RESTRICTED~L

FIIF fliPy Report No. AE-4a

This report was prepared for use within the Bank and its affiliated organizations.I They do not accept responsib"ilty for its sccuracy or c-mp!eenes. Thereot _

not be published nor. may it be quoted as representing their views.

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TMKT"V ATAOrTn,jAT tPANMT 1nRP Q CONST'(r 1?TjCThn ANTTD Th1V1T OPMTX."

LTMT1EP?.J ATTCM.AT DTh1Z1tIO'P.M1T A AOC1TA TTION

THE ECONOMY

OF

BOTSWANA

October 10, 1969

Eastern Africa Department

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CURRENCY EQUIVALENTS

Rand 1 = US$ 1. 40US$ 1 R 0.714R 1 million = US$ 1. 4 million

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Table of Contents

Page

BASIC DATA

SJMMWRY AND CONCLUSIONS ...... ......................... - iii

I. INTRODUCTION .............................. 1...........

A. Geography and Climate ...... ....................... 1B. Population ............. . 2C. History and Politics .............................. 3D. The Nature of the Economy ......................... 4

II. DEVELMENTS _ THE ECONOM)' .....M.6......................

A. General ........................................... 6B. Labor and Employment .............................. 8C. Money and Banking ................................. 10D. Customs Agreements ................................ 12E. Recent Developments and Prospects of ttie Main

Sectors ........................................... 14

1. Livestock ...................................... 142. Agriculture ................................... 153. Mining ........................................ 164. Education ..................................... 195. Transportation ................................ 206. Posts and Telecommunications .... .............. 227. Housing ....................................... 238. Manufacturing ................................. 249. Tourism ....................................... 25

III. PUBLIC FINANCE AND DEVELOPMENT PLANNING .... ........... 28

A. Public Finance ................... ................. 28B. Development Planning .............. .. .............. 35

IV. PROSPECTS. . 38

A. General ......... 38B. Public Finance .................................... 4oC. Investment and its Financing ...................... 42D. Public Debt and Terms of Aid ...................... 45

ANNEX

A. Livestock and AgricultureB. Education

STATISTICAL APPENDIX

EDUCATIONAL CUnART

MAPS

BASIC DATA

1. Area: (square miles) (%)State Lands 104,720 (45-2)Tribal Lands 11.7,403 (50.6)Freehold Areas 9,682 (4.2)

Total 231.,805 (100)

2. Population: (1969) 629,000Rate of growth: 3%Density (per square mile): 3

3. C.rons Ntionnal Prodiict AtT mnrk-,F. rwrippe (i 966): P1. 39 irqll±iorGNP per capita (1966): R. 6 ($ 95)

1. ross Dom.estic Prodict. at. Facrtc- Gnot. (1966): R. 38.6 mil]lionof which in percentages:

Agricule iIr 47 .0Construction and manufacturing 12.9Trade and Transport 20.2Others 19.9

100

5.. Money and CreditBotswana is p f' the South A,i-ri- m-n-ta+nr area. Thprp are

no statistics available on money supply.(At Sept. 30)

Commercial Bank statistics: 1967 1968

Total deposits (million Rand) 12.3 13.6Total ad-rances (mL.Jloi Pad 6.o 5. 9Ratio of advances to deposits 48.8% 43.8p

6. PricesNo reliable price indices are available for Botswana. It is

.thought that prices in Botsswana follow closely the price trend in theRepublic of South Africa. The average annual rate of' increase ofconsumer prices .4n the Republic o.t South A I rica over the period 1963-68

was about 3 percent.

7. rub1lic SetorUI V ertions r;lV 4 [-cuXAo1964/65 1966/67 1968/69

LI(uvevjI'llitUIll, CUlrVt'll, I-t'uu-j'I L,ui4.4 0.2 r.uGovernment current expenditur-es 7.5 11.0 12.9

Current deficit. 3.1 44.8 5.Govt. development expenditures 14.4 6.9 2.7

T'otal foreign aid disbursements 6.2 L2M 9.7of which UK 6.0 9.7 8.-

83. External Public DebtDebt outstanding December 31, 1962 $10.9 mnillinDebt service paymen-ts (1968) $ 0.7 millionn,,¾+ e_.n-rnAnc ,.n+;Ar nnnrnr7 - n75o,.,' F,iI

9. B3 alance of Trade

1966 1967

Imports 1B.Pg 22.14 2 ?3.In r _ n n (' r i -r Z

Trade U 0 e I 'I 11.U

Commodity conicentration of exports (1.67) li-vestock- rou-uct..

10. Foreign Exchange RleservesInclud.ed in those of South Al rica and no separate f-1igures

are available.

1.1. IMF Position (at August 1, ly69)

Quota $3.0 million

Drawings Hose

1. B3ank/IDA Operat,ionsAmount committed Amour-; jisbitrsee.'

(In IJS$ million at August 31, 1.969)

IDA Credit (Highways) 3.6 3.6

THE ECONOMY OF BOTSWANt

Summary and Conclusions

1. B-tAwaa, formerly known as RechuanalAnd- bpeame an indenendentrepublic in September 1966. It is a large, soarsely populated country,enclosa- on a1l sids hv other cs:++ of Southern Africa; the KalAharidesert covers much of its territory. Rainfall is low and erratic, and

n.s h + ,s ,,.1 f o. .1vn, ~r+ 1u Tolhe ou1n + _r 4 I!tA + _A Z h a per t t+hn

capita GNP of less than $100. It is heavily dependent on expatriateskilleA marnpover eand foreign 4 d.

2 . Botswana is poE-t of the South Afr4 cain custors and monets+ ar ea;it has no central bank and its banks a e administered from S. Africa. nTl-searrangementJ s and the country's geographLicl' position link i4 cl-sly A de

velopments in S. Africa; while accepting the economic ties as to a large ex-tLent .ai:vroidabulle, the Government is an.xiious Utlo reduuIce its dependlence on S'.

Africa wherever Dossible. It has been engaged in negotiations with SouthAfri.c awi Lth a view LUo imJrov±ing the CLwitryL's p ostLion -arIILer tLlh'.e %u "AUDU

Agreement, and is keeping the monetary arrangements under review.

3. Livestock forms the basis of the economy and accounts for over90% of exports. Crop production is mainly for s-ubsistence. ,N1inety per-cent of the working population is engaged in one or both of these activi-ties. From 1961 to 1966, some areas of the country suflered almost con-tinuous drought; in 1964 and 1965 it was severe all over the country. Thenational herd was seriously depleted, there was widespread crop failure,and government was forced to provide famine relief (with the assistanceof the World Food Program). The last two years have been a period of re-covery as a result of better rains: the crop situation has improved andlivestock numbers have recovered to about their former level. There isconsiderable potential for increasing and improving livestock production,and the market prospects are good. Plentiful unutilised grazing areas areavailable and there is scope for increasing yields in existing grazingareas. To make use of the first, investment in boreholes and fencing isneeded, and to achieve the second better herd management is the principalrequirement. Government is pursuing these two lines of development, al-though in the Tribal areas the traditional land system presents seriousdifficulties. The prospects for crop production are far less favorable be-cause of the difficult climatic conditions; while improved methods canassure a crop even in drought years, the prospects for substantial produc-tion increases, except Dossibly in the northeast of the country, are Door.

4. Manufacturing and mineral nroduction have hitherto been on avery small scale. The immediate prospects for manufacturing are limitedowing to the small size of the domestic market and the competition nro-vided by South African manufacturers within the customs area. However,major discoveries in recent years of copper, nickel, diamonds and coal arelikely to result in the development of a substantial mining industry inthe near future. Two private grou.ps have reached an advanced stage in

planning the start-up of diamond and nickel-couner mining on a major scaleb-y 1971 and 1973 respectively. This will radically improve government re-venues, as well as providing some much needed additional wage-employment.The prospect that exploitation oI other ore bodies, Dresently being ex-plored, will follow in the late 1970's anpears promising. For the nickel-copper mine, government has agreed to nrovide the necessary infrastructureand is seeking assistance from a consortium headed bv the Bank to financeit.

5. The transport system is undeveloped, apart from the railway con-necting Rhodesia and South Africa which passes through the country. Thereare only 16 miles of bitumenised road in all. Some new road constructionwill be required for the mining developments and improvement of certainsections of the north-south road would seem justified.

6. Trained local manpower is in exceptionally short supply, butgovernment is beginning to tackle this by the expansion of secondary edu-cation and of vocational training. Primary education has reached a highlevel of enrollment, although its quality leaves much to be desired. Onedeficiency of the educational system is the absence of a detailed educa-tional plan.

7. Government is extremely dependent on external aid. Over the lastfive years, British aid has financed nearly 50% of recurrent expenditures,and, together with small amounts from other external sources, most of thedevelopment program. Domestic revenues approximately doubled over thisperiod; but recurrent expenditures grew alnost as rapidly and consequent-ly the recurrent deficit widened. The expenditure growth has been attri-butable to government's increased responsibilities arising out of indepen-dence and expansion of economic and social services. Except for the civilservice salary structure, which needs some revision, there is little evi-dence of extravagence in government.

8. Government's power to raise additional revenues is considerablylimited by the customs arrangements, whereby it receives a fixed percentageof South Africa's customs and excise duties; however, there are possibili-ties which require careful consideration, quite apart from the expectedmining revenues. The latter, on present production plans, should morethan double present revenues and, provided expenditure growth can be heldto about 4% p.a., might eliminate the recurrent deficit by the mid-1970's.If expenditures were to grow by very much more than 4% per annum. recurrentbudgetary aid would probably be required throughout the decade.

9. DeveloDment expenditures have been dominated by the constructionof the new eanital, Gaberones; the latter wan a neeeslty,v aiven that thecolonial headquarters had been in South Africa. Other projects seem tohave been nn the whole well planned ancl exeyiitedi,- depite the limitat4onsof administrative capacity. Government's development progrxm is outlinedin its National Developmen+ Plan (1968-73). Again, one item - +he inira-structure for the mining developments - predominates, accounting for over

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50% of total projected outlays. As for non-mining projects, the Plan seeu;srather optimistic: both absorptive capacity and aid availabilities indicattethat expenditures are not likely to exceed the average of the past two yearsby very much.

10. During the three years sinca independence, government has madecommendable efforts to accelerate development, and has followed generallysound economic policies. Production as such has not been significantlyraised, but in several areas the foundations of development have beenlaid. For a number of years to come, government will be very largely de-pendent on external sources for financing the development program, indicat-ing that aid agencies should finance as large a portion of project costs(including local costs) as possible. In view of the country's poverty andweak budgetary position, Botswana should ideally receive all aid on conces-sionary terms. However, for self-liquidating projects, such as Shashewhich will produce greatly increased government revenues, borrowing on no:r-mal terms may be justified.

I. INTRODUCTION

A. Geography and Climate

1. 'he area of Botswana is estimated at 231,805 square miles composedof 220,000 square miles of land and 11,805 square miles of inland water.The country is entirely landlocked, being bounded on the south and east bythe Republic of South Africa, on the west and north by South West Africaand the Caprivi Strip which forms part of that territory, and on the north-east by Rhodesia. Botswana touches Zambia at the confluence of the Zambeziand Chobe Rivers opposite the village of Kazungula in the extreme north.

2. Botswana has a mean altitude of some 3,300 feet, but with eleva-tions of un to 5-000 feet. A nlateau at a height of about 4,000 feet, whichforms a watershed between the Molopo and Limpopo river systems in the southand runs north to the Rhodesian border to the north-east of Francistown,divides the country into two main topographical regions. To the east ofthe platteaui ephemeral streams flow 1stitudinally into the Limnono river:to the west the rivers, which at one time drained into the great MakarikariFlats, a-re now inAetiveA and the l_nd is largelv arit savannahk

3. The most fer+-ile area of the couintry, where 80% of' the poplatilonis concentrated, comprises the central watershed and the lands between itavid the Lirm.po- river, r'1hie forms +ha t aser I,o,,nAr1r w:ith Sou_th Africa.

There is just sufficient rainfall for the growing of food crops, and thepresence of uandergou_ r o_Mnd water, table o,,A am,d - a npl cgas cmneh4 , tn mnke tshi

a good cattle--rearing area. To the west of the watershed, conditions arefar "Less fayvOxable. . The extrem..e southwIn,estern tri=z1gle, ly beteen the

confluence of the Molopo and Nossop Rivers, consists mainly of dry savannahanu .scrubland merging gradu.lly I otw.. i.nto t.h I,'- "h1 ari- Tesert . .he

latter, a sandy tract covered with thorn bush and grass and with only aminimrum of surface walter, covers all the central and -western areas ox Bots-wana. In places such as the Ghanzi plateau, which extends into the desertfrom South-West Afriea, uni'derground potable water near the surface has beentapped and cattle are raised. In the northwestern corner of Botswana, calledNTgamilarnd, the Okrava,g River wthi rises 4- A ngolzndetr ^+W.°atr1~,I4 .Ld. lL 9L l LC .JIzV O.

1 16V lxx-v~J. Wllx-.L xi1 ± x.11 ~11~

5J.4 W ' Uk '

crossing the Caprivi Strip, dissipates most of its flow in the 6,500 squaremjil4es of the Okavango D eWLta. A.t is est-im,ated t.Lhl.at. the z4verage inflow ofwater from Angola is 9,000 cubic feet per second, representing a vast un-tapped water resource. Around the perimeter of the swam,ps, and along th;-northeastern border from Kasane to Francistown, there is forest and densebush.

14. The area of Botswana is d-vided nto State lands (10Q4,70 squa:remiles); six freehold blocks of farms, mainly on land near the eastern border

4-t.. fl2 4- t f~4-t A4J - - fl._ .±.- J , Ooriginally granted in perpetuity to the Dritisi SoUL.1uthiu Ar ca U %rUIpaLP inL 189,1(9,682 square miles); and eight tribal territories where ownership of laadis vested in the tribes for allocation according to tril-a rules (total

117,403 square miles).

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5. The climate of Botswana ranges, according to latitude and altitude,between tropical, sub-tropical, and temperate. The country lies in thesummer rainfall belt, the rains generally beginning in late October andending in April. Rainfall is low on average (with an annual mean of a-round 20 inches or less in the most populous areas) and extremely unrelia-ble. Drought occurs -fairly-frequently and water is a major constraint forthe development of agriculture and livestock. Between 1961 and 1966 thecountry suffered an exceptional succession of drought years.

B. Population

6. The population of Botswana is estimated at close to 630,000(Annendix Table 2) The lIst nonulation eens was earried ouit in 1Q64and showed that the total resident population of the country was 543,105of w'hnTm 0R 5_% werp Afrineanc- The rate of' 0-rnrtw±h of' noeniilplation iuas estim.ated

at 3% per annum. Birth and death statistics are not available, 1/ but atentative ae structmrpe bhend nn the 196h nfata showe that the proport-+ion ofthe population in the lower age grouDs (0-14 years) is relatively large,h3.7 percnt. This indicates that the f1+ure groewth rate of the populationis likely to be even higher than 3 percent if no control measures are taken.

7. The bulk of the population, apart from about 4,000 Europeans andsome 20,000 Buh-shmen, belongs to eight principal tribes: the BRakrgntla, +h

Bakwena, the Bangwaketse, the Bamalete, the Bamangwato, the Barolong, theBaawana and the Batlokwa. The Bam.n_at tribe_ is the large_st. _atswana

is the main African language and is spoken by most of the people, but Englishs the r.ffici i anagug of the nniin+vnr The 19O6h C%"1Q s, 'hHosP that 225pr-

cent of the total population were literate in Setswana and 15 percent lite-rae n English.

8. _.P of the p l n the eastern. par of the coun-

- .D. WI ULL~ _PP U~HL L I~±St .4.4. 4.1 LI.,1 U L 111 1 J0L..U Vi U1 L J41

try. The population density varies between 66 per square mile in theGabU,e r on e sI Dst-Cr ,iLc4t to "less thn2 per sq-are r..l in - areas-- such as GliUd.UCI L1~~ JJ.~ 1,1jUl., L ~ LI1W L jJ - tqum.re LILL~.-Lc 1 eucm ~Li. U. ~11CU14L.±

The overall population density is about 3 persons per square mile. This-- I- Q - - I- _ T _ - -On i.tt.. rO a … .- I .n _ nn

lti L*I contrast. tU 83 per siquaSure Rile Iil LesoL31i, 5U lfl OWKZZL.LUrlU anU 39f *in

the Renublic of South Africa.

9. The health of the poDulatior! is generally good but the droughtconditions over the past years have resuited in a significant increase inmalnutrition in desert areas. The principal diseases are respiratory in-fections, tuberculosis, gastro-enteritis, malaria (wnich is endemic inNgamiland) and outbreaks of infectious diseases such as measles and typhoid.Ngamiland is also infected by sleeping sickness and bilharzia. _The ratiosof medical doctors and hospital beds to population are about 1:26,000 and1:400 respectively.

1/ The (Government introduced birth registration in three towns, Gaberones,Lobamsi and Francistown, on Anril 1, 1969.

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C. HnisIory nd roolUibs

10. Botswana became an independent republic in September i966. Form-erly known as Bechuanaland, its history as an administrative entity datesfrom 108085 when Britain proclaimed it a Protectorate. Then, as now, thecountry was largely inhabited by various closely-related Setswana-speakingtribes. From the mid-nineteenth century, their chiefs repeatedly appealedto Britain for protection against Boer encroachment from the Transvaal.Cecil Rhodes had also sought British intervention to secure for the,CapeProvince's trading interests the road running north through the territoryto the Zambezi. None of these appeals was successful. The factor thatfinally led Britain to intervene was her fear of German expansionism intoCentral Africa following the establishment of a German Protectorate inSouth West Africa.

11. Britain had no desire to set up an expensive colonial administra-tion and at first was willing for Rhodes' British South Africa Company torun the territory. This was successfullv opposed by the chiefs, but as acompromise they agreed to cede to the company land needed for the buildingof the railway north to Rhodesia. This land comprises the Tuli, Gaberonesand Lobatsi farming blocks held by Europeans to this day. Later in 1898a number of Afrikaners were granted farms in the western Kalahari whichformed the beginning of the Ghanzi Etropean farming area. The one otherconcession of importance had been ma&e earlier in 1880, when the Matabeleking, Lobengula, had granted the Tati District in the northeast to a groupof gold-miners. The ownership of the land and mineral rights passed to the!Tati company, where it has remained ever since. Over the years this hascaused increasing dissatisfaction. 1/

12. After the establishment of the Protectorate, Britain played aminimal role in administering the country, relying on the chiefs to rulemuch as they had done before. The colonial administration was based not inthe territory itself, but at Mafeking in South Africa. For most of thecolonial period. nolitical and economic progress was. at best, extremelyslow. Only in the late 1950's did the pace quicken, when for the firsttime independence, rather than eventual incorporation into South Africa,seemed a clear likelihood. Britain provided assistance to improve the levelof government services, and constitutional reforms were made, leading tothe election of the first Legislative Council in 1961. The country's firstpolitical party was formed only in 1959.

13. The first elections with universal suffrage were held in March1965, under a new constitution giving the country internal self-government.The election was won by the Botswana Democratic PArty (BDP); led by SeretseKhama who thereby became Prime Minister. A year later, at indeoendence, hehb-onme t.he neountry's first. Presqident._

1/ It has recently been reported (September 1969) that agreement isex.ected shortly beetweer. the governmeent and t'he ccompar.y, for thegovernment to purchase the land (but not the mineral rights) ofthe TatI District.

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14 The BDP gove.rnment is politically moderate. President 1hamaderives great personal popularity from having been formerly heir to thechieftanshlp of the Bam.afngwato, the largest tribe int+he country. T.hegovernment appears to have retained the support of most of the population,which is strongly traditionvalist, and seems likcely to be returned to powerin new elections later in 1969. It has maintained good relations with thesmall but econ1vmlroly influential -- ii- c om., 4 +r. A+ +1,t .- +

4tm, i+

is committed to development, and appears to be willing to carry out suchinstitutional ad social reforms a-e necessary to achieve this, includingreducing the traditional power of the chiefs. The government is stronglyo p p o s e d to SouthA h4ric a's ra ci al1 poli c i es, but -I giveIn Btw.tswar,' s e onomic tie-swith that country has reconciled itself to maintaining fairly amicable rela-ti ons s-i it . * ieverth eleUS-, the t.. i. WiouU to reduce it depen--.

dence on South Africa wherever possible.

D. The Nature of the Economy

15. Botswana, with a per capita GNP of about R. 68 (US $95), is apoor country. It has a simple economy, based largely upon cattle whichaccounts (with by-products) for over 90 percent of exports. Crop production,mainly sorghum and maize, is basically for subsistence, being carried on asan adjunct to the cattle industry. Mineral production is at present insig-nificant. Recently, ho wever, di amonds an d couper-nickel ores hrav-e ueendiscovered and their exploitation is likely to commence in the early 1970's.Surveys have also revealed the existence of extensive coal deposits, whichmay be exploited to provide thermal Dower for -the pronosed nickel-coppermines. Botswana contains within its boundaries a great variety of game whicnprovides a source of orotein and saleable by-products for the local popula-tion and forms the basis for the development of a tourist industry. 'Manu-facturing in Botswana is on a very small scale. Within the country paidemployment amounts to only 28,000 while the sutbsistence sector absorbs about200,000 nersorns. Every year about 28,000 adult male Botswana citizens seekemployment in the Republic of South Africa. Deferred pay and remittances ofthese migrant workers are equivalent to about 10 oercent of the total exportsof the country.

16. It is estimated that 90 percent of the population is engaged inagriculture and livestock. There is a considerable potential to expand andimprove livestock production. Plentiful unutilized grazing areas are avail-able for increasing the national herd, currently estimated at l.4 millionhead, and there is considerable scope for increasing yields from the existingherd. The main constraints are water availability and the tribal land tenuresystem which hinders improvement in arimal husbandry and represents a strongdisincentive to investment in land improvement by farmers. The existence ofthe white farmers, who own about 20 percent of the cattle population in thefreehold areas in the east and west and who maintain modern ranches, doesnot seem to have had a significant "demonstration effect" on African farmers.

17. 'There are no pablic savings in Botswana and the Government isheavily dependent on British aid for financing its recurrent expendituresand most of its development program. It is probable that a large portion

of private savings, especially those dgenerated by the white farmers and ex-patriate civil servants., are kept abroad. There is no information on theinflows and outflows of private foreign capital. Foreign private capital,however, has been mainly concentrated in the development of livestock andagriculture in the free-hold areas and in commercial activities.

18. Botswana, together with Lesotho and Swaziland, is part of a customsand monetarv area with the Renubl4ie of Snutih Afritea= TUndpr the Cus;tnTns Agree-ment of 1910 1/ there are no tariffs between South Africa and Botswana otherthan on iTnports of a few consumer roods. Tmnports frnm ounitri niitsirde thecustoms area are subject to tariffs fixed by South lAfrica, and DoLswaiLa -e-npivpye a fiyxe nPrr!Pnts.er of aFll niitnmq annr. wrni-- Pvpn1p rn1P -t.eI vr

South Africa (about 0.3%). There is no formal monetary agreement betweenBostwana and South Africa but the South Af4rieannc,ency q b e+abIHAby law as the legal tender in Botswana. The customs and monetary arrange-ments iink uhe Bots+%krana econo LI closely to ht h.4 Sou+b+fh Af.o A a lnd mc -sensitive to economic fluctuations in the Renublic. For some types of econo-mni an lys-s, such az 4iCe an,alysi fa -n,,4 .A

South Africa.

19. The geographical situation, the physical features, and the spars-.Lty of hLe population. create acut'e transpotLL probdLerus , th e sUol-LUIo of WIh chI

Botswana's poverty has so far prevented. The requirements of the governmen-tal struucture of an independent state cOmmitted to development have far ex-ceeded the ability of Botswana's educational system to meet them. The ratioof expatriates in the labor force amounts to 10 percent of the total; mostof these hold key technical and administrative positions. Finally, it shouldbe empnasized that statistical information on the country is extremely weak.

1/ This agreement is in the course of renegotiation.

II. DEVELOPMENTS IN THE ECONOMY

A. qen1eral

20. hLie long-ter- growth of the economy for the period 1955-1965 isestimated by the government to have been in the order of 5 percent a year.With an estimated annual increase in -pbpulation oI 3 percent, average percapita income may have risen at about 2 percent a year.

21. National income accounts are not available on a continuous basisfor Botswana. However, in 1968 the government published a set of nationalaccounts for the period 1964-1966 (see Appendix Tables 4 and 5). GDP andper capita GDP were estimated as follows:

1964 1965 lbb

GDP at factor cost (in million Rands) 32.7 35.8 38.6

Population (thousands) 543 559 576

Per Capita GDP (Rands) 60 64 67

In the preparation of the National Development Plan 1968-73, another esti-mate of GDP at factor cost was made for the year 1965, which put it atR 27.9 million and thus GDP per capita at R 50. The main difference be-tween the two estimates may be found in the valuation of the contributionof the agricultural sector, especially subsistence agriculture, to totalGDP. However, all the national accounts figures for Botswana should be re-garded as very crude estimates.

