instruments are designed to control liquidity in the banking system, and are not intended for general investment purposes, since 2006, only commercial and merchant banks have been allowed to hold BoBCs.

To facilitate the day-to-day liquidity management, the Bank also conducts repos and reverse repos (that is lending and borrowing for a short time period – sometime overnight – using securities as collateral). For �ne-tuning the OMO

Economy continued

Botswana 2010: Economy

New Economia

Access to Safe 59% Drinking Water Urban 89% (31% of population)

Rural 43% (28% of population)

both during and at the end of the day, the Bank o�ers a credit facility (the Secured Lending Facility) for banks, where the borrowing rate is linked directly to the bank rate.

E�ective conduct of these various instruments that consti-tute the Bank’s OMO requires daily forecasts in order to determine liquidity conditions. In addition, a variety of money market statistics are published, including the BoBC auction summary (published weekly on the Bank’s website), and total outstanding BoBCs. �ese are included in the Bank’s various statistical publications, including the Annual Report and Botswana Financial Statistics.

To ensure that its monetary policy is open and transparent, the Bank produces several publications that apprise the public about the monetary policy framework, policy stance and performance, discussions relating to recent monetary policy developments, and macroeconomic indicators.

�e MPS is published annually to inform stakeholders about the policy framework, performance over the past year and future stance in the context of the in�ation outlook. �e Mid-Term Review of the MPS reviews the implementation and performance of monetary policy over the �rst six months of the year, as well as the in�ation outlook.

�e Annual Report describes the Bank's operations during the course of the year and includes both a review of recent economic developments and a collection of statistical tables. �is helps put monetary policy in the context of broader developments a�ecting the domestic economy.

�e Bank publishes a selection of economic research, as research bulletins, which is intended for a wider, less techni-cal audience, including research related to monetary policy issues.

�e Botswana Financial Statistics publication provides monthly updates of macroeconomic and �nancial indicators.

Exchange rate policy In�ation has traditionally wreaked havoc with Botswana’s exchange rate policy. Because of its troubles, Botswana has moved toward an in�ation cautious approach – deemphasiz-

19

Bank of Botswana, continued

ing bilateral movements of its currency against other currency and focusing on the real e�ective exchange rate (REER). Botswana’s recent exchange rate policy focus has been on the  composite trade-weighted e�ective exchange rate.

To avoid a repeat of the somewhat dramatic devaluations of February 2004 and May 2005, a crawling band exchange rate mechanism was introduced at the time of the second devalu-ation in May 2005 with the objective of enabling an auto-matic nominal adjustment of the pula exchange rate with a view of maintaining REER stability. Maintaining a credible crawling band mechanism imposes certain constraints on other economic policies, such as monetary and �scal policies, where these policies have to complement the exchange rate policy.

�e crawling band exchange rate regime is implemented through continuous adjustment of the trade-weighted nomi-nal e�ective exchange rate (NEER) of the pula at a rate of crawl based on the di�erential between the Bank’s in�ation objective and the forecast in�ation of trading partner coun-tries. �e rate of crawl is thus determined using a forward-looking approach and  is revised on a regular basis. In this forward-looking system, the authorities periodically deter-mine the rate of crawl for the subsequent period, such as the next six or twelve months. Since the introduction of the crawl, Botswana’s in�ation objective has, in general,  been higher than the average in�ation of its trading partners and this has necessitated a downward crawl. However, if in�ation di�erentials were to be reversed such that the domestic in�a-tion objective fell below expected in�ation in trading partner countries, then an upward crawl could be introduced.

Banking Botswana’s banking system’s resilience to the �nancial crisis could be seen on both sides of the banks’ balance sheets, as deposit liabilities continued to grow strongly, while asset growth also �rmed up to exceed the 2007 performance. �e favorable domestic macroeconomic climate, as characterized by strong growth in the non-mining sector served as major contributors to the positive banking sector balance sheet performance. Against this background, the banking sector

Botswana 2010: Economy

New Economia

has seen an increase in pro�tability, thus sustaining the historically high levels of shareholder value.

Banking sector assets remained predominantly domestic, as did banking sector liabilities; only 27 percent of the latter was denominated in foreign currency. O�-balance sheet foreign currency holdings were minimal, thus reinforcing the strong domestic orientation of the banks’ balance sheets.

From a risk management standpoint, the banks need to diversify their funding to avoid vulnerability associated with concentration of funding from a single source. Between the banks as a whole, there is a high concentration of funding sources. �e bulk (approximately 83 percent) of the funding comes from deposit liabilities, followed by a distant six percent and �ve percent for ‘other liabilities’ and share capital, respectively. Other funding sources account for two percent or less of total liabilities.

However, within the category of deposit liabilities, there is a degree of diversi�cation; 66 percent of the deposits originate from private sector enterprises, 22 percent from households and 12 percent from public sector enterprises. Although the balance between the three could be improved even at this level of diversi�cation, the concentration risk has been mitigated to a certain extent. Most of the funding is mobi-lized from the private sector, notably institutional investors such as pension funds.

�e banking sector is strong and is poised to grow stronger, as evidenced by the positive trends seen in certain economic indicators. Financial deepening has traditionally been measured by the ratios of money supply (M2 which very roughly amounts to M1 [currency and deposit accounts] plus time deposits) to GDP and cash to M2. �e M2 to GDP ratio is a measure of the money supply relative to the size of the economy, with a higher ratio indicating greater �nancial sector depth. �e lower the cash to M2 ratio, which is a measure of liquidity preference, the more trust the public has in bank deposits, which itself re�ects a level of con�dence in the banking system.

