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The cut-off rate of this report was September 15, 2025. i REPUBLIC OF BOTSWANA World Bank Group COUNTRY CLIMATE AND DEVELOPMENT REPORT 2025 ii Table of Contents Abbreviations and acronyms ....................................................................................... vii Acknowledgments ........................................................................................................ ix Executive Summary ...................................................................................................... xi 1. Development and Climate Change Resilience Are Closely Linked in Botswana ........ 1 1.1. An impressive development trajectory that has stalled and needs urgent course correction ............................................................................................................................................................ 1 1.2. High exposure to climate change brings development risks .................................................. 9 1.3. Three pillars for more robust, resilient and equitable growth .............................................. 16 2. Institutional and Policy Readiness to Meet Climate Commitments, Galvanize the Private Sector, and Protect Vulnerable Batswana ...................................................... 19 2.1. Climate Commitments and Policies: increasing awareness and ambition, though challenges persist ........................................................................................................................... 19 2.2. The high presence of the state in the economy exacerbates fiscal risks ............................ 25 2.3. The financial sector is exposed to transition risks but awareness is heterogeneous, and regulators are still developing tools for assessment .................................................................... 27 2.4. Key options for institutional strengthening and policy readiness ........................................ 29 3. Increasing the Resilience of Botswana’s Economy ................................................. 32 3.1. Investments to increase resilience pay off, but damages remain significant ..................... 32 3.2. Addressing water security challenges is crucial to enhance development ......................... 34 3.3. Developing a resilient agricultural sector .............................................................................. 37 3.4. Climate change impacts on biodiversity and ecosystem services could undermine nature- based tourism.................................................................................................................................. 44 4. Harnessing Decarbonization and Green Growth Opportunities ...............................49 4.1. Renewable energy is key for expanding access to electricity and transforming Botswana into a net energy exporter............................................................................................................... 49 4.2. Policy options to harness decarbonization opportunities through renewables................... 54 5. A People-Focused Transition: Boosting Job Creation, Human Capital Deepening, and Social Protection ................................................................................................... 57 5.1. Towards an education system which is protected from and responds to climate change challenges........................................................................................................................................ 57 5.2. A social protection system that is more efficient, progressive and able to respond to climate change challenges ............................................................................................................. 61 6. Financing the Transition Towards a Resilient Green Growth Path .......................... 69 iii 6.1. Climate finance needs ............................................................................................................ 69 6.2. Financial sector engagement and funding sources available .............................................. 71 6.3. Policy options to unlock climate finance opportunities ........................................................ 73 7. The Way Forward: Prioritized Policy Packages and Financing Action .................... 77 References ................................................................................................................... 87 iv List of Figures Figure ES- 1. Botswana has improved the living standards of its population........................................... xi Figure ES- 2. Botswana saw remarkable and consistent improvements in many development indicators ....................................................................................................................................................... xi Figure ES- 3. Inequality ranks among the highest in the world ................................................................ xii Figure ES- 4. The unemployment rate is rising from a high level and poverty remains comparatively high ............................................................................................................................................................... xii Figure ES- 5. Over the past decade, expenditure has not adjusted to the decline in revenues ............ xiii Figure ES- 6. As consequence, the fiscal balance deteriorated and public debt soared ....................... xiii Figure ES- 7. The cost of inaction increases over time and, under a dry/hot future, could reduce GDP by 7 percent by 2050 .................................................................................................................................. xv Figure ES- 8. Climate change impacts would be unequally distributed across sectors and jobs........... xv Figure ES- 9. The most climate-affected regions also exhibit some of the highest rates of social exclusion...................................................................................................................................................... xvi Figure ES- 10. Adaptation investments would reduce the negative impacts of climate change......... xviii Figure ES- 11. Boosting economic growth would drastically lower poverty levels, providing resilience to climate change............................................................................................................................................ xix Figure 1. Botswana has reached upper-middle income country status and has improved its development indicators. However, convergence to higher income levels has stalled ............................. 1 Figure 2. The unemployment rate is high and rising, not allowing for meaningful reductions in poverty ....................................................................................................................................................................... 2 Figure 3. Poverty reduction has slowed ...................................................................................................... 2 Figure 4. Botswana’s poverty rate is high for a country of its income level .............................................. 3 Figure 5. Botswana is among the most unequal countries in the world ................................................... 3 Figure 6. Botswana’s exports are heavily dependent on diamonds .......................................................... 4 Figure 7. Over the past decade, expenditures have not adjusted to the decline in revenues ................ 5 Figure 8. As consequence, the fiscal balance has deteriorated and public debt has risen .................... 5 Figure 9. Botswana is not a significant contributor of GHG emissions ..................................................... 7 Figure 10. The energy sector is the main contributor to non-LULUCF emissions ..................................... 7 Figure 11. The energy and agriculture sectors are the main contributors to GHG emission intensity ... 8 Figure 12. Botswana’s GHG emission intensity reductions are in line with regional peers ..................... 8 Figure 13. Implicit fossil fuel subsidies arise from undercharging consumption for environmental and health costs ................................................................................................................................................... 9 Figure 14. Fossil fuel implicit subsidies are lower than the SSA average................................................. 9 Figure 15. The ND-Gain Index is improving, signaling advances in readiness to address climate change challenges ...................................................................................................................................... 11 Figure 16. Botswana shows lower vulnerability to climate shocks than Namibia and South Africa ..... 11 Figure 17. Climate change could lower GDP up to 7 percent by 2050 ................................................... 12 Figure 18. Climate change impacts would be unequally distributed across sectors and jobs .............. 12 Figure 19. Almost 2 percent of jobs or livelihoods could be lost due to climate change relative to the baseline (2030, dry/hot), clustered in the agriculture and services sectors.......................................... 13 Figure 20. Job losses would have different gender impact, as the share of female workers is larger in the service sector........................................................................................................................................ 13 Figure 21. Higher growth rates would mitigate the impact of climate change on poverty .................... 14 Figure 22. Poorer villages tend to be more exposed to excessive or scarce rainfall ............................. 14 v Figure 23. The Southern District and the Ngamiland Delta/Francistown regions are highly vulnerable, with many poor households facing high exposure to droughts and floods ............................................. 15 Figure 24. Mitigation investment needs are mostly conditional on international financing .............. 23 Figure 25. The public sector presence in vulnerable sectors exacerbates fiscal risks .......................... 26 Figure 26. The majority of BOS in vulnerable sectors operate in competitive markets ................. 27 Figure 27. Financial sector exposure to climate risk is limited ............................................................... 28 Figure 28. Adaptation investments would reduce the negative impacts of climate change ................. 32 Figure 29. Agriculture has a limited contribution to GDP but is a key economic activity in rural areas 38 Figure 30. Climate change impacts on livestock production are likely to be severe, particularly in a dry/hot future .............................................................................................................................................. 39 Figure 31. Climate change could also result in rainfed crop production declines under the dry/hot conditions .................................................................................................................................................... 39 Figure 32. The country has been reliant on groundwater for livestock production ................................ 41 Figure 33. Climate change negatively impacts tourism receipts......................................................... 46 Figure 34. A comparison of IRP and Vision 2036 renewable plans in a low demand scenario with 300 MW of additional coal ................................................................................................................................ 52 Figure 35. Achieving Vision 2036 goals Botswana needs substantial additional investment .............. 53 Figure 36. Botswana lags income peers in human capital accumulation .............................................. 57 Figure 37. Social protection interventions include social insurance, social assistance, and labor market programs. ....................................................................................................................................... 62 List of Tables Table ES- 1. Key policy actions .................................................................................................................. xxi Table 1. Botswana has demonstrated increasing commitment with climate policies ........................... 20 Table 2. Different climate-related policies and plans have an impact on the private sector ................ 24 Table 3. Summary of impacts annual average, 2041-2050.................................................................... 45 Table 4. Spending per student shows regional inequalities between urban and rural areas ............... 58 Table 5. Climate adaptation investment needs in key sectors through 2050 ....................................... 70 Table 6. Selected policy actions supporting the pillars to more robust and sustainable growth .......... 78 List of Boxes Box 1. A Guide for Climate Change Framework Legislation ..................................................................... 20 vi Abbreviations and acronyms AfCFTA African Continental Free Trade Area AFOLU Agriculture, forestry, and other land use BAU Business As Usual Bn. Billions BESS Battery Energy Storage System BoB Bank of Botswana BDC Botswana Development Corporation BITC Botswana Investment and Trade Centre BOS Business of the State BOOT Build-Own-Operate-Transfer BPC Botswana Power Corporation BPOPF Botswana Public Officers Pension Fund BSE Botswana Stock Exchange CBAM Carbon Border Adjustment Mechanism CCBG Committee of Central Bank Governors CCDR Country Climate and Development Report CEM Country Economic Memorandum CH4 Methane DAP Department of Animal Production DVS Department of Veterinary Services CO2 Carbon Dioxide CPSD Country Private Sector Diagnostics CSA Climate-Smart Agriculture CSP Concentrated Solar Power DFC Debt-for-climate DFIs Development Finance Institutions DRM Disaster Risk Management eq equivalent ESIA Environmental and Social Impact Assessment (ESIA) EPM Electricity Planning Model EV Electric vehicle FDI Foreign direct investment FMIS Financial Management Information System GCM General Circulation Models GDP Gross Domestic Product GHG Greenhouse Gas GoB Government of Botswana GSS Green, social and sustainable GVC Global Value Chain DHCI Human Capital Index HDI Human Development Index HIC High Income Country HFCs Hydrofluorocarbon IEA International Energy Agency IFC International Finance Corporation IEc Industrial Economics, Incorporated IMF International Monetary Fund IPPU Industrial processes and product use IPP Independent Power Producer IRP Integrated Resource Plan ITA International Trade Administration LPG Liquefied Petroleum Gas LULUCF Land Use, Land-Use Change and Forestry MA Ministry of Agriculture MDAs Ministries, Departments and Agencies MDCB Mineral Development Company Botswana vii MDE Multi-dimensional exclusion MFMOD Macro-Fiscal Model MISs Management information systems MLGRD Ministry of Local Government and Rural Development MoE Ministry of Environment and Tourism MoF Ministry of Finance MPO Macro Poverty Outlook MSMEs Micro, Small and Medium Enterprises MW Mega Watts NAP National Adaptation Plan NARDI National Agricultural Research and Development Institute NBFI Non-Bank Financial Institutions NBFIRA Non-Bank Financial Institutions Regulatory Authority NESC National Electricity Standard Connection Cost NCCC National Committee of Climate Change NCCSAP National Climate Change Strategy and Action Plan NCDM National Committee on Disaster Management ND-GAIN Notre Dame Global Adaptation Initiative NDC Nationally Determined Contribution NDP National Development Plan NGFS Network for Greening the Financial System NGOs Non-Governmental Organizations NPV Net present value NRW Non-revenue water NSC North-South Carrier NSPF National Social Protection Framework PA Paris Agreement PGMs Platinum group metals PEFA Public Expenditure and Financial Accountability PIMA Public Investment Management Assessment PFM Public Financial Management PPA Power Purchase Agreement PPP Public-Private Partnership PV Photovoltaic RE Renewable energy REFIT Renewable Energy Feed-In Tariff SADC South Africa Development Community SAPP Southern African Power Pool SDGs Sustainable Development Goals SCD Systematic Country Diagnostics SLL Sustainability-linked loan SME Small and Medium Enterprises SOE State-owned enterprise SOFIs State-owned financial institutions SSP Shared Socioeconomic Pathway STEM Science Technology Engineering and Mathematics TFP Total factor productivity TVET Technical and Vocational Education and Training UMIC Upper-Middle Income Countries UN United Nations UNDP United Nations Development Programme UNFCCC United Nations Framework Convention on Climate Change VRE Variable Renewable Energy WDI World Development Indicators WGI World Governance Indicators WUC Water Utilities Corporation viii Acknowledgments This report was authored by a World Bank Task Team led by Sonia Araujo, including Daniela Dborkin and Jorge Thompson Araujo with the editorial support of John Carey. The report has benefitted from invaluable inputs from the task team, macro-economic, climate and poverty modeling teams: Sarah Moyer, Tshepho Babatshi-Gasha, Zivanemoyo Chinzara, Ana Cristina Canales Gomez, Diego Juan Rodriguez, Homero Alejandro Paltan Lopez, Sandhya Srinivasan, Ezgi Canpolat, Paola Marcela Ballon Fernandez, Unnada Chewpreecha, Ira Irina Dorband, Ammara Shariq, Elham Shabahat, Hardwick Tchale, Esther Mona Laske, Philippe Ambrosi, Raffaello Cervigni, Etienne Victor Sannicolo, Mariem Malouche, Stefen Apfalter, Francis Ralambotsiferana Ratsimbazafy, Remi Bealle, Elsa Nabenge Shichilenge, Mirlan Aldayarov, Zijun Li, Nadia Taobane, Raimund Malischek, Zukhruf Amjad, Jingyi Wu, Carolina Diaz-Bonilla, Ifeanyi Nzegwu Edochie, Philippe Auffret, Yevgeniya Savchenko, Martin Lokanc, Lois Margaret Hooge, James Seward and Jessica Wade. The team would like to extend sincere thanks to the Industrial Economics (IEc) team of Brent Boehlert, Ken Strzepek, Kim Smet, and Diego Castillo, who led the impact channel and adaptation modeling. The team benefited immensely from the guidance of, and is grateful to, the key reviewers: Kevin Carey, Marcos Vaena, Marcus J. Wishart, Stephane Hallegatte, Craig Meisner, Arame Tall, Mariano Salto, Sebastian-A Molineus and Tijen Arin. An extended thank you to all the corporate reviewers from CCG, Global Program for Sustainability, Strategy and Operations, Legal, Human Development, Infrastructure, Social Development and Prosperity who commented at the concept, quality enhancement, and decision review stages. The Botswana CCDR was prepared under the guidance and leadership of Satu Kahkonen, Mary Porter Peschka, Șebnem Erol Madan, Hassan Zaman, Franz R. Drees-Gross, Preeti Arora, Wendy Hughes, Anna Wellenstein, and Daniel Dulitzky. Thanks are extended to the Management and their teams on their guidance. In particular, Marco Hernandez, Abdelaziz Lagnaoui Almud Weitz, Yadviga Semikolenova, Manuel Vargas, Frauke Jungbluth, Paramita Dasgupta, Bekele Debele, Elizabeth Ninan Dulvy, Nana Soetantri, Jacques Morisset, and Stephan Dreyhaupt. Finally, the team is grateful for the close collaboration with the government of the Republic of Botswana, in particular the leadership of the Ministry of Finance. Funding for the analytical work on the relationship between climate change and tourism was provided by the Global Program for Sustainability (GPS), a multi-donor trust fund housed at the World Bank that supports countries to integrate environmental sustainability into decision making by providing policy makers and the financial sector with economic data and tools for valuing natural capital and ecosystem services. ix Executive Summary x Executive Summary Botswana’s socioeconomic development hinges on bold actions to address fiscal pressures, diversify the sources of growth, and strengthen resilience to climate shocks Botswana stands at a critical juncture where climate action and sustainable development must be pursued together to secure long-term prosperity and resilience. Until relatively recently, Botswana was hailed as an economic growth success story, buttressed by low levels of corruption, solid institutions, and sound natural resource wealth management. Using mineral revenues to invest in infrastructure, human capital, social welfare, and strengthening “institutions of private property,� Botswana avoided the worst effects of the “resource curse� and attained rapid development gains, a remarkable achievement considering its challenging initial conditions and unfavorable geography. Figure ES- 1. Botswana has improved the living Figure ES- 2. Botswana saw remarkable and standards of its population consistent improvements in many development indicators Coverage (percentage) Source: WDI, World Bank. Source: World Bank (2023). Botswana reached upper-middle-income status in the 1990s and saw significant progress in poverty reduction and other measures of well-being (Figure ES- 1). Government investments in infrastructure and human capital have significantly expanded the road network; increased access to electricity, water, and sanitation; and boosted primary school enrollment.1 The benefits have been enormous. Most people now have access to basic services, such as electricity, water, and sanitation (Figure ES- 2) and the poverty headcount index has fallen sharply, from 30.6 percent in 2003 to 16 percent in 2016.2 Inequality, poverty, and unemployment remain high. Botswana pursued a State-led development model, in which the State received, managed, and distributed mining revenues by enhancing infrastructure and providing public goods, such as access to services and a generous social protection system. The strong presence of the State in the economy, with a large number of SOEs, which enjoy preferential treatment in the markets in which they operate, together with burdensome regulations on business entry and international trade barriers, have hampered private sector development, export 1Botswana Poverty Assessment, World Bank, 2024. population living below the official poverty line rapid decreased between 2003 and 2009, while poverty 2 The share of the declined more slowly between 2009 and 2016 (Botswana Poverty Assessment, World Bank, 2024). xi diversification, and also job creation, making it more difficult for Botswana to overcome its legacy of high inequality (Figure ES- 3). Botswana spends around 8 percent of GDP on education and another 2.7 percent on GDP on social protection, far above the average of middle-income countries (4 percent and 1.7 percent of GDP, respectively). Yet, education outcomes remain comparatively low, unemployment is high and rising, and poverty levels, despite remarkable progress, remain high for Botswana’s income level (Figure ES- 4). Figure ES- 3. Inequality ranks among the highest in the world Source: WDI, World Bank. Note: latest data available for each country. Figure ES- 4. The unemployment rate is rising from a high level and poverty remains comparatively high Source: World Bank (2024) Note: International poverty Source: WDI, World Bank. rate ($2.15 in 2017 PPP). Limited economic diversification and fiscal pressures threaten hard-won development progress Botswana’s development model has been showing its weaknesses and requires an overhaul. Economic growth has been decelerating since 2009 and convergence has stalled, underscoring the limits of the diamond/SOE-driven model. The country remains an extractive-based economy, subject to volatility in global commodity markets, with weak links to the broader economy and low diversification of production and exports. Botswana’s