Credit: BWgovernment
But promises growth potential
Fitch Solutions has assigned Botswana a low ranking in its latest Infrastructure Risk/Reward Index, placing the country 14th out of 18 regional markets and 88th out of 104 global markets.
According to Fitch Solutions’ Infrastructure Report, Botswana's poor performance is attributed to its small market size in value terms and limited investment opportunities for potential investors.
Despite its relatively small size in absolute terms, Fitch acknowledged that Botswana's construction industry is the largest in Sub-Saharan Africa on a per capita basis. The country's construction market per person is comparable to that of Mainland China and Mexico.
Global Monitor, which provides unique data, expert analysis & innovative solutions to companies in the world's largest industries, has concluded that a common denominator in Botswana’s infrastructure is that they all rely heavily on government spending and PPP projects, which in turn largely hinge on loan or debt-instrument financing. Additionally, Global Monitor found that the poor financial health of many infrastructure companies has resulted in lenders seeking to limit their credit exposure to the infrastructure sector, which in turn has made many players cash-strapped.
Fitch adds that: “Domestic construction companies have limited capacity and cannot take the lead on large-scale infrastructure developments”.
Because small-sized companies are not equipped to handle large-scale projects, Global Monitor said this means that the sheer size of Botswana's typical infrastructure projects (alongside other factors such as access to financing) are conducive to sector consolidation.
Global Monitor believes Botswana, therefore, has a substantial project backlog over the short- to mid-term, which bodes well for the growth of its infrastructure sector and the economy in general, given that good infrastructure is essential for successful business activities.
“The government has adopted measures to attract more FDI into the country in order to boost tourism, both in terms of domestic travellers and large-scale international MICE events,” Global Monitor said adding that this has also created a higher demand for airports and airport infrastructure.
“The needs of Botswana’s foreign trade have put a strain on existing ports in the country, necessitating the construction of new ones.”
Over the long term, Fitch expects growth in Botswana's construction industry will average 3.5% a year, to reach an industry value of P64.0 billion (USD4.3 billion) in 2033. This long-term growth is supported by government support for infrastructure development, Botswana's status as a business-friendly investment destination and the country's emergence as a major transportation gateway for the Southern African North-South Corridor.
Fitch anticipates that developments to support mining, as well as improvements to the water and power supplies, will be the main drivers of growth in Botswana's infrastructure and construction industry, supported by several transport projects aimed at improving rail and road connections in the Southern Africa region.
The government's National Development Plan 11 expired in March 2023, and the National Planning Commission aims to provide a new development plan following the 2024 elections.
“We expect this new plan to remain largely consistent with the previous one, with the government aiming to continue tackling Botswana's infrastructure gaps across, energy, water, transport and residential construction.”
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