As visitors hazily stroll into the expansive courtyard of the Three Chiefs Monument in central Gaborone in a 40-degree heat that is typical of afternoons in Botswana, the tall and imposing bronze statues of three of Botswana’s most renowned leaders lend the monument a regal yet distinctly African quality.

Being Gaborone’s most visited tourist destination, according to official estimates, the memorial is the city’s centrepiece as it encapsulates Botswana’s role as a bulwark that withstood the challenges of operating in a region that sits atop several fault lines. Having historically played neighbour to apartheid in Namibia and South Africa, and upholding peace while Zimbabwe experienced a protracted independence conflict and Angola underwent a 26-year-long civil war, Botswana’s ruling elite has been credited for maintaining a haven of stability and prosperity in what has often been a volatile region.

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A diamond in the rough

Following its discovery of diamonds in 1967, Botswana became globally known for its exports of the precious mineral, and the African Development Bank estimates that its mining sector represents 26.4% of Botswana's GDP. Yet Letsebe Sejoe, the CEO of Botswana Investment and Trade Centre (BITC), estimates diamond mining contributes closer to 40% of GDP. “Diamonds represent up to 40% of GDP, and the remaining 60% comes from an array of other services, including beef farming and financial services,” he says.

Pointing to the decision in August 2012 by DeBeers, the world’s largest diamond producer, to relocate more of its mining operations to Botswana, Mr Sejoe says this decision is evidence that the government has successfully tackled bottlenecks constraining Botswana’s investment environment, and foreign investors are responding positively to its initiatives. “What really underpinned this [decision] was a broader action strategy on the part of government to create a diamond industry that is [beneficial to all],” he says. “We have issued 16 licences to diamond cutters and polishers at this initial stage, and we have been successful in attracting FDI into the resources sector.”

Botswana is heavily reliant on its mining sector, and data from greenfield investment monitor fDi Markets shows that the country’s minerals sector leads the way when it comes to attracting greenfield projects. Between 2003 and 2013, Botswana's mining sector attracted 24 greenfield FDI projects, which represents 26% all FDI projects into the country in this period. However, the country’s metals sector attracted the most capital in this time. fDi Markets recorded $2.3bn-worth of investments into the metals sector in Botswana between 2003 and 2013, representing 37% of all capital invested in greenfield projects in the country during this time.

Room for improvement

Mr Sejoe maintains that Botswana, which is classified by the World Bank as an upper middle-income country, has been successful in achieving economic growth due to the prudent fiscal management of its natural resources. However, he admits that the country could do more to develop its production competence across the supply chain, as well as reduce its dependence on its mining industry.

“For far too long Africa has exported jobs and economic value to different countries, and we are no different,” says Mr Sejoe. “We export a significant value of our diamonds [elsewhere], as the real value comes on the manufacturing and finishing part of the diamond business.”

And while Botswana prides itself on being the least corrupt country in Africa, according to ratings by Transparency International, the country’s business environment remains beset by other challenges. Occasional power shortages resulting from South Africa’s decision to reduce its power exports have caused Botswana to experience daily bouts of load shedding. According energy database Reegle, 70% of Botswana’s electricity is imported from Eskom, a South African utility provider. Thus, while Botswana’s government has invested in new power generation projects, the country is yet to develop energy independence from its neighbour.

“The government had invested significantly in boosting our power generation capacity to 600 megawatts, yet because of technical difficulties, we have sort of fallen behind in delivering it,” says Mr Sejoe.

Banking on Botswana

Yet Mr Sejoe is confident that the energy supply challenge is a short-term issue, and he maintains that Botswana’s developed infrastructure and advanced skills base will enable it to gradually develop alternative competitive sectors. Pointing to the presence of global banks in Gaborone, including Barclays and Stanbic, he says Botswana will become a key base of operations for banks looking to access neighbouring yet underdeveloped markets such as Zambia and Angola.

“We have a number of banks in this space,” says Mr Sejoe. “We are positioning ourselves to be a conduit for significant capital investment that is coming from outside Africa, specifically in pan-African equity funds and infrastructure funds. I believe we have the prerequisites that are necessary to develop a successful financial services sector.”