�e M2 to GDP ratio increased from 31 percent to 49

percent between 2004 and 2008, while the cash to M2 ratio fell from 32 percent to 19 percent over the same period. Both measures suggest that there has been considerable �nancial deepening and the con�dence in the �nancial system has been increasing. �is is also re�ected by the growth rate of household savings by 58 percent in 2008 compared to 11 percent in 2007. Similarly, banking assets, banking deposits, and banking credit to GDP ratios have all trended upward suggesting a developing �nancial system.

One exceptional characteristic of the banking sector’s outreach during 2009 was the fact that banks established a presence in areas that they previously avoided. Further indications of �nancial deepening have also been evidenced by the expansion e�orts of other �nancial entities, like the Botswana Savings Bank through its linkage with the Botswana Postal Services.

�e banking sector is regulated by the Bank of Botswana as proscribed by the Banking Act. �e banking sector is made up of nine commercial banks, one investment bank, three development �nance institutions and one micro�nance institution.

Trade

Diamonds have been Botswana’s principal export by value since the 1970s, accounting for as much as 88 percent of total earnings and for more than 50 percent of government earning in some years. In 2007, they accounted for 64 percent of total export revenue.

Other exports include copper-nickel matte, textiles, meat and meat products, soda ash, and salt. Botswana’s principal imports are fuel, machinery, and electrical equipment, chemical and rubber products, vehicles, food, and paper products. �e United Kingdom is generally the principal client, purchasing 64 percent by value of all exports in 2007. Other major clients include other countries of the Southern African Customs Union (SACU). Botswana’s main supplier is the Common Customs Area (primarily South Africa), which in 2007 provided 84 percent of Botswana’s imports by value.

20

Banking, continued

Botswana 2010: Economy

New Economia

Botswana, the world’s largest diamond producer, has begun to import rough diamonds - a testament to the recently established diamond cutting and polishing operations.

Botswana operates an open economy, with combined import and export values exceeding GDP, making both the domestic economy and the external account vulnerable to �uctuations in in terms of trade and exchange rates. �e government has maintained a �exible, trade-oriented exchange rate policy.

Botswana’s balance of payments is attributable to its low debt burden. �e country’s total debt-service costs in 2006 were P1,270 million, of which P850 million was set aside for the redemption of a �ve-year domestic bond issued in 2003. Botswana’s total external debt can be paid o� completely out of the country’s foreign reserves 50 times over.

TaxationCorporate A company is a resident if it is incorporated in Botswana or managed in Botswana. Nonresident and resident entities carrying on business in Botswana are liable for tax in Botswana on the same basis, except that nonresident entities are not subject to the two-tier system of taxation (explained below). Corporate income tax is levied on the Botswana-source taxable income of all entities, except tax exempt bodies (such as charities and pensions) and small companies that elect to be treated as partnerships or sole proprietor-ships. Taxable income is gross income, including capital gains, less exempt income and allowable deductions. Capital gains on the sale of shares and debentures, including those of unincorporated businesses and on the sale of immovable (real) property, are taxable in Botswana at normal corporate rates (however, a 25 percent allowance is permitted in the calculation of capital gains on the sale of shares). In contrast, shares that are listed on the Botswana stock exchange are exempt from tax, provided that they are in the hands of the general public. Dividends received are speci�cally excluded from the de�nition of gross income and, therefore, consti-

21New Economia

Trade, continued

Top Ten Export commodities

1 Diamonds (not Set)

2 Nickel Matte

3 Copper Matte

4

Jerseys, Pullovers, Cardigans, etc.5

Meat and Bovine Animals (Fresh or Chilled)6

Gold, (Unwrought or Semi-manufactured) 7

Meat and Bovine Animals (Frozen)

Women’s, Girl’s Suits

T-Shirts (Knitted or Crocheted)

8

9

10

Copper Ores and Concentrates

Top Ten Import commodities

1 Oils Petroleum (Except Crude)

2 Diamonds (Not Set)

3 Motor Vehicles for the Transport of Goods

4

Medicaments5

Self-Propelled Earth Moving Machines6

Nickel Ore and Concentrates7

Electrical Energy

Structures, Iron Parts of Structures

Parts and Accessories for Motor Vehicles

8

9

10

Motor Vehicles for the Transport of Persons

Botswana 2010: Economy

tute exempt income. Foreign source dividends and interest are deemed to be from a Botswana source and are taxable on accrual, while business pro�ts are taxable only when remit-ted to Botswana.

For residents, the corporate income tax rate is split into two tiers: a basic company tax of 15 percent (�ve percent for manufacturing companies) and an additional company tax (ACT) of 10 percent. Hence, the e�ective rate of corporate tax for non-manufacturing companies is 25 percent. �is two-tier system becomes relevant when the company pays dividends. A resident company paying dividends must with-hold tax at 15 percent. �is withholding tax can be set o� against the company’s ACT liability for the tax year, and any unused ACT is accumulated and may be carried forward for �ve years. �e 15 percent withholding tax, which is consid-ered part of the corporate tax structure and not a tax on dividends, can be reduced by ACT not previously used. In e�ect, the two-tier system has the result that a resident company incurs no additional tax cost in the distribution of pro�ts, provided the withholding tax payable does not exceed the current year’s ACT liability. A 15 percent with-holding tax is levied on interest and royalties paid to nonresidents and 10 percent on interest paid to residents. �e withholding on interest and royalties may not be o�set against the corporate liability.

