## 1bwaea2025002-source-pdf ## Source details **Canonical URL:** [1bwaea2025002-source-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1bwaea2025002-source-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1bwaea2025002-source-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1bwaea2025002-source-pdf.pdf.json) --- ### Economic Complexity and Diversification - Findings: - Global ECI rank: around 92 (2000) to 102 (2023). - Current ECI index value: near –0.67. - Diamonds accounted for about 80 percent of exports in 2023. - Manufacturing accounts for about 5 percent of GDP in Botswana, compared with: - over 30 percent in Lesotho and eSwatini, - 10 percent in Namibia, - 15 percent in South Africa. - Implications: - Falling ECI signals production and export of a narrower, less sophisticated set of goods and greater reliance on low-complexity, resource-based exports. - Associated with reduced long-term growth prospects, greater vulnerability to commodity price volatility, and constrained structural transformation. ### WBES “Bottom-Up” Firm Evidence - Survey scope and comparability: - 2010 survey: 268 firms in Gaborone and Francistown. - 2023 wave: 622 establishments across the entire country, covering privately owned manufacturing and selected service sectors. - Firm-reported constraints (2023 WBES): - 25 percent of businesses reported that access to finance is their biggest problem. - 13 percent of firms consider land access their most important obstacle. - 11 percent of firms consider electricity supply their main obstacle. - Corruption mentioned by 13 percent of businesses as a major issue (up from 10 percent in 2010 WBES). - Overlap with macro diagnostics: - Firm-level constraints align with macro-structural gaps: labor regulation, governance, external sector, and credit markets. ### Financial Inclusion and Credit Constraints - Diagnostics: - About 8 percent of Botswana’s micro, small and medium enterprises had a bank loan in 2019. - Private sector credit is around 30 percent of GDP in Botswana. - South Africa’s private credit is about 90 percent of GDP (for comparison). - Botswana’s financial system is bank-dominated; absence of a robust microfinance sector or local venture capital limits financing options. - Consequences and evidence: - Limited access to credit constrains investment, expansion, innovation, and hiring—especially for SMEs. - Empirical literature referenced: financing obstacles for small firms can have nearly twice the negative impact on annual growth compared to large firms (Beck and others, 2005). - Regional context: up to one-third of firms in many African and emerging markets report limited finance as a major constraint (Brixiova and others 2020). - Policy recommendations: - Expand credit bureaus and fully operationalize a movable collateral registry. - Reform to enable banks and non-bank institutions to offer products tailored to MSMEs. - Expand digital payment services by developing acquiring infrastructure and improving interoperability. - Reorient public support from direct lending by state-owned banks to catalytic co-investment models. - Use regulatory sandboxes and proportional licensing to foster inclusion and develop domestic capital markets (bond and equity listings for midsize firms). - Potential payoffs: - Credit flowing to productive smaller firms yields gains in innovation, employment, and diversification. ### Governance and Corruption - Diagnostics: - Botswana historically among least corrupt in mainland Africa; Corruption Perception Index declined by about 12 percent between 2012 and 2024. - Business survey (2023 WBES): corruption is the second most mentioned obstacle (13 percent of businesses). - Empirical links cited: Mauro (1995) and Hammadi and others (2019) on governance and growth; IMF Fiscal Monitor (2019) on corruption eroding tax revenues and public investment efficiency. - Policy recommendations: - Empower anti-corruption agencies like the DCEC with greater independence and resources. - Ensure Auditor General and parliamentary committees can rigorously scrutinize public spending and tenders. - Expand e-procurement, publish budget and contract details openly, continue adherence to EITI in the diamond sector. - Streamline business licenses, adopt one-stop-shop services, and engage in international anti-corruption standards and forums. ### Access to Land - Diagnostics: - Fragmented land administration: coexistence of customary, state, and freehold systems; customary land managed by Land Boards often lacks clear formal documentation. - Obtaining Certificates of Customary Land Grant (CCLGs) and converting to leasehold is complex and slow. - Botswana’s LAPCAS project mapped a large portion of the country but legal integration and validation into the formal cadaster remain incomplete. - Policy recommendations: - Digitize and update land registries, streamline and decentralize allocation processes. - Allow use of customary land as collateral with clear legal conversion frameworks. - Increase transparency in land transactions to reduce rent-seeking and improve investor clarity. ### Electricity and Power Sector (Powering the Future) - System characteristics and vulnerabilities: - Domestic installed capacity: approximately 900 MW; around 630 MW used during peak hours. - Morupule B: ~600 MW; Morupule A: ~132 MW. - Diesel contingency generators: Orapa (90 MW), Matshelagabedi (73 MW). - Renewable energy installed capacity: 6 MW of solar photovoltaic (PV) capacity. - Domestic generation share: about 48 percent of final power consumption; 52 percent sourced through the Southern African Power Pool (SAPP). - 2023 electricity imports cost: $156 million. - SAPP generation composition: around 60 percent coal generation and around 24 percent hydro. - Recent unit cost increase of imported power: estimated 166 percent. - Transmission and distribution losses: 15.35 percent in 2021. - National electrification: approximately 72–76 percent; urban access: around 95.5 percent; rural access: around 25 percent. - Zero-cost connection policy income threshold: up to P2,400 per month. - Implicit fossil fuel subsidies: around 5 percent of GDP. - Tariff shortfall: 30–32 thebe/kWh (0.021–0.0224 USD/kWh) below actual generation and import costs. - Operational losses: P498 million in FY2023. - Confirmed subsidy support for upcoming year: around P1.2 billion; package size P3–4 billion; estimated shortfall for 2025-2026: P3.4 billion. - Current average domestic tariffs: roughly $0.09/kWh. - IRP and modeling: - IRP incoming renewable installed capacity: 1950 MW. - Planned coal additions: 600 MW Mmamabula (expected 2027); Palapye additional 615 MW by 2027; coal bed methane project 100MW. - CPAT results under IRP: - Power sector emissions fall by approximately 54 percent compared to 2030 baseline levels (exc LULUCF). - Overall emissions fall by 30 percent compared to 2030 baseline levels. - IRP modelling assumptions on imports: 10 percent fall in annual electricity imports for IRP horizon; 5 percent fall in annual electricity imports until 2033. - Risks and constraints: - Planned additions imply bringing over 3000 MW of installed coal and renewable capacity online before 2027, risking oversupply relative to peak demand of just 630 MW. - Solar capacity factor: around 20 percent; adjusted additional supply when accounting for capacity factor: closer to 1050MW. - 2024 regional excess capacity including reserves: 6,401MW. - Single-buyer model concentrates off-taker risk in Botswana Power Corporation (BPC). - Grid code lacks comprehensive RE integration standards; limited BPC engineering capacity cited. - Policy recommendations: - Base IRP on least-cost generation analysis and renewable feasibility studies. - Accelerate grid modernization, regional interconnections, and IPP entry by reducing regulatory barriers. - Update grid code, strengthen institutional capacity for connections, and implement protocols for variable renewable energy management. - Address tariff cost-recovery gap and phase out implicit fossil fuel subsidies to align prices with economic costs. - Consider VAT treatment on fuels and carbon pricing as green fiscal measures: - Applying the standard VAT to diesel and petrol could generate an additional 0.25 percent of GDP in revenues by 2035. - If Botswana imposed a 5USD/tCO2 carbon tax escalating to 25USD/tCO2 by 2030, additional fiscal revenues could increase over 1.2 percent of GDP (by 2035) with an electricity price change of 11 percent over the next five years (modeled impact on GDP negligible). - Use revenues to subsidize green technology or support rural electrification; consider requirements for large electricity users to increase renewable shares. - Equity and access: - Address stark urban-rural disparity: urban ~95.5 percent vs rural ~25 percent. - Mainstream off-grid and decentralized solutions; consider cross-subsidization or targeted green subsidies. ### Structural Reform Gaps and Estimated Macroeconomic Effects - Structural Reform Index and gaps: - Indicators normalized between 0 and 1 over 2000–22; larger gap = further from frontier. - Governance gap relative to Advanced Economies narrowed marginally between 2017 and 2022, from 0.29 to 0.26. - Governance: Botswana scored 0.10 in 2022 (peer countries may have progressed faster). - Business Regulation gaps: - Gap with Advanced Economies widened from 0.31 to 0.35 between 2017 and 2022. - Gap with Emerging Markets increased from 0.13 to 0.15 between 2017 and 2022. - External Sector overall gap narrowed between 2017 and 2022: - Relative to Advanced Economies: from 0.37 to 0.34. - Relative to Emerging Markets: from 0.33 to 0.29. - Non-tariff barriers (EMs): 0.58 to 0.54. - Tariff barriers (EMs): 0.46 to 0.33. - Tariff barriers (AEs): 0.50 to 0.36. - Financial openness gap widened: EMs 0.25 to 0.31; AEs 0.25 to 0.36. - Capital controls unchanged (0.46 in EMs, 0.31 in AEs). Black-market exchange rate gap: stayed at zero. - Credit Market Regulation gaps: - Gap with Advanced Economies widened from 0.09 to 0.19 between 2017 and 2022. - Gap with Emerging Markets widened from 0.09 to 0.17 between 2017 and 2022. - Interest rate controls score gap rose from 0.0 to 0.3. - Labor Market Regulation (widest gaps): - 2022 gaps: Relative to Advanced Economies: 0.67; Relative to Emerging Markets: 0.53. - Hiring/firing regulations gap: unchanged at 0.81 (AEs) and 0.72 (EMs). - Centralized collective bargaining gap widened by 0.06 between 2017 and 2022. - Empirical macro impacts (local projection panel framework): - First-generation reforms (governance, business regulation, external sector): - A 50 percent narrowing of first-generation reform gaps is associated with: - 1.2 percentage point increase in real GDP growth in the short term. - 2.0 percentage point gain in the medium term. - External sector medium-term contribution: 2.1 percentage point boost to growth. - Results statistically significant at the 10-percent level. - Labor market reforms and employment: - Closing half the labor market gap could yield: - 3.9 percentage points increase in employment in the short term. - 3.0 percentage points increase in employment in the medium term. - Results statistically significant at the 10-percent level. - Convergent diagnosis: - Micro WBES analysis and macro-structural estimates converge on binding constraints: access to land, finance, skilled labor, regulatory burdens, governance, and electricity—impeding diversification and economic complexity recovery. - Policy sequencing and priorities: - Prioritize and sequence reforms to enhance institutional quality, improve credit access, modernize land administration, advance energy reforms, and reform labor markets to capture both growth and employment dividends. ### Public Financial Management (PFM) Weaknesses and Reform Roadmap - Key PFM weaknesses: - IFMIS/IFMIS-related (GABS) operational problems since 2018 