product mix has actually been declining over time. Strong diamond dependence has brought a decline in fiscal revenues over the past decade, which has not been matched by an adjustment in public spending, causing recurrent deficits (Figure ES- 5). Botswana’s diamond industry is now facing declining global demand, a shift that is believed to be structural, and xii rising extraction costs. As a consequence, mining output and GDP growth have contracted in 2024 and are projected to continue to decline in 2025. Fiscal revenues and foreign currency inflows have collapsed and the reluctance to implement spending cuts has opened up a wide fiscal deficit, depleted fiscal buffers, and led to a rapid increase in public debt (Figure ES- 6). These outcomes convey a broader lesson for resource-rich countries: Sound natural resource revenue management is a necessary but not a sufficient condition for sustained growth: it needs to be complemented by deliberate efforts to facilitate economic diversification and export competitiveness through private sector development. Figure ES- 5. Over the past decade, expenditure Figure ES- 6. As consequence, the fiscal has not adjusted to the decline in revenues balance deteriorated and public debt soared Source: Ministry of Finance and World Bank staff Source: Ministry of Finance and World Bank staff estimates. estimates. Overhauling the State-led growth model and adopting fiscal consolidation measures are urgent imperatives. Financing climate actions and resilient growth-enhanced infrastructure will require urgent fiscal consolidation to create more fiscal space. Fortunately, there is scope to improve public sector efficiency and effectiveness. Streamlining the wage bill, improving the targeting of social assistance programs, reducing transfers to SOEs — which are concentrated in the energy, water, and transportation sectors — and more broadly, rationalizing the presence of the public sector in the economy while strengthening their governance are options going forward. Private sector development is a key ingredient for a robust strategy of job creation and economic diversification. Botswana has not exhausted the menu of options to reinvigorate its private sector. It remains constrained by the outsize role of State-owned enterprises (SOEs) and other Businesses of the State (BOS)3 by creating barriers to entry, discouraging diversification, and causing large economic inefficiencies and higher prices for consumers (World Bank 2023; Apfalter et al. 2024). In Botswana, BOS enjoy several advantages, including monopoly rights and exclusive access to markets, preferential government procurement, and regulatory and tax exemptions. This restricts competition, private sector development, and job creation in areas where Botswana has comparative advantages (such as Botswana’s livestock industry). Overhauling regulations that discriminate against the private sector is thus key to incentivizing business entry. Second, Botswana could also strengthen the Competition Law 3 BOS are businesses where governments own at least 10 percent of a company, directly or indirectly, and which are engaged in market production, operate for a financial gain, and are legally independent. The World Bank uses this term to understand the state's role in commercial markets and its impact on economic growth, investment, and private sector development. xiii and enhance the powers of the Competition Authority as discussed in the Country Private Sector Diagnostic (World Bank 2024c). Reforms that could be considered are: (i) clarifying and strengthening legal definitions in the Competition Law, such as the concept of abuse of dominance and market share thresholds; (ii) extending the remit of the Competition Law to SOEs and statutory monopolies, such as in utility markets; and (iii) limiting ministerial discretion in granting exemptions and influence in merger control decisions. Providing the Competition and Consumer Authority with adequate resources to enforce competition rules, extending its competencies to subsidy oversight, and making more use of dawn raids, fines, and settlements as deterrence mechanisms would strengthen the functioning of markets, support business entry, and ensure the interests of consumers and the broader economy. Ensuring that key input markets such as telecommunications, transportation, and energy work efficiently is key for overall business dynamism and productivity. Private sector development and productivity growth could also be better supported by simplifying business registrations, eliminating redundant permits and licenses, and introducing digital platforms to reduce time and costs of starting a business. Furthermore, a comprehensive trade policy reform that moves away from an import substitution tilt and that lifts bans, quotas (including in foreign direct investment), and high “infant industry� tariffs in food products would shift firms’ focus from the small domestic market to exports. In addition, a broader regional trade reform within SACU could reduce relatively high external tariffs on many intermediate inputs that raise production costs, particularly in manufacturing, and would also facilitate improve business competitiveness. These reforms would allow the private sector to unlock climate-aligned growth potential. They are necessary for Botswana to achieve its National Vision 2036 goals of becoming a high-income country. Botswana's private sector faces both challenges and opportunities in achieving sustainable and resilient growth. Botswana’s economy is highly exposed to climate shocks Climate change impacts are projected to worsen, threatening Botswana socioeconomic development and environmental sustainability. The nation’s semi-arid climate, with low and highly variable rainfall patterns, makes Botswana particularly vulnerable to the impacts of climate change. Prolonged droughts, increasingly erratic weather patterns, and rising temperatures have already exacerbated water scarcity, harming agriculture, livestock, and the livelihoods of rural communities. In addition, floods, heatwaves, and other extreme weather events have become more frequent and more intense, posing risks to infrastructure, human health, and biodiversity. Water security is a foundational objective of Botswana’s Vision 2036, but the water sector is under immense pressure. Water sustains key economic sectors, including mining, agriculture, tourism, and energy, and is essential for urban and rural communities. Current resources are nearly fully allocated and the current water supply-demand deficit of about 50 Mm³/year could increase to 100 Mm³/year by 2036 if high water use continues and non-revenue water (NRW) losses stay at 33 percent. Additional pressures are likely to come from the expansion of economic activity, including the acceleration of copper extraction, a commodity anticipated to be in significant demand with the global transition to the green economy. The pressure on existing water infrastructure is also severe, as urbanization and industrial activity increase (especially around Gaborone, Francistown, and the rapidly growing south- eastern corridor) and as new irrigation schemes, such as one in the Chobe-Zambezi region, are proposed. Water scarcity is major development challenge. Adaptation and increasing resilience to climate shocks are therefore the central climate-related challenges in Botswana. Given Botswana's reliance on natural resources and rain-fed agriculture, its development path is vulnerable to climate change unless urgent adaptation actions are taken. xiv Vulnerable sectors to climate change, such as agriculture, the mining value chain, water, and tourism account for about twenty five percent of the country’s GDP, but indirect contributions are likely to considerably increase the impact of climate shocks on output, employment, and incomes. The agricultural sector, particularly rainfed crops and livestock, is already experiencing declines in productivity due to increasing temperatures and unpredictable rainfall patterns. Without any additional adaptation effort, modeling for this CCDR estimates that the average annual GDP losses will increase over time and could reach up to 7 percent of GDP by 2050 (Figure ES- 7). According to this analysis, the largest contributor to this loss is heat impacts on labor productivity — mostly related to the agricultural sector, which has the highest share of outdoor workers — followed by damages to roads and livestock yields. A “high growth scenario,� consistent with the National Vision 2036 and the reforms proposed in the Country Economic Memorandum (World Bank 2024) to boost growth, would entail slightly larger GDP impacts compared with the current “low growth scenario� of no additional reforms. This is because in a high growth scenario, productivity and capital losses would be higher. While the agricultural sector would be most impacted in terms of its sectoral GDP, the private services and mining sectors would be the main drivers of the overall GDP loss, given their weight in the economy. The jobs most at risk are in retail and wholesale trade as economic production and activity slows down due to climate change, followed by agriculture (Figure ES- 8). Figure ES- 7. The cost of inaction increases over time and, under a dry/hot future, could reduce GDP by 7 percent by 2050 Source: World Bank CC-MFMod Botswana (2024). Figure ES- 8. Climate change impacts would be unequally distributed across sectors and jobs A) Percent sectoral GDP, dry/hot low growth B) Percent economy-wide GDP, dry/hot low growth scenario (2030) scenario (2030) Source: World Bank staff estimates using MINDSET. xv Climate change would particularly hurt the most vulnerable population Climate change shocks are projected to be unequally distributed. Beyond the differentiated impact on sectors and jobs, modeling results show an overlap between regions that are projected to be more impacted by climate change shocks and a concentration of the number of poor, risking exacerbating pre-existing vulnerabilities and inequalities and underscoring the desirability of conducting further research to design targeted interventions to increase the resilience of vulnerable Batswana. Vulnerabilities to climate change are exacerbated by patterns of social exclusion. Seventy-three percent of the population in Botswana experiences exclusion in measures of economic opportunity, resilience, social cohesion, and process legitimacy, with the highest rates being among women, rural people, and the elderly. Some regions, such as the Ngamiland, Chobe, and Central Districts, face a double burden: They are both among the most climate-affected regions and those with the highest rates of social exclusion (Figure ES- 9), creating zones of compounded vulnerability. The primary drivers of exclusion are process legitimacy issues (32.9 percent) and social cohesion challenges (26.5 percent) suggesting that governance improvements are critical for both reducing social vulnerability and enhancing climate resilience. Figure ES- 9. The most climate-affected regions also exhibit some of the highest rates of social exclusion Climate Vulnerability: Overlay of Climate Vulnerability: Overlay of Spatial Distribution of MDE with anomaly in MDE with anomaly in Multidimensional Exclusion (MDE) precipitation temperature Source: Climate Change and Social Vulnerability in Botswana. Analysis for Botswana’s CCDR. Note: These bivariate maps present the spatial convergence of social and climate vulnerability across districts in Botswana. They overlay two dimensions: i) Multidimensional Exclusion Index (horizontal axis of the color grid) measures the share of the population experiencing multiple, overlapping forms of exclusion across four dimensions, economic inclusion, resilience, social cohesion, and process legitimacy, based on a 33 percent cutoff (districts with higher exclusion are shown in increasingly deeper shades of teal); ii) Climate anomalies (vertical axis of the color grid) reflect projected changes compared to historical baseline levels, either increases in average temperature (°C) or changes in precipitation patterns—with districts experiencing higher climate anomalies shown in increasingly deeper shades of magenta. The resulting colors in the bivariate maps represent the interaction between these two dimensions. Dark purple-navy blue areas indicate both high exclusion and high climate risk—signaling districts where compounded vulnerabilities may require priority attention. Paler shades suggest lower levels of either or both vulnerabilities. xvi Rural communities, particularly smallholder farmers and those reliant on livestock farming, are among the most susceptible to climate change impacts (Stringer et al. 2009), predominantly water resource fluctuations.4 Children in these communities are facing increasing risks of malnutrition (Zhou et al. 2013). Meanwhile, valuable indigenous knowledge for both perceiving climatic changes and devising effective adaptation strategies (Kolawole et al. 2016) is being eroded or underutilized, thus exacerbating vulnerabilities to environmental stresses (Dube et al. 2007). Climate change deepens existing gender inequalities. Women face heightened risks, especially in rural areas, due to their roles in managing water, food, and natural resources. Despite limited institutional support, however, women have emerged as key agents of resilience, drawing on indigenous knowledge and adaptive practices. Their contributions underscore the need for climate policies that actively support women’s leadership, knowledge, and access to resources. Adaptation investment would reduce the negative impacts of climate change, but more robust growth will be the main driver of resilience Investment in climate resilience interventions would reduce GDP losses by 1.5 percentage points under a dry/hot climate future and by 1 percentage point of GDP under a wet/warm climate future, net of costs. Adaptation benefits are higher under a dry/hot future compared to the wet/warm future. Compared to the baseline scenario of no further climate change from today, adaptation investments in a dry/hot climate future would reduce the negative impact of climate change on GDP from 6.7 percent to 5 percent by 2050, net of investment costs (Figure ES- 10).5 Adaptation payoffs are somewhat lower under the wet/warm future. In this climate future, the cost of adaptation can outweigh the benefits for adaptation investments in roads and bridges in the time frame of our analysis and the annual expected shocks approach. Road adaptation investments are the most cost effective while bridges and productivity adaptation are less cost effective, given the current structure of the economy. The impact of climate adaptation investments shown here are underestimated. The assessment, although rigorous in the use of state-of-the art techniques and data, still endures several methodological limitations. Beyond climate change uncertainty, full adaptation to the impacts of climate change is not possible due to technological limitations and implementation barriers. Moreover, adaptation investments and their impacts are not quantified for all vulnerable sectors, notably for tourism, which modeling results project is substantially impacted by climate change and contributes significantly to GDP losses.6 4 Slightly less than 30 percent of Batswana live in rural areas, according with the World Urbanization Prospects, United Nations (UN). 5 In practice, full adaptation to the impacts of climate change is not possible due to technological limitations and other implementation barriers. Annex 1, available online, details the methodology underpinning the assessment of climate adaptation investments and impacts. 6 The interventions considered under the adaptation scenario are channel-specific and were selected based on modelling feasibility, applicability to the specific country context, and the degree of projected climate change impacts. The interventions aim to strike a realistic balance between adaptation costs and residual impacts. Adaptation costs are based on unit cost estimates obtained from international and, where available, local sources. xvii Figure ES- 10. Adaptation investments would reduce the negative impacts of climate change Source: World Bank CC-MFMod Botswana (2024). Boosting economic growth is the main driver shielding Batswana from climate shocks and lifting them out of poverty (Figure ES- 11). A truly people-centered transition needs to involve vulnerable groups — especially women, indigenous communities, and the rural poor — leveraging their knowledge of environmental resilience. Awareness in the private sector about climate adaptation action has been rising, but obstacles remain. According to the Climate Change Readiness Report (IFC, 2025), Botswana’s private sector is becoming increasingly aware of the potential impacts of climate change in energy, agriculture, tourism, mining, and manufacturing. However, levels of readiness to invest in climate adaptation and mitigation remain highly variable. Larger firms and internationally connected businesses are more advanced in implementing or planning green investments, while SMEs are constrained by limited finance, skills, and policy incentives. Leveraging private sector investments to bridge the climate finance gap is key for achieving Botswana’s NDC targets. However, the lack of supportive private sector regulations hinders its ability to become more climate responsive. The absence of detailed regulatory frameworks creates uncertainty for businesses, making it difficult for them to plan and invest in sustainable practices. A comprehensive strategy involving enhancing regulatory frameworks and improving access to finance for smaller business would effectively galvanize the private sector and protect vulnerable populations, fostering a more inclusive and resilient economic model. xviii Figure ES- 11. Boosting economic growth would drastically lower poverty levels, providing resilience to climate change Source: World Bank staff estimates. Three pillars to more robust, sustainable and green growth Botswana can achieve both its development and climate goals by diversifying the economy beyond diamond mining, investing in renewable energy resources like solar and wind, and by implementing climate-resilient policies in sectors most impacted by climate change, notably agriculture, tourism, and the water sector. This report proposes three mutually enforcing pillars for achieving more robust and sustainable growth. They are: (i) moving towards high-income country (HIC) status through private sector-led economic diversification; (ii) adapting to climate change and strengthening resilience; and (iii) harnessing green growth and decarbonization opportunities. Pillar 1 focuses on policy options to improve fiscal sustainability and revitalize growth, thereby achieving Vision 2036. The CCDR outlines reforms to raise productivity growth and private sector investment and jobs, through product-market and trade reforms, enhanced connectivity, and access to finance. It emphasizes the need for a more efficient and effective public sector to improve the business environment and to support growth and climate resilience investments. Key reforms include streamlining the presence of the State in the economy, lowering business startup costs, and enhancing public financial management. Human capital is also a key ingredient of Botswana’s growth strategy with a focus on improving education quality, especially in STEM, revamping TVET, and preparing students to take advantage of emerging opportunities in the green transition and digital transformation. Allocating a sufficient capital budget for equitable adaptation investments in school infrastructure is also a priority. Pillar 2 focuses on policy options to harness energy decarbonization and green growth opportunities. Botswana is at a crossroads, investing in both coal expansion and solar energy. Coal is currently the primary fuel for electricity generation, and Botswana plans to expand domestic electricity access and export the surplus, supporting its Vision 2036 goals for economic diversification and increased foreign exchange. However, the long-term future of coal is uncertain. Global and regional trends are shifting toward renewable energy, and coal demand is expected to plateau. Coal-based capacity addition faces xix transition risks, as regional demand for coal power may decline and major electricity consumers are adopting net-zero goals. Exporting coal also faces logistical, infrastructure, and regulatory challenges. Meanwhile, Botswana has abundant solar resources and is beginning to integrate renewables into its energy mix, with plans to commission 336 MW of new solar capacity by 2027. Botswana’s Vision 2036 aims for 50 percent renewable generation by 2036 and 80 percent by 2050, with the country becoming a net electricity exporter. The planned capacity additions far exceed current peak demand, posing fiscal risks and the potential for underutilized assets. Expanding both coal and renewable generation raises the risk of power oversupply, especially as other countries in the Southern African Power Pool (SAPP) are also increasing capacity. Meanwhile, solar energy is rapidly becoming cost-competitive with coal. Diversifying the energy mix enhances system resilience and reduces vulnerability to disruptions but requires coordinated planning at national and regional levels, as excess supply could lead to economic and environmental costs. Achieving Vision 2036 requires accelerating wind and solar development, upgrading the grid, and expanding transmission and distribution, especially for rural electrification. Modeling for this CCDR shows that Vision 2036 goals for renewable energy are feasible with strong renewables build-out and battery storage, and that reducing coal capacity can lower costs and risks. Botswana has therefore a significant opportunity to transition to low-cost, low-impact solar energy. Achieving Vision 2036 will require substantial investment, but co-benefits include improved air quality, reduced pollution, and enhanced energy security. A diversified grid can also support the competitiveness of Botswana’s mining and manufacturing sectors as they seek green electricity. A transition is needed to support workers and communities affected by the shift away from coal. To harness decarbonization opportunities, Botswana could develop a clear, consistent energy policy based on least-cost planning, strengthen the grid, and create an enabling environment for private investment. Reliable procurement timelines, coordination, and risk mitigation strategies are needed to integrate renewables and drive down costs. High-quality data and climate-adaptive approaches will support universal access and clean cooking goals. Investing in battery energy storage and grid upgrades will improve flexibility and support renewable integration. Pillar 3 focuses on policy options to build resilience to climate change, helping to protect the most vulnerable and exposed Batswana from climate shocks. Recommendations focus on the sectors most impacted by climate change — water, agriculture, and tourism — and on reforming the social protection system, as it is possible to improve targeting and raise poverty alleviation effectiveness and scale up social protection to cushion vulnerable households against the impact of climate change. This pillar calls also for the adoption of institutional reforms, such as to develop and implement Disaster Risk Management strategies, develop green finance frameworks to attract private capital into climate related projects, and enhance intra- and inter-sectoral coordination. There are significant