�ere is no alternative minimum tax, but losses may be carried forward for �ve years. Farming and mining enter-prises may carry forward their losses inde�nitely. Moreover, relief from double taxation is provided in the form of credit against Botswana tax for foreign tax paid on the same income. �e credit may be granted under a tax treaty or unilaterally under Botswana domestic tax law; in the latter case, the credit is limited to the amount of Botswana tax applicable on the foreign income.

�ere is a �ve percent transfer duty for all property sales.

Personal A resident is an individual who resides in Botswana for 183 days or more in a tax year. Residents and nonresidents are taxed only on Botswana-source income. Taxable income

includes employment, business, and passive income, and capital gains. Capital gains are subject to the normal personal income tax rate. �e tax rate in Botswana on individuals is progressive and is maxed out at 25 percent. Taxpayers with business income are allowed the same deductions as companies.

Value-added taxation (VAT) replaced a simple sales tax in 2002. VAT is charges on the supply of goods or services made by a vendor in the course of doing business and on the importation of goods or services by any person. �e standard rate is 10 percent. A zero rate applies to exports, the international transport of passengers or goods and the insurance or arrangement of those services, and various services rendered directly to nonresidents that are not regis-tered for Botswana VAT purposes (this list is not exhaus-tive). Moreover, certain goods and services are exempt from VAT, including certain �nancial services, educational services, the letting of residential accommodation and certain medical services.

22

Botswana 2010: Economy

Top Ten Export Partners

Countries Value in Millions of US$

UK 2,749

South Africa 981

China

215Zimbabwe

152Israel

123Belgium

65

51

49

Norway

Switzerland

USA

235

Zambia 39

New Economia

Development Model

National development plans �e government of Botswana from the onset has made its belief clear in its need to plan the social and economic devel-opment of the country. �e rationale for planning, as stated by the government in 1970, was that the country’s available resources were few and the problems facing the country were so great that it was only by careful planning that these resources could be put to their most e�ective use. �e govern-ment considered that the decisions made in the planning could a�ect the quality of life in Botswana for generations.

From the beginning, the plans in Botswana were meant to describe the direction the nation was heading. �e plans were intended to explain the objectives and policies that were meant to guide the government in attaining the stated objec-tives and policies. �e �rst plan was published in 1966, at the time of independence. Since then, there have been nine successive plans created and implemented, with the most recent plan ending in 2009.

In order to incorporate the process of consultation with non-governmental institutions in the formulation and implementation of national development plans, the government decided to establish the National Economic Advisory Council, which consisted of representations from the public and private sector.

Planning in Botswana involves the participation of people at all levels of society, from the National Economic Advi-sory Council to the Village Development Committee. In order to ensure meaningful participation and e�ective implementation of decisions at all levels, the government improved communication between central government agencies and local government machinery.

23

Botswana 2010: Economy

New Economia

Infrastructure

Transport

RoadsBotswana is a landlocked country which is located in the southern part of Africa. It shares a border to the south with South Africa, to the west with Namibia, to the north with Zambia, and to the northeast with Zimbabwe. �is puts Botswana in the center of the Southern African region. As a result of this geographical location, its roads are put under strenuous use having to act as the central nerve of regional tra�c between neighboring countries. Since independence there has been a deliberate policy by the government through the Roads Department under the Ministry of Works and Transport to provide a road network to link all population centers, cities, towns and neighboring countries.

During the years 1966 to 1986 more than P260 million was invested in new roads. During the National Development Plan Seven, for the period from 1991 to 1997, P870 million was spent for the development of the network. During the National Development Plan Eight, for the period from 1997 to 2003, P2.6 billion was spent. For National Development Plan Nine for the period from 2003 to 2009, the estimated amount was P 2.4 billion.

�e paved road network has almost entirely been constructed after independence. �e network consists of approximately 6,116 km of paved and 2,800 km of unpaved road. �is is complemented by a further 9,000 km of district roads which fall under the responsibility of the district councils. Road transportation is the major mode of travel in Botswana, covering about 93% of the total volume of passenger trans-port. �e railway, a single line, which runs from south to north on the eastern side of the country, together with air transport, have been responsible for about 7% of passenger transportation.

�e Roads Department has established a number of rotating tra�c measuring stations across the country used to closely monitor the growth rate in terms of vehicle characteristic and axle load. �e overall tra�c growth rate is in the order of 10 percent per year. It is expected to grow by six to seven percent

24

in the coming years. �e most rapid growth of tra�c has been in the eastern part of the country.

Road tra�c accidents in Botswana are increasing at an alarm-ing rate and such accident cost is estimated equivalent to one to two percent of the GNP. Gaborone accounts for about 50 percent of accidents and they mostly occur at night on unlit sections of the network. New road projects are beginning to focus on this problem.

A number of foreign funding agencies have been involved in road projects, studies and technical assistance. Contributions have been received from the African Development Bank, Kuwait, and USAID, among others.