22. The first of the above estima$es suggest that, over the period1964-1966, the growth rate of GDP and G .P was 8.6% per annum. Most of thisrelatively high growth rate was accountad for by expansion in the tertiarysector, most notably in construction and trade. The growth of this sectorlargely resulted, both directly and indirectly, from heavy increases ingovernment expenditures, which actually exceeded in absolute terms thegrowth in GDP. These were partly associated with the construction of thenew capital of Gaberones. By contrast, the agricultural sector showed onlya small increase in production over the two years and this was accompaniedby a serious reduction in productive capacity. From 1961 onwards, many partsof Botswana suffe:red from severe drought conditions resulting in poor cropsin successive vears: this culminated in 1965/66 with the most widesnread cropfailure of all. Because of the severe food shortages in 1965 and 1966, farm-ers werp foreopa tn innrpnp t.heir sales of eatein ordipr toA buyv fonod- The

value of this increase in livestock "production" seems more than to have off-set the decline in crop production, but together witi h shrtY'+ age of feeding imra-terials it resulted in the national herd being seriously reduced.

23. Mthe econx.-: is -rCry sensitive to changes 'I gu-ver;ament outlaysand in exports, an' it seems orobable tha.t .D deereesed in 1967 but morethan reco-vered its 196J level iln l96. In1 J.967 total g.,veTrment expendi--tures declined -u5te suLitantially, and continued to do so in 1968 thouglby a smaller amn ro.w .. : r-os improved folloving lbetter rains, but catt:Lesales fell considerably due to the process of restockIng afjt;er the drouglit.Exports in 1967 were accordingly well below Itheir 1966 level. In 1968,however, with better onality and weighte, and improve;d prices, cattle saLesrecovered and exports increased by almost H 1 million above their level of,1966.

24. Expenditure estimates of GNP are only available for 1964-66 (seeAppendix Table 5). These show that over the period as a whole total con-sumption exceeded GNP, viz. national savings were negative. In 1966 natLon-al savings were positive, but only representel about 3% of GNP and some LO%of gross investmernt. The following table shcws that, although savings imn-proved over the period, the resource gap widened because of a large in-crease in investment.

(in million rands)

1964 1965 1966

GNP at market prices 33.4 36.7 39.3

Less: Consumption 34.5 37.0 38.1

Equals: Gross National Savings -1.1 -0.3 1.2

Less: Gross Investment 5.9 7.0 10.5

Equals: Resource Gap -7.0 -7.3 -9.3

Source: Appendix Table 5

Information on the financing of the resource gap is incomplete. However,data on foreign aid disbursements (see para 25) show that they probablymore than covered it for the three years taken together. 2/ This suggeststhat there was a net outflow of private resources. Average investment forthe two succeeding years, 1967 and 1968, has probably been lower than in1966 since government investment outlays fell merkedly and there was nonoticeable increase in private sector investment. Foreign aid disbursenmentsprobably exceeded total investment in both years (as they did in 1964-66),implying a continued net outflow of private funds and/or negative nationalsavings.

1/ In FY 1967/68 they fell by R 1.5 million and FY 1968/69 according torevised estimates by R 0.8 million.

2/ Foreign aid data is on a financial year basis, i.e. April 1 to March31. It has been assumed in this analysis that financial year 1964/65corresponuz to calendar 1964, etc..

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25. Total foreign aid disbursements have averaged about R 11 millionannually over the past four years (see Appendix Table 21). The largestpart, some 80%, has been provided by the U.K. government and principallyin the form of grants. IDA made a $3.6 million credit for road construc-tion in 1964, which has been fully disbursed. The third main source ofassistance has been the World Food Program (WFP) which provided over theperiod 1965/66 to 1968/69 about R 3-4 million worth of maize, vegetableoil and dried fruit. This was given initially in conjunction with thegovernment's emergency feeding program necessitated by the drought. Thefood has since been distributed under a "Food for Work" scheme under whichpeople work on community development and self-help projects in return forfood for themselves and their denendents Tt is estimated that over 35% ofthe total population has received food under this scheme. At present, theWFP is still sponsoring a nrogram for "Siinplementavy Feeding" for schoolchildren, mothers, and ore-school children. Due to the insufficient rain-fall in 1968169. the government has anplied for further WFP assistance tocover the expected food shortages in 1969-70.

26. The government sector is an important part of the economy. Overthe period 1964-66, government outlays on consiimptiont n"d investment amouPt-ed to about 35% of GDP. Between FY 1963/64 and FY 1968/69, government re-current expenditures abou_t dou_bled, from R 6. mnllion in 1963!64 to R 12=9million in 1968/69. Development exDenditures rose from R 1.8 million in1963/64 to a neak of R 6.8 million in 1966, 1/ but declined to R 2.7 mil-lion in 1968/69. The expansion in goveTnment expenditures was made possi-ble both by a rapid growth of revenues a-d by increasing forelgn assistance.

27. Botswana's foreign trade statistics -re very weak mainly becauseof the absence of customs posts. However, estimates show that for the pe-riod 1964-66 imports accounted for about 40% and exports for about 25 % ofGDP. The principal export is beef and its by-products which account forover 90% of the tot * uonsamer goodus acco-'u for uabout half of total i.m-ports. Exports are sold principally in South Africa and the U.K.; importsoriginate m,ainly from S3.Arica and nnodesia. According to the figures, thetrade deficit widened from R 6.4 million in 1965 to R 11.5 million in 1968(A UL UL L+ppendix ,ab'l_e 14).X

B. LaUor and Empoyment

28. Tne wage earning labor force in Botswana (see Appendix Table 3)was given as 28,148 in the 1967/68 labor census; the total wage bill wasestimated at R 11 million, giving an average annual wage of R 391. Thesefigures do not cover persons engaged in subsistence agriculture or smallscale employers who required no license. The total number employed by thecentral and local governments amounted to 8,808 or 31%/o of the total wageearning labor force. An earlier census conducted in 1965/66 showed a wageearning labor force of 24,837, indicating an annual growth rate in the fol-lowing two years of 6.5%. The ratio of non-Botswana citizens in the labor

1f See footnote 1, page 34.

-9-

force amounts to 10% of the total. Because of the shortage of skilled Bats-wana manpower, most of these hold key technical and administrative positions.Basic employment conditions are governed by the Employment Law of 1963 whichforbids forced labor and stipulates certain requirements regarding contractsof service, the protection of wages, the employment of women and children,recruiting, and health of workers. Conditions of service of governmentworkers are laid down by administrative instruction, and these conditionsare further applied to workers on public contract. In 1966, the governmentintroduced a set of regulations covering the wages and conditions of serviceof the industrial sector. There is no comprehensive minimum wage legisla-tion but the government expects that the minimrm waes p-aid to its emDloveesin different areas for different work to be used as a guide for the pri-vate sector.

29. The government estimates that there are approximately 200,000oersons employed or self-employed in the subsistence agricultural sector.In addition, many Botswana citizens have for many years sought employmentin S. Africa mainly in the mines b-ut some also on farms. They go to themines as migrant workers on 9-month contracts with the oDtion of renewalfor one further 9-month period before returning to Botswana. They maythen take on another contract. They receive part of their wages in theRenublic and the other part is deferred until thev return to Botswana.Deferred wages plus other transfers made by the migrant workers representan imnortant flow of income in the Botswana economyv The following areestimates of the numbers of migrant workers to the South African minesand thei r total deferred waaes- No figires are avAl Wbl e on migrant I a-bor working on South African farms except for 1968 when 1,585 personswere thus ewmployvd No estimate Of thpir remit-te in vrome. haq bhen madpe

TefePr-rP Ppv + Remrittpncpp

Year Recruits (Rands)

1965 25,332 1,114,841

1966 21,602 1,147,864

1967 22,735 1,097,976

1968 25,955 1,106,779

Source: Ministry of Education, Health and Labor.

30. At present, the practice of migratory labor seems to be beneficialIA) Ihe cunuoum u_j BotUsw1a. . 1 proUVidUS -a Su0ruc UA ) ±e-loymetLL anIU 1I1'nUUIe

and provides a partial solution to the problem of disguised unemployment inthe agriculture sector. Moreover, '<e training -whch the workers get inthe South African mines may help in providing the labor force for the pro-spective -mining industry in Botswana. Huweever, the polic-y of "Job reser-vation't in the Republic sets an upper limit to the degree of skill whichthe workers can acquire. Since the government is seeking the mobilizationof internal sources to finance development, the idea of requesting the

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South African companies to deposit the workers' deferred wages in personalsavings accounts in the Post Office Savings Bank (P.O.S.B.) in Botswana isbeing explored; it will benefit both the economy and the workers who willearn interest on their denosits.

C= Money and RRn-king

31. Botswana is part of' the South African monetarv area and uses theSouth African Rand as its currency. It does not have a Central Bank andthe only _onrmj-rinl bhnnks in t-he coin+try -ro b 'rnnhes of t1he Rtantiard Bankand Barclays Bank DCO, both with headquarters in London. In their day-to-day operations, the Botswana barks awe administered by the tf-iandrd Rnnk'8

South African subsidiary and Barclays' regional office in Johannesburg re-prectively

32. Botswana has no identifiable reserves of gold or foreign exchangeeither in Botswana or Pretoria. It can be argued, and the government,doesso are, that some part of the Sout4h African rese-,e- -f g--d and fo:a, 0 n

exchange which are used as backing for the currency are attributable to thatpart of thle currency wFhicbh circ,vlates in 'Bot-swar.a and should properly be regarded as belonging to Botswana. The Botswana government estimates thatthe portion of the South African, reserjes of gold and f-o-- i e xchange

which are attributable to the currency in circulation in Botswana wouldprovide _ninoe f butR 0 ,000n Ann Unnw- Botswara ha1trigb-H

4.*) J.. U .I. XLLU1LC UI 1 J. bLdLULU I1_U , UPX .LJ IJJJ j. iLU.II JJJ L.Z W LIC 11C ;D CXLX4 4.JL1e 1)L

lances with the Crown Agents in London consisting mainly of the unutilizedamount of British grant aid, which is paid in quarLerly instlments in ad-vance. These balances show considerable fluctuations, reflecting the bud-geta-y needs of, arnd the t±iiUng ol t.'e infilow ol receiptLs Luo tLhiVe governIment.The most recent legislation which officially established the South Afri-can Rand as legal tender in Botswana is the Currency Proclamation ofDecember 30, 1960. There is no information available as to the amount ofSouth African currency in circulation in Botswana thougn the governmentestimated it at 2.5 million Rand in Atgust 1966. 1/

33. The commercial banks operate exchange control procedures as a-greed between the Botswana and South African governments. Transfers oIfunds to sterling area countries are referred to the Ministry of Finance,and provided the funds have been generated in Botswana are normally approved.Transfers to non-sterling countries have to be approved by the South AfricanReserve Bank as well. As regards payments between South Africa and Botswana,there are no restrictions on current account transactions. In general, capi-tal can also move freely between the two countries, though it is believed thatSouth Africa administratively controls capital exports to Botswana of amountsexceeding R 100,000. One exception is when Botswana residents sell SouthAfrican securities; in such cases, they are treated as non-residents of SouthAfrica and the proceeds of sale are liable to blocking by the South Africanauthorities.

l/ This figure was based on an estimate of national income, originatingin the monetary sector, of R 25 million multiplied by an assumed"rcurrencylincome ratio' of 0.1.

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34. As a consequence of the monetary arrangements, Botswana cannot havea balance of pavments problem in the conventional sense. Anv tendenev to a.

balance of payments surplus or deficit is counteracted by an automatic adjust-ment in the level of economic activity in the coulntry In effect., the mone-tary system which operates in Botswana is equivalent to the gold standarda-,rt.+m nnA Adoc not ,11ew the urve-m.nt, byhv +the use nf in.terA monet*-a

policy, to stimulate the use of unemployed resources and thus raise thele,rel of -enomi at+4r4+'r. Thr +he= ar.e +oe, oPf eos 4i+ prevet+s

the problems of recurring or persistent balance of payments deficitsvbAicuil car. res-n14- Prom a policy OfP excss4ive credt4- creati.4on.. The -- resn1;-4

monetary arrangements make it difficult, if not impossible, for the Bots-wana government4 to control an outflow of swavings arL capital 4fom Bwana to the Republic of South Africa, where investment opportunities aregreater. Bot-swana Ls Ln effect, forL mIOnetVUy purpooUses, simply a regLon

of South Africa, the money and credit conditions of which are determinedby that. _ounry a.ut or itis __n a ccordarnce with its needs MI _ p_ese_

WIM4,nf UULu1>s-Y b Mk4sull -L%;>=. -Lll CZL%;%Jscs LL Lull *Lb llt:cu:. ilic prc:UErl6

monetary arrangements make no provision for the Botswana government beingcons-ulted on -the monetary policies whiclii South Africa adopts for the mone-tary area, and in practice Botswana takes no part in their formulation.

35. Apart from the avoidance of the difficulty and expense of settingup its own monetary institutions and having its own currency, zozswana ae-rives one important advantage from the present arrangements. This is thatbeing part of a monetary area witn a strong currency the climate for foreignprivate investment is more favorable than it otherwise might be.

36. The government is keeping under careful study the advantages anddisadvantages of the present arrangements. One important factor which thegovernment would take into account is the outcome of the current negotiationson a revision of the Customs Agreement between South Africa and Botswana,Lesotho and Swaziland (see para. 44).

37. The two commercial banks maintain together eight branches and26 part-time agencies in the country. At the end of September 1968, totaldeposits in these two banks amounted to R 13.6 million while total advancesamounted to R 5.9 million, giving a ratio of advances to deposits of 43.7,%(see Appendix Table 11). Such a low ratio is explained by the lack ofsuitable lending opportunities. After satisfying their liquidity require-ments, the remaining deposits must have been used by the banks' head offi-ces for lending outside Botswana.

38. The National Development Bank (NDB) was established in May 1964.Its main aims are to extend credit to African farmers and cooperatives, andto make loans for new business ventures. At the end of 1968 the NDB's totalresources amounted to R 2.8 million, but only half of this was in the formof general funds available for all kinds of financing. The remainder takesthe form of special loan funds earmarked for specific purposes. Total loensoutstanding at the end of 1968 amounted to R 1.6 million. Of this, about 40percent represented loans for the purchase of farms originally made by thegovernment and now repayable to the NDB; the balance consisted of loans foraericulture, industry and commerce, urban develonment. and water supplv

- 12 -

schemes. The total value of new loans reached a peak of over R 0.5 millionin 1967, falling off in 1968 (see Appendix Table 13).

39. Total deposits in the P.O.S.B. amounted to R 370,000 from 7,200depositors in 1968 (see Appendix Table 12). In addition, there are 21thrift and loan cooperative societies in Botswana with total membershipof 1,700 persons. So far the savings and lending operations of thesesocieties have been negligible.

4o. The structure of interest rates in Botswana corresponds closelyto the rates prevailing in South Africa because of the close financialties between the two countries. The rates of interest charged by comner-cial banks on loans to the nrivate sector range between 8.5% and 10%. Theinterest rate on savings deposits is 4h and on fixed deposits of more than12 months ranges from 6% to 7% aceording to matiritv The rate of int.erpetcharged by the NTDB on its loans is 8%. The post office interest rate onit.q srnw nktsemtqS lS

D.C-L,--tnTns AereePments

41. The Customs Agreement conclded in 1°10 between South Afti ca andthe three High Commission Territories of Bechuanaland, Basutoland (nowLest.ho, a gnd Swazila.;1nd 1/prtovide *f' fr " 1(a t dhe mante;nancen of a (rCusomsUnion Tariff until altered by legislation enacted by South Africa or by theTerritories; (b) the free interchange :- f goods between the Union and theTerritories; (c) an equitable sharing )f the area's total import dutiesand of excise duties Collected on S. Afri can manufactures-" * ines, band spirits of S. African manufacture were excluded from the free inter-change clause. These god are imported in bond from- South Africa andthe other members collect excise duties on them. Under the Agreement,ho£w, ever, t-Uhese dutiCes m1ust b LDe at. tlh11e raltes i1n force iLn SouthL Af ric. Theca

Agreement provided that any party could retire from it by giving threemronths notice before the 3uth uoi J-e in any -ye-r.

III1 10 aLL ±LU UAJWI! 101. WL1tJII L.LY e Unt. arU.LUIi L-IL42. mhe fo-uula laid do-w', for shal-inK the revenue from i mpov-t nd~~~~~~~e r re enu L' VIL I11PZ L

excise duties was based on the average customs revenue of each party inthe three years preceding the signing of the Agreement. Botswana' s sharewas determined as 0.27622%o, Lesotho's 0.88575%, Swaziland's 0.14900% andSouth Africa's 98.68903%. These shares have not been formally alteredsince. However, on the verge of the three territories' independence, theUnited Kingdom introduced a revision of the respective shares of the totaldistributable to them with effect from FY 1965/66. This was in recognitionof the faster growth since 1910 of Botswana's and Swaziland's external tradeas compared with Lesotho's. Botswana's share was increased to 0.30971% andSwaziland's to 0.53033%, while Lesotho's share was reduced to 0.47093%.

1/ Together with the amendmeTts of 1911 and 1913.

- 13 -4

The Agreement as such has not been altered, but the U.K. was able to in-sist on Lesotho's implementing the revision by making periodic payments toBotswana and Swaziland. Thus, at present South Africa pays out to eachcountry on the basis of the original percentages and transfers take placefrom Lesotho to the other two countries. The payments of the shares aremade auarterly.

43. The net effect of the customs arrangements on Botswana is hardto assess. This is both because the statistics are inadequate for a de-tailed study and because it is difficult to estimate the costs to Botswanaof any alternative arrangements. One clear advantage has been the avoid-ance of any expenditures on customs administration. Botswana's livestockindustry has undoubtedly benefited from its access to the S. African market;otherwise. production and investment can hardly have benefited- Rather- in-vestment has tended to concentrate in S. Africa with its superior infrastruc-ture and resources. Furthiermore, Botswana npav higher rriees for its iTmprntsthan might otherwise be the case on account of the common external tariff,whieh is erhipfiv designe-d as a proteetien for S. African industry.

44. Theoretieallyv Botswan,a's (ani Lesotho'q and Suwniland's) shtare ofcustoms and excise revenues should take into account these various ef'ects,as well as, in the case of customs revenues, reflecting her share of thetotal imxoorts from outside the customs area. The government is convincedthat its allocation of revenues is not adequate on this basis. Together Iththe governments of Lesotho and Swaziland, the Botswana government has beencon A 4.cI4n g 1 neJotintion s: . A.J.± h. '..4C 4A t_ bW - - 4L- PA1_,.,A4-4

kLV L tl-LXst llL_cC6v UVIU, UII. YCU4c uvcV JKss" tIc;> @w o U W LA.11

a more equitable distribution. The three coun'tries also claim the rightLuo introduce speci. a L protClectElive measures for- the development- -- ±indu J,as well as to narticipate in economic decisions affecting the area whichS. Africa presently monopolises. VY'Lile progress p etarUV ILV havebee

made, no conclusion to these negotiations has yet been reached. 1/

45. Botswana's trade with Rhodesia has been facilitated by anotherCustoms Agreement which WLS concluded with the Federation of Rhodesia andNyasaland in 1956. This agreement provides for the free interchange ofprod-ucts of' locail rm.anuuacvu-are in either u recui,on ,ur purposes of' final

use only, i.e. not for re-export. At present, this agreement continuesto be operati-ve between Botswana and Rhodesia on the basis of an exchangeof letters of understanding. The advantage to Botswana from this arrange-ment is that it facilitates the supply of consumer goods from Rnodesia tothe northern part of the country at cheaper prices than if they were import-ed from South Africa due to the transportation costs. If this arrangementdid not exist, imports from Rhodesia would be subject to the South Africancustoms duties and Botswana's share of these (0.31 percent) would be so

1/ Tn Sentember 1969. it was renorted that the four narties had reachedagreement in principle on a new revenue formula, involving a substantialincresqe in Rotswana's, Swa7iland's and Lesotho's share. Formtl agreementis expected before the end of 1969.

smail as perhnaps to be inadequate even to ol f sex. the cost of maintlaininLa customs post on the border with Rhodesia.

E. Recent Develo pments and Prosnects of the Main Sectors

1. LIVESTOCK 1/

46. Livestock has hitherto been the main source of cash income forthe majority of Botswana's nopulation. Over two-thirds of rural house-holds own cattle, and virtually all have some form of livestock. Theprocessing of livestock (mainly cattle) by the Botswana Meat Commission(BMIC) at the Lobatsi abattoir is the single industrial activity of anyimportance, and livestock sales provide over 90% of the country;s exnorts.The low population density, the favorable ecological conditions in manyparts of the country, the long tradition of livestock-raising, and therelatively good resistance of the indigenous breeds to drought conditionsall give Botswana an undoubted comparative advantage in livestock-raising.A key factor enabling the build-up of the livestock sector over the yearshas been the animal health control measures of the government, which havegiven Botswana access to the IJ.K. meat market. In 1968, the cattle popu-lation was estimated at 1.4 million.

47. Offtake of cattle has fluctuated in recent years on account ofthe drought, which forced farmers to increase their sales. Total recordedofftake (i.e. excluding slaughter for local consumption) increased from131000 head in 1963 to i62,000 in 1965, but fell sharply to 96,000 in1967. The fall-off after 1965 was due to restocking as the drought final-ly came to an end. In 1968, there has been some recovery towards the morenormal 196'i-64 offtake levels. The value of cattle sales has fluctuatedaccording to the same general pattern,' but to a somewhat smaller extentowing to the lower average slaughter weight in 1965 and 1966 compared withthe preceding and succeeding years, and to an improvement in export pricessince 1966. The national herd declined by probably about 30 percent be-tween 1964 and 1966 on account of the larger sales and the widespr-addeaths. Since then numbers have recovered rapidly, though in 1968 theywere probably still less than in 1963-64.

48. Apart from slaughter for local consumption, most of the cattleofftake has been chennelled through the BMC abattoir and sold in carcaseor canned form principallv in the U.K. and South Africa. BMC has beenoperating at well below its capacity of 250,000 head p.a. With a view toinoreasino its throughnput, a11 expnor+. on-the-hoof have been nrohibitedsince 1968. This policy, while obviously beneficial to BMC, requires care-fuil examination in the lig h+ of fhej gratn-r r1 cfannw,- wbhinh nnttlp in thenorth now have to travel. 2/

1 SeeA-nrex for a more extensive discussion.

/ See Annex, - ars 14 -- an' 1

49. There is great potential for expanding and improving livestockprodu,cti or.. Tb-ere are large ar-eas of unoccupi-ed 1, 4ic, ien -invest-

ment in fencing and bore-holes, would be suitable for livestock-raising.Gvernment 'Ls current'ly prepar'Lng a p:;oject- for_ sub&sio t thu B

which would exploit this possibility. As regards the presently occupiediandWs, in Lthe trib' ar-eas -WIlere UV percent oUJ thte CattU Le± aret ueLU tllere

is plenty of room for improving, and to a lesser extent expanding, produc-tion. hle main constraints in these areas are J. the generally low le-velof husbandry, which in turn is partly related to the existing land tenurearrangements andu tle traditional attitudes towarus cattle ; iL j Inaudequatepermanent water supplies and inadequate management of existing supplies;and iii) the difficulties in obtaining credit for livestoCk purChases. Inrecent years, government has taken steps to help raise production in thetribal areas; these have included the setting-up or an animai nusbandry ex-tension service, and the establishment of government holding grounds. Gov-ernment has also been active in providing, or assisting in the developmentof, water supplies. Credit for livestock purchases has been held back bythe absence of freehold land as potential collateral and the unwilling-ness of the commercial banks to accept livestock as security. But aGrazier Scheme has been started by BMC which in effect provides loans inkind, and it is hoped that the National Development Bank can find ways ofmaking loans for livestock purchases in future. Continued efforts by gov-ernment, together with the gradual break-down in traditional attitudes towardsstock and land tenure arrangements, offer considerable promise of improvetmentin the size and the quality of the offtake.

2. AGRICULTURE 1/

50. Natural conditions in Botswana are extremely inhospitable to a-griculture. Rainfall is very low and unreliable, and soils are on thewhole poor. The only crops of any importance are sorghum, maize and mil-let, and these are grown mainly for subsistance. Most households practiserainfed farming and by and large their standards of husbandry are ratherlow. Irrigation agriculture is not economical at present except possiblyfor high value crops such as cotton and vegetables. For the future, thereis the possibility, presently under study, of tapping the waters of theOkavango system in the north. The low standard of husbandry is due tolack of farm implements, simple ignorance, and probably the disincentiveeffect of unreliable weather conditions. Marketing circuits are undevelop-ed, and trading in grain tends to be dominated by a few traders, who be-cause of their monopsonistic position are able to offer rather low prices.to farmers with surpluses.

