Botswana faces an array of problems.

One of the problems that developing countries face is a balancing act involving natural resources and the country's industry and service sectors. The dilemma comes down to being able to quickly develop and export commodities, as opposed to developing indigenous sources of manufactured goods that otherwise have to be imported.

Manufacturing requires support in terms of infrastructure to supply such elements as transport and warehousing. Institutional support is also needed, for example from a justice system that enforces agreements, and a tax structure that finances good governance. Developed human capital must be in place as well.

In recent years, Botswana has developed a reputation as one of the most progressive countries in sub-Sahara Africa. Its per capita income is the highest in the region, partly due to its small population and the high value of its commodity exports--with diamond mining accounting for approximately 75 percent of its exports.

Diamond production is likely to gradually decline in the medium term. But the country is developing other mineral resources, specifically nickel and copper, according to a July 31, 2007 report in The Voice (Francistown).

A dated CIA estimate (2003) of the portion of the population living below the poverty line is over 30 percent, but many observers say there is a developing consumer class. As this class grows larger, the pressure on inflation--already a major problem for the Bank of Botswana, the country's central bank--will increase because so much of the demand for consumer goods is met by imports.

The rate of inflation grew by 11.3 percent in 2006, according to International Monetary Fund (IMF) estimates. The IMF says inflation will grow 6.0 percent in 2007, and 5.0 percent in 2008.

One expert, a local consultant mentioned in The Voice story cited above, said that Botswana's low rate of population growth, would provide, "a meaningful increase in real per capita incomes, as well as a reduction in unemployment and poverty." The United Nations estimates population population growth in Botswana for the years 2005-2010 at 1.2 percent.

Unfortunately, this low population growth is heavily influenced by the AIDS epidemic in Botswana. The CIA says over 37 percent of the adult population has AIDS. Depending on the source, this is either the highest or second highest rate in the world.

AIDS negatively affects the composition of the working population, and takes a toll on productivity and growth.

In a July 18, 2007 posting on the Internet, via Thomson Dialog NewsEdge and TMCnet, the Economist Intelligence Unit (EIU) said the Botswana economy was "rocky" and that the country was relying too much on the government for employment. The EIU also said Botswana needs to "kickstart" diversification reform.

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