Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Systematic CountryDiagnostic BOTSWANA: Botswana: Systematic Country Diagnostic March, 2015 Botswana Systematic Country Diagnostic (P150575) Vice President: Makhtar Diop Country Director: Asad Alam Task Team Leader: Thomas Farole Contents Contents .............................................................................................................................................................. i Acknowledgments ............................................................................................................................................. iii Acronyms ........................................................................................................................................................... iv Executive Summary ........................................................................................................................................... vi 1. Setting the scene ........................................................................................................................................ 1 1.1. A global success story, but not shared among all Batswana .............................................................. 1 1.2. Preparing for a more challenging future – a framework for asset building ....................................... 2 1.3. Objectives and approach of the Systematic Country Diagnostic ....................................................... 3 1.4. Structure of the note .......................................................................................................................... 4 2. Understanding poverty in Botswana: profiles and progress ...................................................................... 5 2.1. Overview: poverty, shared prosperity, and inequality ....................................................................... 5 2.2. Who are the poor and the less well-off in Botswana? ....................................................................... 7 2.3. Looking ahead: jobs are the key to reducing inequality and eliminating poverty ........................... 12 3. Growth assessment: drivers, constraints, and risks ................................................................................. 15 3.1. Historical growth model and the challenge of diversification .......................................................... 15 3.2. The challenge of diversification remains .......................................................................................... 17 3.3. Where will future growth come from?............................................................................................. 23 3.4. Expanding trade and investment and deepening regional integration ............................................ 30 3.5. Building a broader, deeper, and more competitive private sector .................................................. 33 3.6. Growth: brief summary of main messages and key challenges identified ....................................... 39 4. Inclusion assessment: building assets at the micro level ......................................................................... 41 4.1. Health and nutrition ......................................................................................................................... 41 4.2. Basic resources and services ............................................................................................................ 44 4.3. Education and skills .......................................................................................................................... 49 4.4. Financial assets ................................................................................................................................. 51 4.5. Labor markets ................................................................................................................................... 52 4.6. Social protection system .................................................................................................................. 54 4.7. Social cohesion, voice, and participation ......................................................................................... 55 4.8. Inclusion: brief summary of main messages and key challenges identified .................................... 56 5. Sustainability assessment: managing resources for long-term prosperity .............................................. 59 5.1. Sustainability in Botswana: a wealth accounting framework .......................................................... 59 5.2. Natural resources management: recognizing the trade-offs ........................................................... 62 5.3. Fiscal management: what is the right size for Botswana’s government in the future? ................... 69 i i 5.4. Public sector management: at the heart of Botswana’s challenge .................................................. 75 5.5. Sustainability: brief summary of main messages and key challenges identified ............................. 79 6. Prioritizing the challenges ........................................................................................................................ 81 6.1. Introduction and summary of the challenges .................................................................................. 81 6.2. Description of prioritization process ................................................................................................ 83 6.3. Prioritization: final results ................................................................................................................ 84 6.4. Implementation of the priority interventions .................................................................................. 87 References ........................................................................................................................................................ 89 Annex 1: Detailed description and results of prioritization process ................................................................ 92 Annex 2: Summary of consultations ............................................................................................................... 102 Annex 3: Assessment of key knowledge gaps ................................................................................................ 104 Annex 4: Assessment of data availability and gaps ........................................................................................ 105 Annex 5: Bibliography of studies and reports informing the SCD .................................................................. 106 ii ii Acknowledgments This note was prepared by Thomas Farole (Senior Economist, GTCDR and Country Economist, Botswana) with inputs received from the Botswana SCD project team across the World Bank’s Global Practices and Cross-Cutting Solution Areas, as per the table below: Global Practice / Cross-cutting area Team member Education Xiaonan Cao Energy and Extractives Bryan Land; Martin Lokanc; Vladislav Vucetic Environment and Natural Resources Glenn-Marie Lange; Claudia Sobrevila; Richard Damania, Esther Naikal Finance and Markets Chunlin Zhang; Valeriya Goffe Gender Andy Kotikula Governance Kathrin Plangemann; John Sikazwe; Quamrul Hasan; Gert van der Linde; Tandile Msiwe Health, Nutrition, and Population Patrick Osewe; Sheila Dutta Jobs Dena Ringold Macro-fiscal Catriona Purfield MIGA Stephan Dreyhaupt Poverty Victor Sulla PPP Emmanuel Nyirinkindi Social Protection and Labor Cornelia Tesliuc; Manuel Salazar, Benedicte De La Briere; Emily Weedon Trade and Competitiveness Chunlin Zhang; Thomas Farole Transport and ICT Ben Gericke; Tim Kelly; Anat Lewin Urban, Rural, and Social Development David Sislen; Stephen Mink; Severin Kodderitzsch ; Paula Lytle Water David Sislen; Marcus Wishart The note was prepared in close consultation with the IFC, whose input was coordinated by Eric Soubeiga (Johannesburg) and John Barham (Washington, DC). The note was also prepared in collaboration with the World Bank’s Botswana country office, including involvement of Elene Imnadze (Country Representative; Senior Operations Officer, AFCZA), Keamogetse Molebatse, and Lolo Tibone. Specific background notes for this SCD were prepared by: Esther Naikal and Glenn-Marie Lange (on Botswana’s natural capital and wealth accounting); Harun Dogo, Zeinab Partow, and Boubacar Amadou (on productivity); and EConsult Botswana (on coal fiscal projections and diamond scenarios). Brian Blankespoor prepared the maps. We are particularly grateful to Victor Sulla and his team (GPVDR) for the excellent support and collaboration in providing inputs from the Botswana Poverty Assessment, which was the foundation around which the SCD note was built. Many thanks to our peer reviewers: Indermit Gill (Director, DECDP), Sandeep Mahajan (Lead Economist, EASPR), and Dr. Keith Jefferis (Managing Director, Econsult Botswana). The World Bank is grateful for inputs from the Government of Botswana, particularly the close corporation provided by the Ministry of Finance and Development Planning and the National Strategy Office. The work was carried out under the overall supervision of Asad Alam (Country Director, AFCS1), John Panzer (Director, GMFDR), and Sudarshan Gooptu (Practice Manager, GMFDR). iii Acronyms ARAP Accelerated Rainfed Arable Programme HH household BAIS Botswana AIDS Impact Survey HIES Household Income and Expenditure Survey Human Immunodeficiency Virus / Acquired