51. Accurate information on production trends is completely lacking.It is well known, however, that nroduction was drastically affected by the1961-66 droughts. In year after year, crop failure was common in many areas,

1/ See Annex for a more extensive discussion.

culminating in 1965/66 when rain failure was worse than ever. In 1966/67,heavy rains fell, but acreage plEated was low; crops, while recoveringsomewhat, remained relatively small. In 1967/68, rainfall was again un-satisfactory and planting levels rather Low, so that the crop out-turn wasagain inadequate. Although it is too early to judge finally, the same ap-pears to be true in the 1968/69 season. This general picture is reflect-ed in the imnort and export figures for the major grains, which show thatthe country moved from approximate self-sufficiency in the late 1950's toa position of being a heavy net importer by the mid-1960's (see annex para27).

52. Government policy is for the country to achieve at least self-sufficiency in foodstuffs. In spite of the set-backs of recent years inthe agricultural sector, this remains a valid objective. Members of theGovernment's Pupil Farmer Scheme have shown that, using the "improved"methods, reasonable crops can be achieved even in drought years. The pro-blein remains to disseminate these methods to the vast majority of farmerswho do not presently use them, and at reasonable cost. It appears thatthe present extension effort is inordinately expensive; efforts must there-fore be made to improve the productivity of demonstrators and to explorenew methods of instruction. At the same time, funds will have to be in-creased for agricultural credit so that farmers adopting the 'improved'techniques can obtain the few but necessary inputs. One factor which mayhave held un the recovery of agriculture since 1966 is the disincentiveeffect which the food distribution program seems to have had in some areas.For this reason (and because of its budgetary implications as well), itscontinuation requires careful consideration.

3. MINING

53. Mineral production has a long history in Botswana. At varioustimes over the last 50 years, gold, silver, manganese, asbestos and kyanitehave all been mined, but production has been sporadic and always confinedto small workings. The total value of production reached a peak in 1961 ofjust over R 600,000. Production thereafter declined until 1966 when itpractically ceased altogether. It revived somewhat in 1967 with the open-ing of a small manganese mine, and the reopening of another, both in thesoutheast. (see Appendix, Table 15)

54. Although mining as such has been on the decline, exploration andprosDecting activity over the last decade have been intense, and discover-ies made give promise of development of mining on a large scale by theearly 1970's. There have been several malor discoveries. At Matsitama(northeast of Francistown) proven and probable copper reserves amountingto 8 million tons have been located. At Selebi-Pikwe (southeast sf Fran-cistown) proven nickel and copper deposits of some 31 million tons havebeen discovered. Both these discoveries have been mnEe by BhmangwP+OConcessions Limited (BCL), a subsidiary of Botswana RST. The third majordiscovery has bhen that. of a group of kimberltic pipes 11\0 miles west ofFrancistown made by a subsidiary of De Beers Consolidated Mlines Limited.

- 17 -

One of the piDes, at Orapa, is extremely large and is likely to supportcommercial diamond exploitation. Copper and nickel have also been dis-covered at two locations in the Tati Concession area, in the northeast.In addition to these discoveries, investigations into the brine depositsin the Makarikari region by another subsidiary of Botswana RST, Makari7cariSoda Limited (MSL), have shown them to be commercially exploitable. Agood deal of other prospecting and investigation has occurred whose re-sults, while not immediately important, may be significant in the longrun; for instance, copper has been found in the MauumiGhanzi region to t-ewest.

55. The immediate prospects for e. large-scale mining developmentcenter on the diamonds and on the nickel-copper discovery at Selebi-Pikwe.As regards the former, De Beers are currently conducting an intensive e-valuation of the Orapa pipe. While the precise potential is not clearyet, all indications are that exploitation on a commercial scale willstart in 1971. The total capital investment at Orapa is expected to beabout R25-30 million, all of vhich will be put up by the company.

56. At Selebi-Pikwe. exploration work has reached an advanced stage.and a pilot plant for carrying out beneficiati.on and general tests on theores has been onerating since 1967. The comoanv has indicated that, pro-vided water, power, and transportation are available at reasonable cost,it will nrobablv be readv to start mining nroner by the end of 1972. In-vestment by the company (in developing the two mines, the smelter and theeonnreentrator) is likplv to be abLhnt R 72 million- and the ninkel/connermatte produced is expected to be equivalent to about 14,000 long tons ofniekel and 16,000 long tons of conner per annZmr In addition, 12_000short tons of sulphur will be recovered annually.

57. Government has undertaken to provide the complementary infra-structl-e. This consJsts princtinally of power, water, And transportstion,but also includes the township and medical facilities. During 1968 a UNDPfin r2Anced study (11 6rih the Bank actIng as exeeuitfing eiency) was, earried out

to determine the water, power, and transportation requirements of the pro-iJeet na +n tornino their feaqihiliftv A fpsn-ihilityv Qs,rv,v of the town-

ship requirements was financed by the U.K. Ministry of Overseas Development.The World Health Organisation s-rveyed the medical needs of the proposednew township.

58. Changes in the mining company's requirements led to a supplement-*anrAd4k4 14 4 . .r 'nnn.4 >.a nn nnan A 4, T.., 1 O<tl rPh 4 a ,.anws ,-an.w.n,nnAor4a' J f ec a s i1b i . C X UJ .L*A 5 C' prepar 4- T,,-- InKC.7( * ±i-.

that a power station, using coal to be mined at Morupule in Botswana, shouldprovi1de electuricitly t1o -t-he m"ines at- 4-eb-ie 4o th new town.ship, andto Francistown. A dam is vroposed on the Shashe river, and road and raillI -s Ubet-ween Sel. C1.Le-P.iL ar.d CA the main. norta+h=soutnh, arteries pe plannedA

Total costs of the infrastructure are estimated at R 38 million. 1/

1/ rThe proposed itnfrastructua invest.ment is coXonly kno-wn as the 'Shasheproject".

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59. The diamond and the nickel/copper projects, if brought success-f11 yto frujition, will have A radical imnant on thp Botswana economv.

First of all, and most importantly, government revenues will increasesubstantially. A +¢x qnd royalty rPremPnt with DP Beers has been made.and that with BCL is being negotiated. The increase in government reve-nues could possibly eliminate dfuring tfhe 1Q70l' the recurrent budget de-ficit presently financed by the U.K. and later lead to some public savings.The mines (including the coal mirne nd the nowpr npln.nt will pnrovide directemployment for some 2,500 peonle, over 10% of present employment outsideagriculture, rwhich Will generate additional wages of abnut R 1 millinn neryear. This additional income might stimulate new employment (and wagestherefrom) in the services sector of half as much again. St.nrut.r,n IyV,

the economy will take on the characteristics of other mining economies: ahear exp ort orienta+ion a-id lar1 e fac+or na-mernts abroad.

60. Other -ossibilities of large-scale mineral evploitationn, while

not of such immediate import, an7ear fairly Tromising. ExperimentationbyMST ait iSa Pan on the brine deosits is almosi conplete onA it is

highly likely that provided adequate markets can be found commercial ex--1o a i _-d' +l1,s k-i

4-,.s .r411 +0l1ir ,l oPr, m o n nnx~ r,lanv is +--n

ploIa tion of the b-ines w-- __i t place. Te'-'.'s ' is

extract salt and soda ash at Sua Pan, and to pumqp concentrated brine4L trough a 11O-'.mle pipe-line to a refinezr on the raiiley line for eXtrac-

tion of potash. Potentia.l production is estimated at 130,000 tons of salt,IUi < U U UvLIIb I u _ -, A ;u - ._i iss is ' ta rVi Vll V0 V) dC Vi 10 o f o s nu .1 s l y fr Or, ' s

There is a large market for sodium-sulphate in South Africa, which is pre-sently- ueing satisfied by imported synthetic soda. To exploit it ML needsto find a marketing partner, and, the company is reportedly looking for one.There is a ready outlet for s-lvt throug`hout southern Africa.

61. Another nossibility is that De Beers may exp-loitv a second diuamondpipe, which they have been engaged in evaluating.

n2. Government, through the Geological Surveys Department, has active-ly encouraged and assisted expLoratory work and has strengthened its ownposition in the mining sector. The Geological Surveys Department providesprospecting companies with basic geological information and assists therri in

the actual prospecting as well as in e.raluating their results. In 1967 theMineral Rights in Tribal Territories Act was passed providing for the trans-fer of all mineral rights, which were formerly vested in the various tribes,to the State. This excluded the privately-owned mineral rights of the TatiConcession and those owned by the British South Africa Company on the east-ern frontier. In the same year, the Mines and Minerals Act was passed; itconsolidated previous legislation and included provisions designed to en-sure that the country's mineral resources are adequately exploited. Inpart.icular, it provides that holders of both prospecting and mining rightsmust keep government regularly informed of their activities, and that ifnot seen to be using their rights adequately, the rights may be cancelledafter due warning. The power of cancellation has not been used yet; butit gives government a powerful lever particularly in a case such as theTati Concessioni, on which prospecting had not been pursued to the govern-ment's satisfaction. Prior to the act, private concession-owners had beenpractically immune from mineral legislation. The provision referred to would

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permit government to prospect and mine itself on payment of royalties toconcession owners if the latter did not do so adequately themselves. Min-ing is the responsibility of the Ministry of Commerce. Industrv and WaterAffairs. As development of this sector is proceeding rapidly, it will benecessary for government to engage exnerienced techni'cal; legal and adminis-trative staff adequately to look after the public interest in this develop-ment. Formation of a separate MGinistry of Mfines may well be desirable.

4. EDUCATION 1/

63. The structure of education in Botswana follows roughly the pat-tern of the British system. At the national level, education authorityis vested in the Ministry of Educatlon, Health and Labor. Primary educa-tion is the responsibility of the d-.strict and town councils. The Minis-try directly suoports Government schools, provides subsidies to aidedschools operated by voluntary agencies; provides grants to local Govern-ment administrations to help them meet +he cost of primary schools, andis a partner in financing the University of Botswana, Lesotho and Swazi-land (UBLS). The ministry is understaffed, both in regard to the numbersand quality of its staff and this is reflected in poor administration andsupervision and the absence of planning. Education is not free and tui-tion fees are charged at all levels, but a system of bursaries helps stu-dents from being debarred from education on account of poverty

64. The main problems of the educational system at present are asfollows: (a) the inadequacy of manpower data and forecast needs, and conse-quent uncertainty as to whether the system is effectively geared to thecountry's future need for trained manpower; (b) the lack of a detailed edu--cation development Dlan. particularly with respect to vocational training;(c) the shortage of teachers generally and of qualified teachers specifica:L-ly, partly due to the great difference between salaries of teachers andcivil servants: (d) the shortage of school buildings and equipment; and (e)the inadequacv of vocation&l training.

65. In recent years, the Government has made considerable effortsto raise the level of education throughout the country. This is reflectedby the increase of the primary school enrollment to absorb approximately70% of the school age population and by the increase in secondary schoolenrollment from 976 in 1963 to 2,299 in 1968. This expansion has beenmatched by a steady increase in expenditures on education by central andlocal governments reaching 2.2 million Rands in 1968 or approximately 15%of total public expenditures. 2/ The need for the future is to overcomethe problems referred to above and to expand the system on the basis ofcareful long-term planning.

1/ See Annex for a more extensive discussion.

2/ It is difficult to give a series of figures on total governmentexpenditures on education for the following reasons: (1) localgovernment's figures are scanty and not available for earlieryears; (2) the fiscal year of the local authorities differs fromthat of the central government.

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5. TRANSPORTATION

66. General The large size of the country, the desert conditionsand its small population make the provision of an adequate transport sys-tem a costly proposition. Centers of povulation away from the railway areserved either by tracks which are often difficult for motor vehicles totraverse, or by Botswana National Airways (BNA).

67. R aiiway The only railway traverses the eastern part of thecountrv from the Renublic of South Africa in the south to Rhodesia inthe north. The Railway is owned and operated by Rhodesia Railways, whichpays an annual wavleave of R 390.000 to the Botswana Government. All earn-ings from the operation of the railway accrue to Rhodesia Railways.

68. Airways BNA was until June 1969 a private company, but financialeiiffiuilftircs hnve frorcd tlhe rrgoverrnment to take it over. It onprates a

scheduled service between Lusaka (Zambia) and Johannesburg (South Africa),s4+1n 4 n+ arm

1A+_ aC,+^r.n 0+ PrO,,n

4a+ n. n-,arA (2la.)-n oe T+ lat on aa,r,,withintrm.eiat stps at -rniso-.bd Aae-nes. I rosre

Serondellas, Maun, Serowe, Mahalapye, Ghanzi and Lobatsi. Other towns areserved by charter aircraft+. In addition, Sout.h African Airways operatesa service between Francistown, Gaberones and Johannesburg.

69. Waterways The South African Government operates a barge servicefor L the tansport of G-overnm.Lent stores on the Chobe River. There is --"0sa privately owned barge service operating across the Zambesi River betweenKasane in Blo-tswana and Zambia.

70 nma Botsw-.a has only two ->in roads:- (a) uthe iNour-Soutuhl

roae. which connects Ramaquabane on the Rhodesian border, through Francis-uowi-i ard' Gaberones, to Rarliatlaba.ila on the South A.irican border near Mafe-

king. A number of feeder roads connect towns and villages with this raod.It is an uniengineered road in poor condition although some extensive im-Dro,'ement works have taken place under the IDA road credit; (b) the roadbetween Francistown and Maun which was recently completed also under theIDA credit. In addition to the two main roads there are about 2,100 milesof district roads which are under the jurisdiction of district councils.The following table shows the development of the roads system over theperiod 19066-68.

Main road lenaths bv tVDe

(in miles)YearD. Bxin,en Gravfe' ur

1966 15 1431 1181

1967 15 1479 1161

1968 16 1478 1261

Source: Public Works Department - Road Branch

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i. ine most heavily traff1±kIvu' road is between u.atsi aId Gmaber-o,e

where the count in 1968 exceeded 400 vehicles per day (vpd). It needs ur-gent upgrading to bitumen standard. Several other sections of the mainNorth - South road between the South African border and Rhodesia have traf-fic counts exceeding 100 vpd and need improvement.

72. Statistics of motor vehicles show that their number has increasedfrom 2,40Q in 1962 to 4;992 in 1Q67. In the same nerind revenues from mo-tor vehicles and drivers licences have increased from 1 78,836 to R 130,491,representi ng an annit.l urnwth of thbot in nercefnt

73. The Government's tentativ3 road investment program for the years1968 to 1973 is as follows:

(In Tiiousand Rands)

1968/69 1969/70 1970/71 1971/72 1972/73 Total

Gaberones-Lobatsi 100 400 400 400 - 1,300Irovement of Mair Roads 50 100 1 100 100 L50Part of North/South Road - 100 100 100 - 300TLVo-,ASh'i and -vllage roads 25J 110 It 85 85 390

Road Depots 45 45 30 - _ 120UIoUe-_asane 20 4 - - -29

Nata-Kazungula - 835.3 835.3 - - 1,670.6

74. Highway Administration Responsibility for developing the mainhighway system iB vested in the Ministry of Works and Communications, -whoseheadquarters are in Gaberones where facilities include an administrationbuildinig, central mechanical workshops and a materials laboratory.

75. The administration is overburdened and needs reorganization andexDansion to cope with the legal, administrative and maintenance problemsresulting from increasing road usage. The assistance of a transport eco-nomist is required. More .ield workshops are needed; workshop staff is inshort supply, especially at the executive level. No vehicle size and weightregulations exist and there is no general speed limit. Management Consul-tants are needed to study and recommend a reorganization and strengtheningof the Roads Branch of the Ministry to enable it to develop and maintainthe road network to meet the needs of the country.

76. Hhwai Planning Priorities for highway planning are determinedby the Ministry of Development Planning in consultation with tne Ministryof Works and Communications. More basic data is needed to improve thisplanning.

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77. Highway Design and Construction Tne Ministry of Works and Com-munications only undertakes the design of minor works such as streets andlocalized imorovements or main roads. Construction work is undertaken bycontractors.

78. Highway Maintenance Highway maintenance forms the major functionof the Ministry and includes routine maintenance, periodic regravelling andbetterment. These last two functions are undertaken largely by contract.For the year 1969/70 road maintenance funds, which are provided out of bud-get appropriations, amount to R 317,205. This figure includes allowancesfor routine and periodic maintenance and is patently inadequate. Staffsalaries, overheads and replacement of equipment account for a furtherR 883,324. Maintenance methods are primitive which, coupled with insuffi-cient maintenance funds, have resulted in roads becoming sunken troughs.Special attention will have to be paid to the Francistown-Maun road, sec-tions of which wash out regularly each year. The Roads Branch shouldstudy this problem and improve the drainage in the affected sections.

6. POSTS AND TELECOMMUNICATIONS

79. Distances between population centers in Botswana are great; goodcomrunications are therefore an essential service which assists development.Postal and telegraph services were administered until 1910 by the Cape Prov-ince and subsequently by South Africa. These were transferred to the Gov--ernment of Bechuanaland in the early 1930's. The telephone service waspurchased from Rhodesia in January 1957.

do. In 1968, there were 65 postal, telegraph and telenhone agencies.There are automatic telephone exchanges at Francistown, Gaberones, andLobatsi and a teleohone link with Maun was comoleted in February 1969.T'he number of telephones connected to the public network in 1968 was 2966,or some 0.49 per 100 persons of population. (This telephone density com-pares with ratios of 0.60 for Kenya, 0.214 for Tanzania and 0.22 for Malawi).Contact with centers in western Botswana is maintained through two-way radioequipment and mail delivery is usually once a week. The Botswana telephonesystem is linked, through Gaberones- with South Africa nnd from thwr wi ththe outside world.

81. At present the Departm,ient of Posts and Telegraphs, which is in-cornorated within the Ministry of Works and Commwnim4cations, has the monopolyfor the provision of Post and Telecommunications service. The Departmentis a self accounting - nit. afnd seems to have been able to its recurrentexpenditures from revenues, as shown by the following figures:

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DeDartment of Posts and Telegaahs

(in '000 Rands)

1964/65 1965/66 1966/67 1967/68

Revenues 413 512 794 631

of which:

Post 253 200 552 t24

Telephone 132 177 195 252

Telegraph 24 30 41 41

RecurrentExpenditures 368 461 593 603

Surplus 45 51 201 28

Source: Annual Statements of Accounts

Unfortunately, it is impossible to know whether the Department has been

fully self-supporting, since the expenditure figures do not include certain

cost items such as depreciation allowances and housing subsidies. It is

desirable, for the future, that full business accounting methods should

be used so that the Department's performance can be properly assessed.

82. Revenues increased remarkably in 1966/67 owing to the post office'ssales of commemorative stamps at Independence. Tnis apart, telephone reve--

nues have shown the fastest growth rate, increasing at 24 percent p.a. on

average over the period. The existing telephone capacity is barely adequate

at the present level of demand; it will become increasingly inadequate as

demand increases (according to government projections at a rate of 12 per-

cent p.a.) unless substantial investments are made. The National Develop-ment Plan envisages an investment program for improving telepnone services

of about R 1 million. The government is obtaining suppliers' credits and

commercial bank loans to finance this program; it proposes to raise tariffis,if necessary, so that the Department will be able fully to cover the cost of

debt service.

7. HOUSING

83. The government provides housing for civil servants in government

owned houses at sub-economic rentals. This practice has been a carry-over

from the pre-independence period and the heavy reliance upon non-local

staff. The financial implications of this practice are serious. The gov-

ernment estimates that the cost, met from public revenues, attributable to

housing subsidies, is in the order of R 700,000 per year. In addition, the

servicing of housing loans raised before independence is estimated at R

320,000 each year; the maintenance of government housing costs an addition-

al R 100,000; and payments to Town Councils by government in lieu of rates

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are some R 18,000 p.a. Moreover, of even greater significance is the factthat over 20 percent of the development funds available in the last twoyears has been spent on the government housing program.

84. At present, the Government's basic policy on housing is the en-couragement of house ownership. To achieve this, it envisages the esta-blishment of a National Housing Authority (NHA) and the encouragement ofthe creation of building society activities in Botswana. The adoption ofa policy of charging economic rents and the Pavment of housing allowanceswould encourage ownership of houses by civil servants. It is hoped thatthe Salaries Commission, which will report later in 1969, will tackle thisproblem.

85. The NHA would be an independent statutory body, with powers toborr,w and to grant loans; it wonld be rrnosnsiblet for site deve1opment,planning, design and construction of housing schemes, whether for sale orfor rental, bo-th for nrivnte inciviaua,ls and for government. Tt. wnuld main-tain and administer houses built for rental. This would relieve the PublicWorks Department (PVTD) of its housing responsibilities, leving it to eon-centrate on construction of all other government buildings and the mainte-nan'e of roads.

86 Ther is no bhiii1ding soeiety in Rotqwana The gover.nment is

trying to arrange for a South African building society to operate in Bots-Twana; this woildl ruire pemi CiCon fr-om +he Soulh Afr ican aulthort;i+esC for-

funds to be transferred by such a society from South Africa for investmentin Botswana. A buiilding society in Botswana would probably attract localsavings which at present flow out of the country, some to building societiesinj South-1 Af~rica

87 £1OTlne eJ-pansion of the *S- centers and the inerease in the demnand

for housing are matched by an increase in the demand for power, water, andsewerage facilities. Governr,ent policj is to finance -Ithe const.action ofthese projects by commercial loans or suppliers credits on the basis thateconojiuA rad.Utes -will be charged. U JAil L,L1~for the provision o01 ---- -e-i --- thes

costs will be covered over a reasonably short period. The expected develop--tent of services to enable the nickel-copper potential to be exploited willenable the Francistown area to be adequately supplied with power and waterin the future. Without this development, there would be shortages by -972due to the limited capacity of the existing facilities.

3. MANUFACTURING

88. Manufacturing in Botswana is on a very small scale. According tothe 1967 labor census, 1550 persons or 5.5 percent of the wage-earning laborforce, earning a total wage bill of R 757,000, were engaged in manufacturing.The main components of this sector are: food manufacturing, printing, manu-facture of bricks, repair of transoort equipment, and gane industries. Mcstof the manufacturing enternrises are located in Gaberones, Francistown andLobatsi. There is little information available on the activities of theseenterDrises.

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An. MIe deelpmn of..uac n as been -4pe1- 1-aiX 4y th~~;7 4~. AIU AU~ V ~JYJU~I.1 V %J.L J,MIGL.L A .CL~ , .L.LI ±I1 L11. U~~,I1 I1laaup _X LL ULLO.I.LII.LJ V.J wl..5

fact that Botswana does not have the combination of capital, labor, adequaterlBet r. 31 az a; a.l m g a.1a s±L nlue-. l.Lo maInuLfact ulr eU. 1e: U;UL4%. %D WILL .LI O.;ULL

compete with South African ones. Moreover, the Customs Agreement does not4. l.... J a J L . .L 4i nt..J S

permi.it BuotswWa1 tuo olfer any miieas-eLr e porProtection 1.o its L. iLWLLndustr,.Lb

90. The Goverrnment is making ari e±iort to stimulate new investmentE,in this sector. In 1968, it passed the Industrial Development Act whichorganizes the licensing of manufactures. One of the articles of this Actstates that a producer can ask for protection, i.e. the exclusion of allother manufacturers of the products. Tne President has the power, if he issatisfied that it is in the public interest and it is in the interests ofthe efficient development of the industry, to grant such protection. TheGovernment also intends to establish a National Development Corporationas a specialized financial institution, the function of which will be tointerest investors in specific projects and assist in their implementation.It will differ from the existing National Development Bank in that it willprovide management as well as capital (including equity) for enterprises.Government's tax policy is also aimed at encouraging foreign investmentsin Botswana. The present company tax rate of 30 percent is coupled withliberal deductions for capital investments.

91. In any program of industrial development, it would be necessaryto make provision for training. At present the Botswana Training Centeris the only training center and is considered inadequate. With the devel-opment of the UNDP scheme of national vocational training (See Annex para.46), this situation may improve. However, better manpower planning isparticularly needed in this field.

92. No detailed investigations of industrial possibilities have yetbeen made. The Government is hoping that investments will be attracted ontwo main lines: (a) small industries to sup-ly the internal market mainlywith foodstuffs and clothing; (b) export-oriented industries which willtake advantage of Botswana's free access to the South African and Rhodesianmarkets as well as its good relations with other African countries and itsrelatively cheap labor. The completion of the power and water facilitiesfor the nickel-copper mining, as well as the additional wages generated byit, will provide a considerably more favorable base than presently existsfor manufacturing in the Francistown area.

