Botswana is a landlocked country located in southern Africa, bordered by South Africa to the south, Namibia to the west, Zambia to the north, and Zimbabwe to the east. With a population of over 2.3 million people, it is one of the most sparsely populated countries in the world. Botswana is known for its political and economic stability, which has been achieved through good governance, transparency, and effective management of its natural resources, including diamonds, beef, and tourism.
Botswana’s economy is primarily driven by the mining industry, particularly the diamond industry, which accounts for a significant portion of the country’s GDP and exports. The country has been successful in using the revenues generated from its natural resources to invest in social and economic development, including infrastructure, education, and healthcare.
PESTLE Analysis of Botswana
The PESTLE analysis of Botswana provides an overview of the different factors in the country’s macro-environment that work together to create a dynamic business environment for the various sectors.
Political Factors
Among the different countries in Africa, Botswana has displayed a high level of political strength over the years. The democratic system has been successfully in place, allowing the country to focus on developmental goals. Since 1966 Botswana Democratic Party (BDP) has been getting a favorable outcome in each election, continuing to be the ruling party till now.
Overall, the political climate is regarded as maintaining a similar level of stability, with minimal disruption occurring due to any conflict. Such high levels of stability make the country an appealing location for startups. In addition, the companies already operating in the region find numerous growth opportunities due to the peaceful environment.
Another positive aspect of the country is the low levels of corruption which signify the positive climate for the different industries. According to Transparency International (2022), Botswana was ranked at the 35th position considering the low instances of corrupt practices in the region.
Economic Factors
Diamond industry is one of the major domains that support its economic prosperity and revenues. In 2023, the economic growth is expected to experience slow down due to lower diamond production. Moreover, the diamond prices are also depicting a downward trend, adding to the economic pressure for the country (Economist Intelligence, 2023).
The government’s focus has been on diamond industry primarily, which has caused economic issues during the pandemic. The trading process was not able to generate high amount of revenues in 2020 as the demand for the diamonds was lower due to pandemic related financial constraints. From 2021 onwards, the economy is forecasted to show positive trends.
Due to less stringent monetary policies, Botswana has experienced an increase in the inflation rate. However, the government has taken the necessary steps to make the policies more favorable for the country’s economic stability. The country has realized the need to diversify its economic activities and has shifted attention towards developing in the digital domain.
Another area where it is imperative to focus attention is the high rate of unemployment, which is estimated to be 26% (The World Bank, 2022). High unemployment is an indication that the creation of relevant jobs in the market is not in accordance to the availability of the people seeking jobs.
Social Factors
The population of Botswana is more than 2.5 million, with more than 70% of the population residing in the urban regions. The country has experienced a sharp decline in the population growth rate due to a higher ratio of females opting to invest in their academics and career. Low fertility rate which can disrupt the population distribution and economic growth in the long run.
Even though the country has been able to maintain political and economic stability, there are some challenges that hinder the social development. An area of concern for the country is the high dependency ratio among the youth. This indicates that the people who are employed have to invest more effort in order to handle the expenses of the dependent, creating financial stress.
High youth unemployment indicates the lack of proper resources for connecting the workforce with opportunities. In addition, the education offered is not focused on creating skilled workforce (The World Bank, 2022). Another social challenge that Botswana struggled with was the high rate of HIV infected individuals which was controlled with required medical intervention.
Technological Factors
The government of Botswana has acknowledged the risks embedded in depending on the diamond sector for economic prosperity. The financial crunch and then the pandemic have pushed the government to focus on the technological sector as a rising opportunity for country’s development.
The digital trend has not been able to receive the same attention in Botswana as in other regions indicated through the low ratio of people engaged in the use of e-commerce portals. The government has created Vision 2036, including e-commerce growth as a part of the development objectives showing the commitment to technology integration in the country (UNCTAD, 2021).
Botswana is aiming to develop its ICT infrastructure along with investing in the strengthening of e-commerce skills of the population. The integration of digitalization would enable the country to further develop in the domain of exports and allow the local firms to increase their global market presence.
Legal Factors
The legal domain of Botswana tries to create a positive business environment. The laws devised by the government encourage the foreign investors, along with the local business activities. Citizens Economic Empowerment (CEE) Law has been put in place to ensure that the local population is able to find employment in foreign investment based firms.
Due to lack of availability of skilled workers in the country, organizations depend on foreign workers to fill in the job positions. These employees are required to fulfill the work permit and other legal regulations related to expatriate employees. In addition, organizations need to obtain licenses from the government, which is a slow process due to red tape.
Environmental Factors
The Waste Management Act of 1998 aimed to highlight the importance of sustainable business practices for the organizations in Botswana. By the end of 2030, the country intends to reduce the carbon emission to 15%, which shows the commitment to the sustainability goal of achieving net zero emissions by 2050 (Sunday Standard, 2022).
The country is adhering to the achievement of this goal and working towards adopting green business practices. However the government needs to further develop its environment friendly policies and work on its sustainability goals and work on the reduction of CO2 emissions that have steadily increased at a rate of more than 7% every year.
Conclusion
Botswana is a country with a stable political climate and low levels of corruption, making it an appealing location for startups and providing growth opportunities for companies already operating in the region. However, the country’s economic prosperity is heavily dependent on the diamond industry, which has faced challenges due to the pandemic and decreasing demand. To diversify its economic activities, the government is shifting attention towards developing in the digital domain, which is supported by the Vision 2036 initiative. Botswana also faces social challenges, including high rates of unemployment and a high dependency ratio among the youth, but the government has acknowledged these challenges and is taking steps to address them. Finally, the government is committed to achieving its sustainability goals, including reducing carbon emissions and promoting green business practices, although further development of environment-friendly policies is required. Overall, Botswana has made significant progress in maintaining stability and promoting development, but there are still challenges to overcome for sustainable long-term growth.
References
Economist Intelligence (2023). Botswana. Retrieved from: https://country.eiu.com/botswana
Sunday Standard (2022). Botswana on track for net-zero emissions by 2050. Retrieved from: https://www.sundaystandard.info/botswana-on-track-for-net-zero-emissions-by-2050/#:~:text=The%20report%20further%20notes%20that,re%2Dabsorbed%20from%20the%20atmosphere.
The World Bank (2022). The World Bank in Botswana. Retrieved from: https://www.worldbank.org/en/country/botswana/overview
Transparency International (2022). Botswana. Retrieved from: https://www.transparency.org/en/countries/botswana
UNCTAD (2021). Botswana launches strategy to diversify economy through e-commerce. United Nations Conference on Trade and Development. Retrieved from: https://unctad.org/news/botswana-launches-strategy-diversify-economy-through-e-commerce