Railways For many decades Botswana’s principal lifeline to the outside world was the railway running along its eastern border. With a total length of 642 km, the railway exits into Zimbabwe at Bakaranga in the northeast and into South Africa at Ramatla-bama in the southeast. �e original line was built between 1894 and 1897 by the British South Africa Company.

�e railway has been operated by the parastatal Botswana Railways since 1994. For most of this run, roughly 85 percent of the railway’s revenue was derived from freight transport. As of February, 2009, however, all revenue will come from freight transport, as passenger transport has been inde�nitely suspended.

AirportsBotswana has six international airports – the main one being Gaborone International which is also known as Sir Seretse Khama Airport – and over 80 other regional and private airports, the majority of which are not paved or heavily travelled.

Seaports Botswana does not have any seaports as it is a landlocked country. It does have access to neighboring country seaports.

Botswana 2010: Infrastructure

New Economia

Energy

Since the early 1980s, Botswana has been gradually connect-ing its national electricity grid to all but the smallest and most remote villages. Photovoltaic stand-alone systems have been installed in the sections not reached by the grid. Botswana produces approximately one-half of its electricity and imports the bulk of the rest of needs from South Africa’s Eskom. At Palaye, the Morupule Colliery (93 percent owned by Debswaba) mines nearly a million tons of coal annually to supply the nearby Botswana Power Corporation’s Morupule Power station.

In 2007, the Morupule Colliery began an expansion, with an expected commission date of 2011. �e new expanded facility will be capable of producing 30 million tons annually to meet the demands of a 1,300 megawatt (mw) expansion of the Marupule power station. �e expansion will also facilitate the development of a new 4,500 mw power station at Mmamabula. Botswana’s massive coal reserves will eventually be able to generate enough energy to power all of Botswana’s needs, with excess for export.

Botswana is also partnering with other regional countries in planning and developing three hydroelectric dams, which is projected to be capable of supplying all of southern Africa with its electricity needs.

In Botswana, connectivity has increased from 12 percent of the population in 1998 to 47 percent in 2007. Currently Botswana imports all of its liquid fuel needs from South Africa.

Communications

Botswana maintains a modern telephone and telecommuni-cations system, largely operated by the government-owned parastatal Botswana Telecommunications Corporation (BTC). BTC provides wired and wireless networks, basic voice telephony, Internet Protocol services, high-speed Inter-net, and �ber optic connectivity. BTC provides broadband connectivity to government, corporate customers, and private Internet users.

25

Since 1996, it has been in competition with two private cellular providers, who have installed hundreds of towers throughout the country. Teledensity has exploded from 10 percent in 1998 to 60 percent in 2007. �e country’s inter-national connection is transmitted via satellite through its station near Kgale, south of Gaborone. Botswana recently completed installing a 2,400-kilometer �ber optic cable ring covering the bulk of the country and providing connectivity to Namibia.

In 2006, government regulations, overseen by the ministry of Communications, Science, and Technology and the independent Botswana Telecommunications Authority, opened the telecommunications market to the private sector, ending BTC’s monopoly and moving closer to priva-tization.

Two Cable Projects�e Eastern Africa Submarine Cable System (EASSy) is an initiative to connect countries of eastern Africa (Sudan,

Infrastructure, continued

New Economia

Botswana 2010: Infrastructure

Djibouti, Somalia, Kenya, Tanzania, Mozambique and South Africa) via a high bandwidth undersea �ber optic cable system to the rest of the world via Europe. �e EASSy project is now in the operational phase and Botswana is an investor in the project. �e project will be ready to carry tra�c in June 2010.

�e West African Cable System (WACS) is led by private telecommunications operators  in South Africa and has thirteen consortium members: Broadband Infraco (South Africa), Telkom South Africa (South Africa), Vodacom (South Africa), Neotel (South Africa’s second network opera-tor), MTN (Dubai), Telecom Namibia (Namibia), Angola Telecom (Angola) Tata Communications Limited  (Bermuda), Portugal Telecom (Portugal), Cable & Wireless (UK), AT&T (USA), Togo Telecom (Togo) and SOTELCO (Congo Brazzaville).  �e system is to run from South Africa (Cape Town) to Portugal (Seixal) and UK (London) with intermediate landings along the west coast of Africa. �e WACS cable complements the capacity acquired in EASSy by providing additional capacity and alternative connectivity to

26

Botswana 2010: Infrastructure

Europe. �e project is led by private telecommunication operators who have an urgent requirement for additional capacity in the region and the whole of Africa. �e cable is expected to be ready for commercial service in the �rst quar-ter of 2011.

Postal Botswana Postal Services is a parastatal organization operat-ing more than 100 post o�ces and 70 agencies throughout the country. �e internal mail is conveyed by road or rail. Mail to and from South Africa is conveyed by road. �ere are no door-to-door deliveries but post o�ce boxes are available at post o�ces and there is also a private bag service. All foreign mail is routed to Gaborone for onward dispatch by air, sea and road via Johannesburg.

Radio As a result Botswana’s geography and several sparsely popu-lated areas, it is not possible to provide a regular supply of newspapers and other publications to areas secluded areas, including populated areas of the Kalahari Desert. In these areas telephone service may also not exist. Radio broadcast-ing has become the only regular link connecting some of these areas to the rest of the country. �ere are now two state radio channels providing radio service to the public. �ese are Radio Botswana One (RB1) and Radio Botswana Two (RB2).