9. TOURISM

93. A little over 30,000 square miles or one seventh of the area ofBotswana have been set aside as areas for wild-life conservation. At pre-sent, Botswana's major tourist asset is the Chobe National Park which isannroximatelv 4.500 sauare miles and runs along the banks of the ChobeRiver. The region has abundant grazing and water and contains the bestknnwn sneeies of large game, birds, and fish. The river is excellent forgame-viewing and is easily navigable for about 20 miles upstream from Kasane.In addition to the riverwavy the Park has anoroximately 50 miles of roadsthrough game concentrations and several hundreds of miles of landrover

- 26 -

tracks. The Park i s open F11 year around and is eaVsilv accessible by airand by road from the Victoria Falls (on the Rhodesian side). Visitors from7amhbin can reach the Park hv crossing the Glhobe Rivepr bv ferry at KnnijnfulakBotswana National Airways runs a weekly service which connects Johannesburgand the eastern part of Botswana to the Park.

94 Tshe number of torists who visited the Park has been growing asfollows:

1965 1966 1967 1968

2,891 3,092 4,264 4,407

Source: Dea.tmt o...± I. .AI of 11ldif & NatTio.a l I.

Lb l b UlI.U U u IIdA , UIlV UU.L LI c Udc,y ,UC1 UL .LD v L O.U JUIA

R. 10 and that the average period of stay at the Park is 2 days. Thus,tota- eiuenuit-ures in 1968 by -tourists in the_ Park ,,l« - -have reaced bou~UU~iL XUeIIUJ uuxeb ll .LfUU u UOULUX.b Ulb ±1 UlItf r-ML-A 1MaY IW.Vt= L-t=M;it=U dUULA.U

R 90,000. By 1967 and 1968 accommodation was a constraint on expandingthe tour-ist trade -n the Farik. At4 p re se n t, a b0out A;Icp comp, -i-Ull t,U. _L U UI dU LI UlIC JI d..LI M* I-u CbIU ~ U UIP1 ~ I '.ZUMPMa.IIy L;

negotiating with the government for the establishment of a new modernh.otel in the area.

95. The Moremi game reserve is another tourist attraction. It is partof the Okavango Delta, beginning where the water ends and the vast expansesof grasslands begin. The reserve is triangular in shape, bounded by therivers Kwaai, Santantadibe, Gomoti and the Mogogelo. The number of touriststo this reserve has been growing.as follows:

1965 1966 y167 1968

132 341 349 711

Source: Denartment of Wildlife & National Parks.

More recently the number of tourists to the Okavango swamps has increased.The only accommodation there, Crocodile Camp, started in 1967 and in 1968it was able to accommodate 1,512 tourists who stayed on the average a. periodof 3-4 days.

96. There are 9 photographic and 6 hunting safari companies cperatingin Botswana. It was estimated for 1968/69 that hunting licenses would pro-duce R 160,000 in revenue to the government, in addition to at least R 20,000for export duties on tronhies and to the income tax on the Drofits of thesafari companies. Against these revenues, the recurrent exoenditure appro-priation for the Department of Wildlife & National Parks was R 89,000. Thus,tourism is clearly a source of net revenue to the government, and it has con-siderable notential for further developmernt.

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97. Wildlife utilization in its various forms, however, raises theproblem of choosing among land-use schemes. The value of game is greatestin areas which are marginal for conventional agriculture and livestockgrazing on a long-term basis. In areas where other land-use schemes forlivestock or for timber exploitation (as in the northern area) have beenproposed, cost-benefit analyses of the alternative land-uses have beenconducted. It is important that these should be carefully considered be-eaunse game. as an asset; once destroyvd is difficult, if not impossiblp-to replace.

98. Botswana's tourist trade is and will continue to be heavilydependent on traffie fr,om other narts of the world +tn the Soth Afrrianregion as a whole and particularly to Rhodesia and the Republic of SouthAfri ca The +wo ;mTin eonstraints on the deelopmrent Of tourism are thelack of suitable infrastructure, mainly airfields and roads; and the short-age* of t+ouristH aecc %ommonAatInn r. av- lm-n+ Nolircyr is +rt kreepn +tur4 Qm 4n +'Hprivate sector and to encourage foreign investments in this field. Thestrateg,, follo.,ted + 4 the +goenmn i- tha a .+4. 4. is , 4h immediat

key to expansion of the tourist trade, and that once adequate accommodationis 4A~A the tour4~+ ~ ~-1 -p4e the touri ists into Botswana by

small planes or four-wheel drive vehicles. As the flow of tourists increases,infrastr. Wctur -4 poJ. ts such as i.mproved roads an.d airfields m.y 4then- Ibe J4ustified.

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III. PUBLIC FIiNAWCL Ai!D DETVELOPTIE1T PLAINNI11G

A. Public Finance

99. Introduction: The most salient features of Botswana's publicfinances are:

(a) the extreme dependence on external aid, predominantlyBritisht and

(b! the constraints imnosed by the nresent South AfricanCustoms Union arrangements.

100. Until the mid-1950's Britain provided only a small amount of de-velopment pro1ject asistance- insisting that loral revenues shold .- overall recurrent expenditure. The meagre expenditure allowed under this ar-ran-ement w, -as insu fficie.nt to+ prrorvi evi -irpn the, mons-t 'hpic 1 evel of soe-ia lI

and administrative services and was insufficient to service any adequatedevelopment progrnm. Recrurrent budgetarv aid started in 1956/57 and in-

creased steadily to a peak of almost It 7 million in 1967/63. In mostyears ~since r1961 if- has represne Aron 45j npercpnt of' rt-'iirrent pxnen-

ditures. At the same time, Britisha aid has provided the bulk of the fundsfor the country's development program. At +ndependence, Britain enteredinto a commitment to provide a total assistance of E 13 million over thethree years 167/68 to4 1969/70, wit h the, Iannual nntc nrd the bre-k-dirwn

between recurrent and development to be negotiated. After the devaluationof ster._ings4 -n 1 *BE7 1 A 4;ncraAsed the wmount oo to rta; nt -; n + h_

value in Rand terms.

101. Under the terms of the 1910 Customis Agreement, Botswana does notlevy import L_ - - duty on an.y l-t - other than A Afrlc

beverages, but receives in lieu a fixed percentage of the total import andt:AxC.set UU1 t :b i-UV | CC'6LUtUy b!.- :JUL)i 1 I ±LdAI I4)VU1 1U1 . I XJ l U'JU 4 U)/'Ju

Botswana's percentage was 0.27622 percent; in that year it was increasedmarginally to 0.3097i perce-nt, as has beeni described in para. 42. Dutieson South African beverages are collected by Botswana, but at the relativelylow South African rates of taxation. These arrangerrments have resulted in

relatively small customs and excise receipts, for they have typically re-presented about 20 percent of revenues ani only around 10 percent oI esti-mated import values. This contrasts significantly with most other develop-ing countries, where these ratios are usually very much higher. Further-more, since the Botswana government plays no role in formulating SouthAfrican tariff policy, it is deprived of an important revenue-raising tool. _/

1/ See footnote 1, page 13.

- 29 -

102. In the last few years significant changes have taken place in theorganization of the public finances in conjunction with governmental andtax reforms. In 1966 nine district councils and three town councils wereestablished with jurisdiction over local government finances, in place ofthe former tribal authorities and township councils respectively. At thesame time, the distinction between Africans and non-Africans for tax pur-poses was abolished and a dual system of central and local government taxesapplicable to all was introduced. Prior to this. Africans had been liableto a head tax (the "African ordinary tax") of R.4, hlalf payable to theformer Tribal Treasuries and half to the central government, and to "gradedtax", assessed on income or livestock ownership, with a R.40 maximum pay-able entirely to the 'ribal Treasuries. Non-Africans were subJect to apersonal tEx and income tax, both payable to the central government. Underthe new arrangements. Africans and non-Africans became liable to Local Gov-ernment Tax (ranging from R.3 to R.48) and income tax, payable in their en-tirety to local and central governments resnectivelv. The effent of thesereforms (apart from the slightly greater progressivity) was not to increasethe total incidence of taxation but to alter the allor'rtion of t_xes in

favor of the local authorities. The local authorities gained and the cen-tral government loct some R. 300,000 in revenues In rpt.irn the loca1 Al1_

thorities were no longer to receive grants-in-aid from the central govern-inmnt. ana took ovpr full financial responsibility for district roads, san-tation, maintenance of rural water supplies, and most importantly of all,nriTmarv educatlon. These added responsi e h red to be a great_er financial burden for local authorities than envisaged, however, and sub-

t -ntil cetralgovenment subventions have been requi_ Wih tchanges, an analysis of recent developments in public finance would ideally

_- , 't~ l t _ J _ V V . _VJ _ l|VZ-VAA XS V lV VL4.aJ

this is impossible owing to the scanty information available on local bud-,c- v-.

Central Government Budget--

1031+ Results for the most recent years are given in tA1 follo twin

table:

1/ Central government financial year runs from April 1 to March 31.

- 30 -

Central Governnment Finances

(in million rands)

lio63/64 ln)64/65 1965/66 196-/6T7 1967/6j 1966 '69(RevisedEstimates)

Current Revenue 3.4 4.4 5.4 b.2 5.7 7.0Percent increase (+30) (+23) (+14) (- 7) (+21)

Current I!xuenditure 6.4 7.5 9.1 11.0 12.6 12.9Percent increase (+18) (+21) (+21) (+15) (+ 2)

Current Deficit - 3.O - 3.1 - 3.u - 4.0 - 6.8 - 5.9

DevelopmentLlxpenditure 1.8 4.4 o.0 6.9 3.8 2.7

Overall Deficit - 4.8 - 7.5 - 9.7 -11.6 -10.6 - 8.7

Financed by:

U1C grants 4.2 5.4 7.6 8.6 9.0 8.0Other grants - 0.1 0.1 0.3 0.7Foreign loans ? n 0.7 1.1 2.2 1.0 0.8Domestic loans ) 1.0 1.0 0.5 - )

Drawing on Reserves + 0.1 + 0.3 - 0.2 - - 0.1 - 0.1(+ = drawing)

Source: Appendix Table 16.

104. Ilith re;pect to the recurrent budget, the general picture is oneof rapidly increasing revenues and expenditure, with a rising deficitfinanced by British grant-aid. 'The deficit jumped markedly in 1967/68 buthas fallen in 196b8/6().

10). Current revenues approximately droubled over the five years19(3/64 to 17968/ty9. hlowever, most of this growth took place in the firstthree years 1)63/Cu - 19`6/67. In 1967/63 revenues actually declined

quite substantially, but according to revised estimlates they have recover-ed strongry in 1963/69. A breakdown of revenues is given in Asppendix Table17. Customs Agreement revenues 1/ are shown to have increased by 16 per-cent in 1964/65 and by 29 percent in 1965/66. About half of the increase

1/ 'This discussion refers to the years to which these revenues wereattributable. In some vears there hthve been delays in navment by t'heSouth African authorities and therefore revenues attributable to onevear have been accounted fror i J1 thtie ltext.

- 31 -

in the latter year is explained by the adjustment in Botswana's share (se!epara. 101 above). Custom Agreement revenues grew much more slowly in thefollowing two years, at 3 and 9 percent respectively and probably fell i!..1968/69. Duties on South African liquor more than doubled between 1965/66and 1967/68!h and probably continued to grow in 1968/69. Income taxes, in-cluding the government's share of the African tax prior to 1966/67. roseby almost 90 percent in the three years 1l63/64 - 1966/67. Most of thisgrowth was due to increased taxes paid by B1JC arising from its greatly in-creased throughput and profitability in these years. Cunverse-ly, ii-junetaxes dropped sharply in 1967/68, contributing to a considerable extent tothe overall drop in revenues. This was accounted for entirely by the re-duction in receipts from BMC. reflecting the latter's much smaller throu:h-put in that year and some arrears in payments. Payment of these arrearsend higher throughput have accounted for much of the improvement in 1968/69.Income tax receipts other than those from BMIC have increased steadilythroughotut the perioda in spite of the elimination of the African and ner-sonal taxes. This has been helped by the subjection of Africans to incometax for the first time in 1969/66. Exnprt taxes. which are princinallyv re-rived. from cattle exports, followed a similar pattern to BMC tax payments,frlling off sharnlv in 1067/68-

O~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L - - -- - I I ,,-

10A6. Tun itpms whirh had a suhbs_rntia1 inf'liunre on bon+ hth the incresqP

in overall revenues in 1966/67 and their fall in 1967/68 were Posts andTelegraphs receipts on reimbursements. Posts and Telegraphs had excep=tional revenues in 1966/67 through the sale of commemorative stamps.Lilkewise, reirzbursemer.ts rose shap-ly in l'g6/67 the local authorJtiesbecame responsible for school-teachers' salaries, repaying the governmentwhich continued actually to pay the teachers. This arrangement continuedin 1967/68 and 1968/69, but reimbursement and payment was made to and frcma "elo the -li" acco.nt, resulting in aLL hr L alli reim,loursem,enIts

(as well as in central government education expenditures). One fairly im-L,ran t revenue head, of l;he years ani/6 ~d i95u sale of stat'e

lends, has disappeared, receipts from this now accruing to the NiationalDevelopmXent Bnk.o On the otherB1 +V - -e-e- a onceaand-for=all receipt of R.430,000 in 1968/69 for the sale of the former administra-ti ve~ headqu-ters at M g which1 contributed ~. ~Co0ns1%UerLab t4o h1e recc-

very of revenue.

107. Despite the rapid advance of revenues, it has been insufficienttlo prevent a widening of thle currentu 1due-l.-lt. Onre zL-lportuari't reason forthe rather low level of revenues has been thle relatively small receiptsfrom custom-Us and excise. Anoteulur is bith aUsencte of nIy sauls Ur turx±uvertax which might be expected to be a substitute for low customs duty re-turns. Personal iucuLie tax is low; for example, a married person earn-ing R.3,000 pays only R.291 excluding any deductions (which are generous).Furthermore, incoume tax is difficult to collect from farmers, and thereappears to have been widespread evasion, The revenue office is currentlybeing strengthened in an attempt to rectify this situation. Company tax,at 30 percent compared with the new rate of 40 percent in South Africa,is set low with the object of attracting industry; but given the very

-32 -

small industrial sector, excluding BMIC which pays according to a specialtax schedule, any increase in rate would have only a marginal impact; on

revenues.

108. A substantial reduction in or the elimination of the current de-ficit will have to await the prospective mining developments (see para. 134below). But there do appear to be opportunities for irmproving local re-venues considerably irrespective of these developments and within the pre-sent custorms agreement fraraework. The recent introduction of a sales taxin South Africa in the latter's 1969/70 budget has given Botswana littlechoice but to follow suit. A thorough study of other possibilities, suchas higher personal taxes, is required. The Botswana government has not sofar introduced any significant new tax measures, possibly in part becauseimproved revenue performance would be offset by reductions in British aid.But there is an obvious need to reduce the goverrmlent's vulnerability tooutside forces and to demonstrate thie effectiveness of its development ef-fort.

10). Current expenditures increas-Žd at about tthe same pace as revenuesta.ing the period 1963/C64 - 1968/69 overal].. But nearly all this growthoccurred prior to 1968/69; in this latter year, according to revised esti-iates, expenditures have barely risen at all. Tfotal expenditures in anygiven year have essentially been governed by the waount of budgetary aidmade available by Britain. The expenditure growth is reflected in practi-cally all items (see Appendix Table 18). Expenditures on administrationand internal security were inevitably inflated by the coming of indepen-dence; pensions and gratuities also increased sharply with the departureof many exnatriate civil servants. Exrendi tures on economli rind soci alservices have also shownv a considerable expansion. In 1965/66 and 1966/67fani ne reli ef' added a very substnntial namoant t.o the total -

11O Governnient.' 4 etiitictudI to expenditures is one of distinct frugali-

ty. Expenditures on administration have been kept to a bare minimum, whileWfiS tare iT! the e-cnorn4 e n'l socia] sePrrvices h hasbeen Y-Prmckn1-lir absent.

The i4inistry of Finance maintains extremely tight control over the expen-ditures of other- mi n i stries. The one -ea on eXtravag--ce is te govern-ment salary structure iiherited from the colonial period. In many otherf4 o zrme i r color.l al terrirtorie, ci vllt. servanWts' basic sal'arlies were reduced

after independence and such expatriates as were required were retainedthrough the I.,paM o1fj "tUoppng upt iUe by the forLUeIr cLojloniaL ,vtV

erminent. At Botswana's independence, the UK government felt that a larget<.u,L,J i o i U}it '°rics WUL4-U CGn4 iUe Uto betneede WV411U IVLulU LIt) be eli-

gib-,le for UtK "topping up", and that the relatively generous basic salariesof the colonial period sh-Oud therefore le retained to keep them. Conse-quently, as posts have been localized, Batswana filling them have beenpald unnecessarly high salaries wrhichi ae not supportaule by Lte country'sresources. As localization increases, tie problem will become more serious.

While the political difficulties cannot be underestimiated, the need now isfor the basic salary structure to be reduced and for government to provide

11toppiig.-up" to expatriates on an ad hoc basis where necessary. 1/ Apartfror. salaries 9 C4ivil servants l SO reciv generou -o g wate -I_-4 -

.5.. .JI~OC.4J.A .. .O 0.l.V ... O.J VWIJO O..O.J 4 L. 6UAI~J. .J O 1AUtJU-.D ±11tS WflL,C. WIUl

electricity subsidies. These should in any case be eliminated since theyhave seriously dstorted their respective markets, and if uecesarys becompensated for. The government has become .ncreasingly concerned overthese problems, anU has appointed a Sal_aries CmiuiuijUr to revied Itlem.

His report is expected later this year.

111. Within the limited resources available, the allocation of expen-.diture has by and large been unexceptionable. As noted in para. 52, agri--cultural extension services require some reconsideration owing to theirseemingly hign cost. Careful consideration should also be given to theburden on the budget imposed by the continuation of the "Food for Work"program. Finally, subventions to local authorities in the last two yearsmay have been unnecessarily large, since several local authorities havebuilt up considerable reserves. More careful appraisal of their resour-ces is needed in determining the size of these subventions.

112. Development expenditures 2/ have been financed very largely byforeign aid, 3/ and to a small extent by loans from local commercial banks.British aid has again been the chief source of funds. Prior to indepen-dence,7 this took the form of C. D. and W. grants and Exchequer Loans.Since independence Botswana has received from the U.K. an annual grant-in-aid for an agreed development program. Any portion of this grant notspent by the end of the financial year is cancelled. The only other ex-ternal financing of any size has been the IDA road credit. As for domesticresoiu,ces, government has been able to borrow from the commercial banks,such as for power anad telecommunications schemes; terms have been 10 yearsat 7-8% interest. There have so far been no sales of government bonds orTreasury bills.

113. Total development outlays increased rapidly after 1963/64 to apeak of almost 7 million Rands in 1966/67, but have since fallen off. Thisfluctuation is explained partly by the construction of the new capital ofGaberones and by the IDA financed road construction, the main expenditureson which occurred in the earlier years. But even excluding these items,there was a marked peak in 1966/67, reflecting the build-up of C. D. andW. grants until 1966/67, and the smaller grant-in-aid for development in

1/ UK nationals already receive inducement allowances, albeit lowerthan in other countries, from the UK under the OSAS scheme. Hence,salary discrimination would not be new.

2/ See Appendix Table 19.

3/ See Appendix Table 21.

the succeeding two years. l/ Total development expenditures for the fiveyears 1963/64-1967/68 was 22.8 raillion Rand, slightly in excess of theamount projected for the same period in the pre-independence plan.

114. The level of expenditure is determined first of all by the avail-ability of finance. This is certainly the case for large projects whichcan be put out to contractors. For small projects the limited administra-tive capacity of the governmlent, which in turn reflects the limitations ofthe recurrent budget, can also be a serious constraint. For example, du-ring the past two years government has barely managed to spend the fullamount of the British development grant-in-aid, most of which was destinedfor small Drojects.

115. The construction of Gaberones, while a political and administra-tive necessity, has had a profound effect on the distribution of develop-ment expenditure (see Appendix Table 19). Including all the related infra-structure, it has accounted for about a third of the total over the six-year period, 1963/61,-1968/69. Looked at sectorally, the largest expendi-tures hiave been on administrative buildings, housing and sewerage, ac-counting for 25% of the total. These have been followed by- outlays onroads and civil aviation (to a large extent attributable to the IDA credit)with, 14.8%. Lducation has accounted for 11.3% of the total, water devel-opmrent 13.5" and agriculture and livestock toge'ther 14.2%.

Local Government Budgets

116. In 1968, 2/ local government authorities spent about 1.9 millionRands (roughly 12 percent of central government outlays) which was approxi-mately matched by revenues. Two-thirds of expenditure went on primary edu-cation, about a fifth on administration and the remairnder on health, water,buildings, power and roads, About half of revenues were derived from thelocal government tax, a quarter from central government subventions and therest fronm licenses and fees (in particular, school fees). The authoritiesrange in size from the Central district with outlays of over 600,ooo Randto the smallest with less than 50.000 Rand.

1/ A recent analysis by the government has shown tllat, of the total de-velnnment expenditure of R. 6.9 million in 1966/67; only R. 5.2 mil-lion was capital formation strictly defined. H. 1.2 million wasconsumpti on o-r '"ricurrent" xnpnnditure- and the rest was transfers,

In 1967/68, the consumption and transfers components were far smallerc in r, R P n;illinn rP-n"Pcszont-r1 >n-nit.nl fnrrmpti;nn n,f. of}t+l HPv-

elopment outlays of P. 3.8 million.

2/ District councils have a calendar financial year; town councils haveth-1'e sw-e fln cciral' year as cent-rl goverrnment.

117. The financial responsibilities assigned to the new local govern-ments under the 1966 reforms have placed a heavy strain on their adminis-trative capacities. In the district councils (as opposed to the town coun-cils) there is a great shortage of officials capable of financial and pro-ject administration. Financial management has consequently been rather lack-ing. Several councils have built up substantial reserves through inabilityto initiate and implement projects. As for revenues, many councils ini-tially experienced difficulty in collecting the ;aew Loc^' GovernLment tax,but the increase in receipts from R. 7'18,000 in 1966 to R. 911,000 in 1968signifies an improvement. Nevertheless, there is said to be considerableevasion still. Another item where there is scope for revenue-raising iswater charges. Although all councils maintain boreholes, scarcely anycharge for their use. Higher revenues would allow a reduction in the gov--ernment subvention, which is R. 511,000 for 1969/70 (mainly for teachers'salaries), and progress towards the finra'ial autonomy originally intended.

118. Central government is well aware of the administrative inadequa.-cies at the local level, and is trying to strengthen local governmentstaffs. It is providing training to officials, and has recruited severalPeace Corps volunteers as advisers to local authorities. It is now in-sisting that local governments produce detailed plans of prospective pro-jects with a view to irmiprove irmplementation, and subventions will infuture be partly related to projects. As suggested in para. 111, a morecareful appraisal of each council's financial position when determiningthe size of grants would also be desirable. This in turn will requirebetter accounting and reporting by councils.

B. Development Planning

119. Botswana has had development plans since before independence.The last pre.-independence plan, covering the period 1963-68, was essen-tially a collection of public sector programs not explicitly related toeach other nor to any particular set of development goals. In 1966 anew plan, the Transitional Plan for Social and Economic Development, wasproduced. Like its predecessor, it was a plan for the public sector butframed more in the context of the country's economic constraints and ob-lectives. It covered all prolects designed to start in the three vears1966/67 to 1968/69, and the continuing outlays on them in the followingtwo vears

120.) Tn 1096R the Transitional Plan was sunerseded bv the NationalDevelopment 'Plan (1968-73) (NDP). Again, this is a public sector plan.Tt i8 hbairallv a refinement and updatinz of the earlier version. With-in the limitations of partial planning and Botswana's poor statistics,i+ rrnovidec a cenevincing rationality to gonvernme_nt nol i r-v and chni rses of

projects. It rightly gives emphasis to the fiscal implications of thedevelopment program. One seri ous inadequynii- is in t.hp peuirationa1 sec-tor, where no attempt has been made to draw up a detailed educationalpln. In view of the cri+ical short, aes of trained personnel and theconsiderable expenditures which government intends to make in education,klile prepara 14on o- sucv a pln iS a. _rgent p,_,-w +

- 36 -

121. The NDP relates only to projects starting in 1968/69 and1969/70, or continuinrn from earlier years. For the later years it in-

cludes continuing outlays on these projects and a hypothetical amountfor projects which will be spelt out in the next pIan to he preparedlater in 1969. For the first three years 1968/69-1970/71, the IiDP

calls for expenditure of R.4(6.l million. The total is dominated bythe Shashe complex, which accounts for 58% of it (see Appendix Table22). 1Qy the same token, the sectoral distribution of outlays is

weighed heavily by physical infrastructure and water resources. Edu-cation accounts for only )i/ of the +to+l,but in a +er.+ is30/J higher tharn the average for the previous f'ive years. Agricultureand dlivestoc rceive less than 3 of +the +otal, and only abou+ +he

same in absolute terms as in earlier years. This is due oartly to,the fact that agricultural and livestocl, projects st'arti.r in 1 /

and 1969/70 are not expected to have much of a carry-over into 1970/71.I, a-so reflec ts the ac thaa t "a par' of g overnm,ent's effort in these sec-tors is concentrated in expansion of the existing extension services, whichis not included in plan outlays.