synergies and complementarities across these three pillars. Opening the economy will encourage private investment, including in renewable energy projects, and will create more jobs and raise fiscal revenues, helping to finance more investments in resilience. Increased resilience will reduce harm from climate events, especially among the most vulnerable groups, thus helping to reduce poverty and inequalities. Greater economic diversification will also help bring about green growth, while reducing ad-hoc transferences to SOEs. In addition, improving the efficiency of spending on social protection would free up resources for investments in growth-enhancing resilient infrastructure. Synergies exist also within pillars. In Pillar 1, for instance, growth and fiscal agendas are complementary, as faster GDP growth will boost tax revenues and reduce public debt ratios, thus improving the country’s fiscal sustainability. xx Given the limited resources under a fiscally constrained environment, and complex interactions of the different policies and investment actions proposed in this report, the table below prioritizes the most pressing interventions. The table presents reforms to correct fiscal imbalances to create fiscal space for productivity and resilient infrastructure public investment, that lay the foundations to sustainably higher growth rates via private sector development, and that promote resilience to climate change as well as allow harnessing green growth opportunities. The emphasis has been on short-term actions (to be implemented within 1-2 years) that do not entail immediate fiscal costs or that are policies that should not wait as inaction will imply greater costs in the future. These policy suggestions are described in detail in Table 6, together with additional complementary policies for more robust and climate- resilient growth. Mobilizing finance for climate action is a major imperative for Botswana. Analysis conducted for this CCDR gauges investment needs at 1.4 percent of GDP in the period 2025-30 and below 0.6 percent thereafter until 2050. Global experience also shows that in many sectors there is potential for private sector participation in resilient investments. This CCDR recommends leveraging a mix of public, private, concessional, and blended finance to support adaptation and mitigation investments. Innovative financing mechanisms, such as carbon taxes and green bonds, used over time in compliance with Botswana’s debt rule can also help raise the necessary resources. Botswana faces significant climate and development challenges, but with coordinated, ambitious action, it can unlock new opportunities for sustainable growth, resilience, and social inclusion. Integrating climate action into its development strategy is essential to safeguard economic gains, improve living standards, and protect its most vulnerable populations from the escalating impacts of climate change. The Botswana CCDR calls for bold, urgent action to diversify the economy, achieve fiscal sustainability, and build resilience to climate change. Achieving these interconnected goals is essential for a robust, sustainable, and equitable future for all Batswana. Table ES- 1. Key policy actions Pillar Priority Area Critical Actions • Reduce the weight of the public sector wage bill by setting a Fiscal consolidation to fiscal anchor linked to fiscal objectives; implementing freezes or caps on allowances and overtime payments; achieve macroeconomic undertake payroll-personnel reconciliation to eliminate stability, reduce public “ghost workers� and dual payees and conduct regular debt and replenish fiscal “proof-of life� checks 1: Moving buffers to withstand • Reduce transfers to SOEs, particularly in energy and towards high- shocks transportation, and rationalize sovereign guarantees on SOE borrowing income • Accelerate the rollout of the Single Social Registry to all country status households through • Re-organize public sector services to align it with key private-sector- Improving the quality of objectives, including climate led economic public expenditure, and • Formulate a comprehensive SOE/BOS Ownership Policy, to diversification rationalize the presence of public sector in the economy, aligning with Botswana’s and effective ensure the separation between commercial and non- public service climate agenda commercial roles of SOEs, strengthen SOE governance and provision assess implicit and explicit support to SOEs/BOS and privately owned firms • Remove the preferential treatment of SOEs Encouraging dynamic firm • Improve pro-competition regulation and ensure its creation and growth implementation in key input markets that are key for overall productivity and competitiveness such as in telecommunications, and transportation; in energy, xxi accelerate reforms to promote private sector participation and pro-competition regulations • Simplify business registration by eliminating redundant permits and licenses Developing skills • Develop smart partnerships with the private sector to enhance workplace-based learning (WBL) Improving access to • Improve digital financial services (DFS) by developing fast finance payment services through the payment switch • Implement targeted reforms to foster competition in the SME credit market • Develop Green Finance Frameworks: Create guidelines to facilitate green bonds, green loans, and other innovative Institutional strengthening financing mechanisms to attract private capital to climate- related projects • Enhance strong intra and inter sectoral coordination to implement climate-smart actions Water • Reduce non-revenue water usage • Scale up wastewater reuse and resource recovery • Implement demand management incentives 2: Adapting to • Promote investment in sustainable irrigation systems climate change Agriculture • Review grazing by-laws in communal rangelands; establish and or revive the implementation of rotational grazing plans on strengthening communal rangelands resilience • Diversify tourism offers beyond luxury experiences to attract Tourism middle-income customers by promoting eco-tourism and cultural tourism • Foster partnerships with local communities • Review the legislation and policy documents related to social protection to integrate the impacts of climate change Social protection • Implement a social protection expenditure review to reallocate inefficient programs and incorporate parametric triggers for cash transfers during droughts or floods to enhance climate resilience • Improve climate literacy by combining local and scientific knowledge in education programs and create inclusive spaces for community input, drawing on traditional Social development leadership and local knowledge • Support smallholder farmers and pastoralists with resources and incentivize the use of good practices and indigenous knowledge • Develop inclusive, transparent systems for equitable and sustainable green mineral use • Evaluate coal expansion plans and compare costs and benefits of meeting future demand growth through 3: Harnessing Energy renewables green growth • Develop a coherent national energy policy consistent with opportunities least-cost planning principles to provide a credible strategy for electricity sector development that can attract private investment • Develop a climate finance strategy that clarifies institutional roles, organizes procurement for infrastructure projects, defines the government’s strategy to attract private investments and leverages green finance instruments 4: Develop • Review and approve the Green Social and Sustainable climate finance Framework introduce by the Botswana Stock Exchange for GSS bonds listing • Issue guidelines to help the financial sector to understand and assess climate risk exposure xxii 1. Development and Climate Change Resilience Are Closely Linked in Botswana 23 1. Development and Climate Change Resilience Are Closely Linked in Botswana 1.1. An impressive development trajectory that has stalled and needs urgent course correction 1.1.1. Resource wealth, strong institutions, and good governance propelled rapid development until the early 2010s Until relatively recently, Botswana was hailed as an economic growth success story, thanks to solid institutions, prudent macroeconomic policies, and sound natural resource revenue management, despite a challenging geography. Botswana was deemed an “African success story� by Acemoglu, Johnson and Robinson (2003), especially for having in place what they call “institutions of private property� — that is, institutions that ensure that effective property rights are available to a broad cross- section of the society.7 This is even more remarkable considering the country’s very challenging initial conditions and generally unfavorable geography. “Despite being a small, agriculturally marginal, predominantly tropical, landlocked nation in a very precarious geo-political situation, Botswana experienced rapid development� (Acemoglu, Johnson and Robinson, 2003). Reaping initial development gains was made possible because, in contrast with many other commodity- rich countries, Botswana successfully avoided the worst effects of the “resource curse�. The country built sound institutions and strong governance and has used its mineral (mostly diamond) revenues for the development of public services and social protection and for investments in infrastructure, human capital, and institutional strengthening. Botswana is among Africa’s top performers in terms of governance indicators (World Bank 2023) and its performance in controlling corruption has surpassed comparator countries for most of the past three decades (World Bank 2024b). Botswana exemplifies several key elements of good governance: the government enforces effective checks and balances, and the institutions are robust, inclusive, and transparent (Poukam, 2022). Figure 1. Botswana has reached upper-middle income country status and has improved its development indicators. However, convergence to higher income levels has stalled Source: WDI, World Bank and World Bank (2023). 7 On the other side of the institutional spectrum, extractive institutions increase expropriation risks, by governments or ruling elites. 1 Botswana reached upper-middle-income status in the 1990s and saw significant progress in poverty reduction and other measures of well-being (Figure 1). Between 2002 and 2008, the real GDP growth rate averaged 5.1 percent, corresponding to a 3.1 percent per capita increase. The poverty headcount index fell sharply from 30.6 percent in 2003 to 19.3 percent in 2009. Access to basic services, such as electricity, water, and sanitation expanded to the majority of the population over the past four decades (World Bank 2023). Universal primary education enrollment was achieved in the 1980s and significant gains have been observed at the secondary level through the early 2000s. As a result, the Human Development Index (HDI) increased up until the mid-2010s (World Bank 2024b). 1.1.2. Persistent development gaps and plummeting diamond revenues show the urgent need for fiscal consolidation and economic diversification Botswana aspires to achieve prosperity for all and become a high-income country by 2036, while promoting environmental sustainability and making optimal use of its endowments of natural resources. The government’s National Vision 2036 rests on four pillars: (i) Sustainable Economic Development; (ii) Human and Social Development; (iii) Sustainable Environment; and (iv) Governance, Peace, and Security. The Vision is currently being implemented through the Second Transitional National Development Plan (2023/24 – 2024/25), under the theme “Towards a High-Income Economy: Transformation Now, Prosperity Tomorrow.� Figure 2. The unemployment rate is high and rising, Figure 3. Poverty reduction has slowed not allowing for meaningful reductions in poverty 35 29.1 30 Poverty rate (percent) 25 17.7 20 15.4 13.9 13.2 12.9 13.7 15 10 5 0 2002 2009 2015 2021e 2022e 2023e 2024e Source: WDI, World Bank. Source: WDI and World Bank staff estimates. Note: International Poverty Rate ($2.15 in 2017 PPP). However, convergence has stalled and Botswana risks being “stuck in the middle� (McCaig et al. 2015) or even seeing development gains reversing if it does not take action to overhaul its growth model (Figure 1). There are several signs that the current growth model is exhausted. GDP growth has trended downward since 2009, and became more volatile, partly because of commodity, health, and climate shocks, including two severe droughts in 2015-16 and 2023-24. In addition, unemployment has been high and is increasing, especially among the young (Figure 2). As a result, poverty reduction has decelerated and recently shows an upward trend (Figure 3), with the overall rate remaining high compared to the country’s income level (Figure 4). Meanwhile, the quality of human capital is declining, in part because of impacts from HIV-AIDS and COVID-19 (World Bank 2024b). Furthermore, Botswana remains one of the most unequal countries in the world (Figure 5). Government effectiveness has also been declining, and projections point to Botswana achieving fewer than 30 percent of its targets under the Sustainable Development Goals (SDGs). 2 Figure 4. Botswana’s poverty rate is high for a Figure 5. Botswana is among the most country of its income level unequal countries in the world Source: World Bank Botswana Poverty Assessment, based on Source: WDI, World Bank (latest available year). WDI and Poverty and Inequality Platform. Note: International poverty rate ($2.15 in 2017 PPP). Botswana’s growth model has been anchored on diamond revenue and public investment and has failed to diversify beyond raw commodities. Raw diamonds have played a central role in Botswana’s economy since the country’s independence in 1966, accounting on average for 85 percent of the country’s exports since 1980 (Figure 6). Meanwhile, the State plays a major role in the economy. Botswana holds 90 Businesses of the State (BOS) 8 across multiple sectors,9 including in competitive markets, under favorable regulatory conditions, providing substantial formal employment. More than 90 percent of GDP growth in past decades has come from capital investments, with public investments as the main engine. However, these capital investments are bringing decreasing returns; total factor productivity growth has been negative since the 1990s. Low diversification exposes Botswana to economic shocks. Revenues from diamond exports fluctuated from a maximum of US$7.3 billion in 2014 to a low of US$3.8 billion in 2020 (World Bank, 2024b). Furthermore, over the past two decades, Botswana's economy has become less complex, dropping from the 69th to the 92nd position in the Economic Complexity Index (ECI) rank. Diversification beyond diamond mining and generating value-added is, therefore, essential for increasing resilience, stimulating faster economic growth, creating jobs, reducing poverty, and taking advantage of emerging green technologies (Deléchat et al. 2024). Botswana therefore lacks key characteristics of high-income economies and finds itself at a crossroads. A declining growth rate underscores the limits of an economic model centered on diamonds and State- owned enterprises (SOE). Direct job creation is low (only 2 percent of total paid workers) and the value of natural capital has dropped 16 percent since 2010. Diamond exports have plummeted further in 2024 as the diamond industry now faces declining global demand, a shift that is believed to be structural, rather than just cyclical. The industry faces competition from man-made diamonds, rising extraction costs, and greater commodity price volatility. Achieving National Vision 2036 goals of becoming a high-income country will require addressing these challenges. 8 BOS are defined as firms with state ownership from 10 percent and higher (Apfalter et al. 2024). 9 Economic activities with BOS presence include finance (17 percent of all BOS), real estate (13 percent), wholesale and retail trade (12 percent), hospitality (9 percent), and manufacturing (9 percent) (Apfalter et al. 2024). 3 Figure 6. Botswana’s exports are heavily dependent on diamonds Source: World Bank (2024b) based on Bank of Botswana and Ministry of Finance. Botswana’s fiscal position has recently deteriorated quickly, increasing the urgency of overhauling the state-led growth model. Several shocks, including Covid and climate shocks, declining diamond revenues, and high budgetary rigidity (on public sector wages and social safety nets) have led to persistent budget deficits. In 2024, revenues declined by 23 percent, leading to a large estimated deficit of about 9 percent of GDP (Figure 7 and Figure 8). As a result, public debt has soared to more than 30 percent of GDP (though still within the statutory limit of 40 percent of GDP (Figure 8), the Pula Fund10 has shrunk from more than 100 percent of GDP in the early 2000s to about 15 percent of GDP at the beginning of 2025, and the Government liquidity fund, the Government Investment Account, is almost depleted. Fiscal consolidation is critical to create fiscal space over the medium-term to finance climate actions and resilient growth-enhancing infrastructure. In the implementation of fiscal reforms, there is room for efficiency gains and increases in the effectiveness of public sector services delivery. Immediate options for fiscal consolidation include (i) reducing the public sector wage bill by setting a fiscal anchor linked to fiscal objectives (for example, setting the weight of the public wage bill as a share of expenditures, or GDP); (ii) implementing freezes or caps on allowances and overtime payments, undertaking payroll-personnel reconciliation to eliminate “ghost workers� and dual payees, and conducting regular “proof-of life� checks; (iii) reducing transfers to SOEs, particularly in energy and transportation, and rationalizing sovereign guarantees on SOE borrowing; and (iv) accelerating the rollout of the Single Social Registry to all households to eliminate inefficiencies, improve targeting, and develop adaptive (to climate shocks) social protection. Medium-term reforms could focus on a fully-fledged public sector reform to eliminate overlaps in service provision, revise and rationalize public sector service goals, and consolidate units and redeploy staff accordingly. Botswana could also consider upgrading its Financial Management Information System (FMIS) — GABS — and provide training to fully implement the 2021 Public Procurement Act to achieve further fiscal savings and quality in service provision. It also could introduce new technologies to facilitate intra-government cooperation and the exchange of information among government units, as well upgrading e-government to facilitate the relationship with business and households. 10 The Pula Fund is a stabilization fund created in 1993 to manage mineral revenue fluctuations. 4 Figure 7. Over the past decade, expenditures Figure 8. As consequence, the fiscal balance have not adjusted to the decline in revenues has deteriorated and public debt has risen Source: Ministry of Finance and World Bank staff Source: Ministry of Finance and World Bank staff estimates. estimates. Re-igniting growth is an imperative to attain the objectives of the National Vision 2036. Private sector development and diversification are constrained by the outsized role of SOEs and other BOS. The large presence of the public sector in the economy “creates barriers to entry, discourages diversification, and results in large economic inefficiencies, including for consumers� (World Bank 2023; Apfalter et al. 2024). BOS enjoy several advantages, including monopoly rights and exclusive access to markets (Hillbom 2012), preferential government procurement (World Bank 2019), and regulatory and tax exemptions (IMF 2020). SOEs also benefit from subsidies and bailouts,11 land and resource allocations (BIDPA 2018), and political and institutional support (Sebudubudu, 2012). Many SOEs are state- mandated monopolies in sectors that are competitive or partially contestable and are granted privileges such as preferential access to finance, capital injections, or tax exemptions for transfers or leases of land (World Bank 2022). These privileges effectively restrict business entry, competition, private sector development, and job creation in areas where Botswana has a comparative advantage (such as meat production). They also create barriers to innovation and diversification. Support to SOEs has been declining recently but remains substantial, reducing fiscal space for other critical areas. In addition, Botswana’s Competition Law and the powers of its Competition Authority are inadequate for ensuring market competition, allowing large shares for the largest participant in each market and FDI caps in competitive sectors (World Bank 2024c). Other pervasive structural bottlenecks to private sector led growth exist. They include: (i) persistent skills mismatches, despite Botswana’s high spending in education (World Bank 2022, World Bank 2023; Chapter 5) and (ii) limited access to finance for Micro, Small, and Medium Enterprises (MSMEs) and low financial inclusion (Chapter 6). Botswana could also explore options to support new businesses and SMEs by eliminating redundant administrative procedures, deepen digitalization of government-to- business processes, and create programs to facilitate high-growth startups with access to risk capital, business training, and mentorship (World Bank, 2024b). 11 For instance, Air Botswana, the national airline, has received repeated government bailouts to cover operational losses, a privilege rarely extended to private companies. See the Budget speech 2021 detailed allocations for SOE bailouts (Ministry of Finance and Economic Development, 2021). 