upgrade; critical breakdown in August 2023 when the General Ledger stopped updating. - Causes: excessive customization, poor configuration, recurring hardware and database failures. - Consequences: suspension of in-year and annual financial reporting for the last two fiscal years; disrupted payment processing; delayed supplier settlements and bank reconciliations. - Fragmented procurement responsibilities and procurement system deficiencies leading to delays, cost overruns, and weak value for money. - Fragmented financial reporting: EBFs, SOEs, and local governments maintain independent systems; consolidated reporting incomplete. - Inadequate Chart of Accounts (CoA) and limited use of accrual concepts. - Fiscal risks if shortcomings persist: - Undermine spending efficiency, heighten fiscal risks (arrears and contingent liabilities), limit growth impact of public spending, erode fiscal credibility, and jeopardize debt sustainability. - TADAT findings and recommendations: - TADAT (2021) strengths: extensive taxpayer registration info; strong legal/regulatory framework for BURS. - Significant weaknesses: underdeveloped compliance risk management; manual audit selection; fragmented taxpayer services; TAX IS implementation challenges; integration issues between customs and domestic tax functions. - February 2022 post-TADAT priority reforms: systematize compliance risk management, create Taxpayer Services Department, external review of TAX IS, realign BURS structure to separate customs and domestic tax functions. - PIMA findings and recommendations: - Historical public investment trends: - Public investment averaged 35 percent of total investment from 1990 to 2012, declining to 25 percent in the past decade. - Public investment peaked at 17 percent of GDP in 2009. - Public capital stock reached 106 percent of GDP in 2019. - Per capita public capital stock 50 percent above EME average and ten times that of SSA (2019, in 2017 PPP$-adjusted, IMF estimates). - PIMA gaps: unclear project selection criteria, weak appraisal processes, inconsistent use of DPMS, limited project management capacity, maintenance shortfalls, and fragmented coordination across ministries. - Recommendations: refine PFMA, formalize project selection and cost-benefit analysis, improve DPMS use, build capacity, and develop an asset management strategy. - Financial reporting recommendations: - Immediate: restore IFMIS financial reporting and finalize CoA redesign; develop IPSAS-aligned reporting templates; conduct IT gap analysis. - Medium-term: roll out revised CoA; pilot Financial Reporting Manual (FRM); begin hybrid accrual reporting for selected areas. - Long-term: full adoption of accrual-based IPSAS reporting at general government level; integrate SOE and EBF data into consolidated reports. - Core actions: redesign CoA aligned with GFS 2014 and IPSAS; codify inter-entity financial relationships; introduce unique identifiers for government transactions; issue FRM and update PFMA. - Ministry of Finance organizational assessment: - MoF lacks a unified macro-fiscal structure; PRDMU performs select forecasting but not full MTFF and below-the-line projections. - Budget coordination fragmented; recurrent and development budgets prepared separately. - Only five desk officers manage budget challenge responsibilities for all MDAs. - Recommendations: - Establish a Macro-Fiscal Management Department. - Create a dedicated budget coordination unit. - Augment desk officer capacity and restore gatekeeping function. - Strengthen Accountant General’s Department and systems function; procure a new IFMIS or reinstall GABS; implement interim reporting solutions. - PFM reform implementation and roadmap: - Implementation has been piecemeal and lacks strategic coherence. - Governance and coordination recommendations: place reform coordination under the Permanent Secretary; integrate finance and accounting functions across MDAs; establish a single coordination unit for external engagement. - 16 priority recommendations across MACRO-FISCAL, BUDGET PREPARATION, FINANCIAL CONTROL, and CROSS-CUTTING themes with short-, medium-, and long-term timelines (examples include establishing Macro-Fiscal Management Department; combining budget coordination; strengthening AGD systems function; expanding Cash Management Unit). - Strategic imperative: - Modernize PFM to adapt to deteriorating fiscal conditions and rising macro risks; success requires senior leadership commitment, sequencing, and capacity investment. ### Climate Adaptation, Fiscal Integration, and Macroeconomic Risks - Adaptation integration principles: - Differentiate clearly between development and strictly additional adaptation investments; count only additional costs attributable to climate change as adaptation expense. - Apply CBA consistently to adaptation and development projects; complement with distributional analysis. - Government roles and prioritization: - Public provision of climate services (early warning systems, climate risk mapping). - Boost water sector efficiency (water transfers, loss minimization, transboundary agreements). - Reforms to ease resource use and ensure competitive access to markets (credit markets for farmers, efficient water pricing). - Climate macro risks and projections: - Short-term: extreme heat events have been shown to lower growth by up to 2 percentage points. - Long-term: sustained warming could lead to as much as a 10 percent reduction in GDP by the century’s end compared to projections under current conditions, with cascading fiscal consequences. - Policy recommendations: - Refine Second Updated NDC measures, prioritize climate services and water sector efficiency. - Use fiscal policy tools (VAT on fuels, carbon pricing, import-duty exemptions for green tech) carefully with distributional mitigation. - Introduce targeted green fiscal measures to ease fiscal pressures from electricity subsidies and support renewable expansion. *Italic: Source — Content unit: 1bwaea2025002-source-pdf (IMF staff text excerpts).* ### 1. Economic Complexity Index in SACU Countries _____________________________________ 5 ### 1. Economic Complexity Index in SACU Countries ### A. Introduction and Purpose - The note examines Botswana’s growth constraints using a dual approach: - A “bottom-up” analysis based on the 2023 World Bank Enterprise Survey (WBES) identifying key business obstacles (limited access to finance, corruption, land tenure challenges, infrastructure gaps). - A macro-structural cross-country empirical model (Budina et al. (2023) framework) estimating growth gains from closing reform gaps in institutions, credit markets, and labor regulations. - Objective: inform a strategy to rethink Botswana’s growth model as diamond revenues decline and to identify reforms with highest payoffs for diversification, productivity, and employment. ### B. Key Findings on Economic Complexity - Over the past two decades Botswana’s Economic Complexity Index (ECI) has deteriorated: - Global ECI rank: around 92 (2000) to 102 (2023). - Current ECI index value: near –0.67. - Structural concentration: - Diamonds accounted for about 80 percent of exports in 2023. - Manufacturing accounts for about 5 percent of GDP in Botswana, compared with: - over 30 percent in Lesotho and eSwatini, - 10 percent in Namibia, - 15 percent in South Africa. - Implications of a falling ECI: - Indicates production and export of a narrower, less sophisticated set of goods. - Signals increasing reliance on low-complexity, resource-based exports and stalled development of knowledge-intensive sectors. - Associated with reduced long-term growth prospects, greater vulnerability to commodity price volatility, and constrained structural transformation. ### C. WBES “Bottom-Up” Evidence - WBES 2023 sampling and scope: - 2010 survey covered 268 firms in Gaborone and Francistown. - 2023 wave sampled 622 establishments across the entire country, covering privately owned manufacturing and selected service sectors. - WBES captures both objective indicators (frequency of electricity outages, time to obtain permits) and subjective perceptions (finance, corruption, regulation, infrastructure). - Overlap: firm-level constraints identified by WBES align with macro-structural gaps from cross-country analysis (labor regulation, governance, external sector, credit markets), providing corroborating diagnostic evidence. ### D. Firm-Reported Obstacles and Financial Constraints - Firm perception (2023 WBES): - 25 percent of businesses reported that access to finance is their biggest problem. - Financial depth and access metrics: - About 8 percent of Botswana’s micro, small and medium enterprises had a bank loan in 2019. - Private sector credit is around 30 percent of GDP in Botswana. - South Africa’s private credit is about 90 percent of GDP (for comparison). - Consequences: - Limited access to credit and financial services constrains investment, expansion, innovation, and hiring—especially for SMEs. - Empirical literature cited: financing obstacles for small firms can have nearly twice the negative impact on annual growth compared to large firms (Beck and others, 2005). - Regional context: up to one-third of firms in many African and emerging markets report limited finance as a major constraint (Brixiova and others 2020). ### E. Synthesis and Policy Implications (from the analysis) - Diagnosed bottlenecks hampering diversification and ECI recovery: - Access to finance and shallow financial intermediation. - Governance and corruption issues. - Land acquisition and tenure challenges. - Infrastructure deficits (including electricity reliability). - Cumbersome regulatory procedures and labor market regulation gaps. - Reform priorities implied by findings: - Enhance financial inclusion and deepen private credit intermediation to raise private sector credit beyond the current ~30 percent of GDP. - Improve the regulatory environment to reduce time/costs of permits and land acquisition. - Strengthen governance and anti-corruption measures to address firms’ perceived obstacles. - Invest in infrastructure reliability (notably electricity) to support manufacturing and complex production. - Targeted interventions across governance, energy, land administration, labor market regulations, and financial access could significantly enhance medium-term growth and support diversification. *Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1bwaea2025002-source-pdf.pdf* ### 17. Compared to its peers, Botswana lags in some aspects of financial inclusion. Other ### 1bwaea2025002-source-pdf - 17. Compared to its peers, Botswana lags in some aspects of financial inclusion. Other ### Financial inclusion: diagnosis and findings - Botswana’s financial system is bank-dominated and cautious; other upper-middle-income economies often have more developed capital markets and alternative financing channels (equity, venture capital, etc.). - Within Africa, countries like South Africa and Mauritius have higher credit-to-GDP ratios and more SMEs utilizing formal loans, partly explaining their more diversified industrial base. - Botswana’s conservative lending environment favors low-risk, well-collateralized borrowers (often larger firms), leaving smaller enterprises and startups behind. - Absence of a robust microfinance sector or local venture capital limits financing options. - Empirical evidence cited: firms in countries with shallow financial sectors grow more slowly and create fewer jobs than those in financially developed economies (Beck & Demirgüç-Kunt, 2006). ### Financial inclusion: policy recommendations - Strengthen credit infrastructure: - Expand credit bureaus and fully operationalize a movable collateral registry so banks can lend against assets beyond fixed property. - Rationale: better credit reporting and collateral frameworks have been associated with higher SME lending in