Radio Botswana OneWhen Radio Bechuanaland began to transmit in 1965, it was inheriting a one-kilowatt medium wave transmitter from the veterinary department of the out-going colonial government based at Mafeking. �e transmitter had been used for communications among veterinary �eld sta� within a 20-mile radius since World War II.

Shortly before independence, three more transmitters were acquired so that Radio Bechuanaland would be able to prepare Batswana during the run-up to independence. Since then, more and better equipment has been made available, and its operation time has increased from a mere one and

Two Cable Projects, continued

New Economia

half-hours to the present 18 hours a day. Radio Botswana established a newsroom in the early 1970's and the number news bulletins were increased from one to four a day. Today, bulletins are available every hour.

�e station is made up of two sections, namely culture and entertainment, and news and current a�airs. �e News and Current A�airs programs include programs such as Around-the-World-Today, Masa-a-asele/Morning Show, and Tatediso-ya-Dikgang/Newsreel. Newsreel and the Morning Show are mainly composed of local current a�airs issues. Around-the-World-Today, on the other hand, features inter-national current a�airs.

�e Culture and Entertainment Section of RB 1 is respon-sible for the general programs and features cultural themes, music and drama. Most of the programs are designed to educate the public, especially about government programs, but also to entertain.

Radio Botswana Two (RB2)�e �rst commercial radio channel - RB2- started operating in April 1992 as a government pilot project to �nd ways to o�set increasing expenditure through advertising. It initially utilized a 100-watt transmitter, whose coverage extended 50 km around the capital city, Gaborone, however, the radio, dubbed "FM 103" (from its initial Gaborone reception frequency), can now be tuned to across the country.

RB2 caters to an audience ranging in age from 15 to 45 years comprising mainly urban and suburban dwellers. �e radio station features contemporary entertainment appealing especially to the younger members of society and young urban professionals.

RB2 also carries the full Radio Botswana news bulletins several times every weekday. Bulletins are also available during weekends. Unlike its sister channel, RB2 broadcasts around the clock.

As a commercial channel, it generates some revenue of its own. As a result, it provides recording facilities for commer-cials, and accepts sponsored programing which may be done

27

Botswana 2010: Infrastructure

either from the studio or on location using an outside broadcast van.

Television Botswana's �rst national television service started in 2000 following a 1997 government charter. �e station delivers eight hours of local and international programs daily on weekdays and 10 hours of programing on weekends. Since it was launched on 31st July 2000, BTV has estab-lished itself at the center of Batswana's viewing habits.

�e station has committed itself to provide at least 60 percent local content to meet the diverse needs of Batswana. According to its guiding principles, the station is upbeat and forward looking, and seeks to align its strategy with the national vision, Vision 2016.

BTV is the �rst station in Africa and the second in the world after ITN (UK-based Independent Television News) to fully utilize digital technology. It signal is carried on a PAS 7 satellite with a signi�cant footprint, which covers the whole country, and most of the South-ern African Development Community (SADC) region. �e station is fully Serial Digital Video, 4:3 and 19:9 switchable, but with the �exibility of analogue with dual language stereo capabilities.

�e station uses the Quantel Inspiration System for processing and transmission with the news processing software ENPS (Electronic News Production System) in the newsroom. Its server-based technology gives the news the speed and �exibility sought by journalists and news editors.

To cover the wide area of the country, two satellite News Gathering (SNG) teams are based in the North and North-West - Francistown and Maun respectively. �eir area of responsibility stretches from Palapye/Serowe to the border with Zimbabwe and Zambia. �e Maun team also covers Ghanzi the extreme West.

�e only practical means of ensuring complete national coverage in a vast country such a Botswana is via satellite.

Judicial, continued

New Economia

28

Television, continued

Both radio and television programs are available country-wide direct-to-home via satellite. Satellite newsgathering vehicles also use the same transponder to �le stories from anywhere across the country back to headquarters.

However, satellite-receiving equipment is expensive to the majority of viewers as compared to the terrestrial receiving gear. As a result, parallel to satellite coverage, this low entry medium must continue to be extended to the public. It is for this reason that the department is expanding its terrestrial transmitter network for both radio and television to cover settlements around the country. Radio and television trans-mitters are located at various points across the country.�e national terrestrial transmitter coverage is extensively provided in medium, UHF, VHF, and FM bands, and to a lesser extent via short wave.

New Economia

Botswana 2010: Infrastructure

29

Botswana 2010: Business Environment

Business Environment

Laws

Companies Regulation of companies is managed by one central author-ity, the Registrar of Companies, which itself is a part of the Ministry of Trade and Industry. �e Registrar of Companies is responsible for the administration of the Companies Act.

Under the Companies Act, a company falls into one of three categories: 1) a close company 2) a company limited by shares and 3) a company limited by guarantee. A company limited by shares or guarantee will either be a public or private company. Moreover, every company limited by shares or guarantee will be a public company unless stated other-wise in the articles of incorporation or constitution. A company shall have: one or more shares in the case of a company limited by shares; one or more members in the case of a close company or a company limited by guarantee; one or more directors for private companies and two or more directors for public companies; and a secretary in the case of companies except close companies which must have an accounting o�cer.

Moreover, the Companies Act requires that unless a license has been issued, the registered name of a company shall end with the word “limited,” except in the case of close compa-nies, which must place “CC” at the end of its registered name. �e motivation is to inform the public of the type of business with which they consider conducting business and therefore the Registrar of Companies does allow the substi-tutes “Ltd” and “Pty” to be added in the stead of “limited.”

