## Botswana: Mining a New Growth Model

_IMF News, September 5, 2018_

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**Canonical URL:** [Botswana: Mining a New Growth Model](https://www.imf.org/en/news/articles/2018/09/05/na090518botswana)

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## Bibliographic details
- Published: September 5, 2018

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### Overview
- Botswana transformed from a severely impoverished nation to a high-middle-income country over the half century since independence, with substantial reductions in poverty and rapid improvements in living standards.
- Diamonds and sound economic policies have helped build infrastructure and keep the economy stable, but the diamond- and public sector-led development model is showing its limits.

### Key success factors
- Prudent and transparent management of diamond revenues, contributing to sizable savings for stabilization, investment, and future generations.
- Significant government spending allocated to health, education, social assistance, and public infrastructure.
- A tradition of democratic values supporting political and social stability.

### Challenges and the need to "mine a new growth model"
- Unemployment rate of nearly 18 percent.
- Export concentration: diamonds account for 90 percent of export receipts.
- Diamond production may only extend for another 30 years.
- Small domestic market and limited job creation from mining and public sector expansion necessitate a new development model focused on private sector development and export diversification.

### Diversification priorities and policy recommendations
- Improve the business environment:
  - Remove bureaucratic regulations and impediments.
  - Adopt policies that promote competition.
  - Privatize inefficient state-owned companies (parastatals), including mergers of inefficient government-funded enterprises to improve efficiency.
- Strengthen the labor force and attract skilled workers:
  - Improve policies to build skills and work ethic.
  - Remove restrictions on visas and permits for skilled workers.
- Leverage non-mining sectors:
  - Tourism (e.g., Okavango delta).
  - High-quality, free-range beef production with quota and duty-free access to the EU market.
- Public sector role in enabling private sector growth:
  - Prioritize public projects with economy-wide benefits (examples: air transportation and internet connectivity).
  - Encourage financial development through reforms that increase bank lending and access to credit.

### Fiscal policy, social spending, and inequality
- Fiscal policy contributed to lower poverty and inequality, mostly through social spending.
- High spending in primary and secondary education had an equalizing effect on income distribution.
- Further measures to reduce inequality:
  - Better targeting of social programs and education bursaries.
  - Increasing the rate and coverage of property taxes.
  - Streamlining VAT exemptions to generate resources for social spending and public investment, while compensating the most vulnerable with cash transfers.

### Implementation and next steps
- Successful medium-term prospects depend on implementing key reforms, some long-standing.
- Recent government announcements by President Masisi to remove burdensome regulations, proceed with privatizations, and relax restrictions on permits and visas for foreign workers are encouraging.
- For reforms to succeed they need:
  - Clear assignment of implementation responsibility.
  - Timetables for action.
  - Accountability through high-level monitoring.

_International Monetary Fund (IMF) — Botswana country assessment (News article, September 5, 2018)._

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Read the report](http://www.imf.org/en/Publications/CR/Issues/2018/09/05/Botswana-2018-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-46209)
- [Read the press release](http://www.imf.org/en/News/Articles/2018/09/05/pr18341-imf-executive-board-concludes-2018-article-iv-consultation-with-botswana)
- [Botswana and the IMF](http://www.imf.org/en/Countries/BWA)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/09/05/na090518botswana_