- AfDB says slow economic transformation with limited economic diversification holds back Botswana from achieving high-income status by 2036
In a recently released Country Strategy Paper (CSP) 2022-2026 for Botswana, the African Development Bank (AfDB) says it plans to support the country in its ambitions to diversify its economy and speed up structural transformation for sustainable and inclusive growth.
The bank’s choice of intervention areas was informed by the development priorities of the government as articulated in Vision 2036, the mid-term review (MTR) of the 11th National Development Plan 2017-2023 (NDP 11), and the accompanying Economic Recovery and Transformation Plan 2020/2021-2022/2023 (ERTP).
“The bank’s 2021 Country Diagnostic Note (CDN) for Botswana informed the proposed strategic orientation of the CSP 2022-2026,” the report notes. “The CDN emphasised several reform areas including the need to accelerate economic diversification to reduce vulnerability to diamond market volatility, implement adequate private sector and public financial management reforms, and augment the country’s resilience to climate change.
“Given the magnitude and diversity of Botswana’s development challenges, bank support will be selective to ensure that it is provided in a focused and well-targeted manner. The selective criteria include government priorities for bank support, findings from stakeholder consultations and lessons learnt from implementing the previous CSP.”
To achieve its objective, the bank says it will focus its assistance on two priority areas of prompting the private sector through regulatory reforms and Public Private Partnerships (PPPs). It will also aim to improve fiscal performance, public financial management and public sector efficiency and support to small and medium enterprises (SMEs) development.
“Under Priority Area II, the bank will prioritise support to growth-oriented infrastructure such as transport, water and energy to improve Botswana’s competitiveness,” says the report. “Lower transport and logistics costs will promote regional trade, encourage private sector investment, and facilitate integration into regional and global value chains. Interventions in energy will expand renewable electricity capacity and improve the business climate by lowering the cost of production, eventually promoting power trade through the Southern African Power Pool (SAPP).”
In the energy sector, the AfDB will assist Botswana in implementing its low carbon and climate resilience strategy through enabling a large-scale rollout of renewable energy generation by supporting the energy sector’s policy, regulatory and institutional frameworks, including those required for renewable energy exports.
The AfDB says it will position itself to support Botswana through various financing windows and that given the country’s statutory limit on debt, sovereign instruments will include the AfDB sovereign window for programmatic budget support, trust funds, and technical assistance. On the non-sovereign side, the bank will use credit enhancement products such as partial guarantees and senior loans. Bank instruments will leverage climate finance and the regional operations envelope, with avenues such as the Africa Investment Forum, being tapped into for potential cross-border projects.
The AfDB is Africa’s leading infrastructure investor, the continent’s only Triple A-rated financial institution, and its active portfolio in Botswana amounts to $223 million. The portfolio is dominated by multi-sector projects, which account for the largest segment. Sixty-two percent of this falls under the Economic Recovery Support Programme, 36.3 percent is in financial support, with the rest financing the country’s agriculture, industrial and power sectors.