To properly charter a company, the incorporators or promot-ers must �le articles of incorporation. Likewise, all external (foreign) companies must register with the Registrar. How-ever, every company is not required to have a constitution (the equivalent of corporate bylaws) and those that choose to forgo a constitution by default accept all of the rules, rights, and duties of the Companies Act. Companies that do decide to have a constitution are granted rather broad authority to create their own rules. �e constitution of a company controls to the extent that the Companies Act allows.

�e constitution may be used to alter certain rights of shareholders. By default, shareholders are given a few rights: �rst, a shareholder has the right to one vote on a poll at a meeting of the company on any resolution. Sharehold-ers are also granted rights to an equal share in dividends authorized by the board and the right to an equal share in the distribution of surplus assets of the company. Lastly shareholders have preemptive rights, whenever unissued authorized shares are to be o�ered to the public. However, as mentioned before, all of these rights can be altered or stripped entirely by the constitution. �e constitution can even determine the transferability of shares.

�e transfer of shares is done through entry in a company’s share register. �e Companies Act requires that all compa-nies having share capital maintain a share register that records the shares issued by the company, and in the case of a public company the register shall state: 1) whether there are any restrictions or limitations on the transfer of shares and 2) where the document that contains the limitations – constitution or terms of issue for shares – may be located. �is register serves as rebuttable proof of ownership; save for the power of the court to rectify share register, the entry of the name of a person in the share register is prima facie evidence of legal title.

Share management is not entirely by company book entry, however. Share and debenture certi�cates are issued to owners as they come and go. �e Companies Act requires that a public company, within 20 working days of an issue of shares or the registration of a transfer, send a share certi�cate to every new holder of the shares stating: 1) the name of the company 2) the class of the shares held and 3) the number of shares held. Shares trading electronically on the Botswana Stock Exchange are exempt from this requirement.

Conversion between company types is allowed given that the surviving company complies with the requirements of its new form.

New Economia

30

Company Characteristics

Public Limited by Shares Limited by Guarantee (private) Close Company

Botswana 2010: Business Environment

Membership

Liability

Alienability

Usually open to all public.

Limited to the investment in shares. Liability can be altered by the constitution

Subject to any limitations on the transfer of shares in the constitu-tion, shares of a public company are transferable

Private companies must limit their membership to no more than 25. Two or more shareholders holding a share jointly counts as one member. Employees holding shares do not count as members

Limits the liability of its members to the capital originally invested in the shares of the company. Can be altered by the constitution

A private company cannot make any o�er to the public to subscribe to its securities or debentures. May provide in its constitution that the right transfer shares is restricted

Private companies must limit their membership to no more than 25. Two or more shareholders holding a share jointly counts as one member. Employees holding shares do not count as members

Members are only liable for their original guarantee. Liability can be altered by the constitution

A private company cannot make any o�er to the public to subscribe to its securities or debentures. May provide in its constitution that the right transfer shares is restricted

Close company membership cannot exceed �ve members. Two or more persons cannot be joint holders of the same interest

Any amount which the member has contributed to the company or undertaken or agreed to contribute to the company. Liability can be altered by the constitution. Members also have a �duciary responsibility to other members with regards to company management

Transfer of shares is only allowed to quali�ed individu-als. Moreover, any transfer of shares cannot cause member-ship to increase to �ve

Securities Securities are regulated by the Registrar of Companies. All securities trade within the country must be registered with the Registrar. In fact, no person is allowed to make any o�er to the public for the subscription for shares unless it is accom-panied by a prospectus complying with requirements of the Companies Act and registered with the Registrar. Moreover, no person is allowed to issue such a prospectus unless it has so registered as a body corporate with the Registrar.

�e prospectus is meant to inform potential investors of the condition of the business and to describe the securities that are to be o�ered. Legally, it must be detailed, accurate, and updated whenever facts change. It is to include information about directors and management. Among other things regulators want investors to know the borrowing power exercisable by the directors. �e prospectus is also required to describe in-depth information about the company. For instance, the prospectus should include (among other

New Economia

Botswana 2010: Business Environment

31

Botswana’s enforcement of foreign awards only apply to awards arising out of legal relationships, whether contractual or not, considered as commercial under the laws of Botswana. Moreover, no arbitral award made in any country which is a party to the Convention shall be enforceable in Botswana unless a similar award made in Botswana would be enforceable in such country.

Tax

Corporate A company is a resident if it is incorporated in Botswana or managed in Botswana. Nonresident and resident entities carrying on business in Botswana are liable for tax in Botswana on the same basis, except that nonresident entities are not subject to the two-tier system of taxation (explained below). Corporate income tax is levied on the Botswana-source taxable income of all entities, except tax exempt bodies (such as charities and pensions) and small companies that elect to be treated as partnerships or sole proprietor-ships. Taxable income is gross income, including capital gains, less exempt income and allowable deductions. Capital gains on the sale of shares and debentures, including those of unincorporated businesses and on the sale of immovable (real) property, are taxable in Botswana at normal corporate rates (however, a 25 percent allowance is permitted in the calculation of capital gains on the sale of shares). In contrast, shares that are listed on the Botswana stock exchange are exempt from tax, provided that they are in the hands of the general public. Dividends received are speci�cally excluded from the de�nition of gross income and, therefore, consti-tute exempt income. Foreign source dividends and interest are deemed to be from a Botswana source and are taxable on accrual, while business pro�ts are taxable only when remit-ted to Botswana.