peer economies (Djankov, McLiesh, & Shleifer, 2007). - Promote diverse financing instruments: - Reform to enable banks and non-bank institutions to offer products tailored to micro, small, and medium enterprises (MSMEs). - Expand access to innovative financial products—such as accounts receivable financing with more flexible collateral requirements. - Expand digital payment services by developing acquiring infrastructure, improving system interoperability, and enabling the entry of new market participants. - Reorient public support schemes: - Move away from direct lending by state-owned banks toward catalytic approaches where public SME funds co-invest alongside banks or investors, sharing risk and focusing on capacity-building. - Cite examples: Chile (CORFO programs) and Malaysia; any remaining government credit programs should be carefully targeted and performance-monitored to avoid distortions. - Enhance competition in the banking sector: - Use regulatory sandboxes and proportional licensing (for microfinance banks) to foster inclusion. - Over the medium term, develop domestic capital markets (bond and equity listings for midsize firms) to provide alternative financing and reduce over-reliance on banks. ### Potential payoffs from financial inclusion reform - International experience indicates credit flowing to productive smaller firms yields gains in innovation, employment, and diversification. - A concerted push on financial inclusion aligns with reducing unemployment and fostering a more dynamic private sector-led economy in Botswana. ### Governance and corruption: diagnosis and findings - Botswana historically cited as the least corrupt nation in mainland Africa and consistently ranks among top performers on the continent in Transparency International’s Corruption Perceptions Index. - Strong institutions (independent judiciary, effective anti-graft agency) have aided investment attraction and management of diamond revenues. - Perception of corruption has deteriorated: Corruption Perception Index declined by about 12 percent between 2012 and 2024. - Business survey evidence: in the 2023 WBES, corruption is the second most mentioned obstacle to development, with 13 percent of businesses naming it as a major issue, up from 10 percent in the 2010 WBES. - Empirical links: - Mauro (1995): a one standard-deviation improvement in bureaucratic efficiency is associated with a boost of annual per capita GDP growth by around one percentage point. - Hammadi and others (2019): for a middle-income country, moving from a low-corruption rank to a mediocre one tends to reduce long-term GDP per capita levels through lower productivity and human capital accumulation. - Chapter 2 of the 2019 IMF Fiscal Monitor: corruption undermines growth by eroding tax revenues, distorting spending toward rent-seeking projects, and reducing efficiency of public investment and services. - Regional evidence: the growth dividend of governance reforms in sub-Saharan Africa is two to three times larger than in other regions. ### Governance: policy recommendations - Bolster institutional checks and oversight: - Empower anti-corruption agencies like the DCEC with greater independence, resources, and investigative authority. - Ensure Auditor General and parliamentary committees can rigorously scrutinize public spending and tenders. - Maintain and reinforce judicial independence to handle corruption cases fairly and without political interference. - Enhance transparency and e-governance: - Expand e-procurement systems for public tenders. - Publish budget information, mining revenues, and contract details openly (open data portals). - Continue adherence to initiatives like the Extractive Industries Transparency Initiative (EITI) in the diamond sector. - Simplify regulations and reduce red tape: - Streamline business licenses, permits, and customs procedures; adopt “smarter” regulation and one-stop-shop services to reduce petty corruption opportunities. - Share experiences and engage internationally: - Participate in regional anti-corruption forums and adopt international standards (e.g., OECD Anti-Bribery Convention, World Bank integrity diagnostics). ### Access to land: diagnosis and findings - In the 2023 WBES, 13 percent of firms consider land access their most important obstacle. - Main problem: fragmented and inefficient land administration due to coexistence of customary, state, and freehold land systems. - Customary land (majority) is managed by Land Boards but often lacks clear, formal documentation, creating delays, weak land security, and hampering use of land as collateral. - Institutional overlaps, slow allocation processes, and limited coordination between national and local authorities compound access issues, especially for businesses and women (White, 2018). - Secure and transferable land rights are critical for collateralization; without formal titles firms cannot use land as collateral (Deininger & Feder, 2001). - Obtaining Certificates of Customary Land Grant (CCLGs) and converting to leasehold remains complex and slow, particularly for SMEs and female-headed households. - Botswana’s LAPCAS project mapped a large portion of the country, yet legal integration and validation of records into the formal cadaster remain incomplete (White, 2018). - Comparative evidence: Rwanda’s national land registry and digitized titling improved investment and credit access (Ali, Deininger, & Goldstein, 2011). ### Electricity: diagnosis and findings - In the 2023 World Bank Enterprise Survey, 11 percent of firms consider electricity supply to be their main obstacle to doing business. - Electricity tariffs remain in the mid to high range in the Southern African region despite government subsidies and partial market liberalization. - Botswana Power Corporation (BPC) faces operational inefficiencies, aging infrastructure, and fiscal dependency; power outages and voltage fluctuations increase production costs and deter energy-intensive investors (Allcott et al., 2016). - Reliance on imports from South Africa and Namibia exposes Botswana to external supply risks; insufficient generation capacity and a fragile grid lead to vulnerability to power shortages and transmission losses. - SMEs are disproportionately affected as they often lack capital for backup solutions (diesel generators, solar). - Lack of a transparent and competitive electricity market limits private investment in generation and renewables. - National Energy Policy (2021) commits to diversifying energy sources and increasing renewables, but implementation has been slow and regulatory uncertainty inhibits independent power producers (IPPs). ### Electricity: policy recommendations - Accelerate reforms to: - Strengthen the financial viability and operational performance of BPC. - Invest in grid modernization and regional interconnections. - Incentivize renewable energy development through transparent regulation and feed-in tariffs. - Promote mini-grid and off-grid solutions for underserved areas. - Reduce regulatory barriers to entry for IPPs and improve energy governance to catalyze the sector’s contribution to economic development. ### Structural reforms: analytical approach and structural gaps - The assessment leverages the IMF Staff Discussion Note “Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies” (Budina and others 2023), using a panel of 54 EMDEs over 1985–2021. - A composite Structural Reform Index (SRI) is constructed encompassing reforms in domestic finance, trade, labor, and product markets; fixed-effects panel regressions estimate dynamic effects of reforms on real GDP per capita growth, accounting for short-term adjustment costs and long-term gains. - Structural indicators used (normalized between 0 and 1 over 2000–22; higher = better): - Governance (World Bank, Worldwide Governance Indicators): voice and accountability, rule of law, political stability, government effectiveness, regulatory quality, control of corruption. - External sector (Fraser Institute, Index of Economic Freedom): tariff and non-tariff barriers, exchange rate flexibility, constraints on movement of physical capital. - Business regulation (Fraser Institute, Index of Economic Freedom): regulation and bureaucratic procedures that restrain entry and reduce competition; impartial public administration. - Credit market regulation (Fraser Institute, Index of Economic Freedom): extent credit is supplied to private sector, presence of interest rate controls, private ownership of banking industry. - Labor market regulation (Fraser Institute, Index of Economic Freedom): flexibility of hiring/firing regulation and centralized collective bargaining. - Structural gap methodology: for each year, gap = absolute difference between the frontier (maximum value in comparator group) and Botswana; larger gap = further from frontier. - Findings on governance gap: - Botswana remains structurally closer to the Emerging Market average than to Advanced Economies. - Reform gap relative to Advanced Economies narrowed marginally between 2017 and 2022, from 0.29 to 0.26. - Gap relative to Emerging Markets widened slightly, from 0.08 in 2017 to (value not completed in source text). *Italic: Source — Content unit: 1bwaea2025002-source-pdf (IMF staff text excerpts).* ### 0.10 in 2022, indicating that peer countries may have progressed at a faster pace in ### Structural reform gaps and policy advice — Botswana ### Key findings on reform gaps by area - Governance: Botswana scored 0.10 in 2022, indicating that peer countries may have progressed at a faster pace in strengthening governance institutions. - Business Regulation: - Reform gap with Advanced Economies widened from 0.31 to 0.35 between 2017 and 2022. - Reform gap with Emerging Markets increased from 0.13 to 0.15 between 2017 and 2022. - Interpretation: regulatory improvements have not kept pace with global or regional reform momentum; gap levels remain relatively moderate but trend points to growing risk of institutional drift. - External Sector: - Overall external sector reform gap narrowed slightly between 2017 and 2022: - Relative to Advanced Economies: from 0.37 to 0.34. - Relative to Emerging Markets: from 0.33 to 0.29. - Disaggregation into five dimensions: non-tariff barriers, tariff barriers, capital controls, financial openness, black-market exchange rate. - Non-tariff barriers (Emerging Markets): gap narrowed from 0.58 to 0.54. - Tariff barriers (Emerging Markets): gap narrowed from 0.46 to 0.33. - Non-tariff barriers (Advanced Economies): gap fell from 0.64 to 0.61. - Tariff barriers (Advanced Economies): gap fell from 0.50 to 0.36. - Financial openness: gap widened - Emerging Markets: from 0.25 to 0.31. - Advanced Economies: from 0.25 to 0.36. - Capital controls: unchanged (0.46 in EMs, 0.31 in AEs). - Black-market exchange rate gap: stayed at zero. - Credit Market Regulation: - Gap with Advanced Economies widened from 0.09 to 0.19 between 2017 and 2022. - Gap with Emerging Markets widened from 0.09 to 0.17 between 2017 and 2022. - Interest rate controls score gap rose from 0.0 to 0.3. - Labor Market Regulation: - 2022 reform gaps: - Relative to Advanced Economies: 0.67. - Relative to Emerging Markets: 0.53. - Widest across all core reform pillars. - Sub-indicators: - Hiring and firing regulations gap: unchanged at 0.81 (Advanced Economies) and 0.72 (Emerging Markets). - Centralized collective bargaining gap widened by 0.06 between 2017 and 2022. ### Empirical approach to estimating reform impacts - Framework: local projection approach in a panel data setting to estimate impact of reforms on output. - Specification elements: - Dependent variable: log of real GDP (PPP). - Controls: country fixed effects (αi), year fixed effects (λt), change in average structural reform score (ΔReform_i,t), time-varying controls X′ including lags of dependent variable and past reforms, and