5 Botswana faces significant challenges in leveraging trade as a driver of inclusive growth. The country’s landlocked geography, low population density, and small domestic market size inherently limit economies of scale and access to global markets. These structural constraints are compounded by policy and regulatory barriers that restrict trade and competition, particularly in commercial sectors and services. Improving regional connectivity is crucial for achieving economies of scale and economies of agglomeration. Landlocked with low population and economic density, Botswana needs to enlarge its markets and reduce market access costs to realize economies of scale and positive agglomeration effects. That will require upgrading both physical (particularly electricity supply and railways) and digital infrastructure and trade facilitation policies that now hinder the movement of goods, services, people, and capital (World Bank 2024b). In addition, poor air and ground connectivity hurts important sectors, especially tourism (World Bank 2023). Trade policy reform also support economic diversification and exports. Southern African Customs Union (SACU) tariffs raise costs of inputs, particularly in manufacturing, while Botswana's unilateral border policies hamper competitiveness and export diversification, especially in agriculture. This creates a bias for producers to sell in domestic and regional markets rather than globally. This undermines long-term competitiveness (World Bank, 2024b). Policies that foster FDI could also help in raising exports and productivity growth. In this regard, Botswana could consider facilitating the entry of skilled workers, promoting technology transfer, and encouraging partnerships between foreign and local firms to develop efficient supply chains. Finally, Botswana could also implement African Continental Free Trade Area (AfCFTA) and other existing trade commitments to develop value chains with high export potential and integrate Botswana into regional and global markets. Overcoming persistent obstacles would allow the private sector to unlock the potential for climate- aligned growth. According to the Climate Change Readiness report (IFC, 2025) current private sector challenges include limited concessional credit, unclear permitting, shortage of skilled labor, and an inadequate electricity grid, all of which deter private investment and slow technology uptake. In the same sense, the Botswana CPSD also highlights private sector challenges including infrastructure quality, limited early-stage finance for entrepreneurial startups and SMEs and skills mismatch, as firms report dissatisfaction with workforce skills while permit processes for foreign labor are cumbersome. However, Botswana’s abundant solar resources, experience with public-private partnerships, and supportive policy intent provide strong foundations for climate-aligned growth. Commercially viable models that can be replicated and scaled already exist in ecotourism, utility-scale solar, and circular- economy waste solutions. Tariff peaks on certain environmental goods, misclassification of environmental goods by Botswana’s Customs, lack of clear quality standards for environmental goods, import licenses, red tape, and fossil fuel subsidies all hamper the transition to green technologies (World Bank, 2023). Overall, Botswana remains an extractive-based economy, with weak links to the broader economy, and inequality remains very high, especially considering Botswana’s relatively high per capita income level. Prior to the discovery of diamonds, Botswana was one of the world’s poorest nations, with no real jobs or wealth-creating activities beyond rearing cattle. Strong historical inequalities existed both between and within groups, as reflected in large disparities in asset ownership, cattle ownership, and access to water. Groups living in drought-vulnerable areas of the country had difficulties accumulating productive assets and investing in education. While diamonds did bring wealth to the government, allowing infrastructure to be built and public services and social protection to be developed, the wealth did not create jobs or improve other economic sectors (World Bank 2015). The lack of preexisting economic diversification and developed economic institutions led to the emergence of a State-led growth and distributive model. Today, disparities in skills and abilities account for 29 percent of inequality, while 6 differences in higher education contribute 24 percent. Uneven labor market outcomes, such as variations in participation, sectors of employment, and occupation types, explain another 36 percent of overall inequality (World Bank 2024b). These outcomes convey a broader lesson for resource-rich countries: Good natural resource revenue management is a necessary but not sufficient condition for sustained growth — it needs to be complemented by deliberate efforts to facilitate economic diversification through private sector development. 1.1.3. Economic activity has a limited impact on emissions Botswana contributes only 0.019 of total global emissions, and emissions per unit of GDP have steadily fallen since the 1990s. However, emissions will have to decline further through 2030 for the country to meet its NDC commitments (Figure 9). The largest source of emissions is land use, land use change and forestry (LULUCF), mainly from land degradation (due to overgrazing and poor rangeland management) and agricultural practices. Excluding LULUCF, the main source of GHG emissions (and the main contributor to emissions intensity) is the energy sector, including mining, and agriculture (Figure 10, Figure 11). While Botswana’s GHG emission intensity reductions are in line with world and neighboring countries’ averages, they are exceeded by the Sub-Saharan African average (Figure 12). Despite its comparatively low GHG emissions from the energy sector, Botswana remains highly dependent on fossil fuel-based energy production. The country relies on domestic coal-fired electricity generation from the Morupule A (132 MW) and Morupule B (600 MW) power plants. Since the latter does not operate at full capacity, Botswana also depends on electricity imports from South Africa and the Southern African Power Pool, accounting for one-quarter of its total needs (Word Bank 2023). The government is currently planning to expand coal-fired power capacity.12 Figure 9. Botswana is not a significant contributor Figure 10. The energy sector is the main of GHG emissions contributor to non-LULUCF emissions Source: Climate Watch and WEO IMF-October 2023. Source: Climate Watch. 12 This would run counter to achieving the NDC targets. While Botswana’s Integrated Resource Plan for Electricity (2020) outlines plans for most of the electricity mix being generated from renewables, it also proposes the addition of 300 MW of new coal and 100 MW of coal bed methane. 7 Figure 11. The energy and agriculture sectors are Figure 12. Botswana’s GHG emission intensity the main contributors to GHG emission intensity reductions are in line with regional peers Source: Climate Watch. Source: Climate Watch. While Botswana does not explicitly subsidize fossil fuels, implicit subsidies add up to 5 percent of GDP (Figure 13) (Black et al. 2024).13 The subsidies largely arise from a failure to internalize coal, climate change, air pollution, and transport externalities, and raise demand for fossil fuels beyond the optimal consumption level in light of those externalities. In addition, consumer electricity tariffs in Botswana are explicitly subsidized to make electricity more affordable, although the subsidy has been falling in recent years. Implicit subsidies are higher than in Lesotho and Namibia while lower than in South Africa, and also lower than the SSA and UMIC countries’ average (Figure 14). 13 Explicit subsidies arise when the retail price is below a fuel’s supply cost. Direct support to producers, such as accelerated depreciation policies, are also included in this category. Implicit subsidies arise when the retail price fails to include external costs, such as foregone consumption tax revenues, contributions to climate change through greenhouse gas emissions, local health damages (primarily premature deaths) through the release of harmful local pollutants like fine particulates, and traffic congestion and accident externalities associated with the use of road fuels. The full gap between efficient prices (the sum of supply, environmental, and other costs) and retail prices multiplied by consumption equals the total fossil fuel subsidy. Additional details can be found in Black et al. (2024). 8 Figure 13. Implicit fossil fuel subsidies arise from Figure 14. Fossil fuel implicit subsidies are undercharging consumption for environmental lower than the SSA average and health costs Source: IMF, Fossil Subsidies Database, 2023. Source: IMF, Fossil Subsidies Database, 2023. 1.2. High exposure to climate change brings development risks 1.2.1. Botswana’s economy is highly exposed to climate shocks Botswana is highly vulnerable to climate shocks, especially because of its dependence on rainfed agriculture and natural resources. Climate change is also imposing limits to growth, contributing to output volatility, threatening food security, and placing vulnerable populations at risk, including deteriorated health conditions. Key climate-related challenges include water resource availability, highly erratic rainfall, and rising population pressures on natural resources (World Bank Climate Risk Country Profile, 2021). Botswana has the highest dependency ratio on transboundary waters among the southern African countries. About 80 percent of Botswana’s renewable freshwater lies in basins shared with up to eight countries (the river basins are Okavango, Zambezi, Orange–Senqu, and Limpopo). Sustaining access requires negotiated allocations, data sharing, and operating rules through River Basin Organizations. Delays or weak compliance in these bodies — and the transaction costs of multi-country agreements — directly affect Botswana’s supply reliability and future transfers. Availability of and access to water resources remains a key determinant for the exploitation of copper and other critical minerals in the country. Botswana’s tourism sector, particularly around the Okavango Delta, also is deeply linked to water availability and ecosystem health. Information gaps hamper the potential of inter-regional transfers. Most surface water is in the northwest, while the largest and fastest-growing demand is in the southeast (Greater Gaborone). The pressure on existing water infrastructure is already acute, especially around Gaborone, Francistown, and the rapidly growing southeastern corridor, and new supply options are increasingly limited and costly. Coordinating national transfers (for example, the North–South) with potential regional imports (for example, from the Chobe–Zambezi system or Lesotho Highlands) is complex, capital intensive, and requires alignment of basin-level and domestic plans, financing, and operating protocols. 9 Botswana’s current resources are nearly fully allocated. Water sustains key economic sectors, including mining, agriculture, tourism, and energy, and is essential for both urban and rural communities. According to the National Water Conservation and Demand Management Strategy of 2021, the mean annual volume of water resources is approximately 225 Mm³/year. However, the water demand during the same period was estimated at 275 Mm³/year, showing a water supply-demand deficit of approximately 50 Mm³/year. It is important to note that this figure refers to water currently available for use, not total renewable water resources. Botswana’s Total Renewable Water Resources are estimated at 12.2 billion m³/year, of which internal renewable water resources account for 2.4 billion m³/year, and internal surface water resources around 0.8 billion m³/year. However, much of this is not economically or physically accessible for development. If high water use continues over the next 15 years and non-revenue water (NRW) losses stay at the current high level of 33 percent, the water deficit may reach over 100 Mm³/year by the year 2036, adversely affecting Botswana's economy, prosperity, and sustainability. Climate change impacts are expected to harm health. Climate change may increase vector-borne diseases and vulnerabilities to water, food or person-person borne diseases like cholera. Predicted declines in the quantity and quality of drinking water will also affect health. More extreme floods are expected to affect sanitary conditions, increasing illness and child mortality. Botswana is already feeling the impacts of climate change. The country has a long history of both recurring floods and droughts; however, their magnitude, frequency, and impact have increased (World Bank 2021). Floods are the most frequent climate-related disasters, followed by droughts. Average temperatures have risen 1.5°C since the 1970s and could climb by 5°C by 2100 under a global high emission scenario. Precipitation is becoming more variable, putting greater pressure on water resources. For example, droughts in 2015 and 2019 exposed the severe vulnerabilities of Botswana’s water system, leading to urban water rationing and supply interruptions that lasted several months. More frequent and severe droughts are expected to become the norm, testing the limits of both surface and groundwater supplies. The World Bank projects that, under extreme conditions, inflows to key reservoirs like Gaborone, Bokaa, and Shashe could decline by 3.5 percent to 19 percent, representing a loss of up to 75 Mm³ of water. Botswana’s resilience indicators confirm its significant climate vulnerability, despite some improvements. In 2024, Botswana ranked 86th out of 187 countries in the Notre Dame Global Adaptation Initiative Index (ND-GAIN) (Figure 15) — which measures vulnerability to climate shocks and readiness to improve resilience — performing better than South Africa (95) and Namibia (107).14 Botswana’s vulnerabilities have been declining, while readiness scores are rising. Botswana also tends to fare somewhat better than South Africa and Namibia overall in the European Commission’s INFORM Climate Change Risk index, but risks stemming from weak coping capacity are higher than South Africa’s and similar to Namibia’s (Figure 16). 14 Notre Dame Global Adaptation Initiative Country Index (ND-GAIN). (2025). Botswana was ranked 99 in 1995. https://gain.nd.edu/our-work/country-index/rankings/ University of Notre Dame. 10 Figure 15. The ND-Gain Index is improving, Figure 16. Botswana shows lower vulnerability to signaling advances in readiness to address climate shocks than Namibia and South Africa climate change challenges 7 Inform risk index (scale: 0-10) 6 5 4 3 2 1 0 Inform risk Lack of coping exposure Vulnerability Hazard & capacity Botswana Namibia South Africa Source: Notre Dame Global Adaptation Initiative Country Source: European Commission, Inform Risk Report Index (ND-GAIN). (2025). University of Notre Dame. 2024. Note: The general Index INFORM risk and the three dimensions rank from 1 to 10. 1.2.2. Climate change could have severe macroeconomic impacts More frequent and severe climate-related natural disasters can have major adverse macroeconomic effects in Botswana. Every year, nearly 0.3 percent of Botswana’s GDP is at risk from floods (World Bank 2023). The most vulnerable sectors to floods are agriculture, transport, and housing; the agricultural sector is also the most vulnerable to droughts. Frequent droughts put water-based wildlife at risk, affecting the ecotourism industry. The state also has a large footprint in climate-vulnerable economic activities, since 46 percent of the country’s BOS operate in sectors that are especially vulnerable to climate shocks, such as agriculture and transport (Apfalter et al. 2024). Climate change could cause significant GDP losses. The World Bank estimates that a dry future could reduce GDP by 7.2 percent by 2050 (Figure 17, Panel A), because of the effects on labor productivity, rainfed crops, livestock, tourism, roads, and bridges.15 The biggest contributors to this loss would be heat impacts on labor productivity, mainly in agriculture, followed by damages to roads and reduced livestock yields. Under a more favorable wet scenario, GDP losses would be smaller (Figure 17, Panel B), with some positive impacts (in rainfed crops). GDP impacts would be higher in a “high growth scenario,� consistent with the National Vision 2036 and the reforms proposed in the Country Economic Memorandum (World Bank 2024) to boost growth, than in the current “low growth scenario� of no additional reforms, because of higher productivity and capital losses. 15 Annex 1 details the methodology and Chapter 3 analyzes key channels of impact in more depth. 11 Figure 17. Climate change could lower GDP up to 7 percent by 2050 A) “Dry/hot� scenario B) “Wet/warm� scenario Source: World Bank CC-MFMod Botswana (2024). Climate change impacts are unequally distributed across sectors. While the agricultural sector would be the most impacted in terms of its sectoral GDP (Figure 18, Panel A), the private services and mining sectors would be the main drivers of overall GDP loss because of their contribution to overall GDP (Figure 18, Panel B). Heat and drought impacts on crops and livestock could reduce agricultural GDP by up to 12 percent compared to a no-climate-change baseline. Without adaptation measures, climate shocks could undermine the effort to diversify exports by exporting more beef and veal, taking advantage of Botswana’s quota-free access to European markets. Most of the jobs that would be lost are in service sectors, followed by agriculture. Almost 2 percent of jobs could be lost by 2030 in the dry/hot case, compared to the baseline. Job losses will occur mainly in labor-intensive sectors, such as services and agriculture, where up to 9 percent of farmers could lose their source of income (Figure 19). In contrast, few job losses are expected in mining. Given the larger share of women in the services sector, climate change could reduce an important source of income for working women. The jobs most at risk are in retail and wholesale trade (Figure 20). Figure 18. Climate change impacts would be unequally distributed across sectors and jobs A) Percent sectoral GDP, dry/hot low growth B) Percent economy-wide GDP, dry/hot low growth scenario (2030) scenario (2030) Source: World Bank staff estimates using MINDSET. 12 Figure 19. Almost 2 percent of jobs or livelihoods could be lost due to climate change relative to the baseline (2030, dry/hot), clustered in the agriculture and services sectors Source: World Bank staff estimates using MINDSET and Botswana LFS 2022. Note: ‘Employment’ here includes informal or subsistence activities. Figure 20. Job losses would have different gender impact, as the share of female workers is larger in the service sector Source: World Bank staff estimates using MINDSET and Botswana LFS 2022. Note: ‘Employment’ includes informal or subsistence activities. 1.2.3. Climate change would particularly affect the most vulnerable populations Analysis for this CCDR reveals that the number of poor would increase under climate change, but higher growth rates would substantially mitigate the effect (Figure 21). Higher growth rates would dramatically reduce the number of people living in poverty, compared to a low growth rate. This is true in both climate scenarios, as the positive effects of faster growth are far greater than the small negative effects from climate change. This underscores the importance of economic growth in the climate policy agenda. 13 Figure 21. Higher growth rates would mitigate the impact of climate change on poverty 350,000 300,000 237,558 250,000 229,443 217,696 Number of poor 200,000 150,000 100,000 50,000 27,064 31,572 28,286 - Baseline Dry/hot (w.o adapt.) Wet/Warm (w.o adapt) 2024 2050 Low Growth 2050 High growth Source: World Bank staff estimates. Climate shocks such as rising temperatures and more frequent floods and droughts disproportionately affect poorer small-scale farmers. Poorer villages tend to be more exposed to excessive or scarce rainfall (Figure 22) (World Bank 2023) and are highly vulnerable to food insecurity and unstable livelihoods (World Bank 2021). Smallholder farmers also typically lack the resources to implement effective adaptation strategies to reduce crop or livestock losses, despite being acutely aware of climate changes. However, there are promising some developments: in Ngamiland East, farmers have adopted coping strategies such as using hybrid seeds, modifying planting techniques, and implementing water- harvesting systems, though access to credit remains a major barrier to investment. Figure 22. Poorer villages tend to be more exposed to excessive or scarce rainfall Source: World Bank (2024). Analysis for this CCDR reveals an overlay in poverty and exposure to climate shocks. The highest drought vulnerability pockets are in the Southern District, followed by the Kgalagadi and western Ghanzi districts (Figure 23 A), which also have high proportions of poor households. For floods, the Ngamiland Delta subdistrict and Francistown have both high flood risks and a large poor population (Figure 23 B). These pockets of vulnerability may need targeted climate actions and social assistance, especially because some rural communities (for example, in the Limpopo Basin) also face increased vulnerability 14 due to the erosion of traditional collective decision-making structures like the Kgotla system. Ethnic diversity, particularly in the Kalahari region, adds complexity to climate vulnerability challenge, with communal pastoralists disproportionately affected by land privatization policies. In Botswana, climate change disproportionately affects women in rural and peri-urban areas due to their roles in water collection and household labor, and their dependence on natural resources. Women have responded with adaptive strategies like drought-tolerant crops, livelihood diversification, and backyard gardening. Their indigenous knowledge — especially among groups like the Bogakhwe —is central to local adaptation (Kolawole et al. 2014). Female-headed households, such as in Kweneng, show higher adaptability (Kgosikoma et al. 2018), yet women overall report lower confidence in institutional support than men (Makwatse et al. 2022). These dynamics call for gender-responsive climate policies that actively integrate women’s knowledge, leadership, and access to support systems (Akinyemi, 2017). Figure 23. The Southern District and the Ngamiland Delta/Francistown regions are highly vulnerable, with many poor households facing high exposure to droughts and floods A) Number of Poor and Drought Exposure B) Number of Poor and Exposure to Flood Hazards Source: World Bank staff estimates. Note: The charts overlay poverty maps with climate risks maps. They are choropleth maps that show color gradation of high exposure (gray to more clue) and high poverty (gray to redder). Poverty is measured by the number of poor (i.e. headcount rate times the target area population). Drought risk is defined as the proportion of cropland over a specific period of time in a given area which we expect to have severe drought, as measured by the agricultural stress index, ASI and poverty. Panel A shows the regions with more than 50 percent of cropland area affected by a drought event. The flood measure is the expected amount of inundation (in meters) of flood water i.e. what height of water we expect to flood a certain area. 15 1.3. Three pillars for more robust, resilient and equitable growth Climate change significantly threatens Botswana's goal of becoming a high-income country. Botswana experiences severe impacts from climate change: water scarcity, unpredictable rainfall, temperature extremes, and persistent droughts. Thus, reforms promoting sustainable diversification, job creation, green transition, productivity growth, and fiscal space restoration are crucial. This CCDR describes adaptation challenges, mitigation opportunities, and the need for a people focused transition. A successful diversification strategy could focus on expanding beyond diamonds and other commodities rather than moving away from them entirely. In fact, diversifying partly by moving up the value chain within the mining sector itself is a highly efficient way of capitalizing on the country’s comparative advantages. However, mining activities have limited potential for job creation (World Bank 2023), highlighting the urgent need to harness other economically viable opportunities. Five key productivity drivers are priority areas for growth- and diversification-promoting reforms (World Bank 2024b). They are: (i) encouraging dynamic firm creation and growth and technology adoption/innovation; (ii) developing skills in the labor force; (iii) improving access to financial services; (iv) enhancing connectivity to enlarge markets; and (v) upgrading public sector performance. Some of the key reform priorities for Botswana cut across these five productivity drivers, such as promoting private sector-led growth by removing preferential treatment of SOEs, improving market contestability by reducing entry barriers and the cost of doing business, reinforcing the powers of the Competition (and Consumer) Authority, and embarking on a trade reform agenda to reduce costly access to foreign inputs and to promote access to foreign markets. Furthermore, an ambitious fiscal consolidation plan would help reduce public debt and rebuild fiscal buffers, creating