122. The investment progran has been pu--osely conce:ived without

regard to immediate financial availabilities, but rather to reflect whatcan- be feasibly Gone as S"-U- f in4 c - "'C "' M"

,~~~~ ~ ~~~ , eiall oeasnng fn>cisforth omng. Tliis, at 'he tim,eof publication, less than 15, of the necessary financing for the threeyearst outlay was in s ,I Vium.nce the im plementation depenidus to such ar,

extent on additional external finanacing, the Plan can only be regardedas being of an indicative nature even in the public sector. As such it

is still a valuable document because it has forced departments to ration-alize their investment dem-ands within ai o-verall policy frawmework and

because it acts as a useful olue-print of possible developments to po-

tential aid donors. In fact, inadequacy of new aid coimitments and over-optimism in projecting disbursements o;i the Shashe project, make certaina large shortfall on the thiree year inrestmrient target.

123. Since the setting up, first of a planning unit within the Min-istry of Finance in 1966, and then a full-fledged ivlinistry of Develop-ment l'lanning (under the Vice-President) in 1967, economic planning hasimproved significantly. Besides drafting the Plan, the Ministry is res-

ponsible for obtaining development aid and for preparing and administer-ing the development budget. In the latter capacity and in coordinating

other ministries' programs it has had a powerful and beneficial influence.It has overall responsibility for the Shashe project, which, while still

at the planning stage, it has so far executed -with efficiency. It hasalso stimulated local authorities to prepare development p'. ans which arecurrently being revised. Implementation of these has been slow, but if

staff can be strengtherned they promise a better use of local resources,including cormmunal labor. Other ministries have planning units whichare rather weak, and need to be strengthlene(l.

1'2h. The existing poor statistics are a serious ilipediinent to good

plan-iiig. They hinder judgement on sectoral problems, and hence on their

- 3r -

solution; they make production targets meaningless and evaluation of pro--grams difficult; and they do not permit total resource planning. Govern-ment is well aware of the problem, and is selectively trying to tackle it.The mission proposes that a 5-year program be undertaken to construct acomprehensive statistical series. This should include continuous serieson agricultural and industrial production, prices, financial transactionsboth internal and external. and fixed capital formation (public and Dri-vate). Pilot studies at successive intervals using sampling tecnniquescan give reasonable estimates of private consumption. The constructionof series, such as these, can provide a sound basis for the preparationof national accounts. The statistical staff is currently being strengthened,and should thus be better equipped to carry it out.,

- 38 -

IV. ECONOMIC PROSPECTS

A. General

125. Botswana is, by all standards, one of the least developedcountries anywhere. The vast majori.ty of the population is engaged insubsistence agriculture or orimitive stock-raising, and manufacturingis practically non-existent. The social and physical infrastructureis very poor,, government services are ereatlv denendent on ext.rrialsources for financing and manpower, and per capita incomes are extreme-ly low Political in__nen ennP ha.s not chanidrP,9 this but, it has givento development an urgency which was hitherto lacking.

126. The greater urgency is reflected in government's expandedrole in the economic sphere. Governmnent outlays in the pMroductive sec-tors have been limited for lack of resources, but it has taken on aconsiderably more active role in tfJrin, to sti..ulate developmen+. mT-

portant legislation has been passed, suchl as the Mines and Minerals Actand the Industrial Develoom.errt Aet.- The allocastion of suchi public re-sources as there are has been carefully examined, as also have the mon-etar-y and rding- 4 rran ement-s .th1, a vi.er to i4mproving Bots-miar s posi=

tion. Great efforts have been made to diversify the sources of foreign1A. 4 ove !sr _m re +- dAln ; Evet,51ttr+1;thi It ;c+AnoY' to brn . -Abou+ t e estbls -

Cl. '' _Id- V ' t IIA II 1 i.LU.± 5 1. V 'S ' J 411 6'" S E5 v 14.161 V4 1 2.. 11) a 4 IS UI iSO w iJO.v J E II

ment of' large-scale mining. It is in the Process of setting up a Levelop--ment Corporation, and has enmbarked on schemes to rai.se beef ProduC4 ion,the one area other than mining where Botswaria has great obvious potential.euch eff'orts, -111ile by __ -Sm; suf:icen tG 4s.ss,re rapl _A-fc,prvd

U)t4UIL 5±4 1414.1 W I ICL' LjJ 111)0 IaL I1444 -4 LSCI 14 141 0.014 - a1L WIJC p.LuvLJVuz

a favorable fou-ndation for development in the future,

127. The growth DrosToects are dominated by the prosnective mineraldevelopiments, bot-h as to their timlng arid their extent. Only the dia-mond mining at Orava and nickel-copner mining at Selebi-Pikwe can beforecast with any degree of certainty. Other mining p)ossibiities areinsufficiently advanced to warrant any finr prediction, and could notin any event have a big .mpact until the late :19970's, but developmentsof similar imrnortance to those at Orapa and 'Selebi-Pikwe cannot be ex-cluded. The start-up of mining at Orapa and Selebi-Plkwe will Dossiblyraise CDP b)y 50-60 percent in 1973 and by 70-80 percent in 1976, as com-pared with 1968. The effect on GNP will be somewhat less than half ot'this because of factor rpayments abroad. There will be ind:irect effectson GDP from the additional services and -Qossib:ly manufacturing which thermning develomrnents will induce. The main beneficiary of these develop-ments will be the public finances, which could on certain assumptions moveinto surDlus on current account by the late 1970's (see para. 134). Ben-efits in the form of wages from the mines and related infrastructure, andtheir secondary e-lects, wil.l be significant comn-oared with oresent mone-tary incomes; but in relation to tne likely total capital investment ofabout r IlO million they will be very small indeed. The effect on ex-nor-ts will be aprproximately to Quad-ruple them; the imnort needs afterthe initial canital investments are not exactly known, but the present

trade deficit will almost certainly be turned into a surplus. This willbe offset, ho-wever, by the factor payments mentioned above. The conclu-sion is that the mines will have a radical impact on the economic structwueOf the counltry, and t.hat aliholugh mueh oI the income therefrom wil flowabroad, a substantial amount, perhaps around R. 10 million per year, willaccrue to Botswana. But the additional government revenues, wnich are thesmain national benefit, will in all likelihood be offset by reductions inU.K. aid. Therefore, while giving the government for the first time ameasure of financial independence, the mining developments, in net terms,will not add very muen to the resources available to Botswana.

128. A large majority of the population will have to look to growthin the agricultural and livestock sectors for improvements in livingstandards. This will be unquestionably the case for the next decade,when relatively few will be affected by the mining developments, gov-ernment services will be held on a tight rein, and manufacturing devel-opment will at best be limited. This means that government, despite itspreoccupation with mining developments, cannot afford to neglect the needsof these two sectors. Livestock requires considerably more attention ifthe country's great potential is tc be realized; agricultural productionneeds continued support so that farine and its consequent drain on the bud-get can be reduced or eliminated.

129. Growth in the livestock and agricultural sectors will be de-termined as in the past basically by two factors: climatic conditions,and the extent; and success of government measures to raise production.For livestock, changes in attitude will also be an important determinant.A recent enquiry has shown that, in eastern Botswana, 85 nercent of themean annual rainfall can be expected in seven years out of ten. It isunlikely therefore that the drought, during which rainfall was on thewhole less than 85 percent of the mean for four years in succession,will soon be repeated. Individual drought years, however, will doubtlesscontinue. In that case, in the absence of government programs, thelivestock herd would Probably increase slowly, much as it did in the1950's, since it is not seriouslv affected by individual drought years,while arable production would probably give self-sufficiency in food ingood years but would fall short in bad years. But with government as-sistance, especially in opening up new grazing lands, the herd can bebuilt up more rapidly (i.e. at perhaps 3 percent per annum). With amore commerc:ial attitude to cattle rearing, off-take in the next fewyears can probably be expected to rise by at least 5 percent p.a. onaverage. Actual beef output will increase by more, given improvedweight per beast arising from better husbandry. Beef prices will prob-ably stay firm, so that an annual increase in the value of beef outputin the order of 7 percent may be forecast for the 1970's 1/. Agricul-ture is more difficult to predict since it is so much more dependent on

1/ See Para. 20 of Annex.

- 4o -

adequate rainfall. All that can be said is that, if better techniqueswere adopted on a wide scale, self-sufficiency in food would be assuredin all but the very worst years. Whether this is so will depend on gov-ernment's success in disseminating these techniques at reasonable costto the mass of farmers.

B. Public Finance

130. There is no immediate prospect of eliminating the governmentrec-uirrentf hlirltpt. doofi-nit- Tn thp mTprliim t.erm h^wpvpr with thp tTom-

ing into operation of the mining developments described in Chapter II,there is the possibilitv o)f achieving it.

13. TrTo exnlore this posibiiv pr ctinn for re-rre'nt reve-

nues and expenditures have been made, first excluding the direct ef-fects of the + mining C)Pr^-+C On tho 'oir ni"o r-ictn z nnt, o^-;i

other than duties on South African liquor are difficult to predict sincethey are related to activrlrty in South Africa . Fr-thermore, the currentre-negotiation of the Customs Agreement might lead to a significant in-crease in Bo+QTsnna's llcntfinn ?x-clvrdlinc- fo-vr the mp ni,+ +this In ltte.r

eventuality, it is assumed that customs agreement revenues will increaseat the 7 --ercent a-ver-age rate achieved between 1963/_64 =16/8(afterdeducting for the redistribution of 1965/66 and allocating receipts toGIh IC: to t LAJ Which1"- thej were O.Utl iQ 1bGa,LL ). DuULeUs o LIo uIhLI African.

liquor, which have grown extremely fast since 1965/66, can be assumedto grow at 10 percent. Dc.mestic and exort taxes ae th maII n re4veue

head which government itself can influence, and returns from these willuer,endu pTuarly on- w-i wheth olI OrL not gorve-mIIent takes miteasures to increase

them. However, the following projections assume taxation at existingrates. Recent perforlmiance and the probable secondary effects of themining projects suggest that income tax, excluding that from BMC, cangrow at 10 percent p.a. provided collection is improved. Icome taxfrom BMC will depend on F4C's throughput and its value. In para. 129,the value oI beef production is forecast -to grow at 7 percent p.a. onaverage in the 1970's; as an approximation, the same rate is predictedfor PIC's receir,ts. Until the end of the decade aMC will have sDarecapacity, implying rather low marginal costs. 'Hence, BMC profits andtax receipts therefrom might well increase at a faster rate, say 10 per-cent p.a. Export taxes, which are levied on a per head basis, can beassumed to increase at the same pace as that of cattle offtake, i.e. at5 percent p.a. Revenues from Posts and Telegraphs are assumed to growat 10 percent, and all otner revenues at 7 percent p.a.

132. Projections of recurrent expenditure can only be illustrative.Government has estimated that recurrent outlays arising from develop-ment expenditures not related to the mining projects would increase byabout R. 250,000 p.a. until 197S, and by R. 400,000 p.a. thereafter.As far as recurrent expenditures not connected with new development pro-jects are concerned, Government expects a growth rate of 4 percent p.a.,which would allow present services on a r,er capita basis to increase

marginally. This may be taken as a first assumption (A). As a second,(B), asume a 7 percent growtuh rate -which would be more realistic 'n re-lation to the past trend 1/.

133. Appendix Table 20 gives detailed projections based on theassumptions described above. Budget estimates for 1969/70 are usedas the base. It shows that, in the absence of the mining projects,and on expeinditure assumption A, the recurrent defii t: would remainabout constant throughout the 1970's at around R. 8 million. On ex-penditure assumption B, the deficit would increase steadily from R. 7million to R. 16 million in 1980/81. These projections assume no im-provements in the tax structure. If as a result of the Customs Agree-,ment negotiations customs and excise duties were raised as a proportionof imports to the more typical figure of around 30 percent, revenuesmight be increased by perhaps R. 2 million p.a., and the deficit re-duced accordingly. Likewise, the introduction of a sales tax similarto that now prevailing in South Africa may possibly yield an additionalR. 0.5 million p.a.

134. At this stage, it is not possible to make a precise predictionas to the fiscal implications of the diamond and nickel-copper projects.Very roughly, however, it can be estimated that net revenues accruing togovernment 2/ from them will be of the order of II 4-5 million in 1973/74rising to R. 8-9 million p.a. in the years 1975/76 - 1977/78, and aboutR 12 million in 1978/79 - 1979/80. As can be seen from the projectionsin the previous paragraph, these amounts, assuming they are achieved,could provide the additional revenue necessary to balance the recurrentbudget from 1975/76 onwards. Whether this is so will depend on government'ssuccess in holding down recurrent expenditure growth at 4 percent aided per-haps by improved customs receipts and other tax measures. On the other hand,if recurrent expenditures were allowed to increase by 7 percent p.a. (i.e.assumption B) the defici t would in all probability continue throughout thedecade even assuming better tax effort, unless a further major source ofrevenue (e.g. further mining developments) were to appear or unless therevised customs arrangements lead to greater additional revenues than theR 2 million posited in para 133.

135. The above exercise indicates that, for the next five years,at the very least, Botswana will need recurrent budgetary aid. Britainhas agreed to cover the 1969/70 deficit as part of its three-year com-mitment at independence, and has indicated its willingness t& negotiatea new three-year conmmitment for the period 1970/71 - 1972/73.

1/ Information on recurrent expenditures arising from new developmentprojects is not available prior to 1967/68. But assuming a figureof R. 250,000 p.a. for the years 1963/64-1968/69, recurrent expendi-tures unrelated to new projects still grew by about 12 percent p.a.On average over this period.

2/ i.e., taxes, royalties and dividends accruing to government lessrecurrent expenditures by government related to the projects.

- 42 -

136. It follows that at least until the mid-1970's the developmentA"rr _ En- 1wl hsva ftn 7rplv sn1mr-q1t. r nlv nn f',-rpi nfn nli ,,nna pv+tvn,,1

or domestic borrowing. (Projects could be financed to a limited extentout of BMC's profits, see para. 145.) Government is studying the nos-sibility of issuing Treasury bills and bonds so as to absorb some ofthe domestic savings which presently flow out of the country, and itis also considering a bond sale in South Africa.

C. Investment and Its Financing

137. Private investment hitherto has been extremely small; in themonetar-y sphilere, it hias lbeen r,ainl;y limit Leud 4to 4that 4f th,1i-e few 1xge

farmers, of the few manufacturing establishments, and of the mining ex-pJLoration ComUipaies. In th ie nextU uhii±e years, prlvaute ±L1VC:i wlleL, W±±±

increase dramatically in connection with the mining developments. Thelatter ,ay accouuut for somie R. 100U *Iillion between 1970 and 1972, all

of which will be financed from abroad. The rate of private investmentoutside the mines is unlikely to increase very much until around1973, when they have come into operation. Then the additional incomesgenerated -will create a derm.and for new ser-vices, and together with theprobable availability of power at reasonable rates will provide a moreattractive base for local manufacturing. Private investment is there-fore likely to increase. Much of this would be financed from abroadsince potential entrepreneurs are likely ZO De mainly ioreigners. in-vestment based on domestic resources should also be possible if trojectsare sufficiently attractive to warrant lending by commercial banks, orthrough financing by the NDB or the Droposed development corporation.

138. Public investment will be geared to availability of financeand in some areas to absorptive capacity. In the case of large projects,such as the Shashe complex, where contractors can be brought in and whererecurrent costs will be paid for by the project itself, finance is thechief limitation, though the problems of administering them can imposelarge strains on the relatively small elministrative capacity in thegovernment. Lack of absorptive capacity may be the constraint for cer--tain relatively small projects. For instance, agricultural projects tendto be severely limited by government's capacity to plan and implement,and they also usually result in recurrent costs which have to be borneby the budget. Any great increase in investment in agriculture is like-ly, therefore, to require additional expatriate manpower and recurrentbudgetary allocations. The same is equally true of investments in educ-ation.

139. If the mining developments go ahead as planned, which now seemslikely, the investments associated with them will completely dominate thepublic investment program over the next few years, The necessary infra-structure for the nickel-copner mining at Selebi-Pikwe, including en-gineering, will cost about R. 38 million. This will be phased approxima-tely as follows:

(in million Rands)

1970 1971 1972 1973

8.o 15.0 13.0 2.0

Government is seeking finance for these outlays from a consortium of ex-ternal agencies headed by the Bnk . AKlmost all of the inLrastructure forthe diamond mine at Orapa is being provided by the company. The govern-ment is constructing the road from Francistown to Orapa, together withthe telephone link, at a cost of R. 2.3 million, which is being lent bythe company.

14o. For expenditures outside the mining sector, the National De-velopment Plan forecast the following amounts 1/:

(in million Rands)

1968/69 1969/70 1970/71

5.1 6.5 5.1

In 1968/69 actual expenditures were only R. 2.7 million. The short-fall as compared with the Plan was due partly to lack of sufficientlyprepared projects, but more imvortantly to lack of finance. In 1969/70government has budgeted for development expenditures, again outside min-ing, of R. 5.6 million 2/. Of this, only R. 3.0 million in financinghad been negotiated at the start of the financial year. In the lightof the 1968/69 experience, when expenditures were in fact probably some-what less than the amount for which finance had been negotiated at thebeginning of the year, it is unlikely, even allowing for some additionalfinancing being negotiated, that outlays will be much above R. 3 million.

141. Looking to 1970/71 and beyond, there are a number of new pro-jects, e.g. in livestock, education and transportation, as well as ex-pansion of existing programs, which could be economically justified. 3/These could probably raise total public investment well above the R. 3million p.a. level. Limitations on recurrent budgetary allocations andfinance of the capital costs will continue to be the constraints.

142. Botswana has virtually no external aid in the pipe-line for1970/71. This is largely because the British development grant, whichaccounts for over two-thirds of non-Shashe project financing in 1969/70,

1/ National Development Bank credits have been subtracted.

21 i.e. R. 7.4 million less R. 1.8 million for Shashe complex.

3/ One urgent priority is a oroJect to improve Lobatsi's water sunply,costing about R 1 million. Unless this is begun in 1970, adequatewFter supplies for BMC's abattoir may well be endangered.

does not extend to expenditures in 1970/71. The only oroject of anysize, ior wnicn there is a commitment oI iunas over several years, isthe UNDP hydrological survey. Disbursements on this will be aboutR. 400,000 annually until 1972. The prospects for new commitments fornon-mining projects are uncertain. British development aid seems unlike-ly to fall below the R. 2.1 million level of 1969/70, and might possiblyincrease. British assistance will continue to be of critical importance,even if considerable amounts of other aid are available, since it canoften be used for projects which would not attract other donors. Gov-ernment will probably have a more precise indication of the level ofBritish aid for the years 1970/71-1972/73 at the end of 1969. The onlyother governments to have provided assistance on any scale have beenthose of Sweden and Denmark. Together, they have committed aboutR. 500,000 for 1969/70, which includes R. 173,000 for the WIDP hydro-logical survey. Since Botswana is hoping to obtain funds from both gov-ernments for Shashe, there can be no assurance that their assistance toother projects will be maintained at this level. Assistance for non-mining projects from other governments is even more difficult to fore-see. On the other hand, there is the possibility of Bank Group assist-ance on an increased scale. The most immediate prospect is a live-stock project, currently being nrepared, which might involve aboutRf 2 million, starting in 1971/72. An education and a road projectare further possibilities. Gifts from charitable organizations, suchas Britain's Freedom from Hunger Campaign, will probably continue tobe of some importance.

143. In addition to external aid, government may be able to borrowfrom local commercial banks, as it has done in the nast, for self-linuidating projects. As mentioned in para. 136, it is consideringissuing paper to the local banks and on the South African market, whichcould provide a further source of investment funds. This would only bedesirable if such funds continued to be apnlied to self-liquidatingschemes, given the tightness of the budgetary situation.

144. On the basis of the above discussion, financing may be suf-ficient to allow an annual investment, outside Shashe, of R. 3-4 mil-lion during the early 1970's. Such an amount should be within govern-inent's capacity to implement. (Recurrent expenditures arising out ofdevelopment Drolects have been allowed for in the recurrent budget pro-jections.)

145. At least until 1975/76 it seems unlikely that there will bean.y bhiietary savings and there might. be no sueh savings thromi,houtthe-decade. The only savings of any significance in the public sector

*.r;1 1ho Mr 1s c snfia lii c r;. silAh icA+ 8 oo ;so+^lr -rA

livestock-related projects. While this source and the proceeds ofgovernment borwn,ml;,h-t all1ow governmient to p;ut up li..m4ted counter-part contributions for ai(i-financed] projects, in general external ag,en-cles will have ti'o finance 1. ve[i hii h - ProLportion of1 nro,IJectl costs . 'LJI he

- 45 -

UJ. IiC IL L~1~ U .. Ci £~J I.bW .PLALJJ.LVCPM1rLL.A Z.LAU L±UjJ.LA1Z U W LL _L1K

projects, reflecting unavoidable s-tringency in the recurrent budget,inuicate tLle UdsLrtbUdi±±y U.o prUvaJU±LJr LtechUnc. abs iut as paLrt of

project financing.

D. Public Debt and Terms of Aid

146. As of December 31, 1968 Botswana's external public debt out-standing, including undisbursed, stood at R 7.8 million ($10.9 million).Service on it in 1968 was R 493,000 ($690,000), about 4 percent of exports(see Appendix Tables 23-25). Total debt service fallirg on the budget in1968/69 was R. 709,000, about 6 percent of recurrent expenditures. Onpresently committed loans, such service will rise to about R. 1.0 millionin 1972/73 and R. 1.5 million in 1975/76. At least until that time, ex-ternal aid will probably be needed to balance the recurrent budget.Any further increase in public debt service not accompanied by greaterincreases in revenue wou cL simply increase the recurrent deficit.

147. In view of the country's poverty and weak budgetary position,Botswana should ideally receive all aid on concessionary terms. However,for self-liquidating projects, such as Shashe which will produce greatlyincreased government revenues, borrowing on normal terms may be justified.

ANpiv.Y

A. LIVESTOCK AND AGRICULTURE

1. I~~ntrodu-cti-1on: Abo-ut 90N percent of" -Botswana's worSig opua>Lo%LI ~j%A%4. UJ.& JLIL 'A%,~U. 7J U L~ AJ~.iJ UOWO4.Q 0 W ..L AL PWYUJL.LMLJ.LWJ

is engaged in agriculture and livestock. This accounts for some 50 percentof GDP. A.-S& of thbe activity is concentrated, follow-ng population d.1;ri-

bution, to the east of the Kalahari plain in the Limpopo catchment area.This area "Ls well-suited ecologict-'ly 'io livestock. Livestock acco-unfis -_rl;-some 90 percent of exports, and provides the principal source of cash in-come to the r-ral sector. Crops are produced mainly: for subsistVence.

2. The general pattern of farming consists oL the growing of graiinson the so-called "lands" and the raising of cattle and other livestock onthe remaining ve'ldt.. M--st farmers engage in Dot;n activities. Land iscommunally owned by the tribe and is allocated on a usufruct basis by thechiefs. Because of the traditional iheavy concentration oI population inlarge villages, the "lands" and cattle areas, known as "cattle posts", ELrein the majority of cases some distance from the villages and often the"lands" and "cattle posts" are a long way apart also. The main exceptionto this pattern is to be found in the Tuli and Ghanzi blocks (See Map 3,;on the eastern and western frontiers respectively, where the land is heldon a freehold basis (almost entirely by non-Africans).

3. A key factor influencing arable and livestock production is wateravailability. Rainfall is both low on average and extremely unreliable.Average annual rainfall over most of the country is less than 20 inches,and it may vary by 50 percent from year to year; on a monthly basis, it iseven less reliable. In addition, a great deal of the effective rainfall. islost in flash floods and on account of high evaporation rates. This makesagriculture difficult, even using the most modern methods, and though water-ing is normally available in drought years from underground supplies, live-stock can be badly affected by deterioration of the veldt. Between 1961and 1966, the country experienced al¶rost continuous drought conditions,culminating in 1965/66 in the worst rain failure in 30 years. In 1966/67rainfall was good, but in 1967/68 it was again below average.

4. Livestock: The livestock population in 1968 has been estimatedas follows: 1/

(in thousands)

Cattle Sheep Goats

1,406 273 738

1/ The 1967/68 Agricultural Survey, Department of Agriculture, December1968. The cattle figure has been adjusted upward to take account ofthe areas not covered by the survey. For want of information and be-cause the areas not covered were principally cattle ranching areas, noadJustment has been made to the figures for sheep and goats.

