COUNTRY REPORT Botswana Lesotho 1st quarter 1998 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. 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ISSN 1356-4021 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary Botswana 4 Political structure 5 Economic structure 6 Outlook for 1998-99 9 Review 9 The political scene 11 Economic policy 12 The economy 14 Finance 16 Education, health and social matters 17 Agriculture 18 Industry and Commerce 19 Power, transport and communications 21 Mining 22 Aid 23 Foreign trade and payments Lesotho 25 Political structure 26 Economic structure 27 Outlook for 1998-99 29 Review 29 The political scene 31 The economy 34 Foreign trade and payments 35 Quarterly indicators and trade data List of tables 8 Botswana: forecast summary 11 Botswana: defence expenditure 13 Botswana: share of outstanding loans and advances of commercial banks, by sector, at year-end 14 Botswana: consumer price inflation 35 Botswana: quarterly indicators of economic activity 35 Lesotho: quarterly indicators of economic activity 36 Botswana and Lesotho: UK trade EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 2 List of figures 8 Botswana: gross domestic product 8 Botswana: pula real exchange rate 28 Lesotho: gross domestic product 28 Lesotho: loti real exchange rate EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 3 January 16th 1998 Summary 1st quarter 1998 Botswana Outlook for 1998-99: The resignation of President Quett Ketumile Masire has opened up the race for the vice-presidency. The 1998/99 budget is in preparation, but is expected to contain few surprises. GDP growth will be robust and inflation will fall in the short term, but bounce back in 1999. Trade prospects are also promising, with total export earnings rising in 1998-99. Review: Festus Mogae is set to succeed President Masire at the end of March 1998. Ian Khama, the commander of the Botswana Defence Force, has an- nounced his resignation. The opposition Botswana National Front has gained some parliamentary chairmanships in line with its electoral success, but, like the ruling Botswana Democratic Party, is suffering from factional quarrels. The Hague received submissions from the parties in the Sedudu dispute. Vision 2016 was published and a privatisation task-force was established. Commercial bank lending remained stagnant in the first half of 1997, and inflation slowed further. The stock exchange has fallen slightly and obtained new dual-listed stocks. The Botswana Development Corp has successfully launched Botswana’s first bond issue. First National Bank of Botswana did well in 1997. Kgolo Ya Sechaba has nearly completed its voluntary winding-up. AIDS has started to have an impact on population projections. A conference is planned on the San question. Rains have not been abnormal so far, despite the anticipated effect of El Niño. The Botswana Housing Corp has started to evict defaulters. An anti- malarial paint factory is planned. A Botswana-based retailer has expanded its interests into Namibia. The first cellphone contract has been awarded and plans have been announced for a national television service. Diamond sales are up, but Bangwato Concessions Ltd has suffered from low nickel prices. Vehicle and diamond exports have done well, and foreign reserves remain high. Lesotho Outlook for 1998-99: Lawyer Hae Phoofolo has been detained for alleged treason, which may further delay and complicate the trial of 33 police officers detained after the February 1997 mutiny. Delays in preparations for the March 1998 election have raised concerns that voting may have to be postponed. The ruling Lesotho Congress for Democracy party is poised to win at the polls. A drought is likely and this year’s harvest will be poor. Lesotho Flour Mills is next in line under the privatisation programme. Review: Revised data put Lesotho’s GDP at over M3bn ($604m) in 1995/96. The growth rate in 1996 is estimated to have been around 10%. The compos- ition of GDP in 1995/96 indicates a strong showing on gross domestic invest- ment at the expense of private consumption. The 1996/97 budget surplus exceeded 3.7% of GDP, above the target of the structural adjustment pro- gramme. New overseas financing has been secured for Phase 1B of the Highland Water Scheme. Prospects for a drought are stronger with poor early-season rains. Editors: Stephanie Wolters; Piers Haben All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 4 Botswana Botswana Political structure Official name Republic of Botswana Form of state Unitary republic Legal system Roman-Dutch law; cases in rural areas are heard by customary courts National legislature National Assembly; 34 members elected by universal suffrage and four nominated by the assembly; in addition, the president is an ex officio member and the attorney-general a non-voting member; all serve a five-year term; a 15-member House of Chiefs advises on tribal matters National elections October 1994 (legislative); next election due by October 1999 (legislative) Head of state President, chosen by the National Assembly for concurrent term of office National government The president, his appointed vice-president and cabinet Main political parties The Botswana Democratic Party (BDP), the ruling party; the Botswana National Front (BNF); the Botswana People’s Party (BPP); the United Action Party (UAP) The government President Sir Quett Ketumile Joni Masire Vice-president, minister of finance & development planning Festus Mogae Key ministers Agriculture Ronald Sebago Commerce & industry George Kgoroba Education Gaositwe Chiepe External affairs Mompati Merafhe Health Chapson Butale Labour & home affairs Bahiti K Temane Local government, lands & housing Margaret Nasha Mineral resources, energy & water affairs David Magang Presidential affairs & public administration Ponatshego Kedikilwe Works, transport & communications Daniel Kwelagobe Central bank governor Baledze Gaolathe EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 Botswana 5 Economic structure Latest available figures Economic indicators 1993 1994 1995 1996a 1997a GDP at market pricesb (P m) 9,126 11,115 12,530 14,631c 16,686 Real GDP growthb (%) –0.2 4.0 3.5 6.8 7.0 Consumer price inflation (%) 14.3 10.6 10.5 10.1d 9.0 Population (m) 1.39 1.42 1.45c 1.48 1.52 Exports fob ($ m) 1,722 1,878 2,164 2,304 2,695 Imports fob ($ m) –1,455 –1,350 –1,579 –1,293 –1,700 Current account ($ m) 503 243 342 701 777 Reserves excl gold ($ m) 4,153 4,462 4,764 5,028d 5,600 Total external debt ($ m) 660 676 699 678 670 External debt-service ratio (paid; %) 3.7 4.0 3.2 4.0 3.0 Diamond production (m carats) 14.7 15.6 16.8 17.7d 18.9 Cattle slaughteringse (’000) 181 158 166 140 130 Exchange rate (av; P:$) 2.419 2.683 2.772 3.320d 3.610 January 16th 1998 P3.839:$1 % of % of Origins of gross domestic product 1996bc total Components of gross domestic product 1996bc total Agriculture 3.8 Private consumption 28.4 Mining & quarrying 33.2 Public