fiscal space to finance climate action. A robust institutional framework, including binding fiscal rules and legislation, would enhance credibility and allow for adjustments to lower revenues. Botswana also could contemplate a legal requirement for mid-budget adjustments of approved expenditures when revenue forecasts fall short. Reforms to reduce budgetary rigidity would facilitate these adjustments. In addition, Botswana could reduce the size of the State in the economy, particularly public sector participation in competitive markets that distort the level playing field, inhibit private initiative, and generate fiscal costs. Reducing high levels of transfers to SOEs would generate important fiscal savings, and the government could also consider broader reforms to reduce the favorable treatment of SOEs and to require SOEs to adopt best practices in governance. Meanwhile, social protection reforms could reduce costs and better target poor people who currently do not benefit from the system. Similarly, public financial management reforms would also improve spending efficiency and raise the impact of public spending on growth. Such reforms would make it possible to increase public investments on productivity and resilient infrastructure and improve public investment management, following the findings and recommendations of the most recent C-PIMA (IMF, 2024). The growth and fiscal agendas are complementary, as reform-driven growth can also help improve Botswana’s fiscal stance. Faster GDP growth would boost tax revenues and reduce public debt ratios over time, thereby improving the country’s fiscal sustainability prospects. Growth -promoting reforms would also facilitate fiscal consolidation by requiring less drastic spending cuts and tax hikes than under a no-reform scenario. More robust growth can only happen if the country reduces the impact of climate shocks. Adaptation and resilience to climate shocks are the central climate-related challenges in Botswana, which can benefit from international experience adjusted to local needs. Bhattacharya et al. (2021) underscore two broad objectives in a climate adaptation strategy: (i) smoothing the impact of shocks and easing adjustment to those that are permanent, through structural transformation; and (ii) reducing exposure and vulnerability to climate shocks. Policy goals under the first broad objective include: (i) maintaining 16 macroeconomic stability to enable governments to enact counter-cyclical macroeconomic policies when needed; (ii) maintaining fiscal and foreign exchange buffers, and requiring financial institutions to keep enough capital buffers to face climate shocks; (iii) buying insurance or insurance-like instruments against climate shocks and natural disasters; (iv) implementing structural reforms to diversify away from economic activities turned unviable or too costly by climate change; and (v) engaging in active labor market policies and strengthening social safety nets to protect affected workers. Policy goals under the second broad objective include: (i) designing and implementing early warning systems about natural disasters; (ii) encouraging private investment in resilience; and (iii) investing in resilient public infrastructure. Taking bold measures to bring down the large fiscal deficit is crucial to create fiscal space over the medium term to finance climate actions and growth-enhancing resilient infrastructure. Fortunately, there are several options. Botswana can reallocate spending to support growth without incurring extra costs by improving public sector efficiency, prioritizing high-impact investments, and leveraging private sector participation. Key measures include rationalizing and reducing the public wage bill and transfers to state-owned enterprises, rethinking the state’s involvement in the economy, and cutting non- essential development expenditures. Enhancing public financial management through digital tools and improved procurement can reduce wastage and improve transparency. Botswana can also shift spending toward cost-effective and climate-smart interventions that generate economic returns, such as investing in skills development through public-private partnerships and expanding digital and physical connectivity to reduce business costs. Encouraging private investment by deregulating strategic sectors and creating a more enabling business environment will mobilize additional resources without increasing public spending. In addition to its environmental and health benefits, decarbonization opens up opportunities for economic diversification and green growth. Expanding investments in renewable electricity is a key component of the country’s decarbonization strategy. This transition is expected to have positive environmental, health, and growth effects. As part of the decarbonization process, and to ensure energy security, Botswana will need investments in new solar and wind power generation capacity. Solar irradiation and wind resources are abundant, respectively, in the southwest and northeast areas of the country. Botswana’s renewable energy supply potential exceeds domestic demand, creating opportunities for electricity exports. Botswana’s Integrated Resource Plan (IRP) for Electricity (2020) outlines a roadmap for the energy sector, proposing that 15 percent of electricity generation come from renewables by 2030, with a focus on solar and wind energy. Three mutually enforcing pillars to a more robust and sustainable growth model follow from the analysis in this Chapter. These pillars highlight the need to: (i) advance towards high-income country (HIC) status through private sector led economic diversification; (ii) adapt to climate change and strengthen resilience; and (iii) harness green growth and decarbonization opportunities, including by taking advantage of Botswana’s endowments of cobalt, copper, manganese and nickel to help meet rising global demand for minerals that are essential for green technologies. To ensure a just transition, future mineral development must prioritize inclusive governance, robust environmental and social safeguards, and equitable benefit-sharing. Transparent decision-making, comprehensive environmental and social impact assessments, and meaningful consultations with affected communities will be essential to align with Botswana’s climate resilience and social development goals. There is a high degree of complementarity among the reforms needed to achieve this vision: Policies geared towards promoting green growth will also help bring about economic diversification and more broad-based growth. These policies are presented in Chapter 7. 17 2. Institutional and Policy Readiness to Meet Climate Commitments, Galvanize the Private Sector, and Protect Vulnerable Batswana 18 2. Institutional and Policy Readiness to Meet Climate Commitments, Galvanize the Private Sector, and Protect Vulnerable Batswana 2.1. Climate Commitments and Policies: increasing awareness and ambition, though challenges persist 2.1.1. Institutions and policy frameworks Botswana's commitment to addressing climate change has evolved significantly over the years, reflecting a growing recognition of the need for both adaptation and mitigation strategies. Botswana has made significant strides in policy readiness by integrating climate change considerations into its national development planning, notably through the Eleventh National Development Plan (NDP11). As the first medium-term plan towards achieving Vision 2036, NDP11 includes climate change as a key consideration in its six national priorities. It emphasizes diversified economic development, which indirectly supports climate resilience by reducing dependence on vulnerable sectors. Vision 2036 outlines objectives for climate resilience and disaster risk reduction, positioning Botswana towards a low carbon footprint and a society resilient to climate change impacts. Botswana has strengthened its institutional and policy framework to tackle climate challenges. Botswana has demonstrated a steadfast commitment to addressing climate change, dating back to its early adoption of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992 and subsequent ratification in 1994. Over the years, the country has strengthened its institutional and policy framework to tackle climate challenges (Table 1). Key milestones include the development of a draft national climate change response policy in 2016, which was complemented by the National Climate Change Strategy and Action Plan (NCCSAP) in 2018. The NCCSAP operationalized the draft policy and provided a roadmap for climate action. Botswana also adopted its Climate Change Policy in April 2021. This strategic framework underscores Botswana's dedication to both climate change adaptation and mitigation, aligning with its Vision 2036 and the Sustainable Development Goals (SDGs). Given Botswana's strong governance foundations and institutional capacity, the development of appropriate climate legislation (including key areas such as water, land tenure, and carbon markets) could provide an important legal foundation for long-term climate action across political cycles. In this sense, the policy framework would benefit by the introduction of comprehensive framework legislation, with key elements as detailed by the World Bank (2020) (Box 1). While Botswana has taken important policy steps, greater attention to social inclusion, particularly the needs of marginalized groups and women, will be critical to ensure that climate adaptation and mitigation efforts are equitable, locally grounded, and effectively implemented. 19 Table 1. Botswana has demonstrated increasing commitment with climate policies Key national policies and plans Sectoral Plans • Botswana Vision 2036 (2016) • Energy Policy • Updated Nationally Determined Contribution (2024) • Rooftop Solar Program • Third National Communication (2019) • Spatial Development Plan • National Climate Change Strategy (2018, approved by • National Drought Management Plan Parliament in 2021) • Integrated Water Resources Management • Climate Change Policy passed by National Assembly in 2021 and Water Efficiency Plan • National Adaptation Plan Framework (2020) • National Water Policy • National Disaster Risk Reduction Strategy (2013) • Integrated Waste Management Policy • Economic Recovery and Transformation Program (2020) Source: World Bank staff compilation based on official documents from the GoB. Box 1. A Guide for Climate Change Framework Legislation16 Climate change framework legislation is a comprehensive, multi-sectoral legal instrument that defines the overarching principles, institutional architecture, and governance mechanisms for a country's climate policy. It typically sets out national long-term mitigation and adaptation objectives, often aligned with net-zero commitments and climate-resilient development goals and establishes the institutions and procedures necessary to deliver them. A well-designed framework law enables coordinated, transparent, and accountable climate action, supporting the mainstreaming of climate considerations into decision-making across government and society. Beyond setting direction, such legislation serves multiple critical functions. It strengthens the durability and credibility of climate policy across electoral cycles and political transitions, provides clarity to public and private actors regarding regulatory expectations, creates mechanisms for independent oversight and public participation, and facilitates harmonization between sectoral policies and international commitments, including Nationally Determined Contributions (NDCs) and Long-Term Low Emissions Development Strategies (LT-LEDS). In Botswana, a climate change framework law could provide the legal foundation for operationalizing the country's 2018 Climate Change Policy, clarifying institutional mandates and aligning national efforts with international obligations. It could also help to embed climate risk management into development planning and investment decisions and promote long-term policy certainty to unlock public and private climate finance. Lessons from laws in other African countries, including Kenya's Climate Change Act (2016), Nigeria's Climate Change Act (2021), and Sierra Leone's Climate Change Act (2023), demonstrate the enabling role that such legislation can play in mainstreaming climate action and building institutional resilience. The World Bank's Reference Guide to Climate Change Framework Laws identifies core elements of effective climate legislation, many of which have been adopted by an increasing number of countries across income levels and legal traditions. Those elements include: • Target-setting provisions that establish long-term emissions reduction and adaptation goals, as seen in Chile, Denmark, and the United Kingdom, complemented by intermediate and sector-specific targets as implemented in Mexico, New Zealand, and France. • Climate risk assessment and planning provisions that mandate regular climate risk and vulnerability assessments, as required in the United Kingdom and France, or require public entities to prepare climate strategies and action plans, as mandated in Kenya and Ireland. • Policy instruments and public finance integration that allow laws to authorize a range of regulatory and fiscal tools, such as taxation, subsidies, and carbon pricing, as implemented in Mexico and France, or require climate objectives to be integrated into public financial management systems, including budgets and investment planning, as seen in France, Kenya, Germany, and Bangladesh. • Institutional coordination and capacity measures that establish clear roles for lead ministries or coordinating bodies, as demonstrated in Colombia, Kenya, and Bulgaria, and that may mandate dedicated units or inter- ministerial committees for coherence and efficiency. 16 This box is based on World Bank (2020). 20 • Embedding the use of expert advice with provisions for science-policy interfaces through standing advisory bodies, as established in Ireland, Costa Rica, and Mexico, often with mandates to review targets, monitor progress, and recommend course corrections. • Public participation and procedural rights, which ensure stakeholder engagement is institutionalized through consultation mechanisms, grievance procedures, and access-to-information guarantees, as implemented in Colombia, Costa Rica, and Peru, which reinforce the legitimacy and inclusiveness of climate governance. • Subnational integration provisions that account for the roles of subnational governments in climate action, tailored to each country's constitutional structure, as demonstrated in Colombia and Mexico. • Monitoring, reporting, and verification (MRV) provisions that require regular reporting on emissions, progress toward targets, and the effectiveness of policies, as mandated in Mexico, with independent review and parliamentary oversight, as established in Colombia. In a deteriorated fiscal context, addressing challenges in public financial management would help to better allocate resources for climate initiatives. According to the latest PEFA assessment (PEFA 2020), there is no evidence that budgeted expenditures in Botswana align with the strategic plans. In addition, budget allocations are not based on substantiated information and cost justifications, key performance evaluations are missing, and little evidence shows whether budget resources are being used efficiently. While PFM reforms have been on the agenda in the last decade,17 progress has been slow. Improvements in public investment management (PIM) will better align project selection with development objectives, while also reaping efficiency gains. Public investment efficiency is about one- third lower in Botswana than in the most efficient country with comparable income levels. Projects suffer from delayed commencement, overdue completion, unauthorized contract variations, unplanned cost escalations, and ultimately delays to service provision. Project selection occurs when the National Development Plan is approved. As a result, projects are not much more than preliminary concepts when included in the Public Investment Program, which seriously diminishes the usefulness and decisiveness of the appraisal stage. Lack of contract management and due diligence increase implementation costs, while the procurement process is excessively lengthy and often requires unbundling of projects, increasing the workload and causing undue delays. A dedicated central PIM unit would help coordination across the government, including implementation units. It would also improve information sharing and public investment management, which is currently an add-on responsibility for planners and budget officers. Climate change risks and related adaptation and mitigation objectives are not incorporated in the project appraisal and selection process. Neither are climate-related expenditures separately identified in the budget or subject to ex-post reviews or audits. These are serious flaws, since infrastructure projects in vulnerable sectors, such as agriculture and water resources, need to be designed and developed in ways that increase resilience to climate events (see Chapter 3). 2.1.2. Botswana’s NDC provides a structured approach to cross-sectoral climate governance but lacks strong enforcement mechanisms and economic incentives to drive private sector collaboration Botswana signed the UNFCCC and Paris Agreement and updated its NDC in 2024. Despite contributing just 0.019 percent of global emissions, the country has committed to achieve an overall emissions reduction of 15 percent by 2030 relative to a Business as Usual (BAU) scenario. The emissions reduction target was estimated based on the baseline inventory for the three main GHGs, carbon 17 A PFM Reform Programme (PFMRP) was approved by the PFM Reform Steering committee on September 24, 2014. It has 13 components, including strategic planning, macro-fiscal policy and planning, and national budgeting and accounting and reporting, among other areas of reforms. 21 dioxide (CO2), methane (CH4) and nitrous oxide (N2O). The key sectors covered by the NDC are energy (electricity generation and transport, which are projected to provide the bulk of the reductions), Industrial Processes and Product Use (IPPU), and Agriculture, Forest, and other Land Uses (AFOLU).18 Botswana has committed to increasing the share of renewable energy in the energy sector to 30 percent by 2030.19 According to its IRP, the country aims to expand solar PV capacity to 600 MW, establish 200 MW of concentrated solar power, and introduce wind power. Botswana also plans to promote small-scale solar projects and energy-efficient appliances, and to expand and modernize the public transport network. The latter will reduce emissions and save energy by reducing the use of private cars, reducing congestion, and adopting cleaner vehicle technologies such as electric buses. However, Botswana’s plans to increase reliance on coal for energy, which already accounts for 99 percent of the energy mix, are a significant barrier to transitioning towards renewable energy sources. Botswana’s IRP proposes to add 300 MW of coal power by 2026. However, recent government statements suggest that the government is considering investing in a 615 MW coal-fired power plant near Morupule B to reduce dependence on costly electricity imports, mainly from South Africa and the Southern African Power Pool, and to ensure a stable domestic electricity supply. If these plans are carried out, Botswana’s high carbon footprint could harm the country’s export competitiveness compared to other countries that invest in low-carbon electricity generation. High operational costs for coal plants could also divert resources from Botswana’s planned solar expansion, delaying the transition to cleaner energy and locking the country into an outdated, expensive technology. Moreover, there is a potential risk of oversupply if renewable energy capacity is also expanded. Mitigation measures also include industrial processes and the AFOLU sector. Botswana plans to phase out HFCs in industry (Kigali Amendment) and reduce net AFOLU emissions with better livestock and rangeland management, including improved diets, and with increased carbon sequestration from tree planting, wildfire management, and improved rangeland management. Adaptation measures are at the core of the updated NDC. The country has prioritized climate change adaptation that offers co-benefits of mitigating GHG emissions over pure mitigation measures, given the country's vulnerability to climate change impacts and its low contribution to global emissions. Botswana's updated NDCs outline 44 adaptation measures across all economic sectors, mainly involving crops, livestock, water, forestry, biodiversity and rangelands, health, infrastructure, and climate services, which build upon existing sectoral adaptation initiatives. These include promoting climate-smart and conservation agriculture, introducing drought-tolerant livestock, and advancing water management through water transfer schemes and integrated water resources management. In the biodiversity sector, efforts are focused on improving protected area management, establishing wildlife corridors, and providing water in protected areas. The Department of Forestry and Range Resources is working on wildfire control through fire breaks, community training, and early warning systems. Infrastructure measures include improving drainage systems, using climate-resistant building materials, and improving infrastructure design for climate extremes. Domestic funding will mostly finance the current adaptation budget. Financing needs in the updated NDC reach US$6.2 billion, an estimate that will be adjusted according to the National Adaptation Plan and does not include infrastructure. Near 60 percent of total funds are related to mitigation, (Figure 24, left), mostly conditional on international financing (Figure 24, right). While the overall goal is to reduce 15 percent of GHGs emissions relative to a BAU scenario, unconditional reductions reach 18 GoB (2024) Botswana’s 2nd Updated Nationally Determined Contribution under Paris Agreement, Government of Botswana, October 2024. 19 GoB (2024) Botswana’s 2nd Updated Nationally Determined Contribution under Paris Agreement, Government of Botswana, October 2024. 22 only 3 percent. In the energy sector (where most emissions reductions would be made), 80 percent of the measures are conditional on the availability of funds. On the other hand, the adaptation budget is mostly unconditional (Figure 24, left). Overall, 70 percent of domestic funds would be dedicated to adaptation (12.18 percent of GDP) and 30 percent to mitigation (3.65 percent of GDP) (Figure 24, right). Figure 24. Mitigation investment needs are mostly conditional on international financing Source: Government of Botswana - Updated NDC (2024). Botswana has made strides in creating an enabling environment for a climate-responsive private sector, focusing on enhancing competitiveness, productivity, and resilience. The government's commitment is evident through strategic frameworks like the Country Strategy Paper (2022-2026), which emphasizes economic resilience via governance reforms and private sector development. This strategy aims to diversify the economy beyond diamonds, fostering a more robust and competitive business landscape. However, challenges persist, mainly related to the significant presence of state- owned enterprises, which can impede competition and limit innovation and private investment in green technologies (see Chapter 1 and Section 2.2).20 Botswana aims to galvanize the private sector by creating an enabling environment for green growth and climate action. Leveraging private sector investments to bridge the climate finance gap is crucial for achieving Botswana’s NDC targets. For instance, the increase in renewable energy (solar PV projects and solar rooftops) will be implemented solely by the private sector and communities. However, the lack of supportive private sector regulations hinders its ability to become more climate responsive. Despite the adoption of the Climate Change Policy in 2021 (Table 2), Botswana lacks comprehensive legislation and specific strategies to effectively address climate change impacts (see Box 1). This absence of detailed regulatory frameworks creates uncertainty for businesses, making it difficult for them to plan and invest in sustainable practices. For example, the Environmental and Social Impact Assessment (ESIA) does not require development projects in the mining sector to include climate and related impacts or to design infrastructure consistent with climate change impacts, including the use of water. A comprehensive strategy involving enhancing regulatory frameworks and improving access to finance for smaller business would effectively galvanize the private sector and protect vulnerable populations, fostering a more inclusive and resilient economic model. 