controls for simultaneous and past reforms in other areas. - Important caveat: local projection approach is less robust to addressing endogeneity; large coefficients should be interpreted with caution. - Note: Each reform area includes multiple sub-indicators, with 1 representing the highest score. ### Estimated macro and employment effects of priority reforms - First-generation reforms (governance, business regulation, external sector): - A 50 percent narrowing of first-generation reform gaps is associated with: - 1.2 percentage point increase in real GDP growth in the short term. - 2.0 percentage point gain in the medium term. - External sector medium-term contribution: 2.1 percentage point boost to growth. - Results: statistically significant at the 10-percent level (coefficients taken at end of projection horizon; converted to annual contribution using CAGR formula). - Labor market reforms and employment: - Closing half the labor market gap could yield: - 3.9 percentage points increase in employment in the short term. - 3.0 percentage points increase in employment in the medium term. - Results: statistically significant at the 10-percent level (coefficients taken at end of projection horizon; converted to annual contribution using CAGR formula). ### Convergent diagnosis from micro and macro approaches - WBES-based analysis identifies firm-level constraints: access to land, finance, skilled labor, and regulatory burdens—impeding private sector growth and economic diversification and contributing to declining economic complexity. - Empirical macro analysis indicates highest growth gains from labor market adjustments; governance and credit market reforms also offer meaningful dividends. - Common binding constraints: inefficiencies in public resource allocation, underperforming private sector capabilities, and need to shift from state-driven to market-enabled growth. ### Policy recommendations (grouped by reform area) - Improve Access to Land: - Digitize and update land registries, especially in urban and peri-urban areas. - Streamline and decentralize land allocation processes to reduce bureaucratic delays. - Allow the use of customary land as collateral, with clear legal frameworks for conversion to leasehold. - Increase transparency in land transactions to reduce rent-seeking and provide investors with clarity on land availability. - Enhance Access to Finance: - Support credit guarantee schemes for SMEs to reduce collateral requirements. - Deepen capital markets to diversify financing options beyond traditional banking. - Improve property rights and contract enforcement to lower the risk premium in lending. - Encourage the use of movable assets as collateral through secured transaction reforms. - Boost Human Capital and Skills: - Align vocational and tertiary education with labor market needs, especially in technical and digital skills. - Expand public-private training partnerships, particularly in tradable sectors. - Implement targeted upskilling programs for youth and rural populations to reduce mismatches. - Simplify Regulation and Lower Compliance Burden: - Establish a one-stop shop for business registration and licensing. - Digitize permit and inspection processes to increase efficiency and transparency. - Conduct regulatory impact assessments before new laws are passed, to reduce unnecessary burdens on firms. - Improve Infrastructure and Utilities: - Invest in reliable electricity and water supply, particularly in industrial zones. - Expand affordable internet and broadband access to facilitate digital business operations. - Promote public-private partnerships (PPPs) for infrastructure development, with clear regulatory oversight. - Foster Competition and Reduce Market Concentration: - Strengthen competition policy enforcement, particularly in sectors with state-owned enterprises or monopolies. - Encourage contestability in procurement and public service delivery to open space for private firms. - Review and rationalize industrial and tax incentives to ensure they are performance-based and do not distort markets. - Strengthen Governance and Institutions: - Implement a national productivity and innovation strategy, including support for startups and R&D. - Reduce corruption risks by improving procurement systems and public financial management transparency. - Enhance judicial efficiency to resolve commercial disputes quickly and fairly. ### Fiscal context and priority for structural fiscal reforms - Botswana faces growing fiscal challenges driven by declining diamond revenues, rigid spending, and weakened fiscal institutions, contributing to elevated fiscal deficits and increasing public debt. - Priority structural fiscal reforms (summary): - Strengthen tax administration. - Improve budget preparation and execution. - Enhance transparency. - Increase efficiency of public investment. - Objective: restore fiscal sustainability, reinforce institutional credibility, and position Botswana to navigate a more constrained economic environment while safeguarding long-term development goals. ### Conclusion and sequencing advice - Two overlapping reform priorities across analyses: access to finance; corruption and governance. - Complementary priorities identified: labor markets, external sector openness, land tenure, and electricity shortages. - Recommended sequencing: prioritize and sequence reforms strategically to enhance institutional quality, improve credit access, modernize land administration, and advance energy reforms. - Sustainability conditions: sustained progress will require strong political will, effective implementation, and inclusive consultation with private sector actors. *Source: INTERNATIONAL MONETARY FUND.* ### 2. These issues have been exacerbated by weaknesses in public financial management. ### 2. These issues have been exacerbated by weaknesses in public financial management. ### Public financial management weaknesses - Technical problems with the Integrated Financial Management Information System (IFMIS) have: - Constrained the capacity to execute expenditure control. - Complicated budget execution. - Reduced fiscal transparency. - Public procurement system deficiencies contribute to: - Delays and cost overruns. - Weak value for money in public investment. - Fragmentation of procurement responsibilities between the Accountant General’s Department and the procurement authority has led to: - Unclear oversight. - Poor coordination with budgeting and planning functions. - Inefficient procedures and limited procurement capacity undermine timely project execution and fiscal discipline. - Priority actions highlighted: - Strengthen institutional arrangements. - Streamline processes. - Build procurement capacity to improve procurement performance and support more efficient public spending. ### Fiscal risks and economic consequences if PFM shortcomings persist - Continued weaknesses in procurement, budget preparation and execution, financial reporting, and institutional coordination would: - Undermine spending efficiency, leading to waste, delays, and poor value for money. - Heighten fiscal risks, including the buildup of arrears and contingent liabilities. - Limit the growth and diversification impact of public spending through weak investment management. - Erode fiscal credibility, constrain the government’s ability to respond to shocks, and jeopardize debt sustainability. - Weaken long-term development outcomes. ### Reform objectives and sequencing - The report draws on IMF technical assistance (including TADAT, PIMA, and financial reporting assessments) to: - Identify structural fiscal reforms to underpin fiscal consolidation. - Set out sequenced reform recommendations to strengthen tax administration, improve public investment management, modernize budget preparation, and enhance transparency and control over public finances. - Overarching objective: - Rebuild Botswana’s fiscal capacity so public policy remains an effective tool for economic transformation and long-term development. - Expected outcomes from implementing reforms: - Strengthening tax administration to broaden the revenue base, reduce leakages, and mobilize resources more equitably and predictably. - Enhancing budget preparation and execution to improve expenditure efficiency, contain deficits, and safeguard priority social and infrastructure spending. - More rigorous public investment management to raise the growth and diversification impact of capital outlays. - Greater transparency and improved financial reporting to bolster accountability, support investor confidence, and anchor expectations about debt sustainability. ### Tax Administration Diagnostic Assessment Tool (TADAT) — summary of evaluation - TADAT assessment: 2021 Tax Administration Diagnostic Assessment Tool (TADAT) assessment. - Purpose: Objective assessment of key components of tax administration, extent of reform required, and priorities. - Key strengths identified: - Taxpayer registration system contains extensive and detailed information about registered taxpayers. - Strong legal and regulatory framework with a well-defined mandate for BURS. - Significant weaknesses identified: - Compliance risk management underdeveloped; lack of a systematic, risk-based approach to enforcement. - Audit selection process largely manual, limiting efficiency. - Taxpayer services fragmented; limited outreach and education initiatives. - Lekgetho Live Tax Information System (TAX IS) implementation challenges: flawed data migration and usability concerns. - Integration of customs and domestic tax functions has resulted in inefficiencies, unclear accountability, and chronic understaffing in domestic tax divisions. - February 2022 post-TADAT mission priority reforms: - Develop a systematic compliance risk management framework and modernize audit selection practices. - Establish a dedicated Taxpayer Services Department and expand outreach initiatives. - Conduct an external review of the TAX IS platform to resolve usability and data migration challenges. - Realign BURS’s organizational structure to separate customs and domestic tax functions and ensure adequate resources. ### ICT, taxpayer service, and revenue mobilization - Lekgetho Live Tax Information System (TAX IS), introduced in 2020, faced: - Flawed data migration. - Inconsistent system usability. - Varied levels of staff acceptance. - Recommendation: External review of TAX IS to assess functionality and identify necessary enhancements. - Need for a comprehensive ICT improvement strategy to support BURS digital transformation. - Taxpayer service and outreach: - Remain fragmented across multiple departments. - Improvements noted in call center responsiveness and online inquiries, but broader stakeholder engagement and customer service initiatives need expansion. - Recommendation: Create a dedicated Taxpayer Services Department. - Three broad recommendations: - Conduct a comprehensive external review of the TAX IS system and implement necessary improvements. - Create a unified Taxpayer Services Department to strengthen outreach, customer service, and voluntary compliance. - Make greater use of data analytics to strengthen risk assessment and operational efficiency. ### Roadmap for reform and strategic priorities - BURS mid-term review of 2019-2024 strategic plan identified priorities: enhancing compliance enforcement, optimizing organizational efficiency, and leveraging digital transformation. - IMF 2022 mission found slow progress due to leadership changes and inadequate execution mechanisms. - Transformation Roadmap proposed focusing on short-term actions to improve revenue collection and tax administration effectiveness. - Strategic reform agenda centers on three actions: - Develop a clear compliance improvement plan with measurable outcomes. - Enhance use of risk-based tax administration to improve audit effectiveness