Botswana gets $76.2m AfDB support to help economic diversification

29 Apr 16

The African Development Bank is to loan Botswana $76.2m to support the country’s economic diversification plan.

The AfDB said it would open a line of credit for the Botswana Development Corporation (BDC) to be invested in spheres outside of mining and the public sector, which currently dominate the country’s economy.

The bank’s board of directors said the country sits at a critical juncture, with its reliance on mining currently leaving the economy highly vulnerable to external shocks.

They agreed Botswana needs to accelerate the economic development of other sectors, with agri-business, clean energy, services, infrastructure and manufacturing looking set to benefit from the funds.

It added that Botswana’s government will provide a sovereign guarantee to the investments, which will also be complemented by a grant to enhance the BDC’s implementation capacity and effectiveness.

Economic growth in Botswana has slowed from highs of 6.6% over 2010-14 to 1.2% last year as a result in falling demand for diamonds.

Their discovery nearly half a century ago had been transformative for the nation, leading to rapid development and putting Botswana on track to become one of Africa’s wealthiest societies.

Now stagnating demand looks set to transform Botswana again, uprooting its reliance on a commodity that has driven the country’s progress for decades.

However this will rely on the availability of significant and appropriate forms of long-term financing, which are currently in short supply in the market.

The bank said the line of credit will provide greater funding options for the BDC, enabling it to broaden its funding mix away from a dependency on shareholder and short-term credit.

This in turn will enable some of Botswana’s other key industries to make use of scarce longer term finance instruments.

The bank said it is hoped the line of credit will also support entrepreneurship and enable jobs and wealth creation. 

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