Botswana still "Africa's freest economy"

2005 Global "Index of Economic Freedom" praises local transparency and investment climate.

The latest, 2005, "Index of Word Freedom" has once more rated Botswana as Africa's "freest economy", with an improved overall score and an international ranking above that of a number of economically advanced, OECD, states.

Published on an annual basis since 1995 by The Heritage Foundation and The Wall Street Journal, the Index of World Freedom seeks to document the correlation between freedom and prosperity. According to the authors of the 2005 report those countries (including Botswana) that have improved their overall scores over the past decade have tended to see a real rise in both per capita incomes and standards of living.

The 2005 Index examined 161 countries and self-governing territories, measuring their performance in 10 categories: trade policy, fiscal burden of government, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights, regulation and informal (or black) market activity.

Botswana's overall score has improved over the past decade from 3.38 to 2.44, also up from last year's 2.55. In addition to once more ranking Botswana as number one in Africa, the 2005 Index puts the country in 37th position in the world, just ahead of such countries as Japan (2.46), France (2.63) and South Korea (2.64).

The 2005 Index leader was Hong Kong (1.35), followed by Singapore (1.60), Luxemburg (1.63), Estonia (1.65), and Ireland (1.70).

The top five African economies in the Index were: Botswana (2.44), Madagascar (2.68), South Africa (2.78), Cape Verde (2.84), and Mauritius (2.90).

The 2005 report further characterizes Botswana as a market-led economy that encourages private enterprise, and has had a democratic system of government with free and fair elections since gaining its independence, adding:

"It was rated Africa's freest economy in the 2004 Index and from the mid-1960s to the mid-1990s enjoyed the world's highest average growth rate. Despite politically motivated deficits and delayed privatizations, Botswana retains an investment grade rating from both Moody's and Standard and Poor's that places it on par with or above countries like Greece, South Korea, and Chile."

The report particularly commends Botswana for encouraging foreign investment, particularly in the non-mining sector. In this respect the authors cite a recent U.S. Department of Commerce study, which notes that:

"the government has abolished all exchange controls...[has] undertaken largely successful efforts to combat crime, including corruption, and to improve the delivery of the judicial system...[and] has assured that low tax rates, the speedy processing of applications for business ventures, a stable macroeconomic environment and a democracy exist."

While noting that Government restricts foreign investment in a range of economic activities, in order to promote citizen empowerment, it observes that "these restrictions are not a meaningful impediment to serious foreign investment." It further observes that the banking system is "more competitive and advanced than those of most other African states", adding that:

"The country's policies facilitate the free flow of financial resources in support of the flow of resources in the product and factor markets. Credit is available on market terms, and foreign investors have access to credit on the local market... The insurance sector and the stock market have been growing strongly in recent years."

Under legal rights the report confirms that the Botswana constitution provides for an independent judiciary, and that "the government respects this provision in practice." It also notes that regulation is transparent and evenly applied:

"The government has made some efforts to make it easier for small businesses to open and operate, creating a one-stop shop for investors to avoid unnecessary bureaucratic steps to start a new business... Investors with experience in other developing nations describe the lack of obstruction or interference by government as among the country's most important assets."

The report also further cites the U.S. Department of Commerce in affirming that:

"Government adheres to transparent policies and maintains effective laws to foster competition and establishes clear rules for operation. Bureaucratic procedures are streamlined and open, although somewhat slow and not excessively overbearing compared to other African countries."