AWNEXPage 2

The figures for earlier years (see Appendix Table 8) are of inferior qualityand are not comparable with those abvner 1/ but +hey do indicate, in thecase of cattle, that there was a severe decline in numbers in 1965 and 1966,probably in the order of 30 percent, on account of the drought. Stock own-ers lost substantial numbers of stock through starvation and/or had to dis-pose o4f immature stock o , e to pv .. _ .to forestall death by starvation. With good rainfall in 1967, stock numbersrecovered rather quick.l- __S*'.L cotiue t s 1thg +o+al

herd was probably still smaller than in 1963. Sheep and goats, which arereareld almost entirely f.or- lwoc41. Cons=fptionI, OUt have been less affected

by the drought.

5. Offtake from the national herd has been recorded for the years1963-6as follows.

fRecorded /latle 141e 1963-68

Olaughtered byBMC (almost all for export) Exported on Hoof Total

1963 103,406 27,348 130,7541964 111,758 15,o45 126,8031965 142,736 19,568 162,3041966 132,232 16,422 148,6541967 88,535 7,367 95,9021960 103,776 103,776

Source: Appendix Table 9.

These figures reflect the emergency de-stocking of 1965-66 and the subse-quent re-stocking which reduced output in 1967 and 1968. Additional off-take for domestic consumption is estimated at 30,000 head per year. Only1963 and 1964 can be considered in any sense "normal" years. Assuming anational herd in those years of 1.5 million, 2/ total offtake was thereforeabout lO. Average carcass weight declined badly during the drought from501 lbs. (Cold Dressed Weight) in 1962 to 405 lbs. in 1966. Since then,however, it has recovered to 499 lbs. in 1968.

The principal indigerous cattle breed is the Tswana. M5any ofthese are of a good type and capable of maintaining fairly good conditionduring severe droughts. In most areas, considerable cross-breeding is tak-ing place with non-indigenous breeds.

1/ They almost certainly underestimate the total cattle population.

2/ This is higher than the official estimate to take account of the feel-ing of most observers that in 1968, -when the herd was estimated for the

first time on a reasonably sound basis at 1.4 million, it had not re-covered to its 1963-64 level.

ANNEXPage 3

7. About 20 percent of the cattle population is held on large-scalefreehold ranches, mostly non-African owned, on the Tuli Block to the east,on the Molopo to the south, and around Ghanzi in the west. The standardSof husbandry and the yields achieved are in many cases good.

8. The remaining 80 percent is kept at unfenced "cattle posts" inthe tribal areas; where about two-thirds of all farmers own cattle. Al-though there are a few large cattle owners in these areas, the typicalholding eonsists of around 20 head. Animal husbandrv is of a generallylow standard. This is due, in the first place, to traditional attitudes,whereby cattle are considered a source of prestize rather than of income.Consequently, stock improvement is not sought after and cattle are kepttoo long before slaughter However. these attitudes seem to be changing --

partly on account of the drought, when farmers were forced to sell cattlieAnmd therehv be'tme more aware of thei-r - neome value, Traditionalism is

compounded by ignorance, with many farmers unaware of improved methodsand of their benefits. Historically, government has done little to imnrove

animal husbandry techniques in the tribal areas although a start has nowbeen made (see para. 19 below).

A+ h,4 "A -factorv, la 4h~ ex 4a' -v,n. A,. terilltt

9. A thir1d __to is the eisting l--- tenure arfneens Iat

owners usually spend much of the year away from their herds at the tribalhI'eaduquartl.ers or atb' IChe ir ."a.sn", leav ingL- thl-1e c Itte ir. th ^ar ef t he irdependents. This militates against improved management, and the frequentseparatLi'on ofL "'lands" fromL "cattule pos'ts" preven,t's inv&Cegrcated mixed farzr-ing and the use of crop residues for stock feeding. Furthermore, underexisting tribal laws, fencing is not permitted. ThLLis makes grazing cont:roldifficult; poor control often results in the widespread destruction ofvegetation because of the vulnerable nature of the Botswana veldt. Lackof fencing also inhibits proper herd management, in particular making itdifficult to realize the full benefits from improved bulls and breedingstock. Fencing has hitherto been unacceptable to the majority of the popDu-lation, since i-t would in effect undermine the system of communal grazingrights. They fear that the best grazing areas would be irrevocably takeinover by a few large cattle o-wn-ers. In fact, a fea w - encen reraches avre al-ready been permitted, and the traditional opposition to fencing appearsto be declining somewhat. Later in i969, following the passage of^ theTribal Lands Act (1968), land allocation will pass from the chiefs toTribal Land Boards. However, while introducing an element of representa.-tion into the allocation procedure, this will not alter the communal systemof tenure.

10. Water and its proper management are obviously vitally importan-t.Over most of the present cattle acres, rainfall is normally sufficient toallow a grazing ratio of one head to 20-30 acres. During the drought years,however, the grazing deteriorated badly, causing widespread starvation.Watering is provided by boreholes, wells and surface water. These togethierare usually adequate in the summer months, but in winter when surface waterdries up, there tends to be overgrazing around boreholes and wells, and

ANNEXPage 4

consequent destruction of the vegetation. The need is for expansion ofpe_ennial water supplies and better contro l of hei . i/

11. Government, through the Geological Survey Department, uldertakesthe exploration of underground water resources and drills boreholes; drill-ing is also done by private contractors. Government seeks to encourageborehole construction through the Borehole Repayment Scheme under which cre-dit is provided by the Nlational Development Bank and costs are reimbursedfor up to two unsuccessful cdrillings. The Geological Survey Departmentdrilled 44 agricultural boreholes in 1967, for a footage of 15,576 feet.Since then drilling has been held up by staff shortages and by the Depart-rment!s heavy involvement in the mining developments. Many boreholes areout of commission through lack of maintenance; government is trying torectify this by setting up maintenance,units, which provide maintenanceon a subsidized basis. Aside from bor4holes, government in 1967 establisheda mechanized dam construction unit which has had encouraging results; theunit cost of water resulting from dam construction has been found to bevery much lower than from borehole drilling. While willing to subsidizewater development to some extent, government's objective is, generally,that users should pay the full cost of water supplies since this would eco-nomize on use and help stimulate a more commercial attitude to cattle-raising. But little progress has been made in this respect as yet. As forcontrol over the numbers using a particular facility, local authoritieswill have to be persuaded of the need for controls and possibly legislationpassed.

12. The animal health situation, compared with many African countries,is extremely favorable. The country is relatively free of major diseases.To control foot-and-mouth disease, the country is divided by cordon fencesand at points on each there are quarantine camps. These and mass inocula-tions and vaccinations have enabled it to coraply with the import regu-lations of the U.K., where a large portion of exports are sold. This isa considerable achievement.

13. Internal marketing of cattle has been largely in the hands ofnon-African traders, who either sell direct to the abattoir or transferthem to fenced farms or to tribal lands where -they have grazing conces-sions, for finishing. Hlowever, with government encouragement, increasingnumbers of stock owners are selling direct to the abattoir or through a-gents who take a fixed percentage of the realized price. In this way,farmers are obtaining generally higher p-ices. Government is also en-couraging cattle auctions, which have th3 benefit of introducing an ele-ment of competition among traders. Effcrts have been made to marketcattle through tribal cooperatives, but with only limited success.

1/ This is said in reference to present cattle areas; it applies afortiori to areas which have yet to be opened up.

ANNEXPage 5

14. Transportation presents a serious problem for stock owners inthe north and west. Ngamiland cattle used to be trekked to Zambia andRhodesia. Under new regulations (see para. 15 below), they are trekkedto the line of rail for trans-shipment to the abattoir, although somesmuggling of cattle across the border is reported. Either way, the ef-fect can be a serious loss of weight and grade. The same is true ofcattle trekked from Ghanzi across the desert. Government maintains bore-holes along the trek routes at regular interva's, but Once in the +ribalareas, trekkers often find the route overgrazed and the boreholes beingused by tribal cattle. Some trucking of cattle from Ghanzi has beentaking place; but because of the very poor state of the Ghanzi-Lobatsiroad it appears to be barely competitive with trekking, despite the lat-ter's difficulties. On the other hand, it would be hard to justify up-grading of the road until cattle off-take and general economic activityin the Ghanzi area are significantly increased.

15. Hitherto, the cattle offtake has been disposed of: (a) throughBotswana Meat Commission (BMC) abattoir at Lobatsi, almost entirely forexport; (b) by exporting on-the-hoof to Zambia and Rhodesia; and (c) byslaughter at the local level. As shown in para. 5, disposal through BMCis much the most important. Since 1968, exports on-the-hoof have beenbanned in the interest of increasing BMC's throughput. This policy willbenefit BMC financially, but it is not certain to be in the economic in-terest of the country as a whole. It is important that the economics ofthe alterniative means of disposal be carefully examined.

16. Prices paid by BMC are fixed in advance for the calendar year:they vary according to grade, and from week to week with a view to stabil-izina the rate of throughput. A bonus payment is paid at the end of theyear on each head sold, depending on the financial results achieved.Between 1965 and 1968 producer nrices (including the bonus) increased byabout 25 percent; they have compared favorably with prices paid in Argentinaand Uruguay for comparable grades, but have been generally lower than thoseobtained in South Africa. BMC operates a quota system, but neither thisnor the price variations have so far generallv been sufficient to inducea steady offtake. A wider range of prices was announced for 1969.

17. BMC is a statutory corporation. It was formed in early 1966oiut of Bechunaland Proteetorate Aba+ttivrs T.t (BPAT.) nd it_ suhsi.-

diary company,, Export and Canning Co. (ECCO), after these two companieswere national iJd. TPhp oiieuit nf PAT.1 -s maTir shareholder; the Commn-

wealth Development Corporation, was converted into a ten-year loan. Witha canital investmer.t of about R3 million, BMC i8 by far the largest

industrial concern in Botswana. It has over 800 employees and contri-butes over on e-thir d o overwnent income tax revenues T+ innliiudme an

abattoir, a de-boning works and cannery, all in one complex at Lobatsi.A modernization progr10un*dertaken beteen 1964 ar.d 1967 has raised theslaughter capacity to at least 1,000 head daily, which would allow anannual throughpuf,+ of at least 225,0,, had AcAual throug.hput ha an

well below this, so that overhead costs are high. This apart, operations

ANNEXrage o

appears to be efficient and management has actively sought new marketsand ways in which to encourage the livestock sector as a whole. In thelatter context, it has started a Grazier Scheme, whereby cattle are pur-chased and put out to farmers for fattening. Ownership of the cattleremains with BMC, and participants receive the difference between pur-chase and sale prices less a financing charge. The scheme has startedwith about 1,000 head, and the object is to build up to 50-60,000 headin 2-3 years. Finance is being provided by BMC itself and by BarelavsOverseas Development Corporation.

18. Export values of livestock products are given in the followingtable.h Det_ailsq for 1968A A-r not. yept available.

(in +11o110nr, Rnn.ds)

1 0<Q 1-I 0(lh 1l0rr 1 0<,< I 0<r7-_,7 J V,7 ____ _,7V - I

Cattle (live) 1,117 64 83Q 793 )4l1

Cattle (carcasses) 4,566 4,772 5,802 6,911 3,856

Shee- and boats )43 45 CZ CZ) 78

Canned meat 810 753 670 269

Meat extract 182 432 125 1,320

Hides and skins 494A 488 A5 893 -1,6' 76

Other b-products I 191 782I 1,00 956 892

r,i,O4.,,1 7 4II '7 '97,1 ( ('I r 10,41 i (. • ,0

Source: Statistical Abstracts, 1966, 1967 and 1968.

Carcasses have been much the most important item, although hides and skinsand other by-products are quite significant. Since tne opening or tnecannery in 1964, which was fornierly operated by ECCO, there have been ex-ports of canned meat and meat extract. Ml'at extract sales showed a spec-tacular jump in 1967. In the early part Df 1969, the cannery was inoperativebecause meat extract prices were relatively unfavorable. The direction ofbeef exports is given in Appendix Table 9. Between 1963 and 1966, thelargest and an increasing proportion of meat was sold in the U.K. In 1967,exports to the U.K. showed a sharp decline because of the reduced outputand because of switching to the Johannesburg market where prices were morefavorable. A serious outbreak of foot and mouth disease in the U.K. led toa total ban on imports in late 1967 from countries where the disease isendemic. This applied to Botswana until April 1968. This and continuedfirm prices in Johannesburg led to a further decline in sales to the U.K.and a substantial increase in sales to South Africa in 1968. BMC's U.K.

ANNEXPage 7

sales are handled by its own subsidiary selling company, Allied Meat Im-porters Ltd., and. in the case of corned beef by Liebig:s Extract of MeatCo. Ltd. which sells BMC's product under its well-known "Fray Bentos" label.The South African market operates on a quota system, but BMC seems to havehad little difficulty in disposing of as much as it has wished to there.

19. Formerly, government's role in the livestock sector was confinedto disease control and providing water facilities. The Veterinary andAgricultural Departments were concerned almost exclusively with animalhealth measures and arable farming, respectirely. During the last 5 years,both Departments have started extension work in animal husbandry. A PupilStockman Scheme has been started which has about 1,000 members. Thoughstill on a small scale, it has reportedly shown good results, and itscontinued expansion would seem desirable. One difficulty in the extensioneffort is the lack of coordination between the two departments, which acoordinating committee set up _.n 1968 has failed to overcome. Some re-structuring of the Ministry of Agriculture is probably necessary, withall aspects of animal husbandry falling under one head. The Departmentshave also initiated various schemes designed to improve yields and levelsof production. These have included a bull subsidy scheme, the setting upof three Artificial Insemination Camps, and the establishment of 7 govern-ment holding grounds ("demonstration ranches").

20. There is, undoubtedly, considerable potential for expanding andimproving livestock production. The Porter Report 1/ considered it"reasonable to aim at building up the' cattle population to two millionhead", regarding this "as the optimum number in relation to the grazingcapacity of the country", and believed that "this would permit a potentialofftake of 250,000 head a year". Relating these figures to stock numbersand offtake / in 1968, the stock population would be increased by about 40percent and total offtake bv around 80 percent, with an eventual offtakerate of 12.5 percent. It is possible that with a successful governmentdevelopment program and further commercialization of farmers this couldbe achieved by 1980, which would imply an average annual increase in theherd of about 3 Dercent and in offtake of about 5 percent. Since there ismuch room for improving the quality of the cattle, the value of production(at constant prices) could be increased by a good deal rmore; i.e. by per-haps 7 percent p.a. The market prospects for beef in general are fairlygood. World nrines are likely to move along in a gradually rising long-.term trend. 3/ Europe should continue to provide an outlet for BotswanELbeef; although it mav be limited by nomnetition from South Ameriean pro-.ducers. On the other hand, Botswana is extremely well placed to exploit

lj The development of the Bechuanaland Economy. U.K. Ministry ofOverseas Development, 1965.

2/ Total offtake in 1968 is assumed to be 140,000 - i.e. 110,000 forexport inenlding an alloiwane for smuggling, nnd 30,n000 for domnst:-iconsumption.

3/ FAO, Review of Trends and major problems in the world meat economy.August 1968.

ANNEX

the prnioeted ranid p2nsion of the souiihern Afric-n market. _/ It islikely to receive prices at least as high as those obtained in the lastfw yrs ±hrough the 1970's. Thus as a rough approximation, it beingassumed that the price of beef for local consumption reflects the exter-nal pr1ce, the va of bDeef pr^duction can , be- 4 to+ rA, b about7 percent p.a.

21. The potential can be developed by (a) improving pasture and herdmanagement in the tribball areas, and (b pnigu nwgazn ndsoU. .*fl U.~i~ '~ .LJ~L a.± QI U / 'JjJIIL.1i1, Upj Uq=W t6' '.L I6 -LLUUb, Ul.

which plenty is available in the Northern and Southern State Lands.

22. As regards the first alternative, this will depend greatly onchangesLI in people'sattiudes towards catt`le ad teiure arrIangemenlCUL.

Private fenced ranching may not be possible in these areas for a number ofyears, but the establishLent of further fenced holding grounds for finish-ing cattle, as additions to those already established by government, maywell be acceptable and might eventually be taken over by cooperatives.

2I. The key to the second alternative is the development oI waterresources. (The ecology of the State Lands is currently being surveyedand in large areas is regarduedu as satisfactuory./ rotential watLer reso-urcesare incompletely surveyed as yet, although the Geological Survey Departmenthas compiled considerable inform-ation. it appears that sufficient is knownto permit starting development schemes in selected areas on a limited scale.There are some areas in the aurthern STate Lands, for example, where wateris not a technical problem but only one of economic feasibility. In otherareas where the probability of water availability is high, only some testdrilling is needed to pave the way for a first phase of development. Gov-ernment is currently preparing a project for suomission to the Bank whichwoula open up new grazing lands along these lines.

24. Agriculture: Natural conditions in Botswana are extremely in-hospitable to crop production. This applies principally to climate. Thepaucity and unreliability of rainfall make farming in general difficultand hazardous. Moreover, a short rainy season is often followed by anearly frost which daiages the crops. Soils are also relatively unfavorable,varying from the infertile Kalahari type sands, covering much of the country,to the more fertile soils of the Limpopo Valley, which in some areas, suchas the Barolong, respond fairly well to dry farming. In many parts, soil issubject to serious erosion.

25. The main crops are sorghum, maize and millet, in that order ofimportance. These are produced basically for subsistence, though for someindividuals, and more generally in years of good rainfall, there are sur-pluses. Other crops include beans and cowpeas, and cotton and groundnutson a small scale.

1/ e.g. A recent Bank project appraisal mission to Zambia has estimatedthat by 19b0 Zm.bia wlll be iiporting over 100,000 ca-casses p.a.

ANNEXPage 9

26. Information on production is very weak, the only reasonablyreliable source being the 1967/68 Agricultural Survey. Estimates madeby the Agricultural Department for the main crops for earlier years areor very dubious value. In assessing recent performance, therefore, re-liance has to be placed on personal Judgments and on external trade datawhich, while subject to a considerable margin of error, provide an indice-tion of production trends. The general impression is that in the droughtyears 1961-66, production was on average over 50 percent less than theaverage for the late fifties. Output probably declined as the droughtcontinued, since smaller acreages were ploughed, owing to the poor condi-tion and losses of oxen. In 1965/66 rain failure was more widespreadthan ever, and in many areas the crops failed cdmpletely. The heavy rainsof 1966/67 finally gave farmers reasonable yields once again, but acreageplanted remained relatively small, owing again to the poor state of theoxen, and also to the difficulty of reaching the "lands" with many of theroads made impassable by the rains. In 1967/68, the early rains wereunsatisfactory, and such rains as there were, farmers failed to take fulladvantage of. Consequently, planting levels were again rather low. Ac-cording to the 1967/68 Agricultural Survey, 42 percent of farming householdsfailed to plant. Then, many of the crops were spoiled, either by heavyrains or by early frosts. 1/ The overall out-turn was therefore poor.It is too early to Judge fully the 1968/69 situation, but in several areascrop failure is likely owing to the lateness of the rains.

27. This general picture is confirmed by the foreign trade figures.given in the following table:

Foreign Trade Balances of Major Grains(000 tons) (+ = net export)

Sorhum Maize and Maize Products Total1954 84 - 1.1 + 7.31955 +10.9 - 1.4 + 9.51956 +13n 4 - 2-5 +lQ.9

1957 + 6.7 - 4.7 + 2.01958 + 4. - 50 -0.91959 + 4,9 - 7.6 -2.7__ _ - 4.7 -22.0 -26.71961 +17.1 - 9.1 + 8.01062 - 2_ -15.v7 -17.v71963 - 5.5 -17.6 -23.11.6 - 8R9 -2 7 -3A.1965 -21,0 -42.7 -63.71966 -12.7 -34.4 - 11967 + 1.9 -16.4 -14.5

Source: Timn"+ av+- iP of rt -ic+1sevw A-.1 R ----

pa en of .A. n -y 1

g/ See Appendix Table 7 for 1967/68 production figures taken from the1967/68 Agricultural Survey.

ANNEXPage 10

28. These figures show how the country moved from a position of self-sufficiencyjr to onef hef'vu-Tr A d ndejnrce on imrtved orl anins roxn acc'nin± of thc~

drought. Starting in 1965, a considerable portion of these imports wereprovided -,nder the World Food Prga nrd distributed .nder a "Food for

Work" scheme. Prior to this, the Government itself had purchased some foodfor .dlt-bt, to". destitutes. larine re'-ief continued Jn 196,< --d 4the

Government has applied for further WFP assistance to cover the expectedfU ood sho.ages in 1969/70.

Cy e va1sC: majorLb li.V dJ UV± l.y of 1 fLarUt:±r prai C e Xra LI-neu ' amrig. uIVtC1

that water is the overriding constraint, the key to successful productionis adaptation to semi-drought conditions. Simr-ple techniques to maximizethe utilization of moisture include winter ploughing, correct spacing,row planting (to allow proper weed control), m-anurings and crop rotation.Water requirements can also be minimized by the use of drought-resistantvarieties. The use of these methods by meDbers of the Government's Pupil

Farmer Scheme has resulted in the production of crops even in the worstyear of drought. However, the number of farmers practising the improvedmethods is very small. 1/ By far the larger number are either ignorantof them or fail to put them into e±Leuu thro-ugh lack of implemenLs, forwhich shortage of agricultural credit is partly responsible. Statistic-ally, it is unlikely that the five-year drought will be repeated, bUtyear-to-year variability in rainfall on a relatively large scale is in-evitable. A wider use of these methods is necessary if the country isto return to self-sufficiency in food production on anything like aregular basis.

30. This is not to say that rainfed farming has great economicpotential in Botswana. On the contrary, assuming agricultural pricescontinue to be determined in the South African market, the income to bederived from dryland farming, except possibly on the Barolong, will nevercompare with that from livestock or from employment in other sectors forthose who can obtain it. Neveitheless, it should be encouraged for tworeasons: first, for many peopLe, arable production represents the mainform of livelihood so that crop failure can mean famine. The need forfamine relief in the past few years points to this only too clearly.Secondly, it can be carried on as an adjt.nct to beef production at smallmarginal cost. Since they do not on the whole compete for scarce resources,and since the absence of a balance of payments constraint may not continueindefinitely, the attainment of national self-sufficiency in foodstuffs,wnich is the government's policy, remains a valid goal.

31. Irrigation agriculture has little immediate economic potential.There are a few small private irrigation schemes in the East producinghigh value crops, such as vegetables and cotton. Where water is cheap

1/ According to the 1967/68 Agricultural Survey, only about 7 Dercent ofhouseholds carried out winter ploughing.

ANNFY

Page 11

(which is rare), management is good, mnd where, as in the case of vegetables,there is a ready local market, some expansion might be justifiable. Thewaters of the Okavango system appear;to offer the one long-term possibilityof any importance; the UNDP has comm4nced a survey of this system and willestablish a pilot irrigation project in connection with it. If economi-cally successful, this could possibly provide the basis for a large re-settlement scheme.

32. Other problems associated with agriculture are credit (whichwill be discussed in paras. 35-36), prices, and the effect of the "Foodfor Work" programs. Although there is no published information avail-able on the subject, it is well known that prices paid to farmers aregenerally rather low. This is firstly because marketing circuits areundeveloped and produce is sold to monopsonistic traders. Secondly,farmers often have to sell as soon as the crop is harvested, either becauseof the need for cash or owing to the lack of storage facilities, whenpriees are lowest. Often the sRame farmer will repurchase from the traderat a later date at a much elevated price. This can be partially overcomeby the adoption of simple storage measures hv indivliitl farmers which iRbeing encouraged by government. Thirdly, Botswana farmers are most likelyto have surnii2ses precisely when the South African harvest is 0oor antigrain prices therefore are low. To combat this, government could con-ceivnhlv oerate a aentral granary, but such a course of action has beenrejected by a consultant as economically unjustifiable. 1/ The most thatcan be done to im.prove prices i.t te cone nf +-H t n11sothern African gralnmarket is the reduction in traders' p±ofit margins. To achieve this,, mar-ktia+ingf coorati+vae h5ir . Thhean ncooprenrtA rivhernr%nan+;orr mrovnmant rnly

began in 1964, but already there are some 25 marketing cooperatives whichhave by and large been .,,,4nu1e-f', +hough o+ir. on a omcl1scale. The further development of the cooperative movement is limitedby the 1ack5 ofA szkilled staff at the Depart-ment- ofA Cooperative Deve1opmer.tand the inadequate training of officials of Cooperative Societies them-se,ves l,, mee4 4h,s prolb.em,, TrhTTTD ma.n e aA g ran 4 4 .1, :7 znr0 - -o,I lo;05OC.s vC1 AO . v,,,o p41& UWJ v; WJAVA' 'Af v 0.IJAJ v W 5A UU* '.CJ A UJ.- .7'w7

to assist in the setting up of a Cooperative Development Center.

