Botswana feels the South African pinch

IN PHAKALANE, an affluent suburb of Botswana’s sleepy capital Gaborone, a modern assembly line spits out thousands of batteries destined for southern African cars. Whether in glitzy Bentleys beloved of the South African elite or the beaten-up Toyotas swerving to avoid Harare’s potholes, the devices made by employees of Chloride Exide keep the region moving.

Yet trouble is brewing just beyond the factory gates. Less than 25 miles (40km) away in South Africa, the company’s largest export market, a slowdown has crippled demand. In the past year some 30,000 fewer batteries than usual were shipped across the border. To make things worse, sales to Zimbabwe, once a big buyer, have been hit by import restrictions.

In September Botswana exported just $54m to South Africa, according to government figures, and imported $371m worth of goods from its big neighbour. Local businessmen grumble that South African firms with operations in Botswana do not spend enough locally. Business Botswana, a lobby group, is calling on South African supermarket chains to boost local procurement above 10%.

Ian Khama, Botswana’s president, has repeatedly criticised his neighbours. In September he renewed a feud with Robert Mugabe, the ailing autocrat who has impoverished Zimbabwe, again urging him to step down. He has also chided Jacob Zuma, South Africa’s beleaguered president. In June Mr Khama accused South Africa of stifling industrialisation in the region by branding itself as a “regional gateway” for investment, and argued that it was treating its neighbours as little more than a marketplace for exports.

Mr Khama is undiplomatic perhaps because he is anxious. The diamonds that propelled Botswana’s exceptional growth and paid for impressive infrastructure could be exhausted before 2050. In 2014 Russia overtook Botswana as the world’s biggest producer. Global rough-diamond sales to cutters fell by some 30% between 2014 and 2015, leaving Botswana with its first budget deficit in four years.

The government is taking note. In February it launched a fiscal stimulus programme to tackle unemployment, estimated at around 19% in a population of 2m. Government investment promoters in swanky premises in downtown Gaborone talk up Botswana’s potential as a hub for tech firms or green energy. But it ranks 108th in the International Telecommunication Union’s ICT Development Index, with only 27.5% of its people online.

A more realistic strategy to diversify away from diamonds is to attract more tourists. But instead much of the government’s focus has been on deepening its dependence on the shiny stones by trying to become a global centre for cutting and polishing them. Its flagship policy involved strong-arming De Beers, the world’s biggest diamond firm (of which it owns 15%), to bring its sales and sorting operations over from London.

For Mr Khama, the diversification plans have gained renewed urgency. His Botswana Democratic Party (BDP), which has held power since independence in 1966, is facing its first real challenge at the ballot box. The BDP’s share of the vote dipped below 50% for the first time in the 2014 general election, amid frustration with unemployment and with water and power shortages. Like South Africa’s African National Congress, the BDP is nervously looking ahead to an election in 2019.