and enforcement. - Accelerate reforms to modernize BURS’s operational framework and align revenue administration with international good practices. ### Public Investment Management Assessment (PIMA) — summary and trends - PIMA framework evaluates institutional design and effectiveness of public investment management across three stages: (i) planning of investment levels, (ii) allocating investments to sectors and projects, and (iii) delivering productive and durable public assets. - 2023 PIMA update conducted in September 2022. - Historical trends: - Public investment averaged 35 percent of total investment from 1990 to 2012, declining to 25 percent in the past decade. - Public investment peaked at 17 percent of GDP in 2009. - Botswana’s public capital stock reached 106 percent of GDP in 2019. - On a per capita basis, public capital stock was 50 percent above the EME average and ten times that of SSA (2019, in 2017 PPP$-adjusted, IMF estimates). - Under National Development Plan 11 (NDP11), investments focused on roads, power, and water and sanitation; implementation was disrupted by the COVID-19 pandemic. - Draft Transitional National Development Plan (TNDP, covering 2023-2025) envisions renewed expansion in public investment, particularly in water and transport infrastructure. ### PIMA key findings - Progress since 2017: - Improvements in institutional structures, legal frameworks, and strategic orientation for public investments. - Implementation lags limit optimal use of public resources. - Institutional strengths and gaps: - MFED plays a central role in public investment planning and budgeting; sector ministries and agencies execute projects. - Lack of coordination across entities leads to fragmented project execution. - Growing disconnect between national planning (NDP) and budget allocation due to competing priorities and slow economic recovery. - Slow pace of project execution caused by inadequate project management practices, lack of skilled personnel, and poor coordination. - Project selection and appraisal challenges: - Criteria for selecting projects often unclear; decision-making lacks transparency. - Tendency to select projects based on political considerations rather than long-term developmental impact. - Appraisal processes are often ad hoc with limited use of cost-benefit analysis or other evaluation tools. - Misalignment between national and sectoral planning and budgeting complicates project selection. - Project implementation and monitoring: - Mechanisms such as the Development Project Monitoring System (DPMS) exist but are inconsistently used. - Lack of detailed, timely reporting on project outcomes; monitoring data not fully utilized for decision-making. - Absence of strong project management capacity and shortage of skilled project managers and technical staff at implementation level. - Frequent delays, cost overruns, maintenance backlogs, and incomplete projects undermine expected outcomes. - Asset management and sustainability: - Lack of an effective asset management strategy for maintenance and sustainability. - Infrastructure projects, particularly roads and energy facilities, face significant maintenance challenges. - Insufficient resources for maintenance lead to premature deterioration of infrastructure. - Absence of a robust asset management system undermines long-term sustainability of public investments. *Prepared by Alexis Meyer-Cirkel based on a series of FAD Technical Assistance Reports.* ### 23. The 2023 PIMA update provides a comprehensive set of recommendations to address ### 23–47: Public Investment Management, Financial Reporting Framework, and Ministry of Finance Organizational Assessment ### A. 2023 PIMA Update — Public Investment Management Recommendations - Objective: Address weaknesses in Botswana’s public investment management framework to improve project selection, implementation and monitoring, and ensure long-term sustainability of infrastructure. - Strengthening legal and institutional frameworks: - Refine the Public Finance Management Act (PFMA). - Ensure sectoral ministries have clear guidelines for planning, selection, and implementation of public investment projects. - Clearly define roles of various actors to improve coordination across ministries and agencies. - Improve alignment of national planning and budgeting processes by integrating national and sectoral plans more effectively with the budget process. - Enhance capacity of the Ministry of Finance and Economic Development to oversee and coordinate the entire public investment cycle. - Enhancing project selection and appraisal: - Formalize project selection criteria and introduce robust cost-benefit analyses. - Prioritize projects based on alignment with national development goals and value-for-money considerations. - Build technical capacity in sector ministries to conduct rigorous appraisals. - Note: where a gap to the efficiency frontier stands out (Figure 4), focus on improving project selection and appraisal. - Improving monitoring and evaluation (M&E) systems: - Increase use of the Development Project Monitoring System (DPMS). - Ensure monitoring data inform decision-making; enhance training for M&E personnel and improve reporting processes for timely, accurate data collection. - Strengthen focus on ex-post evaluation to assess effectiveness of completed projects and extract lessons learned. - Promote a culture of accountability and transparency in public investment management. - Building capacity in public investment management: - Develop a comprehensive capacity-building strategy for civil servants involved in project planning, implementation, and monitoring. - Provide specialized training in project management, public procurement, and asset management. - Explore partnerships with international organizations (e.g., World Bank) for technical assistance. - Focusing on asset management and sustainability: - Develop a comprehensive asset management strategy emphasizing maintenance and sustainability. - Allocate sufficient resources for maintenance and repair. - Conduct regular assessments of infrastructure conditions and develop long-term maintenance plans. - Summary assessment: - The 2023 Public Investment Management Assessment highlights progress in institutional frameworks and project planning but identifies significant gaps in project selection, implementation, and monitoring. - Required approach: multi-faceted reforms (legal, project selection criteria, institutional capacity) emphasizing transparency, accountability, and efficiency to maximize infrastructure investment impact. *Italic source attribution: Excerpts from the 2023 PIMA update and related assessment text.* ### B. Improving the Financial Reporting Framework — Background and Key Findings - Objectives: - Improve coverage and quality of fiscal reporting to strengthen fiscal oversight and policy decision-making. - Align Botswana’s PFM information systems including the chart of accounts (CoA) with international good practices. - Review GABS functionalities, advise on digitalization, propose CoA changes, and re-establish financial reporting. - Key observations and findings: - Government Accounting and Budgeting System (GABS): - IFMIS operational problems since its 2018 upgrade; critical breakdown in August 2023 when the General Ledger stopped updating. - Causes: excessive customization, poor configuration, recurring hardware and database failures. - Consequences: suspension of in-year and annual financial reporting for the last two fiscal years; disrupted payment processing; delayed supplier settlements and bank reconciliations. - Heavy reliance on vendors and consultants; repeated interventions have yet to restore full functionality. - Governance weaknesses: absence of a service-level agreement between the Accountant General’s Office and the Department of Shared Digital Services. - Fragmented financial reporting: - Ministry of Finance produces cash-based financial statements annually. - Extra-budgetary funds (EBFs), State-Owned Enterprises (SOEs), and local governments maintain independent accounting systems with limited integration or standardization. - Consolidated financial reporting remains incomplete and insufficient for comprehensive fiscal analysis. - Inadequate Chart of Accounts (CoA): - Current CoA does not adequately support economic classification, policy analysis, or inter-entity transactions (e.g., transfers to SOEs or EBFs). - Lacks standardization across ministries and departments and undermines budget execution reporting and consolidation or accrual transition. - Limited use of accrual concepts: - Financial reports emphasize cash flows and do not sufficiently incorporate accrual-based data (accounts payable, receivable, depreciation). - Initial steps toward accrual reforms exist (including adoption of IPSAS principles by some SOEs), but a whole-of-government strategy is lacking. ### C. Financial Reporting Recommendations and Implementation Roadmap - Immediate priorities (short-term): - Restore financial reporting (IFMIS) and finalize the CoA redesign. - Develop reporting templates based on IPSAS cash and accrual standards. - Initiate a gap analysis of existing IT systems and accounting processes. - Medium-term priorities: - Roll out the revised CoA across all budgetary and non-budgetary entities. - Adopt and pilot the Financial Reporting Manual (FRM) in key ministries. - Begin transition from cash-based to hybrid accrual reporting for selected areas (e.g., payroll, vendor payments). - Long-term goals: - Full adoption of accrual-based IPSAS reporting at the general government level. - Integration of SOE and EBF financial data into consolidated reports. - Regular publication of whole-of-government financial statements. - Core recommendations: - Redesign the CoA aligned with Government Finance Statistics (GFS 2014) and International Public Sector Accounting Standards (IPSAS). - Codify financial relationships between parent ministries and dependent entities (SOEs and EBFs). - Introduce unique identifiers for government-to-government transactions to improve tracking and eliminate discrepancies. - Establish a new Financial Reporting Framework (FRF) standardizing reporting practices across all government entities, with a uniform reporting calendar and systematic reconciliation between cash-based and accrual-based systems. - Issue a Financial Reporting Manual (FRM) as operational guidance and update the Public Finance Management Act to make compliance mandatory. - Institutional and capacity requirements: - Create a committee to oversee implementation and monitor progress. - Reinforce internal audit and accounting units at the ministry level. - Enhance collaboration between the Accountant General’s Department and the Office of the Auditor General. - Invest in training and upskilling staff across ministries and agencies in modern accounting practices. - Rationale: - Restoring reliable financial reporting is urgent; medium- to long-term accrual transition depends on a well-functioning, stable IFMIS. *Italic source attribution: Summary of “Botswana - Improving the Financial Reporting Framework”; FAD February 2025.