20 IMF (2023). 23 Table 2. Different climate-related policies and plans have an impact on the private sector Policy, Strategy, or Objective Impact on Private Sector National Plan Establishes a national Encourages private sector participation in Climate Change Policy framework for addressing implementing climate-resilient practices and (2021)21 climate change, focusing on technologies, potentially leading to new business adaptation and mitigation opportunities in green technologies and services strategies National Adaptation Integrates climate change Promotes private sector investment in climate- adaptation into national resilient infrastructure and services, emphasizing Plan (NAP) development planning to build the need for businesses to adapt to changing Framework22 a climate-resilient society environmental conditions Impacts the private sector by aligning climate action National Climate Fosters a sustainable, resilient, with economic growth and creating a framework for and economically viable businesses to engage in sustainable development. Change Strategy pathway to address climate The strategy positions businesses to benefit from (2018) challenges long-term sustainability, access to global markets, and resilience against climate disruptions Source: World Bank staff elaboration based on official documents from the Government of Botswana. Other challenges hindering the effective implementation of climate commitments include weaknesses in coordination and enforcement. The National Climate Change Committee (NCCC) acts as an advisory body, but its influence on enforcing climate action across ministries and sectors is limited. Without a strong regulatory mechanism, there is a risk of fragmented implementation. The NDC recognizes the role of private entities in mitigation efforts (such as renewable energy projects), but incentives such as subsidies, tax breaks, or policy instruments to encourage investment in low-carbon projects are not explicitly outlined. Beyond regulatory weaknesses, the lack of technical capacity and access to finance constrain the private sector from taking climate adaptation actions. The private sector is encouraged to invest in solar PV, concentrated solar power, wind, and biogas projects, usually through IPPs (independent power producers). Opportunities also exist for private companies to provide energy-efficient appliances and technologies, and services that reduce demand and emissions. Private sector involvement is sought in electric vehicle (EV) assembly, charging infrastructure, modernization of public transport, sustainable agriculture, and reforestation. However, high upfront costs, perceived project risks, limited data availability, and technical capacity gaps remain significant barriers. The IFC-supported Climate Change Readiness Review concludes that Botswana’s regulatory framework remains insufficiently developed and enforced. Private operators in sectors such as manufacturing, agriculture, energy, and tourism have minimal incentives to prioritize climate resilience in the absence of regulations or incentives for adopting green technologies. Stakeholders cited unclear permitting processes, slow environmental assessments, and the absence of standardized incentives for climate- aligned investments. In the energy generation sector, developers reported challenges accessing the grid, navigating procurement processes, and making feed-in arrangements. Similarly, mining stakeholders noted the lack of clear guidance for integrating renewables into existing operations and supporting domestic beneficiation, i.e., the transformation of the raw commodity into a more complex product of higher value added. 21 agc.gov.bw. 22 afri-res.uneca.org. 24 The government has envisaged several initiatives to crowd-in private investment, but policy options are limited by fiscal consolidation needs. Policy incentives to de-risk investments, such as guarantees, have to be carefully examined so that they do not expose the public sector to rampant fiscal risks. Against this backdrop, regulatory reforms become a key policy option. International financial and technological support will be essential to overcome these barriers and accelerate climate-resilient development. Gender disparities require targeted attention in climate policy implementation. Women face a 4 percent higher exclusion rate than men and are projected to be more impacted by climate change in rural areas. They also face specific challenges in institutional trust and access to resources. The government could consider better integrating women’s unique knowledge and roles in climate resilience, particularly in rural and agricultural settings, such as those demonstrated by the Kgetsi-Ya-Tsi women in response to climate-induced resource scarcity (Ketlhoilwe and Jeremiah, 2015). 2.2. The high presence of the state in the economy exacerbates fiscal risks The public sector faces climate fiscal risks due to the significant presence of the State in the economy. Of Botswana’s 90 BOS, 41 firms (or 46 percent) operate in sectors that are highly vulnerable to climate change impacts, including agriculture and hospitality and tourism. The tourism sector, which depends on water-based wildlife endowments (especially in the Okavango Delta), is especially vulnerable. Eight BOS (or 20 percent of climate-vulnerable BOS, Figure 25), including resorts, lodges, and hotels, are at risk from droughts and lower stream flows. Seventeen percent of BOS are involved with agriculture, where droughts and floods threaten both livestock and crop production (World Bank 2022), BOS in the energy and water utilities sectors account for 44 percent of revenue and 35 percent of employment in climate-vulnerable sectors; they face threats from storms that can damage power lines and from water scarcity. The exposure to climate risks through BOS underscores the threat that climate change poses to the economy of Botswana. Eventually, the government of Botswana may have to cope with the budget implications of diminished tax revenues, reduced household incomes or firm profits, higher disaster recovery expenditures, higher borrowing costs, or contingent liabilities from state-owned enterprises or public-private partnerships (Dunz, Naqvi, and Monasterolo 2021).23 Moreover, a large share (71 percent) of BOS in climate-vulnerable sectors operate in competitive markets, where there are weak economic rationales for state presence (Figure 26). Botswana could therefore reassess and potentially reduce the state's role in those markets, helping to reduce the fiscal strain on the government and enhance the overall efficacy of climate adaptation efforts. 23 Temperature and sea-level rise, for instance, lead to asset devaluation in real estate (Giglio, Kelly, and Stroebel 2021), while lower firm revenues and profits, as well as lower household incomes, increase the probability of default and loss. In combination with the devaluation of collateral (private, corporate, and sovereign), credit risk is likely to increase. Market risk is posed by the sudden repricing and fire sales of debt, equity, and commodities (Roncoroni 2021), and the uncertain nature of climate change impacts increases the underwriting risks of insurance and financial products. Finally, liquidity risk could materialize, if depositors and investors withdraw funds because of higher expenses related to climate risk or fears related to solvency. Moreover, climate change vulnerability already has a statistically and economically significant impact on the cost of sovereign borrowing, credit ratings, and the risk of debt default, especially in developing countries (Cevik and Jalles 2020; 2021; 2022). 25 Figure 25. The public sector presence in vulnerable sectors exacerbates fiscal risks Source: World Bank Global BOS database; World Bank. 2023. The Business of the State. Washington, DC: World Bank. Understanding the state carbon footprint can inform the policy design in the climate mitigation agenda. There are 10 BOS in carbon intensive sectors (mainly transport, energy, cattle, poultry and manufacturing), seventy percent of which operate in partially constable markets, such as energy generation and transportation, where state involvement is more justified. BOS are therefore key actors in the country’s mitigation objectives. Designing specific climate mitigation plans, identifying implementation schedules, stakeholder responsibilities, assessing costs and fiscal contingent liabilities arising from climate risks are elements of this agenda. Factoring in BOS presence in the diamond industry is also crucial, considering that diamond production in Botswana largely relies on coal-based energy, which is highly carbon-intensive (World Bank, 2022). The presence of SOEs can impede competition, potentially stifling innovation and private investment.24 Moreover, regulatory gaps and a growth model heavily dependent on diamonds may limit the private sector's ability to adapt to climate-related disruptions. The Botswana Country Private Sector Diagnostic recommends developing a dedicated investment policy and law, strengthening mechanisms to address investor grievances, combating corruption, and enhancing government effectiveness. Implementing these reforms is essential to cultivate a dynamic, climate-responsive private sector in Botswana. 24 World Bank (2022). 26 Figure 26. The majority of BOS in vulnerable sectors operate in competitive markets Source: World Bank Global BOS database; World Bank. 2023. The Business of the State. Washington, DC: World Bank. To tackle fiscal risks associated with SOEs, including climate risks, and to develop a private-sector friendly business environment, Botswana could review the public sector participation in the economy through SOEs. The World Bank proposes 5 policy principles for effective government engagement (World Bank, 2023c,d): 1. Justification for State Ownership: The state should clearly articulate the rationale for its participation, focusing on market failures, strategic interests, or public service obligations. 2. Governance and Oversight: Strong corporate governance, transparency, and accountability mechanisms are essential, regardless of the ownership share. 3. Competitive Neutrality: Policies should ensure a level playing field between BOSs and private sector firms, avoiding market distortions and unfair advantages. 4. Selective Intervention: State intervention should be reserved for areas where the market cannot deliver efficiently or equitably and should be regularly reassessed. 5. Exit and Privatization Criteria: Clear criteria should be established for when the state should reduce or exit its participation, especially in competitive sectors. 2.3. The financial sector is exposed to transition risks but awareness is heterogeneous, and regulators are still developing tools for assessment Given its low exposure to the private sector and hedging mechanisms on personal loans, the financial sector has limited exposure to physical risks and transfers part of that risk to households. Commercial and development banks have low exposures to the most climate vulnerable sectors, such as tourism (about 5.5 percent) and agriculture (8.1 percent) (Figure 27).25 Banks and microlenders also do not seem exposed to physical risks on their unsecured portfolio of personal loans to households,26 as the deduction at source mechanism is hedging lenders against any borrower’s default as long as the borrower keeps his job. Hence, the physical risks affecting these loans is automatically transferred to borrowers. The exposure of pension funds to physical risks has not been assessed by BPOPF. Insurance companies are insuring some physical risks and are exposed to a certain extent through their life 25 Figure 27 is showing exposure of commercial banks only. 26 The purpose of the loan is rarely asked by the lender, as the deduction at source mechanism allows the lender to deduct loan installments from the borrower's salary before it reaches the bank account. According to the latest Finscope survey (2020), most of these loans are taken to buy/build/extend houses (45 percent), buy land (8 percent), or expand side businesses (9 percent). 27 insurance products when natural disasters cause deaths. They can also be exposed through agricultural insurance that some financial players are offering. The financial sector is exposed to transition risks, particularly from its financing of coal extraction companies, and equity investments in energy companies. Commercial banks and insurers have exposure to the Morupule coal mine, which is owned by the government through a parastatal (MDCB) but also to the national utility company. The Botswana Power Corporation (BPC).27 Development banks and asset-owners, such as insurance companies and pension funds, are also indirectly exposed through participation or loans to the BPC 28 coal mining companies,29 or equity investments in listed carbon-intensive energy producers and fuel importers on the Botswana (BSE) and South African stock exchange (JSE). Transition risks may materialize through the value decline of production units and reduced revenue streams as future global or national policies tighten emissions reduction from coal. Financial institutions show moderate awareness and understanding of climate-related risks. Most financial entities active in Botswana are subsidiaries of foreign corporations and implement their parent companies' strategies for assessing and managing climate risks. However, some subsidiaries and local actors, especially NBFIs, show a poor understanding of the risks and stakes. For foreign-owned entities, the policy objectives are often not clear, and they often do not understand the nature and potential consequences of climate-related risks. When identified, physical risks are often assimilated to credit risks, and transition risks to exclusion lists or ESG principles. Figure 27. Financial sector exposure to climate risk is limited Commercial banks loan portfolio by economic sector, Oct-23. Source: World Bank staff based on Bank of Botswana. Regulatory bodies are building their capacities on climate-related risks and lack quantitative data to start their assessments. The Bank of Botswana (BoB) has undertaken an assessment of biodiversity losses with UNDP under the Bio-FIN initiative to understand nature-related losses as well as to mainstream biodiversity financing by the financial sector. A working group will draft a sustainable 27 Annual report, Botswana Power Corporation, 2022. 28 Botswana Development Corporation (BDC) is the largest lender of Minergy, the only private company extracting coal in Botswana, Minergy Annual report, 2023. 29 For instance, NDB has a 18 percent participation in Minergy, who owns the Massama coal mine, NDB annual report, 2022. 28 finance roadmap, green taxonomy, and financial disclosure for nature-related risks. On climate-related risks, BoB and NBFIRA are at the capacity-building stage with the support of the Committee of Central Bank Governors (CCBG) of the South African Development Community. BoB has started bilateral discussions on climate-related risks but not yet for transition risks. However, BoB has approached the NGFS to prepare for climate-risk stress-testing on the tourism and agriculture sectors. Both regulators currently lack the granular data needed to perform quantitative and qualitative assessments of climate- related risks, as none of them currently collect information on the geographical locations of the assets financed and the sectoral exposures. A revision of the banking act is underway and could increase regulatory reporting requirements, including on nature-related risks. 2.4. Key options for institutional strengthening and policy readiness Mainstream climate change by enacting comprehensive framework legislation: Integrate climate change considerations into all sectoral policies and development plans. This includes ensuring that all new policies and projects are assessed for their climate impacts and resilience. Enhance coordination: Establish clear institutional arrangements to coordinate climate action across government ministries and departments. This will help ensure a cohesive and effective approach to climate change mitigation and adaptation. Strengthen monitoring and evaluation: Develop robust frameworks to track progress on climate adaptation and mitigation. This will help ensure accountability and effectiveness of climate actions. Build capacity: Invest in training and capacity building programs for government officials and other stakeholders to enhance understanding of climate change issues and ability to implement climate policies. Assess fiscal costs and fiscal risks emanating from the exposure to climate shocks and climate change policy actions. Develop green finance frameworks: Facilitate green bonds, green loans, and other innovative financing mechanisms to attract private capital to climate-related projects. Promote Public-Private Partnerships (PPPs): Foster PPPs to leverage private sector expertise and resources for climate-resilient infrastructure development and other climate-related initiatives. Support green entrepreneurship: Provide support and mentorship to green entrepreneurs and startups, helping them to develop and scale up innovative climate solutions. Support community-based adaptation: Support initiatives that empower local communities to develop and implement climate solutions tailored to their specific needs. Major enterprises requiring social investment could consider climate resiliency in the identification of community development projects. Expand early warning systems: Improve early warning systems for extreme weather events. Providing timely information that vulnerable populations can use to prepare and respond effectively will reduce disaster-related casualties and foster climate adaptation. Private sector projects near communities, including mining, could be required to provide climate risk management strategies. Strengthen social inclusion: Enhance participatory processes for vulnerability risk assessments, which will lead to engagement and local ownership of adaptation planning. Strengthening civil society's role and articulating shared values with local groups can strengthen local voices, avoid ritualization of 29 participation, and ensure that adaptation responses take local concerns, vulnerabilities, and capacities into account. Quantify SOEs contingent liabilities: The government could quantify contingent liabilities arising from SOEs and the broader BOS sector, including those stemming from climate risks (both physical and transitional risks). Introduce mandatory GHG reporting: Emissions reporting in high-emitting sectors would lay the groundwork for future carbon pricing or carbon budget mechanisms. Partner with the Projects and Energy Development Unit (PEDU): to help co-design funding strategies, access international climate finance, align projects with NDC targets and budgets, structure blended finance to de-risk investments, and prepare for carbon credit markets under Article 6. Leverage the Sustainable Financing Strategy 2023–30: to introduce green bonds and blended-finance vehicles, enabling large-scale participation by pension and insurance funds. Establish a domestic carbon credit trading framework under Article 6 of the Paris Agreement: to unlock finance for conservation and waste-to-energy projects. 30 3. Increasing the Resilience of Botswana’s Economy 31 3. Increasing the Resilience of Botswana’s Economy Adaptation is the central climate issue for Botswana. Investments to strengthen the resilience of the economy and people to climate shocks are key for Botswana to attain high-income status. Although climate-resilient investments would not completely offset the impacts of climate shocks, they would reduce those impacts. Climate-resilient investments therefore need to go hand-in-hand with the reforms and investments discussed in Chapter 1 to diversify growth, boost jobs, and increase exports. This chapter gauges the potential impacts of climate adaptation investments on the macroeconomy. It also provides a more detailed analysis of the impacts of climate change on the key vulnerable sectors — water, agriculture, and tourism — and proposes policy reforms to increase resilience. 3.1. Investments to increase resilience pay off, but damages remain significant Investments in climate resilience would reduce net GDP losses by 1.5 percent in a dry/hot climate future and by 1 percent in an wet/warm climate future. Adaptation investments in a dry/hot climate future would reduce the negative impact of climate change on GDP from 6.7 percent to 5 percent by 2050, net of investment costs (Figure 28).30 Adaptation payoffs are somewhat lower in the wet/warm future, because adaptation costs can outweigh the benefits. Road adaptation investments are the most cost effective, while bridges and productivity adaptation are less cost effective. Figure 28. Adaptation investments would reduce the negative impacts of climate change Source: World Bank CC-MFMod Botswana (2024). Tourism and agriculture stand to be significantly impacted by climate change. Both sectors employ a significant share of workers and plays important role in Botswana’s economy and rural livelihoods.31 They also have the potential to contribute more to the country’s development. Climate change impacts and options for a more sustainable and resilient tourism and agriculture are discussed below. Water security is a foundational objective of Botswana’s long-term economic diversification under Vision 2036. The country’s efforts to move towards high-value sectors, such as manufacturing, tourism, 30 In practice, full adaptation to the impacts of climate change is not possible due to technological limitations and other implementation barriers. 31 Worth noticing that rural households not only depend on farming for food consumption, as they also receive cash income from remittances or piece jobs and buy food at the market. In that way, they are exposed not only to food production fluctuation but also food prices. 