Arrest of suspected Islamists in eastern Senegal indicates increasing border insecurity, intention to stage Dakar I… https://t.co/TEQzZaeMmb
New President for Botswana
Long-serving Botswanan President Ian Khama of the ruling Botswana Democratic Party (BDP) stepped down on 1 April after completing his second five-year term, and he was replaced by Vice-President Mokgweetsi Masisi ahead of the general election in October 2019.
- A significant change in the government's overall investor-friendly policy stance is unlikely under either a continued BDP administration or the opposition UDC, given Botswana's record of stability.
- An expanded opposition UDC alliance is likely to pose a major challenge to the ruling BDP in the 2019 elections should economic reform efforts stall. New president Mokgweetsi Masisi faces the triple challenge of diversifying the economy, curbing corruption in the BDP, and managing the threat of factional divisions within the ruling party.
- The announcement of the new vice-president and successful prosecutions of public officials involved in corruption are likely to reduce political divisions within the BDP.
Masisi's power play
Masisi, a former education minister, was appointed vice-president in November 2014, ending a period of political and legal wrangling over the position following allegations that President Khama was seeking to appoint his brother, Environment Minister Tshekedi Khama, instead. He subsequently secured the BDP chairmanship at the 2015 and 2017 party congresses, strengthening his position. Key individuals likely to play influential roles in the Masisi administration include intelligence chief General Isaac Kgosi and BDP secretary-general Mpho Balopi. Following his appointment as president, Masisi promptly announced plans to reduce unemployment and diversify the economy in his first public statement on 3 April, according to media reports.
Masisi has taken office following a rebound in the Botswanan economy, reflecting stabilizing prices for diamonds, which account for 85% of total exports. GDP growth has revived from a 1.7% decline in 2015 to average 4.4% between 2016 and 2017, while inflation averaged 3.2% from 2015 to 2017. The fiscal balance has improved from a deficit of 3.1% of GDP in 2015 to a surplus of 0.7% as at December 2017. Consequently, the Botswana pula has remained stable, buoyed by improving external balances, with robust commodity export receipts sustaining the trade surplus and the current-account balance. The prevailing macroeconomic stability, an improved performance of the mining sector, driven by increased domestic diamond production and sustained global demand, and relatively tight fiscal policy are all risk-positive indicators for Botswana's medium-term sovereign risk rating. We have set this at 25/100, or A- on the generic scale, with a stable outlook.
Rising opposition prospects
Despite the economic turnaround, many citizens' groups and opposition parties, notably the coalition Umbrella for Democratic Change (UDC), have voiced concerns about worsening unemployment and increasing public-sector corruption, threatening to stage protests over rising living costs. About 25% of Botswana's population of 2 million is unemployed, and youth unemployment is considerably higher at over 35%. The opposition accuses the BDP administration of mismanagement and unproductive spending; for example, in the USD2-billion Swedish arms deal to retool the Botswanan army. Additionally, leading BDP members such as intelligence chief General Isaac Kgosi are alleged to be linked with corruption scandals, such as the ongoing money-laundering scandal involving an Israeli company, which Kgosi denies.
Although the BDP has ruled Botswana since independence in 1966 and has won all previous national elections, most recently in October 2014 with 33 of 57 parliamentary seats, its share of the vote has been declining in urban areas, where the opposition UDC has broadened its coalition and electoral appeal. In February 2017, the UDC, Botswana's largest opposition movement, announced an alliance with the Botswana Congress Party (BCP). Together with the smaller Botswana National Front and the Botswana People's Party, they cumulatively secured 54% of the vote in the 2014 general election. The UDC won 30% of the vote and 17 seats, whereas the BCP secured 20% and three seats, versus the ruling BDP's 46%. Under the leadership of Duma Gideon Boko, a Harvard-trained lawyer, the UDC is seeking to broaden its alliance of parties, make gains in urban areas such as Gaborone and highlight government corruption prior to the October 2019 polls.
Outlook and implications
Major policy shifts are unlikely during President Masisi's term, while the BDP will maintain its political dominance prior to the October 2019 elections. Masisi is most likely to be nominated by the BDP as its presidential candidate for the polls, although he faces the challenges of diversifying the economy, curbing BDP corruption, and managing the threat of factional divisions within the ruling party from groups such as that led by Nonofo Molefhi.
An expanded opposition UDC alliance is likely to pose a significant challenge to the ruling BDP in the 2019 elections should economic reform efforts stall. During the 2014 polls, the combined opposition voting share exceeded that of the BDP, which won under the country's first-past-the-post system. We assess that the opposition's vote is likely to increase in urban areas, boosted by support from the Botswana Federation of Public Sector Unions. Nonetheless, Botswana's sustained record of stability means that a significant change in the government's overall investor-friendly policies is unlikely under either a continued BDP administration or the opposition UDC. Existing plans to boost economic diversification and local beneficiation in the mining sector, the most significant contributor to GDP, will come under scrutiny after an opposition victory, with more emphasis on beneficiation, boosting local skills, and associated employment in mineral and other diversified sectors. In a bid to promote economic diversification, according to local media reports on 14 February, Botswana will start processing Zimbabwean diamonds at the Diamond Trading Company.
The degree of government determination to proceed with current economic reforms, and its willingness to bow to popular pressures while dealing with the threat of factional division in the ruling administration, will be indicated by President Masisi's choice of vice-president. Leading contenders include Labour Minister Edwin Batshu and veteran Foreign Affairs Minister Pelonomi Venson-Moitoi. A second positive indicator for the BDP would be any successful prosecutions of public officials involved in corruption, as this would strengthen Masisi's candidacy.
- Country Risk Premiums Quarterly: Q1 2021
- Arrest of suspected Islamists in eastern Senegal
- Civil unrest correlations
- Weekly Pricing Pulse: Supply problems send commodities higher
- What can we expect from the new Libyan executive?
- Reality check for eurozone growth expectations
- US to end support for Saudi offensive operations in the war in Yemen
- Capital Markets Weekly: Italian syndication revives focus on price sensitivity, but demand remains strong