* ### D. Ministry of Finance Organizational Assessment — Key Findings and Recommendations - Objectives: - Assess MoF organizational strengths, gaps, and coordination issues in delivering core PFM functions amid deteriorating fiscal buffers and increasing macro-fiscal risks. - Evaluate macro-fiscal forecasting and policy, fiscal risk analysis, budget preparation, financial control and reporting, and cross-cutting reform coordination. - Macro-fiscal functions: - MoF lacks a unified structure for macro-fiscal policy management. - Policy Research and Data Management Unit (PRDMU) performs select forecasting and strategy tasks (e.g., Budget Strategy Paper, debt sustainability analysis) but is not charged with below-the-line fiscal projections, comprehensive MTFF production, regular fiscal performance reporting, and macroeconomic policy analysis. - No standalone macro-fiscal department; fiscal risk management institutional structure underdeveloped. - Recommendation: establish a Macro-Fiscal Management Department integrating macro-fiscal policy, tax policy, debt sustainability analysis, and fiscal risk analysis; reconstitute the technical macro working group including relevant agencies (e.g., Bank of Botswana, Statistics Botswana). - Review and expand mandates of Tax Policy Department and Debt Management Departments to incorporate core tax and debt management functions and build capacity. - Budget preparation functions: - Budget coordination is fragmented with responsibility split across divisions; recurrent and development budgets prepared separately, weakening budget unity. - Recommendation: establish a dedicated budget coordination unit to streamline budget preparation, facilitate cross-department collaboration, and ensure adherence to the budget calendar. - Clarify roles and responsibilities of MoF and National Planning Commission on public investment management (PIM) within the budget calendar. - Budget challenge function: - Capacity constraint: Only five desk officers at MoF manage challenge responsibilities for all Ministries, Departments, and Agencies (MDAs). - Secondment of most finance staff to MDAs dilutes MoF central oversight. - Recommendation: augment desk officer capacity, training, and analytical capabilities to restore MoF’s gatekeeping function. - Financial control, accounting, and reporting: - Structural and operational weaknesses: outdated PFM legal framework, no consolidated financial statements since FY2021/22, incomplete or unreconciled in-year reports. - GABS is technologically obsolete and poorly maintained; lacks functionality to support modern budgeting, reporting, or MTBF requirements. - Core manuals (accounting policies, SCOA guides) are missing; internal controls frequently ineffective, leading to financial losses. - Recommendations: - Strengthen Accountant General’s Department (AGD) responsibilities for design and oversight of financial control, accounting, and reporting framework. - Transfer procurement policy coordination responsibilities fully to the procurement authority. - Strengthen accounting systems management function to better manage and develop GABS and external application providers; expand the AGD systems group. - Upgrade cash management and financial reporting capacities. - Procure a new IFMIS or reinstall GABS; implement an interim reporting solution urgently. - Increase Accounting Officers’ engagement with internal audit findings and decentralize financial control responsibilities. - Cross-cutting functions and reform implementation: - Organizational restructuring and capacity building are proposed to support a shift toward a more sustainable medium-term fiscal path. *Italic source attribution: Summary of “Botswana – Ministry of Finance Organizational Assessment”, [June 2025].* ### 48. PFM reform implementation has been piecemeal and lacks strategic coherence. ### PFM reform implementation has been piecemeal and lacks strategic coherence. ### Key findings on PFM reform implementation - Responsibilities are not clearly assigned, reform monitoring is weak, and the coordination unit is not sufficiently empowered. - Development partner coordination is fragmented, with multiple points of contact within MoF. - Success will depend on senior leadership commitment, DPSM and Office of the President support, and careful sequencing of reforms. ### Governance and coordination recommendations (summary) - Place the reform coordination office under the Permanent Secretary and hold departmental heads accountable for outputs. - Integrate finance and accounting functions across MDAs to improve performance and coordination. - Establish a single coordination unit to ensure harmonized engagement with external stakeholders. ### Implementation Roadmap and Recommendations (16 priority recommendations) - The report proposes 16 priority recommendations with short-, medium-, and long-term timelines, categorized under macro-fiscal, budget management, financial control, and cross-cutting themes. Key structural reforms include the creation of a Macro-Fiscal Management Department, budget coordination unit, and fiscal risk division. Technical recommendations target the rollout of MTBF, baseline costing methodologies, and interim and long-term solutions for financial reporting. - MACRO-FISCAL 1. Establish a stand-alone Macro-Fiscal Management Department, drawing on the existing capabilities of the Transformation Office, and expand role to cover all major macro-fiscal roles. — Short-term — High 2. Expand the mandate and build-up the capacity of Tax Policy and Debt Management Divisions. — Medium-term — Medium 3. Staff, train and direct PEEPA to carry out fully the SOE governance and oversight functions — Medium-term — High 4. Reconstitute the Technical Macro-Fiscal Working Group — Medium-term — Medium - BUDGET PREPARATION AND MANAGEMENT 5. Combine the existing budget coordination functions to guide budget preparation including development of the budget calendar and guidelines, and lead the rollout of budget reforms — Medium-term — High 6. Strengthen coordination of the recurrent and development budget, including the functions and responsibilities of the MoF and NPC — Short-term — High 7. Review institutional arrangements for budget decision making with a view to incorporate the early participation of key role players — Medium-term — High - FINANCIAL CONTROL, ACCOUNTING AND REPORTING 8. Strengthen the OAGs design and oversight of financial control, accounting and reporting framework — Short-term — High 9. Transfer OAG procurement policy coordination responsibilities to PPRA — Short-term — Medium 10. Strengthen the OAG’s systems function to manage and develop GABS and to manage external application providers — Short-term — High 11. Expand mandate of the Cash Management Unit for monitoring cash flows and guiding budget releases — Short-term — High 12. Strengthen arrangements and secure greater engagement of Accounting Officers with the internal audit findings — medium-term — Medium - CROSS-CUTTING 13. Review the arrangements for progress reporting and monitoring of the PFM reform strategy, relocate the coordination function to the Office of the PS — Medium-term — Medium 14. Review the current PFM reform strategy and elaborate aspirational but credible expectations, priorities, plans, etc. for the achievement of proposed reform outputs — Medium-term — Medium 15. Implement arrangements to provide for a more integrated finance function in Ministries, Departments, & Agencies (MDAs) — Longer-term — Medium 16. Review opportunities to consolidate development partner coordination within MoF — Medium-term — Medium ### Strategic imperative and concluding assessment - Botswana’s MoF must modernize its PFM framework to adapt to deteriorating fiscal conditions and rising macroeconomic risks. - Institutional reform, backed by analytical capacity and strategic leadership, is vital to enhance fiscal governance and sustain long-term economic stability. - Implementing these reforms will be essential to restore fiscal sustainability, rebuild buffers, and reinforce the credibility of fiscal policy. - Success will depend on strong political commitment, effective sequencing of reforms, and investment in institutional capacity. - If carried out decisively, the recommended measures will not only safeguard macroeconomic stability but also create the foundation for a more diversified and resilient economy capable of supporting Botswana’s long-term development goal. *Source: IMF staff report excerpt on PFM reform implementation and roadmap.* ### 10. Adaptation can substantially reduce climate change impacts while minimizing fiscal ### 10. Adaptation can substantially reduce climate change impacts while minimizing fiscal costs if supported by efficient public policies ### Integrating adaptation into macro-fiscal planning - IMF staff developed guidance to help countries adapt by integrating climate change in macro-fiscal planning (Gonguet et al. 2021; Bellon and Massetti, 2022a,b; Aligishiev, Bellon, and Massetti, 2022; Sakrak et al. 2022). - First crucial step: differentiate between investment in climate change adaptation and investment in development. - Many development investments reduce climate vulnerability as a side benefit (e.g., irrigation, rural roads, structural shifts in employment). - Adaptation investments are those driven exclusively by climate change; only the additional cost attributable to climate change should be considered adaptation expense (example: larger water storage tanks due to longer dry periods) (Bellon and Massetti, 2022). - Distinction purpose: enable accurate estimation of budgetary pressures and prevent double counting of investment needs. ### Prioritization and public roles - Focusing on strictly additional measures simplifies and strengthens adaptation strategy. - Botswana’s Second Updated NDC outlines approximately forty measures across eight areas: climate services, water, livestock, crops, forestry, biodiversity and rangeland, health, infrastructure (Government of Botswana, 2024), though not all are strict adaptation measures and many are driven primarily by development needs. - Government impact maximized by prioritizing: - Public provision of climate services: expand early warning systems, climate risk mapping, and define a system to measure impacts of climate change. These are instrumental to mainstreaming climate change into government operations, including integrating climate change into Public Financial Management (PFM). - Boosting water sector efficiency: water transfer schemes, minimizing water losses, and strengthening transboundary agreements on water to address present risks and future water stress. - Reforms to ease efficient resource use and ensure competitive access to markets (e.g., access to credit markets for farmers; efficient water pricing). - Addressing adverse distributional impacts to ensure a just transition. ### Cost-benefit analysis and decision-making - Cost-benefit analysis (CBA) is essential to select public adaptation projects and avoid crowding out higher-return development measures. - Examples of projects requiring trade-offs: climate-resilient infrastructure, improved drainage systems, water desalination facilities, rooftop rainfall catchment on public buildings. - CBA, complemented by analysis and correction of distributional impacts, helps decision makers maximize overall social welfare. - Recommendation: apply CBA to adaptation and all other development programs in a consistent manner (Bellon and Massetti, 2022). ### Source attribution *Italic: Source: IMF staff chapter content.