33. As noted above, considerable quantities of free food have beendi.st.ributed fo r fa.i-Line relief. This consisted .nit2ially- of a schoo.l feed-ing program and an emergency free distribution to the needy. School feed-ing has continued, but free distrib-ution has been superseded by- "Food forWork", under which food is provided to families in return for work on a pro-ject b-y the famly head. TeC laP.'ter prograw has uuo-uU.cLu-y saved Julawky

people from starvation and has resulted in the implementation of some use-ful, if small, projects. But the cost of disvtributing the food (which hasto be borne by government) and of administering the projects has been veryhigh from a budgetary point of view. Distribution and storage costs alonie

ij H. C. Biggs - Report on Marketing OI Agricuiturai rroauce, MLni.stryof Overseas Development, London.

ANNEXPage 12

were about R. 950,000 in 196b/67, representing 9 percent of government re-current expenditures. Since then costs have fallen, but they are still aconsiderable burden on the budget. Secondly, it seems likely that thecontinuation of the Drogramn has in some areas had a disincentive effecton agricultural production. School feeding should be continued, but thecontinuation of the other renuires critieal examination

~44 Gvenrnrt-ntin's rolep in ar-rir-illturme has tRken two main forms.. The

Agricultural Department has, firstly, conducted useful research into thetechniques of producur'tion iinder Botswanna's npeuia nonnditions at its rwiou

research stations. Its second main activity has been the propagation ofthe 'improved' methods of production, principally through the Pupil FamerScheme. The number of agricultural demonstrators has increased from aboutfiftyf i 1963 +on sn.e 150 in 1OR, nrA +1,t nlimlhr of fa-mers r... eivi

advice has risen from less than 1,500 to about 4,000. Enquiries have shown+that Schem members ha,v-e a .chieved ve.y b sustnt cr i.nereases over

time, and that they generally obtain crops two to three times as large asnon=SchCeme farmers. 0 1/ T.- the worst drought yearz, tbey at least zchieved

a crop, while non-Scheme farmers often did not obtain a crop at all. Inthese terms, the extension effort would appear to have been. sucCessful.However, the results have been achieved at great cost. Expenditure pro-visions for extension work in 1 were R. 306,000, wchamounts t--o

R. 70-80 per farmer receiving advice. The cost of extension per farmer11a ie :1w act| _ AA-Jopd conidrdlyA_1 sinc the eal A nU7_60s .1-4 4411 -------. | :n *LCAC 4.1 1 aEJ. u&-4wU=, ;t. > su..u± 4a.C UI IC 7a± U:> .±;.4 a9 uu. a u.. aY>'

to be inordinately high. Furthermore, despite the increase in numbers ofScheme farmers, the extension effort has not as yet had a signficant mpacton the agricultural economy as a whole. Efforts must therefore be made to

increase ~ ~ ~ ~ ~ ~ ~ ~~ -the prdciiyo eostaosadt -o e nw metho's of

instruction, such as group extension programs and instruction at the school-1ev e Il. The '1=1.1 ± of rural tai centers, of w-hcich there are now

twc and for which three more are propcsed, and of farm broadcasting, may besteps in the right direction.

35. Credit: Credit for livestock and agriculture has as yet piayeda very minor role. Commercial bank credit appears to be available ingeneral only to non-African producers. African producers, in the absenceof freehold, cannot present land as collateral, and since the banks willnot accept cattle as coJlateral, have difficulty in providing adequatesecurity at all. In any case, the risks involved in loans for rainfedfarming generally are not considered acceptable by the banks.

36. The other potential source of credit has been the government'sNational Development Bank (NiDB) whose activity is summarized in AppendixTable 13. In the field of livestock and agriculture, the NDB finances,firstly, farm implements and ot'her arable inputs such as fertilizer and

1/ For instance, according to a recent enquiry, the median gross outputof Scheme farmers in the south east during 1966/67 was R. 74 and in1967/68 was R. 32. lion-Scheme farmer production was R. 25 and a. 13respectively.

ANNEXPage 13

ploughing oxen; and secondly, livestock-related investments such as bore.-holes and fencing, buit noti tfhe niirohase of livestock asR sth. Tz ns are

for 3-5 years and bear 8 percent interest. Lending to the two sectorshaa bDeen on as v*ery limitedA scale,_ Fmerafinc,oDly arniinA R. inn00 nnn:lthe past 3 years. The reasons for this are .wofold: in the first place,

AL-h .e A A V w A .A__nM + -a .: .Ju.lf n 1i va:+.nnI4 LnAjn a, -o1 u ±z-^

limited in the main to various small, special funds (such as the AmericanL~CYJ.V.L1~LAJLIi A l LiU. UJL, .1 I- .5 - a GO a 411.LIZU& Wle 1-i4SARevol.ving Lwcn rVUnd%. Secon-; +- yX1- +-e -AB h tried- to .mii.iz the risk

factor, which has meant that only small numbers are eligible for loans.Ir, agric-ul -L-e cer_ta LnlyjV -the risks. are great, -and the JJ NDB Z has wisely tLied

credit into the Pupil Farmer Scheme, relying on the Agriculture Departmentto vet loan applications. Ilhere is no lack_ of derund for f-unds, loan ap.-plications substantially exceeding approvals; however, the prospect forgreatly increasing the volume of agricultural lending 'is small at the pre.-sent risk levels allowed for, even given larger resources, on account of thedifficulty in finding eligible borrowwers. Nevertheless, credit will haveto increase hand in hand with the extension effort if the latter's objec.-tives are to be achieved. As for livestock, the NDB should be able to takea larger role in this sector (again assuming larger resources); with thepassage of -the Agricultural Charges Act (1969) allowing the NDB automaticlien on all produce in the case of bad debt, it should be able to financelivestock purchases for finishing.

B. EDUCATION

37. The Education System: The structure of education in Botswana isdepicted in the Chart at the end of this report; it follows roughly thetradition and pattern of the British system. Education authority at thenational level is vested in the Ministry of Education, Health and Labor;under the Minister, the Permanent Secretary is reponsible for policy mattersand administration and the Director of Education oversees the professionalaspects of school organization and operation. Primary education is theresponsibility of the district and town councils. The Ministry directlysupports government schools, provides subsidies to aided schools operatedby voluntary agencies; provides grants to local government administrationsto help them meet the costs of primary schools, and is a partner in financ-ing the University of Botswana, Lesotho and Swaziland (UBLS). The Ministryis understaffed both in regard to the number and quality of its staff, andthis is reflected in poor coordination and supervision and the absence ofplanning.

38. Education is not free, with tuition fees charged at all levels.The system is coeducational.

39. Primary Education: Approximately 70 percent of the school agepopulation is enrolled in primary schools. The average age of studentsbeginning their primary education is at present 8 years. The average time

ANNEX

taken to complete the 7 year course is between 7-10 years. Out of 257schools on!,, abou+ 100 offer the complete tc,wco «he remai n der offer- other

four or six year courses. Recent growth in primary school enrollment andthe nnmber of teac,-rs i a fPollows:

964 141 C_:2VC, 8OJ , 6

1966 251 71L6 1,673

1967 252 71,577 1,713

19oo 257 78,963 1,795

The average class size is 42 but many classes are grossly overcrowded whileothers in sparsely populated areas have sometimes less than 10 pupils.Over-sized classes have had to be divided into two shifts of 3 hours eachper day.

4o. The quality of primary education is impaired by a combination ofvarious factors. First, classrooms and facilities are totally inadequate:there are half as many classrooms as classes, and eighty percent of schoolslack water and sanitation. Secondly, about 40 percent of the teachers areuntrained and the current output will not suffice to meet present and futureneeds. F'inally, syllabuses appear to be unrelated to local and nationalneeds. This leads to the problem of providing employment for primary schoolleavers.

41. Secondary Education: Secondary school education began in Botswanaas recently as 1944. In 1968 there we 'e 10 secondary schools absorbing lessthan 25 percent of the primary school ,raduates. Selection for the second-ary education is made by a committee waich takes into account the applicant'schoice of school, age, school record and performance in the Standard VIIExamination. The growth of the secondary schools has been as follows:

Year Number of Schools Enrollment Number of Teachers

1963 8 976 60

1964 (3 1,036 61

1965 9 1,307 66

1966 9 1,531 89

1967 q 1;854 111

1Q68 10 2X2QQ 131

ANNEXPage 15

42. After three years of secondary education students take theJunior Certificate Examination of the University of Botswana, Lesotho andSwaziland Schools Examination Council. This examination serves two pur-poses: a) it is a graduating examination which provides for entry to cer-tain civil service posts; to teacher training at Primary Higher level; andemployment in business; b) it is a selection test for students who aspireto complete the full five-year secondary course (the Cambridge Certificate).Wastage is extremely high especially between Form I and Form III. Nosecondary school in Botswana includes Form VI wh4ch prepares students furentry to universities overseas but is not required for entry into UBLS.

43. There is a shortage of qualified teachers at the secondary schoollevel. At present only 40 percent have degrees and about 45 percent of thetotal have had professional training. About 30 percent consist of volun-teers, and 90 percent of all teachers are expatriates (mostly Africans fromSouth Africa). Facilities are generally inadequate and the curriculum isnot geared to the needs of the country; for example, it does not includeany agricultural subjects whereas farming is Botswana's principal occupation.Curriculum reform and the diversification of courses are urgently needed.

44. Technical and Vocational Tvaining: The government's main effDrtin technical and vocational training is concentrated at the Botswana Train-ing Center (BTC) at Gaberones. The center offers a three-year course inskill training; and a variety of techincal and administrative short courses,the duration of which is between 2 and 6 weeks. At the end of 1968, theBTC was providing the technical long course for 52 students and the technicalshort course for 39 others. Public service courses were provided for 200civil servants and 134 businessmen attended commercial and cooperativecourses. Special language courses in Setswana and English were offered for134 participants. The total staff in BTC is eleven -- four of them areBatswana while the others are expatriates.

45. In add-tion to the BTC, there are four other vocational trainingfacilities:

(a) The Botswana Aaricultural College: Training of agriculturaldemonstrators was formerly provided at the Mahalapye Agricultural TrainingCenter. Tt was too mall-i however- and did not have adenuate facilitiesfor education in animal husbandry which the Department of Agriculture wasbeginning to inciide in itR Pytpnsion sprviepe Tn 1067 a npv college- the

Botswana Agricultural College, was opened at Gaberones. It provides a 1two-year course; including zreater emphasis on animal husbandrv than its nre-decessor, and will turn out 50 demonstrators per year. At present it doesnot provi de Dnlnm1ia courses, but it is hopedthat thathe nan Snon 'h startPdso that higher posts in the Department of Agriculture, which are at presentheld almnot ntrinl-r 1hyr exatvi e mnir bh filleda hy BRtsaiZna.- Trainin-g

of veterinary assistants is given at the Ramathlabama Veterinary College;a one-year cour,-se ic provide f- v or 30 stuAd,nt+a The cnloo1 s 1 fiiuitre is in-

certain at the moment, since there is a proposal under consideration to in-tegrate veterinary instruction into the Botswana Agricultural Collee.

ANNEXPage 16

(b) Swaneng Hill School: This is a non-governmental school, built andfinanced by voluntary contributions. It is the center for a number of com-munity development projects, primarily concerned with the training of skilledartisans for self employment.

(c) Lokgaba Center at Francistown: Here youth training is undertakenby the Department of Community Development, while supervisory and technicaltraining is provided by Peace Corps volunteers. This center was founded in1968 and is intended to be mainly a center for handicraft training, withsome vocational training in carpentry and cabinet making.

(d) Builder's Brigade at Lobatsi: This provides a three-year trainingcourse and a trade test at the completion of training.

The combined total of trainees in the above schools in 1968 was 224 of whichall but 44 were in the building and carpenter trades. Fourteen of the 25training staff are expatriates.

46. In order to establish more adequate training facilities, trainnecessary instructors and provide a national system for trade training,the government has requested assistance from the UI'DP (Special Fund), forthe establishment of a national vocational training scheme and pilotvocational training center including instructor training. The durationperiod of the project would be 3-1/2 years. The main contribution of thisproject would be in the supply of trained manpower for industrial andparticularly mining expansion. If the project is realized, the functionsof the BTC will be limited to providing training for government employees,and in commerce (e.g. administration, management, typing, bookkeeping):specialized external courses will also continue.

47(. Teacher Training: Full-time teacher-training courses are pro-vided at two government Teacher Training Colleres- one at Lobatsi and theother at Serowe and both are co-educational and residential. Two coursesare offered: the Lower Priniarv Teachers Cnourse and the Tigher PrimaryTeachers Course. The entry qualification to the former is a pass in theStandard VTT etmy,inntinn sna to the lattfr a pas in tho Tinirii Ce%- rtifca+examination. The growth of the system over the period 1963-1968 was asfollows:

AN NEXPage 17

Enrol mentYear Number of Instructors Lower Course Higher Course Total

1963 13 136 36 172

1964 16 175 36 211

1965 16 242 29 271

1966 20 271 22 293

1967 18 284 26 310

1968 22 n.a. n.a. 322

Source: Ministry of Education

Secondary teacher training is undertaken at TUBLS.

, .n _

40. The Government's immediate plans for teacher training are tophase out the instruction of teachers at the lowest level, and to train alarge proportion of the untrained teachers at present teaching in theschools. To achieve the first aim, the Primary Lower Course will be dis-continued as soon as practicable after 1969. As for the second, theFrancistown Teacher Training College, established by a Swedish grant chan-nelled through UNESCO, will be used for some years to conduct in-servicecourses for untrained teachers. The scheme of training envisaged is a re-sidential course of 4 to 6 weeks duration followed by approximately 10months' in-service training by means of a correspondence course and radiolectures, followed by a second similar period of in-service training, andending at the end of the second year with a third residential course. Afterall untrained teachers are qualified, the Francistown College would be usedfor pre-service training of teachers.

49. Higher Education: At present there are no post-secondary schoolsin Botswana, and students proceeding to higher education are sent to theUniversity of Botswana, Lesotho, and Swaziland situated at Roma in Lesotho,or to other institutions in various other countries. In 1968 there were85 Botswana students at UBLS and 36 students in universities abroad. Stu-dents sent to UBLS and elsewhere for higher education are supported by abursaries scheme which was started in 1961. The number of students study-ing abroad with the assistance of this scheme was 6 in 1961 and reached118 in 1968.

50. Botswana, Lesotho, and Swaziland share the cost of the universityat the fixed ratios 18, 46, 36 percent respectively. Botswana's share for1968/69 was estimated at R. 126,900 and for 1969/70 at R. 130,140. Thetotal recurrent costs to government of the university and bursaries perstudent in Botswana is estimated to be over R. 4000 per annum, which isvery high. Since 1969/70 is the last year of the present agreement on

ANNEXPage 18

financing of UBLS, the Government is studying its position before enteringinto negotiations with the other t-wo countries to determine the future ofthe university.

STATISTICAiL APPENDIX

LIST OF Tjii:LES

Table No.

1. Annual hKallinfall

2. Estimates of Populatiorn

3. Labor Force

L. GDP bv Oririn

Exx)enditure ori Q4P

6. Edilnet.in Sais.c

7. Agricul.tural Data

8. LlTvestork Populntion

10. Beef Producer "' r i -; e paid r b-BjI

Meat Comr:ussion

11. Commercial Banks

12. Post Office Savings Bank

13. National. Development Bank

14. Foreign Trade

15. Export of MineralE

16. Central Goverrunent IFinanices

17. Central GovernrneniL Recurremnt. ievenue:s

18. Central Government LRecurrent Expenditures

19. Central Government ie)evelopment Expendi.tiires

20. Projection of Recurrent, Bu(Iget Deficit

21. Disbursement of Foreign Aid.

22. National Development Plan

23. External Public Debt as of Dec. 31, 1968

2h. Estimated Future Service Payments or. h;xt.ernal Debt

25. Past Transactions on IGxternal Public Debt

l'able 1: BOTS.iANA, ANNUAL RAITNFALL(in inches)

Mean Annual Averag1.961 1962 1963 i"64 L965 1966 1967 1968 9217

rGebercnes 18.80) 15.89 13.75 157.83 9.9'3 22.27 36.36 18.93 21.58

SerQ,vie 21.12 12.21 16.99 14.65 8.92 15. 23 24.66 13.85 18.15

Francistown 18.42 16.91 14.92 8.51 4.4-iL 28. 1T 21.01 13-52 17.65

Mahalapye i6.46 12.46 l4.I4O 9.33 7.02 13.61 22.84 17.13 18.2L4

Maun 27.58 17.42 21.11 11.11 9.2? 23.27 25.28 19.99 17.03

Kasane 33.348 23.63 23.82 13.58 1)4.20) 31.0 29.5)4 28.51 26.68

3hanzi 1-5.0( 9.,814 o.86 6.-75 11.7'7 13.35 2)4.77 22.85 18.9o

Sourcce: Meteorological O.ffice

Table 2 : BOTSWANA, ESTIMATES OF POPULATIOIN

Year Population

1964 5h3,000

1965 559,000

1966 576,ooo

1967 593,000

1968 611,000

1969 629,000

Notes:(1) The 1964 census is used as the base year.

(2) The growth rate of the population is set at 3%

Source: Statistical Abstract, 1968.

Table 3^ E5WOVA4A'.A, ESTIMATES J;'i WAGI; EARNING LAY5R FORCCE 1967/66t

Total 5nxbeiSector _ mpl oyd Perc ent

Agriculture, Foiest>.i-.y, Hirnti.g 7,671 27.3

Mi.ning and Qiar^-'ing 81L 2.9

Manufacturing Indlur.ic- 1, 560 5.5

Constructi oz. L,556 5.6

Electricity and WIater Sn;vkjlies 187 0.7

Wholesale ard ret,.i1 r,.rade and hotcls 52275 -8.

Communications l,L7h 5.2

Financial IDStitutions 0.5

Public Admin'ist;:ation 5,970 21.2

Services 3.607 12.8

XCSt 1IL8 ''o

Notes:

(1) The total num,ber er.ployed by Central and Toca I vernn.ents was8,808.

(2) The total labor force includes the ftollowing in addition:

(a) An estimated 200,000 persons emplo.red or selif-employed

in the agric11ul a ^tr

(b) An etmat 3,00 persons erployed in domestc services.

(c) 25955 per0ns .e.i-g n Botswana, '"rl nte

South African mines (1968 estimate).

(d) 1,585 persons from Bo^tswana working on South African

fe) Ar. ur.- k A-Ao L-Anon nmw-b .ber wor'u_ng a- i .u ssibly

of the order of 20,00o.

Source: Report, of the 1967/68 Labor Census ol Botswana; and i.Miristry of'Education, Health and Labor.

Table h BOTSWANA, IN LUSTRIAL ORIGIN OF GROSS DOMESTICPRO WCT AT CURI3NT FACTOR COST

(in tholusands of Rands)

1964 1965 1966

1. Agriculture, forestry, hunting andfishing 16,738 51.2 16,ih7 45.1 18,143 47.0

of which: non-monetary 6,896 (21.1) :,694 (15.9) 7,259 (18.8) -

2. Mining and quarrying 282 .9 196 .5 40 .1

3. Manufacturing 2,725 8.3 3,758 10.5 2,909 7.5

4. Construction 1,010 3.1 2,063 5.8 2,087 5.4

5. Electricity, gas, water andsanitary services 166 .5 224 .6 288 .7

6. Transport, storage and communication 2,309 7.0 2,698 7.5 2,971. 7.7

7. Wholesale and retail trade 3,650 11.2 4,133 11.5 4,818 12.5

8. Banking, insurance and real estate 168 0.5 191 0.5 214 0.6

9. Ownership of dwellings 1,765 5.4 1,911 5.3 2,145 5.5

of which: non-monetary 1,L63 (4.5) 1,549 (4.3) 1,637 (4.2)

10. Public administration and defence 1,272 3.9 1,499 4.2 1,635 4.2

11. Services 2,637 8.1 3,021 8.b 3,349 &.1

rjross domestic product at factor cost 32,722 35,841 38,599

Source: Central Statistics Office, National Accounts 1964-66

Table 5 : BOTSWANA, EXPENDITURE ON GROSS NATIONALPRODUCT AT CURRENT MARKET PRICES

(in thousands of Rands)

1964 1965 1966

1. Private consumption expenditure 27,895 29,112 28,837

of which: non-monetary 8,359 7,243 8,896

2. General government consumptionexpenditure 6,578 7.88h 9,285

3. Gross domestic fixed caDitalformation 5,637 7,215 8,119

of which: non-monetary 1,191 1,248 1,306

4. Increase in stocks + 250 - 178 + 2,386

5. Exports of goods and services 8,566 10,397 10,772

6. Less imports of goods and services -h4,503 -16,591 -18,825

Expenditure on gross domestic 3X,423 37,839 40,574product

7. Factor income from the rest ofthe w.orid R71 1 087 1i o2

R TLess factor in-m -pA to the

rest of the world - 1,916 - 2,192 - 2,487

Ex-,enditlure on gross nationalproduct 33,378 36,734 39,337

SuLrce: Central St 4± atL-±i LstiA.cs Offi ce, NeilUational L-,QUUJILU, 1L7U-16UU

Table 6 : BOTSWANA, GROWTH OF THE EDUCATION SYSTEM (1963-1968)

A. Primary Schools

Year No. of Schools No. of Teachers No. of Pupils

1963 2140 1,343 55,5511964 241 1,364 62,8391965 247 1,651 66,0611966 251 1,673 71,5461967 252 1,713 71,5771968 257 1,795 78,963

B. Secondary Schoci's

1963 8 60 9761964 8 61 1.0361965 9 66 1,3071969 9 89 1,5311967 9 111 1,8541968 10 131 2,299

C. Vocational Training

1963 2 8 801961 2 13 23L1965 2 10 931966 1 3 Lh31967 1 5 441968 1 5 6

D. Primary Teachers Training

1963 2 13 1721964 2 16 2111965 2 16 2711966 2 20 2931967 2 18 3101968 2 n.a. n.a.

SourUe rL,in1istry ofi EIUdbucaio, helthdIA dIlU Labor

Table 7 BGTSKANN, AGFICULTUJRAL DATA, 1967/68 -

A. Acreage planted 303,088 acres

B. Crop production (in short tons)

Sorghum 11,513

Maize 8,317

Millet 1,487

C. Crop yields (mean lb./acre)

Sorghum 163

Maize 226

Millet 100

1/ TI1.L UddUa d Uoes notu cver- approxIimately 17 peren of

agricultural holdings.

Source: The 1967U/68 AgrOiculturI our vey, 1JIL,,ment,of Agriculture, December 1968.

Table 8 : BOTSVANA, ETTIMATED LIV&STCUK POPULATION -

(No.of head in thousands)

Cattle Sheep Goats

1961 1,319 96 274

1962 1,352 11]2 315

1963 1,35o 128 360

196h 1,347 137 378

1965 1,0?7 125 335

1966 916 151 398

1967 1,105 212 6L7

1/ In 1967/68, an Agricultural Survey was carried out in the main

population areas, which measured the livestock population for the

first time on a reasonably statistically sound basis. The

estimates are as follows:

(in thousands)

Cattle Sheep Goats

1,104 273 738

The number of cattle in areas not covered by the survey was

estimated at 302,000, giving a total herd of 1,406,000. Since

by 1968 the herd had almost certainly no-t recovered to its 1963-6h

level, the figures for earlier years (in the case of cattle) are

probably an underestimate.

Sou-rce: Statistical Abstract, 1968.

Table 9 : BOTSWANA. OF'1T'PAKE OF SIAIJGiTEI "UI') LPTT/m CATTlUI

(Numhar t' 1HAeal)

R1a+fg ( n040 PoA J. A 4in. l 1Q417 n5).

"L4 .L I .~ I5S P - p -4j f J.1) iSJC .L I ' 4, ~/) 4- I 9 'S ) - ___ #

cough, i ,l, 1 7 on 39,6271 37,'

it T %). 7fVr^ . ' '7 04 ,r ) 86 15 .17 1D,,Ove. seas ~JIIMJ.1" 7 _L j jJ U _ 86 ?7,'Q7 34,839 ./ QI

Total 31aughter 103,4a06 111,758 142,736 132,232 88,535 103:776

Live Cattle Sales

ZanTbia and .iodesia 27,348 15,045 19,568 16,h22 7,367

Total Off-take 130,754 126,803 162,304 13,65L 95,902 103, 77f

Source: Botswfana Mleat Conmission.