For residents, the corporate income tax rate is split into two tiers: a basic company tax of 15 percent (�ve percent for manufacturing companies) and an additional company tax (ACT) of 10 percent. Hence, the e�ective rate of corporate tax for non-manufacturing companies is 25 percent. �is

Securities, continued

Botswana 2010: Business Environment

New Economia

things): 1) a summary of any o�ers of shares of the company in the past three years 2) the date of conversion into a public company 3) any outstanding loans and the particulars of those loans 4) interest of the directors 5) pro�ts or losses before and after taxes 6) dividends paid, and 7) the dividends paid in pula per share.

�e prospectus has to include a list of all material contracts. �e list should include the dates and nature of, the parties to, and expiration of every material contract entered into by the company or its subsidiaries (contracts entered into more than two years before the issue are excluded from the requirement). �e prospectus should include the purpose of the o�er. Moreover, if any of the proceeds of the issue are to be applied to the acquisition of another company, then the prospectus should give the history of the target company as if it were the issuing company.

A statement as to the adequacy of capital is required in the form of an opinion from the directors that the issued capital (including the amount to be raised) is adequate for the purposes of carrying on the business of the company and its subs. �is statement is to be accompanied by a report from the auditor of the company and an audit report from the target company if any of the funds raised is to be used directly or indirectly for the purpose of acquiring another company.

Complex advertising rules do apply, as do multijurisdic-tional rules in cross-border o�erings.

Arbitration Any arbitral award made after the coming into force of this Act in any country which is a party to the Convention on the Recognition and Enforcement of foreign Arbitral Awards, shall be bindingand may be enforced in Botswana in accordance with and subject to the provisions of the Convention, in such manner as an award may be enforced under the provisions of the Arbitration Act and the laws of Botswana, which call for full enforcement of awards.

32

two-tier system becomes relevant when the company pays dividends. A resident company paying dividends must with-hold tax at 15 percent. �is withholding tax can be set o� against the company’s ACT liability for the tax year, and any unused ACT is accumulated and may be carried forward for �ve years. �e 15 percent withholding tax, which is consid-ered part of the corporate tax structure and not a tax on dividends, can be reduced by ACT not previously used. In e�ect, the two-tier system has the result that a resident company incurs no additional tax cost in the distribution of pro�ts, provided the withholding tax payable does not exceed the current year’s ACT liability. A 15 percent withholding tax is levied on interest and royalties paid to nonresidents and

10 percent on interest paid to residents. �e withholding on interest and royalties may not be o�set against the corporate liability.

�ere is no alternative minimum tax, but losses may be carried forward for �ve years. Farming and mining enter-prises may carry forward their losses inde�nitely. Moreover, relief from double taxation is provided in the form of credit against Botswana tax for foreign tax paid on the same income. �e credit may be granted under a tax treaty or unilaterally under Botswana domestic tax law; in the latter case, the credit is limited to the amount of Botswana tax applicable on the foreign income.

Tax, continued

Starting a Business

Procedures

Survey Subject

Status

Time

Standard Medium-Sized Company (between 10-50 employees; does not own real estate)*

Moderately Cumbersome and Formal ( Ranked 83 out of 183 countries)

• Select and reserve company name• Sign the declaration of compliance of statutory requirements for incorporation before a commissioner for oaths• Return the complete statutory return to the Registrar of Companies about re-allotment, directors, auditors, company secretary, and registered o�cers• Register the company with the Registrar of Companies at the Ministry of Commerce and Industry• Advertise the intention of applying for a license in the official gazette• Obtain an approval of the working condition after an inspection of company premises• Obtain an industrial license from the Industrial Affairs Department, Ministry of Commerce and Industry; or obtain a trading license from the local authority• Register for Corporate Income Tax number with the Botswana United Revenue Services and obtain the approval from the Commissioner of Taxes for the appointment of a public o�cer who is in charge of tax return• Register for VAT with Director of Customs & Excise• Register employees for the work injury insurance

61 days

Cost 2.1 percent of income per capita

Botswana 2010: Business EnvironmentBotswana 2010: Business Environment

New Economia

* �e time necessary for a company of any size to start a business would be substantially reduced with the use of a navigator (see below)

33

Construction

Procedures

Survey Subject

Status

Building a new warehouse *

Overly Cumbersome (Ranked 122 out of 183 countries)

• Obtain a site plan from the Department of Surveys and Maps• Obtain a certified copy of rates certificate from the Gaborone City Council• Obtain an environmental management plan• Obtain an environmental impact assessment• Submit permit application at Gaborone City Council• Receive inspection from the Gaborone City Council• Obtain planning and building permit from the Gaborone City Council• Apply for sewage connection• Receive on-site inspection• Receive inspection from Gaborone City Council of the start of excavation work• Receive labor inspection• Receive inspection from City Council of the start of foundation work• Receive inspection from City Council of the start of concrete work• Receive inspection from City Council of the start of slabs and damp-proof course• Receive inspection from City Council of the setup of structure• Notify the City Council of the practical completion of the building• Receive on-site inspection• Request and receive electricity inspection• Obtain electricity connection• Obtain water connection with Water Utilities Corporation• Obtain telephone connection• Obtain occupation permit