* ### D. Powering the Future: Accelerating Botswana’s Shift to Renewables ### Background and current system characteristics - Domestic installed capacity: approximately 900 MW; around 630 MW used during peak hours. - Coal-fired plants: - Morupule B (~600 MW) and Morupule A (~132 MW) account for over 96 percent of domestic power. - Diesel contingency generators: Orapa (90 MW) and Matshelagabedi (73 MW) provide roughly 160 MW. - Renewable energy installed capacity: 6 MW of solar photovoltaic (PV) capacity (IRENA, 2021). - Domestic generation share: about 48 percent of final power consumption generated domestically; 52 percent sourced through the Southern African Power Pool (SAPP) (primarily from Zambia, Namibia, and South Africa). - 2023 electricity imports cost: $156 million (Botswana was the 55th largest importer of electricity globally). - Composition of SAPP generation: around 60 percent coal generation and around 24 percent hydro. - Recent unit costs of imported power increased by an estimated 166 percent (Timothy, 2025). - Transmission and distribution losses: averaged 15.35 percent in 2021 (World Bank, 2024). - Electrification: - National electrification: approximately 72–76 percent in recent years. - Urban access: around 95.5 percent. - Rural access: around 25 percent. - Zero-cost connection policy (launched in 2024): free supply of a pre-wired electrical distribution system known as a ready board for customers earning up to P2,400 per month. - Implicit fossil fuel subsidies: estimated at around 5 percent of GDP (implicit subsidies include external costs and forgone consumption tax revenue). - Tariff and subsidy details: - BPC tariff increases: 10 percent (April 2018), 22 percent (2020), and 3 percent (2021). - Tariffs remain at 30–32 thebe/kWh (0.021–0.0224 USD/kWh) below actual generation and import costs. - Operational losses: P498 million in FY2023 (Timothy, 2025). - Confirmed subsidy support for upcoming year: around P1.2 billion as part of a P3–4 billion package under the Transitional National Development Plan; estimated shortfall for 2025-2026 is P3.4 billion (Timothy, 2025). - Current average domestic tariffs: roughly $0.09/kWh. - Market structure: single-buyer model with Botswana Power Corporation (BPC) as sole off-taker; concentration of off-taker risk and need for robust financial management and contractual certainty. ### Targets, updated Integrated Resource Plan (IRP), and modeling approach - Energy goals: - Vision 2036 target: 50 percent share of renewable energy generation. - Aim for universal electricity access and net energy exporter status by 2030. - NDC pledge: 15 percent reduction in greenhouse gas emissions relative to a business-as-usual (BAU) scenario by 2030 (conditional on securing adequate financing). - Updated 2025 Integrated Resource Plan (IRP): - Incoming renewable energy installed capacity at 1950 MW. - Implementation led by Projects and Energy Development Unit (PEDU) under the MME, preparing competitive tenders for large-scale solar and wind. - Continued investment planned in coal generation: - 600 MW Mmamabula power plant procured and expected to be completed in 2027. - Another coal plant in Palapye planned by 2027 with an additional 615 MW. - Coal bed methane project reaching 100 MW of installed capacity. - Caveat: the IRP is not informed by a least-cost generation analysis or renewable energy feasibility studies; feasibility of proposed projects remains uncertain. - Climate Policy Assessment Tool (CPAT): - Spreadsheet-based model projecting fuel use and GHG emissions for major energy sectors in over 200 countries. - Impacts of carbon pricing and mitigation policies depend on proportionate impacts on future fuel prices and fuel price elasticities (parameterized to the mid-range of existing literature). - CPAT linked to input-output tables to infer impacts on production costs, consumer prices, and burdens on household income groups. - CPAT is used to model IRP outcomes (see Annex 4 for details). ### CPAT results and implications - Under the IRP (CPAT modelling): - Renewable energy—particularly solar PV—is projected to surpass demand for coal-fired generation within the first year of being introduced, since price for renewable energy is lower than coal-generation. - Because the IRP ends in 2027 and no additional renewable energy is planned beyond this horizon, demand for coal-generation increases again as energy demand grows and modelling assumes a reduction of imported electricity. - CPAT modeling assumptions: a 10 percent fall in annual electricity imports for the time horizon of the IRP and a 5 percent fall in annual electricity imports until 2033. - Under the IRP: - Power sector emissions are expected to fall by approximately 54 percent compared to 2030 baseline levels (exc LULUCF). - Overall emissions are expected to fall by 30 percent compared to 2030 baseline levels, thereby exceeding the country’s NDC. - Energy-related revenue: the majority comes from excise taxes on gasoline and diesel consumption; reduction in coal generation would not significantly diminish government revenue streams. - Co-benefits of renewable transition: reduce reliance on aging coal plants, improve air quality, and enhance energy security by diversifying supply sources. ### Risks, constraints, and sectoral considerations - Oversupply risk: - Bringing over 3000 MW of installed coal and renewable energy capacity online before 2027 risks oversupply relative to current peak demand of just 630 MW. - Solar capacity factor: around 20 percent. When including capacity factors, the level of additional supply is closer to 1050 MW of capacity, which is still an oversupply of domestic generation. - Regional market and infrastructure constraints: - SAPP regional excess capacity in 2024 (including reserves): 6,401 MW (see Table 1). - Regional competition: other SAPP members are planning generation capacity expansions (see Table 2). - Export potential depends on transmission interconnectors that require significant time and investment; delays in regional demand growth or connections could force plants to operate below capacity factors and undermine economic viability. - Market structure and investor risk: - Single-buyer arrangement concentrates off-taker risk in BPC. - Need for robust financial management and contractual certainty to ensure investor confidence and long-term supply security. - Equity and access: - Stark urban-rural access disparity: urban ~95.5 percent vs rural ~25 percent—equity challenges remain despite policies like zero-cost connection (ready board for incomes up to P2,400 per month). - Off-grid and decentralized solutions have not yet been mainstreamed (World Bank, 2023). ### Key statistics and figures (preserved exactly as in source) - Domestic installed capacity: approximately 900 MW. - Peak hours used capacity: around 630 MW. - Morupule B: ~600 MW. - Morupule A: ~132 MW. - Diesel generators: Orapa (90 MW), Matshelagabedi (73 MW). - Renewable energy installed capacity: 6 MW of solar photovoltaic (PV) capacity. - Domestic generation share: about 48 percent of final power consumption; 52 percent sourced through SAPP. - 2023 electricity imports cost: $156 million. - SAPP generation composition: around 60 percent coal generation and around 24 percent hydro. - Recent unit cost increase of imported power: estimated 166 percent. - Transmission and distribution losses: 15.35 percent in 2021. - National electrification: approximately 72–76 percent. - Urban access: around 95.5 percent. - Rural access: around 25 percent. - Zero-cost connection policy income threshold: up to P2,400 per month. - Implicit fossil fuel subsidies: around 5 percent of GDP. - Tariff shortfall: 30–32 thebe/kWh (0.021–0.0224 USD/kWh) below actual costs. - Operational losses: P498 million in FY2023. - Confirmed subsidy support upcoming year: around P1.2 billion; package size P3–4 billion; estimated shortfall for 2025-2026: P3.4 billion. - Current average domestic tariffs: roughly $0.09/kWh. - IRP incoming renewable installed capacity: 1950 MW. - Planned coal additions: 600 MW Mmamabula (expected 2027); Palapye additional 615 MW by 2027; coal bed methane project 100MW. - CPAT emissions reductions under IRP: power sector emissions fall by approximately 54 percent; overall emissions fall by 30 percent (compared to 2030 baseline, exc LULUCF). - IRP time-horizon import reduction assumptions: 10 percent fall in annual electricity imports for IRP horizon; 5 percent fall in annual electricity imports until 2033. - Planned additional installed coal and renewable capacity before 2027: over 3000 MW. - Solar capacity factor: around 20 percent. - Adjusted additional supply when accounting for capacity factor: closer to 1050MW. - 2024 regional excess capacity including reserves: 6,401MW. ### Policy implications and recommended focus areas - Prioritize public provision of climate services and mainstream climate risk information into PFM and all government operations. - Prioritize actions to increase water sector efficiency (water transfers, loss minimization, transboundary agreements). - Use CBA consistently across adaptation and development programs and complement with distributional analysis to maximize social welfare. - Reform market incentives to remove implicit fossil fuel subsidies (implicit subsidies estimated at around 5 percent of GDP) and align prices with economic costs to accelerate shift toward cleaner alternatives. - Address tariff cost-recovery gap (tariffs 30–32 thebe/kWh below costs) to reduce fiscal strain (current subsidies and transfers: confirmed P1.2 billion support; shortfall P3.4 billion for 2025-2026). - Manage generation planning carefully to avoid oversupply risks and ensure export prospects are realistic given SAPP competition, regional excess capacity (6,401MW in 2024), and transmission interconnector constraints. - Strengthen investor confidence and mitigate off-taker risk in the single-buyer model (BPC) through robust financial management, contractual certainty, and potential market or institutional reforms. - Ensure electrification policies address rural access gap (rural ~25 percent) and consider mainstreaming off-grid and decentralized solutions. ### Source attribution *Italic: Source: IMF staff chapter content.* ### 25. Evidence-based planning is essential to ensure that energy investments are both ### Evidence-based planning is essential to ensure that energy investments are both efficient and achievable ### Evidence-based planning and least-cost analysis - The IRP provides a strategic outline for future energy development but "is not based on a least-cost generation analysis or renewable energy feasibility studies," limiting confidence in its economic efficiency and technical viability. - Basing energy planning on least-cost and feasibility analyses ensures: - resources are allocated optimally, - generation options are technically achievable, - the system can reliably meet demand at the lowest possible cost. - Without this foundation, the plan risks promoting solutions that may be financially or operationally unsustainable, potentially leading to higher costs for consumers and delays in achieving energy security and renewable integration goals. ### Procurement, auctions, and investor confidence - Recommendation: Commit to a clear, consistent auction schedule with transparent rules to rebuild investor trust and secure long-term renewable energy investment. - Past experience: Multiple utility-scale solar auctions have been canceled or delayed, undermining confidence (example: the 100 MW PV tender announced in 2017 was canceled in 2019 and later reissued in smaller lots, some of which the government did not pursue). - Procurement must be rolled out in a transparent, consistent, and timely manner to restore credibility and attract sustained investment. ### Grid integration, technical standards, and institutional capacity - The current grid code lacks comprehensive technical standards for integrating renewable energy, storage, and distributed generation; it also lacks clarity on grid access protocols and interconnection requirements for IPPs. - BPC’s workforce includes only a limited number of engineers skilled in transmission and connection planning (Kruger, Alao, and Betz, 2024), hindering smooth renewable integration. - Policy actions: - Update the grid code to incorporate RE integration requirements. - Ensure institutional capacity for timely grid connection approvals and for monitoring and enforcing compliance. - Implement robust provisions for managing variable renewable energy (forecasting, curtailment protocols, ancillary services) to maintain grid stability as more solar and wind come online. ### Tariff reform, subsidies, and cross-subsidization - Increasing electricity tariffs to cost-reflective levels and phasing out subsidies can enable expansion of the renewable energy share by allowing utilities