32 and agro-processing, require a secure, reliable water supply. Without addressing existing and projected water scarcity, Botswana risks constraining new economic opportunities. The National Water Security Strategy notes that achieving Vision 2036 depends on implementing climate-resilient water management and ensuring equitable water access across sectors and regions. However, current resources are nearly fully allocated. As described in Section 1.2, Botswana has a water supply-demand deficit of about 50 Mm³/year, which could climb to 100 Mm³/year by the year 2036 if high water use continues and non-revenue water (NRW) losses stay at 33 percent. This gap would have significant negative impacts on Botswana's economy, prosperity, and sustainability. The pressure on existing water infrastructure already is becoming acute as urbanization and industrial activity increase (especially around Gaborone, Francistown, and the rapidly growing south-eastern corridor). There is potential for regional imports, notably from the Chobe-Zambezi system or Lesotho Highlands. However, the coordination of (north-south) national transfers with regional imports is complex, capital intensive, and requires alignment of basin-level and domestic plans, financing, and operating protocols (World Bank, 2023). Water sustains key economic sectors, including mining, agriculture, tourism, and energy, and is essential for urban and rural communities. For example, Botswana’s thermal power plants, particularly Morupule A and B, depend on water from the North-South Carrier and stressed aquifers for cooling. Future droughts and declining groundwater availability thus could disrupt energy production, compounding water scarcity with energy insecurity. Mining and processing activities also could be delayed or paused because of water scarcity, and mining could compete for water with other users that have more critical needs, such as communities. Agriculture contributes only about 2 percent of Botswana’s GDP, but accounts for approximately 39 percent of total water use. The National Water Security Strategy and World Bank analysis highlight that without radical improvements in irrigation efficiency and water-saving livestock management, agricultural water use will become unsustainable, especially under worsening drought conditions. Opportunities for reducing consumption may be greatest in livestock management, which now uses about 75 percent of total agricultural water.32 Botswana’s tourism sector, particularly around the Okavango Delta,33 is deeply dependent on water availability and ecosystem health. The Okavango Delta is not only a UNESCO World Heritage Site but also a pillar of Botswana’s tourism economy. The region provides an estimated 40 percent of national tourism revenue and sustains many livelihoods in the northwest. Overall, tourism employs about 15-20 percent of Botswana’s workforce and is the second-largest contributor to both GDP and export revenue after mining. In the northwest region, tourism provides 50-60 percent of local employment, with jobs such as guiding, staffing lodges, managing wildlife, and offering cultural tours. Reduced river inflows from climate change or upstream development threaten to degrade the region’s ecosystem, with significant economic and biodiversity consequences. Awareness in the private sector about climate adaptation action has been rising, but obstacles remain. According to the Climate Change Readiness Report (IFC, 2025), Botswana’s private sector is becoming increasingly aware of the potential impacts of climate change in energy, agriculture, tourism, mining, and manufacturing. However, levels of readiness to invest in climate adaptation and mitigation remain highly variable. Larger firms and internationally-connected businesses are more advanced in implementing or planning green investments, while SMEs are constrained by limited finance, skills, and policy incentives. 32 See section 3.3 for a detailed analysis of the agriculture sector. 33 See section 3.4 for and in-depth analysis of the tourism sector and its climate implications. 33 Digital technologies are powerful enablers of climate adaptation and resilience across sectors. In agriculture, they support farmers with real-time data on weather, pests, and sustainable practices — an area where Botswana has shown innovation. More broadly, digital platforms expand access to public services and economic opportunities, especially for women and youth. Tools like digital IDs, mobile money, and micro-credit are vital for post-disaster recovery, helping households maintain livelihoods and bounce back faster (World Bank 2022b). 3.2. Addressing water security challenges is crucial to enhance development 3.2.1. Water deficits are a key development challenge Water scarcity significantly constrains Botswana’s development. As one of the most water-scarce countries in sub-Saharan Africa, Botswana faces profound and growing water security challenges that threaten its national development aspirations. Annual rainfall ranges from just 250 mm in the southwest to 650 mm in the north, and potential evaporation exceeds 2,000 mm per year, severely limiting available water resources. With 90 percent of streams being ephemeral, Botswana’s water system depends heavily on a limited number of surface reservoirs and on highly stressed groundwater aquifers, which supply about two-thirds of total national water needs. Most aquifers have limited recharge capacity, estimated at less than 1 percent of their extractable volume per year, and are already being overexploited in some regions. Groundwater recharge in Botswana is highest in northern regions. Satellite-based observations show that higher recharge occurs in northern regions like Chobe and Ngamiland West, while central and southern areas receive considerably less water. In southern districts like Barolong, for example, recharge has been only 28 mm to 152 mm per year. Recharge peaks were observed in 2015 and 2020, likely reflecting wetter periods caused by seasonal variability and climate oscillations such as ENSO. Water withdrawals have been most concentrated in northern and central Botswana, particularly around Lake Ngami, reaching up to 0.5 km³ between 2003 and 2022. In contrast, abstraction remains limited in the Kalahari. Since 2012, overall abstraction has decreased and groundwater availability has increased, although withdrawals continue to be high during dry months. 3.2.2. Water insecurity has social and economic consequences Botswana has made significant strides in water supply and sanitation, but there is still a rural and urban divide. Overall, 92 percent of the population has access to basic drinking water services. In urban areas, 83 percent the population has safely managed drinking water services, and another 15 percent has basic services. In rural areas, 70 percent of the population has basic services and 15 percent has only limited services. In sanitation, about 77 percent of Botswana’s population has access to at least basic sanitation services, while 11 percent has no form of sanitation facilities and hence practices unsanitary hygienic methods. The remaining 12 percent of the population uses shared or unimproved sanitation facilities. Annual wastewater volumes are estimated at 40.1 Mm3/yr (National Water Conservation and Demand Management Strategy of 2021). According to the National Water Master Plan update of 2018, Botswana is treating about 50 percent of wastewater, but is recycling only 10 percent of the treated effluent (20-30 Mm3/yr). Water insecurity in Botswana disproportionately affects rural populations and women. Many rural communities still rely on distant or unsafe water sources, and the burden of fetching water falls predominantly on women and girls, limiting their time for education or income-generating activities. This situation exacerbates rural poverty, inequalities, and public health, since safe drinking water is essential for preventing waterborne diseases. In regions like Bobirwa and the Limpopo Basin, water scarcity has intensified poverty, weakened traditional governance systems, and heightened 34 vulnerabilities to climate shocks. Equitable water governance and targeted investments in water infrastructure are therefore needed to support resilience and inclusive development. 3.2.3. Vulnerabilities to achieving water security Water stress is projected to intensify in Botswana’s southern and eastern regions because of higher temperatures, declining inflows, and growing demand, increasing the risk of localized supply failures. These regions include key growth hubs, such as Gaborone and Lobatse, and surrounding agricultural zones, which already have significant urban, industrial, and agricultural water use. Without targeted interventions, such as improved spatial planning and demand-side measures, supply disruptions will exacerbate development constraints and widen regional inequalities (WB-DMDU). The North-South Carrier (NSC) system is Botswana’s water lifeline but is critically vulnerable. The NSC transfers water from the northeast to central and southern Botswana. It currently supplies around 45 percent of Gaborone's water needs but is increasingly stressed by declining surface flows, groundwater constraints, and rising urban demand. The NSC could, in fact, become a single point of failure in the national water system, with severe consequences for the country, and its reliability is threatened by future climate variability. Botswana also lacks adequate water storage capacity, and current dams are highly vulnerable to drought. Botswana’s reservoirs have a storage capacity of about 708 million m³, but are already under stress, particularly in the central and southern regions where demand is highest. Key dams, such as Gaborone Dam and Boka Dam, have seen critically low levels in recent droughts, triggering severe water rationing. Non-revenue water remains one of the largest sources of water loss in Botswana. An estimated 33 percent of water produced in Botswana does not reach paying customers because of leakages, illegal connections, and metering inaccuracies, especially in rapidly growing urban areas like Gaborone and Francistown. This is not only a massive waste of an already scarce resource, but also a significant financial loss for utilities. Groundwater is essential for Botswana’s water security but requires much stronger active management. Groundwater supplies over two-thirds of total demand but is unsustainable in many areas. Recharge is less than 1 percent annually, and some wellfields are already over-abstracted. Under high-demand or extreme drought scenarios, groundwater supplies could be irreversibly depleted or rendered unusable by rising salinity. Transboundary water inflows are a major vulnerability that could disrupt Botswana’s entire water strategy. Botswana’s reliance on shared rivers, including the Okavango, Limpopo, Orange, and Zambezi, adds a layer of water politics and climate risk. A World Bank analysis finds that reductions in transboundary flows, due to either upstream withdrawals or climate change, would trigger cascading failures across sectors, particularly in regions supplied by the NSC. While Botswana participates in basin-level cooperation platforms like OKACOM, LIMCOM, and ORASECOM, enforceable agreements are lacking, leaving Botswana exposed to upstream decisions beyond its control. High levels of non-revenue water (NRW) reduce the efficiency and sustainability of Botswana’s water sector. More than a third of treated water never generates revenue or reaches users because of physical losses, metering inaccuracies, unbilled consumption, or other NRW issues. Addressing NRW with investments in leak detection, smart metering, and operational reforms could recover tens of millions of cubic meters annually, defer costly supply expansions, and improve cost recovery. 35 Climate change will aggravate Botswana’s already existing water scarcity and vulnerabilities of the water system. Temperatures are projected to rise by 1.5°C to 2°C by 2050, changing the hydrology of the major transboundary rivers that supply Botswana with freshwater. At the same time, evaporation rates could increase by up to 7 percent, and inflows to key reservoirs are expected to decline between 3.5 percent and 19 percent, posing risks to water supplies to urban and industrial centers. This analysis highlights that under future climate conditions, current water infrastructure and management practices will no longer be adequate to secure the needs of the population and economy. Botswana is evaluating several long-term, large-scale supply-side options to supplement current sources. These include proposed water transfers from the Zambezi River and the Chobe River, and desalination plants along the Namibian coast. However, these options are highly capital-intensive and carry significant trade-offs, including ecological risks, political sensitivity, and the need for complex transboundary negotiations. For example, direct transfers from the Okavango River raise concerns due to the river’s ecological and tourism value. Uncertainties in future climate and demand requires a fundamental shift in Botswana’s water planning approach. Business-as-usual planning will fail under most future climate scenarios. Without clear adaptation, Botswana's water system will collapse under the combined pressures of rising demand and declining supply. To address these issues, Botswana needs adaptive, flexible strategies, including an adaptive intervention roadmap that prioritizes and sequences investments and actions based on real-time monitoring and observed changes. 3.2.4. Policy options to increase the resilience of the water sector Botswana could implement no-regret interventions that would perform well under all future climate scenarios. These include: (i) reducing non-revenue water (which would reduce water losses of up to 33 percent); (ii) scaling up wastewater reuse; (iii) implementing demand management incentives; (iv) developing groundwater management for domestic and agricultural uses, while acknowledging growing demand from other sectors (such as mining and industry); (v) strengthening real-time data systems; and v) organize a national water platform to provide improved coordination across different ministries, private sector, and civil society. For the platform to deliver on its mission, the retrieval, management, and exchange of data relevant for the sector would also have to be coordinated and the models relevant for the sector would have to be shared. Addressing non-revenue water is one of the most cost-effective and climate-resilient measures identified. Also, nature-based solutions offer a critical but underutilized pathway to enhance Botswana’s water security. These include wetland restoration, catchment protection, and managed aquifer recharge, which could significantly improve storage and water quality while also supporting ecosystems like the Okavango Delta. Botswana will also require a strategic blend of infrastructure upgrades, improved allocation mechanisms, and innovative financing to address future water risks. Large-scale infrastructure investments, particularly to reinforce and expand the North-South Carrier (NSC) system, are critical, as the NSC faces mounting stress and could become a single point of failure under climate extremes. While the National Water Security Strategy outlines possible NSC upgrades and extensions, these must be embedded within a flexible, adaptive planning framework that accounts for hydroclimatic uncertainty and shifting spatial demand, especially in fast-growing and water-stressed areas of the southeast. In addition, strengthening national and local water allocation mechanisms (where pricing and allocation mechanisms must remain central) will be essential to ensure water security. Wastewater reuse could become a critical component of Botswana’s water security strategy . Scaling up wastewater reuse would reduce pressure on surface and groundwater sources, contribute to industrial and agricultural water supplies, and increase resilience during droughts. However, current 36 reuse levels are low, and significant investments are needed to upgrade treatment plants and develop new reuse schemes. Wastewater reuse also must be accompanied by national guidelines for reuse and sludge management. Aligning agricultural water investments with water risk hotspots is essential for climate resilience. Analyses by the World Bank show that under future scenarios of climate, southern and eastern Botswana (including key growth nodes such as Gaborone, Lobatse, and surrounding commercial farming zones) is projected to experience more severe water stress. Agricultural support programs thus must better incorporate water constraints into planning by prioritizing investments in drought-resilient crops, climate-smart irrigation, and conjunctive use of surface and groundwater. Moreover, given that livestock accounts for most agricultural water use, policies could also address livestock watering infrastructure, sustainable pasture use, and equitable access to water for general rural users. Enhancing groundwater monitoring and implementing adaptive management are crucial for future resilience. Satellite-based assessments show that groundwater recharge remains low and highly variable in southern and central regions. Abstraction is most concentrated around Lake Ngami and central zones and has become increasingly seasonal. Thus, there is a need to expand real-time monitoring, develop seasonal abstraction rules, and improve aquifer-specific recharge models. Doing so would ensure that groundwater remains a viable drought buffer while preventing localized depletion, especially as future climate patterns grow more uncertain. Strengthening institutional coordination is essential to overcoming fragmented water governance. Botswana’s water sector is currently characterized by fragmented mandates and overlapping responsibilities, limiting the country’s ability to respond to emerging water crises and plan for long-term risks. The Water Security Strategy calls for clearer roles, improved coordination mechanisms, and capacity-building to implement integrated water resources management. Furthermore, integrating water and energy planning will be crucial, particularly as Botswana seeks to expand domestic energy production to reduce reliance on imports. Diversifying toward low-water-use renewable energy sources such as solar could reduce pressure on water systems and improve overall resilience. The proposed expansion of irrigated land in the Chobe-Zambezi region will require close cross-sectoral coordination to ensure that sufficient water is available. Financing Botswana’s water security improvements will require innovative mechanisms beyond public budgets. Current government budgets are insufficient to address the scale of investment needed for infrastructure rehabilitation, new storage, and climate resilience. The National Water Security Strategy (Priority Area 7) proposes creating a National Water Fund to pool and allocate resources, including from public-private partnerships (PPPs), concessional finance, and climate funds. However, operationalizing this fund remains pending. 3.3. Developing a resilient agricultural sector 3.3.1. The agriculture sector is hindered by low productivity and inequalities of access to technology, inputs, and management practices The agriculture sector is dominated by small-scale livestock and crop farmers. Almost 95 percent of Botswana’s farmers are involved in traditional smallholder agriculture, predominantly livestock farming, while only 5 percent are commercial farmers (Statistics Botswana, 2022). In addition to livestock farming, some annual crops (such as maize, sorghum, millet, other cereals, pulses, and vegetables) are grown. Yields on commercial farms are more than double those on smallholder farms. This is because smallholder crop farming in Botswana is largely rainfed, with while commercial farms often use irrigation. Similarly, in the livestock sector, productivity (for both beef and milk production) is much 37 higher on commercial farms than on smallholder farms, because of significant differences in land tenure, the quality of inputs, services, production technologies, and animal husbandry practices. Structural transformation and productivity growth in the agriculture sector appear to have stalled over the past two decades. Over the last 20 years, the percentage of people working in the agriculture sector has remained relatively stable, at 17-23 percent, but adding only about 2 percent to total output, reflecting the sector’s low productivity (Figure 29) (World Bank, 2023). Productivity in the livestock subsector, which provides about 85 percent of agricultural value-added, has also been low due to high cattle mortality attributed mainly to disease and drought, because critical inputs like fodder and water are seasonal and often not accessible to the majority of farmers. Figure 29. Agriculture has a limited contribution to GDP but is a key economic activity in rural areas (a) Agriculture’s contribution to GDP, (b) Agriculture’s contribution to GDP since 2015 employment, and exports Importance of agriculture in Botswana (2022) 2.2 1.9 2.0 1.8 2.1 2.1 1.8 1.8 1.8 percent (85 2.0 Contribution of agriculture to GDP (of which cattle) percent) Employment 23 percent 0.0 Exports 2 percent Source: WDI, World Bank https://databank.worldbank.org/source/world-development-indicators# Although agriculture accounts for only 2 percent of overall GDP, it is critical for rural jobs, farmers’ incomes, and livelihoods. The sector accounted for 23 percent of the labor force in 2022 (Figure 29). More than two-thirds of agriculture workers are employed in the livestock sector, which is a critical source of income for rural communities (Statistics Botswana 2022; National Agricultural Research and Development Institute (NARDI, 2023). Even when rural households receive remittances or income from piece jobs, the rainfed, low productivity agriculture sector contributes heavily to poverty and inequality in Botswana as 97 percent of the rural population remains dependent on it. This dependence is also rooted in traditional ways of life and reinforced by limited employment opportunities in rural areas. 