Time 254 days

Cost 247 percent of GDP per capita

Botswana 2010: Business EnvironmentBotswana 2010: Business Environment

New Economia

* �e time and di�culty of building a structure of any size or purpose would be substantially reduced with the use of a navigator (see below)

34

Property Transactions

Procedures

Survey Subject

Status

Time

Full sequence of procedures necessary for one business to sell purchase property (two-story warehouse) from another business and transfer title from seller to buyer.*

E�cient (Ranked 44 out of 183 countries)

• Obtain certificate of compliance at the Lands Department• Obtain a rates clearance certificate at the Gaborone City council• Notify BURS (Botswana unified revenue services) of VAT payment• The conveyancer prepares the deed of transfer• The deed of transfer is lodged at the Deeds Registry

16 days

Cost 5 percent of GDP per capita

Enforcing Contracts

Procedures

Survey Subject

Status

Time

Contract for the sale of goods between two businesses.

Hard to get a timely decision and to recoup a worthwhile award considering the costs.

Twenty-nine procedures at an average cost of 28 percent of the claim. (Ranked 79 out of 183)

687 days

Trading Across Borders

Documents

Survey Subject

Status

Time

Ordinary, legally-manufactured products transported in a dry cargo 20-foot full container cargo.

Overly Cumbersome (Ranked 150 out of 183 countries)

Import: Nine Export Six

Import: 41 days Export: 30 days

Cost Import: $3,264 Export: $2,810

Botswana 2010: Business EnvironmentBotswana 2010: Business Environment

* The use of navigators can help reduce time necessary to reach a conlusion on contract disputes. New Economia employs several attorneys who have experience in international sales conracts and ADR (see below)

* The difficulty of selling real property (land and buildings) can be significantly reduced with the use of a navigator (see below).

New Economia

Navigators

New EconomiaNew Economia is an emerging market consulting �rm based in New York. It focuses on certain countries of the Southern African Development Community (SADC) – namely, Zambia, Botswana, South Africa, Angola, Mozam-bique, Namibia, and Tanzania. Members of the �rm specialize in law, economics, business, and other disciplines that related to investment. Services o�ered include:

35

Consultancy • Southern Africa (SAf ) Strategy Consulting • Product Adaptation Consulting • Emerging Markets ConsultingFacilitation • Lobbying (SAf and US) • Legal Services (SAf and US) • Corporate Tax Services (SAf, US, and EU) • Legal Compliance (SAf ) • Due Diligence • Market ResearchCoordination • Logistics • Political risk Insurance Brokerage • Talent Strategy (SAf )

Aon Aon Corporation is a multinational insurance brokerage company based in Chicago, Illinois. It has strong founda-tions in political risk insurance and specialty insurance underwriting. �e economy operates 500 o�ces in 120 countries, employing around 36,000 workers. Services o�ered in Zambia include:

• Political Risk Insurance • Risk Consulting• Management Consulting• Outsourcing Management • Global Compensation Consulting and Management • Specialty Insurance Underwriting

www.neweconomia.com

www.aon.com

Zambia 2010: Business Environment

New Economia

Beaulier, S. A., Explaining Botswana’s Success: �e Critical Role of Post-Colonial Policy. CATO Journal 23, no. 2 (2003): 144-52.

Europa Publications (Editor), Africa South of the Sahara 2010 (39th ed.). (Routledge, 2009)

Fombad, C. M., The Botswana Legal System. (LexisNexis Buttersworth, 2006)

Good, K., Diamonds, Dispossession & Democracy in Botswana. (James Currey, 2008)

Jackson, A., Botswana, 1939-1945: An African Country at War. (Clarenden Press, 1999)

Kiggundu, J., Modern Company Law for the New Millenium, International and Comparative Law Journal 4, no. 2 (2002): 101-31.

Lange, G., Wright M., Sustainable Development in Manual Economics: �e Example of Botswana. Environmental & Development Economics 9, no. 4 (2004): 257-83.

Leith, J. C., Why Botswana Prospered. (McGill-Queen’s University Press, 2005)

Morton, F., Ramsay J., Historical Dictionary of Botswana (4th ed.) (Scarecrow Press, 2008)

Ntanda Nbereko, D., Constituional in Botswana. (Pula Press, 2002)

Perrings, C., Sustainable Development and Poverty Alleviation in Sub-Saharan Africa: The Case of Botswana. (St. Martin’s Press, 1996)

Sentsho, J., Performance and Competitiveness of Small and Medium Sized Manufacturing Enterprises in Botswana. (Botswana Institute for Development Economics, 2007)

Varqa, T.P., The Development of Education in Botswana. (Lightbooks Publishers, 2001)

Williams, A. S., Colour Bar: The Triumphs of Seretse Khama and His Nation. (Allen Lane, 2006)

36

Zambia 2010: Select Bibliography

Statistical data was obtained from the following institutions:

African Development Bank

Bank of Botswana

Food and Agriculture Organization

International Labor Organization

International Monetary Fund

Statistical O�ce of Botswana

United Nations Commodities Trade Statistical Database

United Nations Conference on Trade and Development

United Nations Educational Scienti�c and Cultural Organization

United Nations Statistical Division

World Bank

World Health Organization

Select Bibliography

New Economia