to recover operating expenses and invest in grid upgrades/new generation. - Case example: Namibia implemented cost-reflective tariffs following a national tariff and cost-of-service study, enabling NamPower to operate without external subsidies and attracting IPPs that now contribute 25 percent of installed capacity (Baker and Bischof-Niemz, 2022). - Applying the standard VAT rate instead of zero-rated treatment on diesel and petrol could generate an additional 0.25 percent of GDP in revenues by 2035. - Cross-subsidization approach: - Use revenues from businesses/high-consuming residents to support low-consuming domestic users (e.g., rural consumers or consumers in areas of solar mini-grids). - Advantages: support rural electrification, narrow urban-rural access gap, provide predictable revenue streams for mini-grid operators. - Requirements for success: transparent tariff setting, consumption metering (including AMI), estimation of impacts of new mini-grids on tariffs, cost recovery calculations for participating mini-grids, studies on impacts of increased main grid tariffs, periodic tariff reviews, long-term planning of mini-grid sites, and addressing operational losses. ### Alternative subsidy approach: subsidize green technology - Instead of direct cross-subsidization of consumers, additional revenues from urban tariffs could subsidize green technologies (solar mini-grids, battery storage, efficient appliances) in rural areas. - Both approaches require careful assessment of impacts on consumer affordability and long-term planning to maximize economies of scale and ensure transparency and effectiveness through periodic reviews. ### Industry accountability and distributed energy requirements - The mining sector accounts for approximately half of all productive electricity usage in Botswana. - Copper and nickel operations account for 49 percent of the mining sector’s electricity consumption. - The diamond subsector accounts for 45 percent of the mining sector’s electricity consumption. - Policy option: Require large electricity users (e.g., mining companies) to increase the share of renewable-based electricity in their power mix by at least a set percentage each year until 2030, with unmet targets triggering compensatory investments in rural electrification. - Rationale: Leverage private sector investments (e.g., firms such as Debswana aiming for carbon neutrality by 2030) to accelerate sustainable and inclusive energy development. ### Green fiscal measures: VAT on fuels, carbon pricing, and import-duty exemptions - VAT on fuels: - There is a zero-rated VAT on diesel and petrol, avoiding the standard 14 percent rate. - Applying the standard VAT to diesel and petrol could generate an additional 0.25 percent of GDP in revenues by 2035 and help level the playing field across technologies. - Revenue recycling into the general budget could improve consumption for lower-income households; the policy would be progressive because wealthier households have greater access to gasoline and diesel-requiring equipment. - Carbon pricing: - South Africa’s carbon tax is currently 13USD/tCO2 and is expected to rise to 30USD/tCO2 by 2030. - If Botswana imposed a 5USD/tCO2 carbon tax escalating to 25USD/tCO2 by 2030, additional fiscal revenues could increase over 1.2 percent of GDP (by 2035) with only a small change in electricity prices, of 11 percent, over the next five years. - The modeled impact on GDP from the carbon tax is negligible; the tax would complement the IRP to reduce emissions further, particularly in the industrial sector. - Distributional effects: Carbon pricing is inherently progressive in Botswana as poorer households typically have lower fossil fuel consumption; revenue recycling and cash transfers can make effects highly progressive and politically palatable. - Targeted import duty exemptions: - Exemptions on solar PV panels, batteries, inverters, and similar technologies can lower upfront costs and boost adoption. - Trade-off: forgone tariff revenues and potential skewed benefits toward wealthier households; careful targeting is required to avoid widening inequality in energy access. ### Mineral endowments and economic diversification - Opportunity: Botswana can position itself as a supplier to the global clean energy transition by leveraging critical minerals (cobalt, copper, manganese, nickel). - Risks and policy needs: - Avoid Dutch Disease by diversifying beyond resource exports into manufacturing and services. - Manage resource revenues prudently to prevent currency overheating. - Pair mineral development with robust environmental safeguards, strong governance, and sustainable mining practices. ### Conclusions: climate impacts, fiscal risks, and reform priorities - Climate and macroeconomic risks: - Persistent warming is expected to intensify, with more frequent extreme heat and longer droughts, reducing agricultural yields and labor productivity. - Short-term: Extreme heat events have been shown to lower growth by up to 2 percentage points. - Long-term: A sustained warming trend could lead to as much as a 10 percent reduction in GDP by the century’s end compared to projections under current conditions, with cascading fiscal consequences (lower revenues, higher spending on social protection and adaptation). - Priority reforms: - Refine adaptation measures in the Second Updated NDC, prioritizing investments in climate services (early warning systems, climate risk mapping, measurement mechanisms). - Improve water sector efficiency and reduce market inefficiencies to facilitate private adaptation and crowd-in private investment, reducing fiscal risks. - Ease fiscal pressures from electricity subsidies via: - Ambitious renewable expansion in the updated IRP (could cut power sector emissions by over 50 percent relative to a business-as-usual scenario for 2030), - Proper planning including a least-cost generation plan, - Tax adjustments supporting climate goals (apply standard VAT to diesel and petrol), - Gradually introduce a low-level carbon price. *Source: IMF staff report excerpt.* ### 112014. https://doi.org/10.1016/j.rser.2022.112014 ### 112014. https://doi.org/10.1016/j.rser.2022.112014 ### Climate science, datasets, and projections - Copernicus Climate Change Service, Climate Data Store (2021): CMIP6 climate projections. DOI: 10.24381/cds.c866074c - Harris I, Osborn TJ, Jones P and Lister D (2020). Version 4 of the CRU TS Monthly High-Resolution Gridded Multivariate Climate Dataset. Scientific Data (https://doi.org/10.1038/s41597-020-0453-3). - Massetti, E. and F. Tagklis (2024). FADCP Climate Dataset: Temperature and Precipitation. Reference Guide, Fiscal Affairs Department, International Monetary Fund, Washington DC. - Mohaddes, K., and Raissi, M., 2025. “Rising Temperatures, Melting Incomes: Country-Specific Macroeconomic Effects of Climate Scenarios,“ PLOS Climate 4(9), e0000621. - Richardson, K., Calow, R., Mayhew, L., et al. (2022). Climate Risk Report for the Southern Africa Region. Met Office, ODI, and FCDO. Final delivery version: February 2023. - Serdeczny, Olivia, Sophie Adams, Florent Baarsch, et al. "Climate change impacts in Sub-Saharan Africa: from physical changes to their social repercussions." Regional Environmental Change 17, no. 6 (2017): 1585-1600. - Isaac, Morna, and Detlef P. Van Vuuren. "Modeling global residential sector energy demand for heating and air conditioning in the context of climate change." Energy policy 37, no. 2 (2009): 507-511. - Schlenker, Wolfram, and Michael J. Roberts. "Nonlinear temperature effects indicate severe damages to US crop yields under climate change." Proceedings of the National Academy of sciences 106, no. 37 (2009): 15594-15598. ### Energy sector, renewables, and infrastructure developments - International Renewable Energy Agency. (2021). Renewables Readiness Assessment: Botswana. - Southern African Power Pool. (2021). SAPP Annual Report 2021. - Namibia Ministry of Mines & Energy. (2022, October). National Integrated Resource Plan (NIRP) 2022 for the Electricity Supply Industry, Namibia (Final Report). - South Africa Department of Mineral Resources & Energy. (2019, October). Integrated Resource Plan 2019 (IRP 2019). - Reuters. (2024a). Chinese firms to build Namibia’s largest solar power plant. Reuters. (2024-09-09) - Reuters. (2025). Zambia launches 100 megawatt solar plant supplying First Quantum Minerals. Reuters. Retrieved 2025-06-30. - Jowett, P. (2025). South Africa targeting up to 5 GW of new renewables per year. pv magazine. Retrieved 2025-04-07. - Global Transmission Report. (2025, July 11). Zambia: Planned generation and transmission capacity. - Enerdata. (2025). South Africa approves the South African Renewable Energy Masterplan. - Kruger, W., Alao, O., & Betz, S. (2024). Driving growth: Effective renewable energy tendering in Africa: Success factors for private power investment and procurement. - Reuters. (2024b). World Bank approves US$138.5 million loan to Namibia. (2024-05-07) - World Bank. (2024a). Renewable Energy Support and Access Accelerator Project (P181221) – Project Information Document. - Bungane, B. (2018). Mozambique plans 700 % increase in output capacity by 2043. ### Macroeconomic, fiscal, and labor impacts of climate change - Bellon, M. and E. Massetti. 2022. “Economic Principles for Integrating Adaptation to Climate Change into Fiscal Policy.” IMF Staff Climate Note 2022.001, International Monetary Fund, Washington, DC. - Kahn, Matthew E., Kamiar Mohaddes, Ryan NC Ng, M. Hashem Pesaran, Mehdi Raissi, and Jui-Chung Yang (2021). “Long-term macroeconomic effects of climate change: A cross-country analysis.” Energy Economics 104: 105624. - Kurukulasuriya, Pradeep, Robert Mendelsohn, Rashid Hassan, et al. "Will African agriculture survive climate change?." The World Bank Economic Review 20, no. 3 (2006): 367-388. - Kjellstrom, Tord, R. Sari Kovats, Simon J. Lloyd, Tom Holt, and Richard SJ Tol. "The direct impact of climate change on regional labor productivity." Archives of environmental & occupational health 64, no. 4 (2009): 217-227. - Somanathan, Eswaran, Rohini Somanathan, Anant Sudarshan, and Meenu Tewari. "The impact of temperature on productivity and labor supply: Evidence from Indian manufacturing." Journal of Political Economy 129, no. 6 (2021): 1797-1827. - Mohaddes, K., and Raissi, M., 2025. “Rising Temperatures, Melting Incomes: Country-Specific Macroeconomic Effects of Climate Scenarios,“ PLOS Climate 4(9), e0000621. ### Data sources, indicators, and trade/electricity access - SDG 7.1.1 Electrification Dataset, World Bank (WB). Data accessed: 2024-05-16; date published: 2023. - World Bank. (n.d.). Access to electricity (% of population) – Botswana. Retrieved August 25, 2025. - The Observatory of Economic Complexity (OEC). (2023). Electricity in Botswana trade. Retrieved August 25, 2025. - International Energy Agency. (n.d.). Botswana – Electricity. Retrieved August 25, 2025. - IMF Fossil Fuel Subsidies Database, 2023 Update. IMF Climate Change Indicators Dashboard. - SADC Centre for Renewable Energy and Energy Efficiency. (n.d.). Botswana. Retrieved August 25, 2025. - Zambia Ministry of Energy. (n.d.). About the IRP project – Integrated Resource Plan (IRP). ### Regional policy, diagnostics, and country reporting relevant to Botswana - Government of Botswana (2024). Botswana’s Second Nationally Determined Contributions (NDCs) to the Paris Agreement. - World Bank. (2023). At a crossroads: Reigniting efficient and inclusive growth – Botswana Systematic Country Diagnostic Update. - Timothy, L. (2025). Gov’t weighs options as tariffs become ‘unsustainable’. Mmegi Online. - Multiple Reuters and news items documenting project financing and large-scale solar developments in neighboring countries. *International Monetary Fund* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1bwaea2025002-source-pdf.pdf_