Table 10: BOTSWANA, BEEF PRODUCER PRICESPAID BY BOTSWANA MEAT COMMISSION 1/

(Rands per 100 lbs CDW)

iL65 1966 1967 1968

Super 19.60 19.80 20.11 20.91

Prime A 18.47 18.79 19.20 19.89

Prime B 17.42 17.69 18.14 18.90

Prime C 16.39 16.56 17.14 17.93

Grade 1 15.26 15.57 16.22 16.93

Grade 2 13.96 14.44 15.05 15.75

Grade 3 11.96 12.74 13.20 13.89

Grade 4 10.57 1159 12.08 12.76

Detained 10.28 10.92 12.01 12.71

12.62 13.20 114*53 15.145

Condemned q.59 7.91 8e88 8e70

Average 12,36 I3 o 14 = 44 15.35

1/ Includes the bonuses paid at the end of each year.

Source: Botswana Meat Commission Annual Reports.

Table 11 : BO'VSWANA, COMMERCIAL BANk:S STATISTICS(in million of Rands)

(At September 30)eneosits 1967 1968

Current Accounts 5.5 5,0

Savings Accounts 2.5 1.0

meDbposit8 q'3 .6

Total Deposits 12.3 13.6

AAvar.- s.MA FLA.. -.na

t 'L %^V'o-ve.,.en4s *4 4C

CVentr al h Overnments C.4 1. U

OusJLrirLess1 7 9 2.

fuA. I- 1 J1 I.

6.0 5.9

Ratio of Advances to Deposits 48.8% 43.4%

Sources Central Statistics Office

Table 12 : BOTSWANA. POST OFPrC1' SAVrNGS BANK

Yeaxr Tnta,l r)Rnosit.s arrowh Rat!p(at Dec. 31) (thousand Rands) %

1Q6J1 289

- 8.o

1965 266

13. 2

14.31967 344

7.8

Source: Denartment of Posts and Telee7ranhs

Table 13: BOTSWANA, NATIONAL DEVELOPMENT BANK - N LOANS(in thousands of Rands)

1965 1966 1967 1968Number Amount Number Amount Number Amount Number Amount

Water Development 7 70.0 34 95.5 53 96.3 314 93.0

Agricultural Development 28 51.4 330 61.2 363 93.3 40( 95.0

Cooperatives 2 13.0 - - 3 23.0

Industrial andComm.tercial Develoment 5 n 998 10 211=6 1 324.2 '39.6

Purchase and TIprowveentof Farm Lands 7 151.7 1 o.6 4 19.1

Total L49 385.9 375 368.9 a 436 55.8 143 227-A

Source: National Development Bank Annual k(eports.

m - r ,I - lm-n -T A fTnr1'TnN *able -L4 DUIuJIDWYA r UniTl IUl i kA l)i

(million Rands)

1963 1964 1965 1966 1967 1968Exports

Livestock andLivestock Products 7.4 7.7 9.5 10.4 8.5 n.a.

Minerals 0.L 0.3 0.2 0.1 - 0.2

Other 0.3 °.h O.' 0.3 0.7 n.a.

Total 8.1 8.4 10.2 10.8 9.2 11.7

Imports-/

Foodstuffs and ) )Livestock ) j4l0 5.8 5.6 5.8

) )Beverages and j )Tobacco ) ) 1.1 1.6 1.6 1.7

) jChemicals, fuels ) )& lubricants ) n.a. ) n.a. 2.1 2.5 3.3 3.6

? )Manufactured goods,) )building material ) )& machinery ) ) 7.8 6.8 10.7 11.2

) )Other ) ) 1.6 2.1 1.2 0.9

Total 8.3 9.3 16.6 18.8 22.4 23.2

Trade Deficit 0/ 0.2 0.9 6.4 8.o 13.2 11.5

1/ The information on imports for 1963 and 1964 does not allow a classification onthe same basis as for the later years.

2/ The larger deficits in 1965-68, compared with 1963-64. are partly due to imnrovedmethods of collection of import statistics. According to the Government Statistician,these may still be an underestimate.

Source: Statistical Abstracts 1966. 1967. and 1968; and information supplied by theMinistry of Development Planning.

Table 15: BOTSWANA, EXP)RT OF M:INRALS

Asbestos Manganese Ore Gold & Silver l'alcYear Quantity Value Quantity Value Quantity Value Quantity Value

Xi { R 000's) r-7Tons) 1 0I s)O 75zs T3R-00' s) T7hons) R b00 s)

1.961 1,852 322? :24,8:22 288 261 6

1.962 1,889 27-L 25 ,703 165 321 7

1.963 1-,,7-714 219 :23,0141 14,6 163 4

1.964 2,026 258 L4,793 819 10 (0.2)

1965 1,396 18, 5,122 32 - - 53 1

1L966 362 70 1,0o6 110 - - - _

1L967 - 1,1'77 19 - 8o 1

]L968 - - 11,021 215 - - 137 1

Source: Geological Survey Department.

Table 16 BOTSWANA, C(ENTAL GOVERNMENT FINANCES(in thousands of Rands)

1963/64 19564/65 1965/66 1'966/67 19?67/68 19?68/69 1968/69 1969/70Estimates Revised Estimates

__ _. _ _ _ _ _ _ _ _ Estimates

Current Revenue 3,398 4,413 5,443 6,201 5,745 5,830 6,966 6,878

Curr ent Expenditures!/ 6,36 76,499 9,069 1(,980 1:2,587 12,638 12,881 13,873

Deficit (-) -2,962 -3,0 -3-3, 626 -6,77 -6,842 -6,808 -5,915 -6,995-

Devealonent xcpenditures 1,818 4,392 6,042 6,86:2 3,794 ,4,30:1 2,742 7,428

Overall deficit (-) -4,780 -7,478 -I,668 -1, 64:L -10,6365 -1:1,109 -8,657 -14,423

Financed_ by:

UK Grant-in-aid 3,184 3,,74C) 5,32(0 4,70( 13,5814 13,210 7,620 f,467

Overseas aid scheme 101 13C) 224 448 412 42.1 365 346

C. D. and 'W. Grants 911 1,535 2,043 3,436 ---- ___ __

Other ra:nts andDonations --- 142 132 327 721 )

)Loans --- 1,673 2,162 2, 709 L,05( )

) 2,482 816 5,620 21/Appro:K. breakdown: )

Domestic ) 967' 1,047 488 3.3 )) 494 )

Foreign ) 706 ],115' 2, 221 1,026 )

Drawings on Reserves(+ _ draw:ing) +90 +258 -21 3 +21 -14'7 -, -144 -10

1/ iccludes capital outlays on construction of CTaberones and capita:L subscr:iptionsto the National Development Bank. These are shown as development expend:itures.Sese tables 18 and 19.

2,/ Of th:is amount, 4.45 million Rand was yet, to be negotiated at the tire the budgetwas p:roposed to the National Assewmbly.

Sourca: Ainual Statenent of Accounts, Budget estimates 1968/69 and 1969/70 and i.nfornation provid2ed by Botswana Government

Table 17 : BOTSWAMA, INTRAL GOVERINMENT RECURRENT' REVENUES '

(in thousands of Rands)

'196i3/6h 1964/65 1965/66 1966/67 1967/68 1.968/69 1969/70Revised EstimateEstimate

Culstoms a]nd Excises 7154 :1,026 1,149 1,133 1,737 1,7144 L,870

Customs Agreement 527 791 910 747 1,220 nL 1L,23.3(611) (707) (941) (1,026)

Excise on S.African Liquor 227 235 239 386 517 na 637

Taxes and Duties of which: 1,226 1,350 1,825 2,155 1,5h8 2,0 hl 2,007

Income Tax2/ 8155 987 1,375 1,617 1,274 1,700 1L,650

Export Tax 320 33.5 397 396 225 na 277

Licenses 182 21.5 256 283 305 385 313

Fees, Fines and Earnings of 199 220 247 237 344 369 5314Government Departments

Posts and Telegraphs 406 41.3 512 79h 6,31 737 932

Revenue from Oovt.Pro]pert;y 441 516S 559 642 642 1,117 738

Sale of Crown Lands '70 435 410 46 14 __

Other 1:20 238 485 910 524 573 4814

T o t a 1 3,398 4,413 5,443 6,201 5,745 6,966 6,878(3,4132) (0h,329) (6,395) (5,551)

1/ Figures in brackets under Customs Agreemeint revenues signify the amount that was attributable tothe year in question, when because of delays it was accounted for in a different year. Totals inbrackests take into account this adjustment.

2/l Prior to 1L966/67 this includes the "African tax" and the "Non-Africani Personal Tax".

Source: Annual Statements of Accounts, and Budget Estimates 1969/70.

Table 28 OT;3,JtANA 7REk-DO'Ji OF ?EOURENT EXPENDITURES(in thousan-s of lands)

L m5~'A5 19< 7> i-;4 196t8(z957 7/68 19 68J? 19 1959/iCEstimr.;c-s RevisecK E st matesi

Es t imat e s

Administra'tior'&- 1,5:15 1.5L 2, '50 2,773 2,911 3,338 2,182

Internal Secuiii,ty

Pol i.ce 67 7'9 St. 1,21!6 0 ';'35 1,035PrisOns 836 12 ' 21 18 1h 7 I58 162

Economlic SerV7ces 2,98 3, 218 3,33.4 0,52 6,8]I6 64,36 5,687

-I7-iC.1t, u reI17 3?,eteriarieL rr 3 6 1308 837 883 867 928Undergrc)und .;ater 1 135 152 37-1 39>, 39? 833Survev- 138 150 231 276 - )L3 3G53Public 'JorksY 1, 339 1, 323 1,281 1,265 1,266S 1,90 1,60>Post and Telegranlt 3$8 161 593 603 536 588 66)CtherS/ ibo 180 19 !127 1>46 b683

',c,ci] ser vices 1.6.2:5 1,5 17 995 1,"'' 1,8584 1,618 2,1. 827

Educatio)' 840 1,051 1,218 82, 921 807 1,9<'Heal-th Wi 620 81i 793 829 '18Information anm: 4; i P The 162 168

3 oadcast i-

S ub ventior:s to) Lo cal 511 ___

AuLit ho j.lt ).El S

'Pensions an:: Grauit.t3 7E' 68 ^ 9 706

PiPIL 8/ , 7,~~~ ~~~~~~~~~~~069 10, 980 **,~ -,--

-2-

1/ Inc.ludes he, 3a ene -a:L a m-ni:straative e:mteinse;s o. the mininstries resnornsible for economic and socialservices an_ _ncer--al secu-ity, and. all ezcmenditures under the Overseas Aid Sch.eme.

2/ Includes forestry, fisheries and a small amount for livestock.

3/ Figuires for' 19167/68 and. ojr Tars ½clude exrencitili.es of the neijlv formed eLter Branch, which isresponsible for- the maintenance o' both, rural and urban -wiate_r sucplies.

j4/ 19 61/65 and 196'75/6' eincciude expenditures of 748,CO0 and 624,0O0 Rand respectively for constructionof Gaberones , w bhic h -ere included in th.e recurrent budget. These have been shown as developmerit expenditures.

5/ Covers tsetse fly control, game, cooper-at: Ues and community development.

6/ iesponsibilit.v for nart payment of teachers' salaries wjas taken over by local authorities in 1967/6t8.In return the a,.ecnmen-t stopped rece- :intg reimbursement from the local. authorities, as sho-rn by thereduction in "other" revenues in Table 17.

7/ Only the figures for 136W5/66 an.d 1966/67 truly reflect expenditurer on famine relief. For other yearsit has .not been possible to identifCr the. §ull amounts spent. Since 19667;,'8) some aclditional ex,oendi:tu-eson famine relief have certairly been made by the Department of Comamuanity DevelOcpment, which nartly explainsthe increase in the rIOthe-r' item under Economic Services.

8/ Excludes capitaL subscriptions of R. 412,000 and R. 61,000 to the NationaiL Developmrent Saiik, in 196';/66and 1966/67 respect:ively.

Sources: Annual Staterp.ents of Account and 1969/70 BRudet Bstimates.

TA]LE :L9 B_OTSWAN CENTRAL GOVERNMENT DEVELOPMENT PEND)ITURES(In Thousands of Rands)

1963/64 L964/65 1965/66D 1966/67 1967/68 1968/69 19,63/64 - 19663/69 1969/70(Revised Tc;tal per cent. (F.stirmatetEstimatei

Agriculturel/(including forestryand fisheries) 36 117 179 800 429 113 1,672 (6-.5) 211

Livestcck 1L30 26'9 576 449 121 203 1,748 (6.8) 574

Water Developmemnt_/ :38 IL,04:3 6O4 710 397 278 3,413 (13-3) :L,065

Roads and Civil Aviation 16 156 1,509 1,219 623 207 3,730 (14.5) 34:3

Power and Telecommunications :3773/ 409 i664 127 102 861/ 1,765 (6t.9) 9173J

Mineral. Development - .- - 81 27 108 (().4) L,5556

Surveys!/ 19 72 37 239 73 183 623 (2.4) 228

AdmLinistrative bui]Ldings,housing aLnd seweragej- 479 L,435 1,048 1,429 1,066 917 6,374 (24.8) i,115

Education 202 387 431 1,002 542 263 2,827 (11. 0) 888

Medical Services 41 174 :223 203 147 175 963 (3.8) 184

Miscellaneous6/ 137 332 771 684 _213 290 2,427 (9.5) 347

Totall/ 1,818 4,392 6,042 6,862 3,794 2,742 25,650 (1^ *3) 7,428

1/ Includes agricuLtural training.

2/ Includes expenditures for drought and famine re:Lief.

3/ Includes some expenditure on water development in Gaberones Water and Electricity project.

4/ Mainly geological, :Land use and hydrologica:L survey work.

5/ Incluues- the folow:ing amouirlts for couistrucLioWn of Gaberones, which were shown as recurrent outiuys in governnentaccounts, for 1(963/64, 1964/65 and 1965/66 :respectively: R. 352,000, R. 748,00C and. R. 624,ooo.

-2--

6/ ILncludes information and brcadcasting, tsetse control, commumity development, cooperatives, development of wildlife

resoujrces and censmQs. The 1965/66 eLnd 1966/'67 figures inclulde !subscriptions of R. 412,300 and R. 61,000respectively to the National Development Bank.

7/ Of the totals, expenditures attributable to the construction of Gaberones have 'been approximately as follows:

(in million of Raands)

1963/64 1964/65 1965/66 1is66/67 1967/68 1968/69 Total1963/64 - 1(968/69

0.7 2.6 2.1 1. 1. 3 0.14 8i.6

Source: Annual Statements of Accounts, Revised Estimates for 1968/69, and Estimates for 1969/70.

Table 20 BOTSWANA - Projection of Recurrent Budget Def'icit, l/ 2/

(in million Rands)

1'?69/70 70/71 71/72 '72/73 73/74 7,4/75 75/76 76/77 77/78w' 78/79 79/80 30/81(Budgetestimates)

Revenue 6.9 76'> 8.1 8.8 9.5 :10.3 11.2 12.1 13.2 1L.3 15,.5 16.8

x: enditure 13.9 1h.'7 iL5.6 :16.4 1'7.3 18.2 19.1 20.2 21.3 22.5 23,.7 24.9-Assumption A)

Deficit 7.( 7. 2 7.5 7.6 7.8 7.9 7.9 8.1 8.1 8.2 8.2 8.1(Assumption A)

ic:penditure 13.9 15.L 1L6.4 :17.8 19.2 20.8 22.4 24.2 26.2 28.3 30.4l 32.87Assumption B)

Deficit 7.( 7.65 8.3 9.0 9.7 10.5 11.2 12.1 13.0 ll .o 1lt.9 16.0(Assumption B)

1/ Excluding revenues fromn, arid excpendituires related to, prospect:ive mining developments.

2/ Based on assumptions described in paras.131 and 132 of main report.

Source: Projection made on 1969/i70 Budget 3stimates

Table 21 BOTSWANA,, DISiBURSEMETS OF FOREIGN AID !(in thousads' Ranids)

1]964/L65 1L965/66 :1966/67 1967/68 1968/692/U.K. Governmeint 6,036 8,128 9,74!2 9,300 7,985

Grant-in-aid 3,7 40 5,320 L, 700 8,58L 7,620

OverSeas aLid EIchemLe 1 30 224L 48 U12 365

C.D. asnd W. grants 1,535 2,0143 3,4336

Loans 631 51h1 1, 158 3O4 h

Denmark and Swedemn _ 27L 132

UEF.S.A ._ Ll0 ILO ho I00 80

I .D.A. 75 517Ih 1,063 722 -

1 . N. 2/10 50 150 200 4O0

UI.K. Freeidom for Hunger Ctampa.i,gn - 27 2li1 5]L8 52

Oxford Comlit.tee for famine relief 74 95 56 112 59

.b rld Food ProgranY/ 40 NL(O 1,1)0 1,000

T o t a 1 6,2LLI 9,314 1L2, 392 I12206 9,738

1./ By financial year, i.e. April 1 t,o MaLrch 31. Includes teLchnical assistance other than that providedby volunteer organisations such as thLe Peace Corps.

2/ Approximate.

3/ Estimated total value of foocdstuffs received under Jorld Food Program between Jainuary 1966 andMarch 1969 was R.3.5 mil'Lion. It,s distribution between financia:L years i.s very approximrate.

Source: Annual Statements of' Accounts, World Food Program Office (Gaberones), USAID and UNDP.

Table1 22 : TY YTIQLTATA NTA TIOrNTALT DnTTLOT rnhIVMT TT ALT

Swlu,.az~~t 4f Capt2 0spndiur by Se-L -- ctor- .OLJUICUic.LJ VL %Lidy±LUe.- Z&AItJeLU.LLiLL-te UiY OtL; L,L)

1-i niZQ //-n -1 ,n'7 /175 -I\k 7VU/ U7 - 17 IU/ tlJ

(In Millions of Rands)

Physical Infrastructure 31.1 67.4

Water Resources 9.1 19.7

6ducation 2.0 4.3

Agriculture and Livestock 1. 3.0

Commerce and Industry 0.9 2.0

Other 1.6 3.4

TOTAL 46.1 100

Of which Shashi 26.7 57.9Complex

Source: National Develog-ent Plan (1968-73).

Table 23 BOTSWANA - EXTERNAL PUBLIC DEBT OUTSTMENDING AS OF DEC'ZMBER 31, 1968 /1

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Debt Outstanding

Source December 31, 1968Disbursed Including

only undisbursed

TOTAT. F.YTFRNAT. PIURIT.TGT nTRT lo8R6 lOj89h

privatAly held. debt -

Publicly-issued bonds /2 1,306 1,30k

Loans from international organizations -TDA 3,600 3,h00

T n . fvtrnm canvn lmP nt.~ -

United Kingdom 5,990 5,990

Debt with an or4inal or extended maturity of over one year.7: Net of accumulated sinking funds of $1,289,000.

Statistical Services DivisionEcon o n S nn L+m,.n+

July 7, 1969

Table 24 BOTSWANA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOIUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1968

Debt Repayable in Foreign Currency

(In thousands of U.S. dollarn) Page 1

DEBT OUTSTCREGIN OF PERIOD) PAYMENTS nuRING PERIOI

INCLUDING /1 AMORTImYEAR UN1DrSAURSE.n ATIOn INTEREST TnTAI

TOTAL EXTERNAL PUBLIC DEST

1969 10s96 163 455 618190 1nS1 165.161

1971 lOs403 157 448 605J. u

1973 9 873 177 422 60019074 .;7 q A I A 606

1975 9P2B1 23D 413 6431 976 9 n00 3 2 34 408 6*21977 8,717 235 3d5 620197R etA37 275 311 7A7

1979 8*138 226 256 4839 0An 7911 233 i h771981 7R67fl 240 231 47.1982 7,439 247 223 4701983 7 19t 255 215 470

Note: Includes service on all debt listed in Table 23 prepared July 7, 1969.

Table 24: BOTSWANA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTv-uTSTA1^mr1Trr TNTf'TTfLTJD ,Y t Tc^TITQED AC OF DECER 31, L6 AOF.'I-.C '

V L U 1 1J.L" Li I 1~VL VIL L7u L.kuiJVIfll

De'bt- Repayableu1 in vor ign Cu rrency

(In thousands of U.S . do"laz" ) Page 2

DEBT OUTST(9EGIN OF PERIOD) PAYjMENTS flURING PERIOD

INCLUDING /1 A'AONTI-YEAR U14DISBURSED ZATIOti INTEREST TOTAL

PRIVATILY-HELU DE.BT

PUBLICL'Y-ISSUElD B2cI-J[

1969 1i#306 82 ;62 2441970 1P005 79' 162 2411971 980 66 162 2301972 dlO 6a 156 2251973 632 68 :.45 2131974 440 42 1e45 1871975 295 26 145 17l1976 222 25 145 1701977 145 21 !28 1491978 79 65; f1 1151979 - 12 121980 - - 6 6

LOANS FROM INTERNATIONAL ORGANIZATIONS

I . A

1970 3,600 - 272497:4 3 6J.S i I 2,

1972 3P603 - 27 27I' F.J 6 J rd, 0

1974 3060Q ' 27 271974 0bro 736 CF 03

1976 30564 36 2? 634077 -52a -3 6

1978 3,492 36 26 62:979 37# 4, 2 t26 6 2198C 3,423 36 26 62

1982 3 346 36 25 611983 3 312 36 25 61

See footnote at end of table.

Table 24: BOTSWANA - ESTIMATED FUJTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTAT,- tOrTQANDAT,rT1fl TIT- T TNrLTMrJI - 1flTuTTfl1Tf AC Or' t1,kMDECr l R "I 1968 (wf- a t %

%j 1LjL 11~j IU .VJLUJ . ..I..T SBUR&SEM fl.J 'J Li LJ4IJWU 1~ J.L J.71.A Vu 1J J

JJ-vU °_payabe -in U or£egn CuriverIcy

(In thousands of U.S. dollarsj Page 3

DEBT OUTST(BEGIN OF PERIOD) PAYMENTS DURING PERIOD

INCLUDING AMORTIAYEAR UNDISBURSED ZATION NINTiMlUST %n-^

LOANS FROM GOVERNMENTS

UNITED KINGDOM

1969 5,990 82 266 3481970 5'909 AS 2621971 50823 89 259 3481972 5,734 93 255 3A81973 5A641 110 250 3601974 5_ _1 14a6 246 3921975 5.385 166 241 4091976 5hi217 173 __ a091977 59044 178 231 4091978 4 p866 6.84 225 4091979 4p6a2 190 219 4091980 4.'491 197 2 _ 2091981 4P294 204 205 4091962 49091. '11 i98 4n91983 3s879 219 190 409

/1 Net of accumulated sinking funds.

Statistical Services DivisionEconomics Department

July 7, 1969

Tab:le 2,: B0TSWA,NA - PAST TRANSACTIONS ON ErXERNAjL PBLIC DE]BT 196 1 p4968

I)ebt Repayable in Foreign Currency /h

(In thousands of U.S. dollrs)

Debt outstanding rransactions during lperiiDdbeginning of period

Year nci Ii ui3e Jidi s AutM;IDis Lrse-iundisb. only bursed izaltion melnt himort. Interest Total

GRAND TOTAL

I1964 'bI9 41 4 l94 * 47448 11*8 144 309 454:19655 1374d6 51l46 3600 81l8 160 372 5321966 8528 5745 2783 1826 3112 161 376 537:1967' I1)148P 8651 1497 1246 2552 228 511 739'1968 1:1072 ! 10881 1791 3:31 522 216 474 0690:1969S 10896 10896 -

PFtIVATELY HELD DEBT,

PU8iLICLYWISSUED BONDS

1964 2344 2344 4 108 189, 2971965 2181 2181 98 188 21361966 2023 2023 98 188 2861967 1879 1879 ' 98 18el 21861968 1679 1679 - 94 17C0 2641969 1306 1306 -

See footnote at end of taLble.

Table 21: BOTSWANA. - PAST TiANSACTIONS ON EXrTERNAL ]PUJBLIC DEBT 1964-1968

Debt Relpayable in Foreign Currency /l

(In thousands of IJ.S. dollars)

Paige 2

Debt outstandingbeginning of periol Triasactions during period

Yiear n-cluding D:isbu ei- Author- Di usPaFmeiundisb. only bursed ization ment AMort. Interest Total

IDA

19X64 - - - 3600 - 6 -19,65 3600 - 3600 6 818 .

1966 3600 817 V783 - 1523 6 619,67 36001 2340 1260 - 1069 - 18 t81968 3600 3409 191 191 - 2519 69 36 0' 3600

L0ANS FROMl G!IvLEtNMENTS

uN I'TED K I NDO0'

1964 1851 1851 ,148 1J148 3l6 120 1571965 2965 2965 6 , - 2 185 24*61966 2905 2905 _ 1826 1589 63 182 24151967 46,6,9 4432 237 1246 1483 130 305 4351968 579i4 5794 - 331 331 122 278 4011969 5990 5990 -

/1 Debt with an ori.ginEa or extended ma turity of over one year.

StatisticaSl Services Division2conomics Department

Ju.y IL,1969

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