3.3.2. Climate change poses additional threats to agriculture production and livelihoods Botswana’s agricultural development will be significantly affected by climate change induced risks. Climate change impacts on crop and livestock production from heat stress and reductions in the quality and quantity of fodder are likely to increase. Impacts on meat production are expected to be greater than those on milk and eggs (which can be produced under heat-controlled conditions, though energy costs could be high). In the dry/hot scenario, meat production in cattle, goats, and sheep could decline by 34-36 percent by 2041-50, with an overall livestock production decline of 20.7 percent (Figure 30). Impacts would be lower in the wet/warm scenario. Climate change could also cause rainfed crop production to decline by up to 25 percent by 2041–50 under the dry/hot conditions, with the production of key rainfed crops, such as potatoes and vegetables, declining by at least 30 percent. However, a wet/warm future would bring output gains for the majority of rainfed crops (Figure 31). Water, agriculture, and the environment are deeply intertwined in Botswana, shaping both rural livelihoods and the health of ecosystems. Water availability is a fundamental determinant of agricultural 38 productivity, with the sector using about 48 percent of total national water consumption, 34 primarily for rainfed livestock (58 percent) and horticulture (42 percent). In Botswana’s semi-arid climate, agriculture relies heavily on variable rainfall (“green water�) and increasingly on groundwater (“blue water�) accessed through boreholes. In fact, groundwater now supplies over half of national water needs and 36 percent of irrigation water. Persistent droughts, erratic rainfall, and rising temperatures have intensified water scarcity, and heightened agriculture’s vulnerability to climate change. Livestock production, a critical source of rural income, faces mounting risks from declining water quality and quantity, while the expansion of irrigation is constrained by limited surface water and high competition among sectors. With most aquifers experiencing limited recharge and increasing pressure from urbanization and drought, sustainable management of both green and blue water resources is essential. Strengthening the water-agriculture- environment nexus through integrated planning, investment in resilient infrastructure, and support for climate-smart practices is critical for Botswana’s food security, rural livelihoods, and long-term resilience to climate shocks. Figure 30. Climate change impacts on livestock Figure 31. Climate change could also result in production are likely to be severe, particularly in rainfed crop production declines under the a dry/hot future dry/hot conditions (Impacts by 2041-50, as percent from baseline) (Impacts by 2041-50, as percent from baseline) Source: IEc Botswana CCDR Background Report (2024). Source: IEc Botswana CCDR Background Report (2024). Rainfed production of annual crops and livestock among communal producers is particularly at risk. More than 80 percent of the farmers in Botswana cultivate rainfed crops and thus are already susceptible to drought. Now, average temperatures are increasing, as are the number of high heat days and the variability of rainfall, making the production of rainfed crops even more challenging. Similarly, most livestock farmers are in the communal system, where, like crop farmers, they are severely affected by persistent droughts and unreliable rainfall patterns. Livestock and cattle numbers have been declining over the last decade, largely due to repeated droughts that have reduced the supply of quality fodder, the rising incidences of pests and diseases, and ever-increasing climate shocks. The increasing deterioration of water quality is also affecting the sector. Communal farmers have limited abilities to adapt to these changes, making them disproportionately vulnerable to increasing climate shocks. 34 Department of Water Affairs, Botswana Water Accounting Report, 2015/16. 39 Ever-increasing climate shocks and environmental degradation hinder inclusive sector development and increase inequities, as they disproportionately threaten smallholders, especially those relying on rainfed agriculture (Liu and Zhou 2021). Smallholder farmers already have limited access to innovative adaptation tools and solutions (or the capacity to adopt them), hampering their resilience. As a result, the adaptation mechanisms which are available tend to benefit more sophisticated producers, not smallholders. In addition, smallholders face difficulties accessing markets for livestock and livestock- derived products, making it more challenging for them to sell or restock animals during climate crises such as droughts. Smallholders thus tend to remain subsistence-oriented, keeping their underperforming animals mainly for their own consumption instead of taking advantage of commercial opportunities. Climate vulnerability in rural areas is sometimes worsened by geographical and social factors. For instance, in the Limpopo Basin, the legacy of colonialism has eroded traditional collective decision- making structures, particularly the Kgotla (village courts) system, disconnecting rural communities from resource management decisions and exacerbating poverty (Dube et al. 2007; Dougill et al. 2010). In the Kalahari region, ethnic diversity adds complexity to climate vulnerabilities: Poorer communal pastoralists, many of whom belong to historically marginalized ethnic groups such as the Basarwa/San and Herero, have been disproportionately affected by government land privatization policies, while wealthier ranchers, often from more politically dominant groups like the Tswana, have benefited from increased access to resources and institutional support. This dynamic highlight the uneven impacts of climate change and policy interventions (Dougill et al. 2010). Smallholder farmers in regions like Ngamiland east are acutely aware of climate changes but struggle to implement effective adaptation strategies due to resource constraints (Sekelemani et al. 2020). These farmers are trying to cope with temperature increases and rainfall pattern shifts by using hybrid seeds, drought-resistant crops, modified planting techniques, and water-harvesting systems. But their limited access to credit and funds remains a critical factor. Targeted support programs focusing on resource access, credit facilities, and capacity building for climate-adaptive farming techniques are thus essential for enhancing smallholder resilience. The private sector faces challenges in adapting to climate change. The recent Climate Change Readiness Report (IFC, 2025) shows that Botswana's private sector in land and agriculture is increasingly aware of climate change threats, including droughts, floods, and rising temperatures. These climate change impacts are causing operational disruptions, such as infrastructure damage and transport delays, for agribusinesses. However, overall readiness remains low, and engagement in climate-smart agriculture is still emerging. Key barriers to greater adoption include poor soil management, inadequate farming techniques, limited training access, high capital costs, and limited finance options for small and mid-sized businesses. Some agricultural practices are contributing to land and water quality degradation, potentially exacerbating the impact of climate shocks. For example, overgrazing in communal rangelands leads to soil compaction and reduced vegetation cover, allowing increased erosion and reducing the land’s regenerative capacity. Similarly, improper crop farming practices deplete soil nutrients and diminish water infiltration and retention. The unsustainable use of agro-chemicals is also affecting the quality of surface and groundwater. These practices can cause both crop yields and pasture productivity to decline, especially during dry spells. For livestock systems, degraded rangelands have a significantly lower carrying capacity, making them less resilient to droughts. Herds may suffer higher mortality rates or require costly feed supplementation. Furthermore, rangeland degradation compounds climate change by reducing the ability of rangelands to act as carbon sinks. Improved rangeland management and sustainable farming practices will thus help both adapting to and mitigating climate change. 40 Figure 32. The country has been reliant on groundwater for livestock production 100 80 60 40 20 0 Sources Groundwater Sources Dam Sources River Source: Botswana Water Utilities Corporation, 2017 (https://www.wuc.bw/) Given the scarcity of surface water sources, the country has been reliant on groundwater for livestock production. Groundwater abstraction through boreholes accounts for over 52 percent of the water use (Figure 32). There are more than 25,000 officially registered boreholes in Botswana, of which more than 10,000 are owned by the Government of Botswana (GoB). In addition, there are more than 5,000 boreholes that are not registered (Kenabatho & Parida, 2013). Most of these are used for both livestock and human consumption, with livestock alone estimated to utilize about 23 percent of the boreholes (Masike and Urich, 2009). Most of these boreholes were sunk more than 25 years ago and have been inadequately maintained. Over the past 10 years, the quality and reliability of groundwater sources have declined significantly. In addition, water tables have dropped, in part because of climate change, raising the costs of abstraction. Masike and Urich (2009) estimate that the cost of water abstraction through boreholes will increase by 23 percent by 2050 if measures are not taken to rehabilitate boreholes and ensure their sustainable and efficient use. Similarly to the situation with irrigation water, the pricing of groundwater in Botswana does not reflect the total social and economic cost of extraction (Jefferis & Nemaorani, 2015). According to the Water Utilities Corporation (WUC), the fees levied on large scale groundwater abstractors are considerably lower than the fees paid for pipeline water supplied by WUC, which provides a perverse incentive encouraging unsustainable use. Correcting this policy issue would enhance the efficient utilization of borehole water. The Agriculture, Forestry and Other Land Use (AFOLU) sector is one of the key contributors to GHG emissions. Based on Botswana‘s most recent national GHG inventory in 2017 (calculated on the base year 2012), the AFOLU sector accounted for nearly a fifth of the country’s total GHG emissions and was the second largest emitter (after energy) of methane (Ministry of Environment, Wildlife and Tourism, 2016). Cattle are the largest source of GHG emissions in the livestock sector, producing 84 percent of the country’s total methane emissions (Botswana’s Third National Communication 2019), mostly from enteric fermentation (95.8 percent) but also from manure management (4.2 percent). Emissions from enteric fermentation have been declining since 2010, due to decreases in livestock numbers. Forestation and grazing also impact emissions. Botswana has natural forests and woodlands that function as critical carbon sinks. Maintaining forest land or converting agricultural land to forest can reduce net emissions by increasing carbon sinks. However, unsustainable grazing practices have led 41 to increased emissions by reducing the land’s ability to store carbon owing to the destruction of biological soil crusts, increased soil erosion, desertification, bush encroachment, and reduced carbon uptake by plants. 3.3.3. Policy options and strategies for a more resilient and lower emitting agriculture sector Mainstreaming climate actions in investment planning is key to promoting adaptation practices and increasing farmers’ resilience to climate change shocks and risks. Botswana’s Climate Change Strategy and National Adaptation Plan Framework highlights the key adaptation options for the country. They include: (i) investing in irrigation infrastructure, (ii) helping farmers invest in boreholes for livestock, (iii) promoting the adoption of climate-smart agricultural technologies and decision support tools such as digital enabled early warning systems, and (iv) developing agricultural risk management instruments, including agricultural risk insurance. However, there is no investment framework or a coordinated implementation plan to ensure that these adaptation options are mainstreamed in sector development plans or sector budgets. There are also limitations in monitoring and coordinating the implementation of climate actions within and across sectors. Efficient use of water is a top priority, as insufficient surface water makes irrigation challenging. The potential expansion of irrigation is limited due to water resource constraints. Less than 2 percent of Botswana’s potential irrigable land is equipped for irrigation, much lower than in South Africa (14 percent) or the average for Southern Africa (about 12 percent). The use of surface water for irrigation is further limited by the low, unreliable, and unevenly distributed rainfall, compounded by the fact that all the rivers within the country are either dammed, or planned for damming, for domestic water use or livestock watering. Therefore, promoting water use efficiency is crucial. A key strategy would be using proper instrumentation in the conveyance systems (including the use of digital technologies such as Internet of Things (IoT) sensors) to enable farmers to use the right amounts of water at the right time to best meet plants’ needs. Wastewater reuse could also be promoted, and the issue of water rights and mechanisms to ensure compliance with water rights payments under the Water Apportionment Board (WAB) need to be addressed. Climate-smart agricultural (CSA) technologies and practices can improve farmers’ productivity and resilience and help mitigate the effects of climate change. Promising technologies include conservation agriculture (such as deep ripping, minimum tillage, or zero tillage), the use of locally adapted livestock breeds and crop varieties (such as drought tolerant and early maturing sorghum, maize, millet, and cowpeas), crop diversification and intercropping, and optimal timing for planting, fertilizer application, weeding, and harvesting. Complementary measures include decision support tools (such as early warning systems using digital technologies) and risk insurance instruments, such as index-based insurance,35 to hedge against drought risk. Adoption of CSA among smallholder farmers in Botswana has been limited. Barriers to adoption include high initial investment costs, additional labor requirements, greater management intensity needs, and inadequate institutional capacity to develop and transfer the technologies to farmers. In some cases, there are perverse incentives because of government subsidies and programs that encourage conventional agricultural practices and inefficient practices. 35Index-based insurance products are available in Botswana, primarily targeting agricultural and climate-related risks. Key drivers include government collaboration with African Risk Capacity (ARC), international NGOs, and private insurers. These products help mitigate risks from droughts and other climate shocks, though awareness and accessibility among small-scale farmers may still need improvement. 42 Increasing the use of insurance solutions would help the adoption of CSA technologies. A growing body of research36 has shown that agricultural index insurance is effective at mitigating the climate-induced risks that act as barriers to investments in productivity, particularly among small-scale farmers and pastoralists. However, Botswana, like many countries, needs a clear policy and regulatory framework, along with the institutional capacity (across both public and private sector) to make the instrument work for vulnerable small-scale farmers and pastoralists. Integration of indigenous knowledge systems and locally adapted solutions is useful for effective climate adaptation. In the Okavango Delta, rural households use local knowledge of weather forecasting to adapt to climate variability, including ethno-meteorology and pattern recognition of natural indicators (Kolawole et al. 2016). These practices inform adaptation strategies, such as selecting drought-resistant seeds, securing temporary jobs, and shifting farming calendars. Elders remain open to collaborating with scientific weather forecasters, suggesting opportunities for knowledge co-production. Creating suitable platforms for meaningful engagement, such as local committees and workshops where farmers can work with agro-climatologists and weather scientists, would strengthen adaptive capacity and ensure locally appropriate solutions (Kolawole et al. 2014). Growth of the livestock sector through improved production, reduced mortality, and access to premium markets creates opportunities for climate mitigation. The adoption of modern husbandry techniques, improved breeds, sustainable rangeland management, and improved nutrition and feeding would translate to a reduction of GHG emissions intensity in the livestock sector. Furthermore, the Government of Botswana aims to enhance the sustainability of the livestock system by increasing its grassfed and rangeland-raised base and by working to improve animal welfare, sustainability, and equity, further materializing mitigation opportunities. The Government of Botswana aims to reverse the declining livestock trend and increase natural food security by supporting small-scale farmers with financial assistance, capacity building measures, and resources to enhance productivity. The government’s strategy includes adopting rangeland-based production, sustainably managing natural resources, and improving breeding and animal health. These climate-smart livestock production practices will help reduce future emissions and avoid carbon lock-ins that might hamper the achievement of the country’s development goals. Increased livestock production is compatible with mitigation measures. Analyses show that climate- smart approaches could increase beef production by 23 percent while also cutting emissions by 13 percent (to 190,103 tons of CO2eq in 2030). That would represent a 30 percent decline in the emissions intensity of beef production and would decrease overall emissions by 665,361 tons of CO2eq by 2030. GHG mitigation interventions have been selected from the Beef Industry Competitiveness Reinforcement Initiative and National Drought Plan. These recent plans aim to improve beef production and include interventions that enhance livestock productivity and reduce cattle mortality from severe drought. The increase in productivity and reproductivity, improved animal health, and reduced animal mortality translate into a more efficient herd that produces each kilogram of protein with reduced inputs, increased feed conversion efficiency, and thus fewer emissions. Interventions include: (i) improvement of pasture management through resilient fodder crops, fodder reserves, and regenerative grazing; and (ii) improvement of animal health. A financial analysis shows that these measures would result in a higher Net Present Value (NPV) compared to the BAU scenario, including the improvements in pasture management in communal grazing rangelands and the social benefits of lower carbon 36 https://basis.ucdavis.edu/agricultural-index-insurance-economic-development. 43 emissions.37 The economic analysis also shows that total emissions per head of cattle would drop from 2,964 to 2,172 kg CO2eq/head/year (a reduction of 792 kg CO2eq/head/year). Taking mitigation actions that provide co-benefits, rather than just mitigation benefits, would also benefit the development of the sector. The declining cattle herd and Botswana’s mitigation objectives call for an increase in cattle production through improvements in productivity. This strategy is also consistent with global objectives to reduce livestock emissions, particularly methane, and it would open up opportunities for sectoral branding and for access carbon finance markets. Steps towards a more sustainable livestock industry include (i) increasing productivity and reducing emissions intensity; (ii) promoting sustainable herd increases by achieving optimal carrying capacity; (iii) promoting the use of methane-reducing technologies, including low-methane breeds; and (iv) promoting carbon sequestration in landscapes, which can offset emissions. These strategies would help to achieve sustainable livestock development objectives and reduce GHG emissions intensity. Another complementary strategy is exploring genetic and breeding improvements in cattle. Selecting breeds that are highly productive and that adapt well to their environments can improve productivity and reduce emissions in the livestock system. These improvements can be disaggregated to breeds’ reproductive qualities and efficiency, nutrition conversion capacity, resistance to diseases and parasites, and other traits that enhance their health, wellbeing, and productivity. Botswana already is conducting breeding and reproductive research aimed increasing the quality and genetic merit of the national herd, but it could consider scaling up breeding techniques like artificial insemination and increasing the uptake of improved breeds. 3.4. Climate change impacts on biodiversity and ecosystem services could undermine nature-based tourism 3.4.1. Climate change impact on tourism and biodiversity Botswana’s natural wealth is both a national treasure and a foundation for future growth. The country was an early leader in ecotourism, guided by its 2002 National Ecotourism Strategy and a focus on high-value, low-volume tourism. Botswana’s efforts include creating wildlife sanctuaries, protecting free-roaming elephant herds, and saving endangered species like rhinos . Meanwhile, Botswana’s ecosystems support tourism; provide water for drinking, agriculture, and industry; and sustain local livelihoods through agriculture, livestock, and forest products. Forests and wetlands regulate climate, water, and soil fertility, with the Okavango Delta playing a key role in water management and pollution control. The country’s ecosystems also offer cultural benefits, making their conservation and sustainable management important for both current and future generations. The tourism sector, primarily focused on nature tourism, is a key driver of jobs and has the potential to increase its contribution to economic activity and foreign exchange. In 2023, the sector contributed 10 percent of GDP when both direct and indirect effects are considered (World Bank 2022) and more than 10 percent of jobs, generating 5.3 percent of the country’s foreign revenues (US$334 million). However, even before the Covid pandemic, there were signs of declining performance in the sector, as Botswana was not realizing its comparative advantage as a country with extensive diversity and numbers of wildlife (Word Bank 2022). In Botswana, tourism is relatively undiversified, both in terms of products and source markets, which reduces its reliance to shocks. For example, just two areas — Chobe National Park and Moremi Game Reserve, which are both part of the Okavango Delta — accounted for an 37The analysis was undertaken for a typical Botswanan farmer with 20 head of cattle in a traditional beef production system. The financial analysis considered only direct costs and benefits at the farm level. The economic analysis considered also the social benefits of carbon emissions reductions. 44 estimated 94 percent of the country’s total national park revenues in 2022 (“Visitor Entry Statistics� 2022). Climate change may affect nature-based tourism in Botswana through changes in the suitability or attractiveness of a particular location. World Bank climate modeling for this CCDR shows that increases in temperature will make tourism locations less desirable as temperatures increase above optimal thresholds. In Botswana, the shocks are projected to be substantial under both future wet/warm and hot/dry climate scenarios (Table 3). The bulk of this effect is due to changes in international leisure tourism (accounting for 59 percent of tourism revenues) with domestic tourism responsible for a much smaller proportion of the projected effect due to its relative size. Table 3. Summary of impacts annual average, 2041-2050 Baseline Adaptation Impact Cost Impacted Variable Wet/warm Dry/hot Wet/warm Dry/hot Channel (Mill mean mean mean mean USD) Tourism Sector revenues -10.0 percent -19.9 percent N/A Source: IEc Botswana CCDR Background Report (2024). Water inflows to the Okavango Delta, the single largest tourist center in the country, decrease in most climate scenarios.38 The Okavango Delta is an endorheic or inland river delta located in northern Botswana, designated as both a World Heritage Site and a RAMSAR wetland of international importance. With the region’s focus on high-value, low-volume tourism, the viability of this sector and the livelihoods it supports depend on the health of the Delta as a continued biodiversity hotspot. Climate change is expected to reduce the mean flooded area by 8 percent by 2041-2050, with a high growth scenario resulting in flooded areas that are approximately 2 percent smaller than under a low growth scenario.39 When development is considered, the negative impacts to tourism are likely to be most significant in years that experience higher-than-average flood extents, with less-than-average flood extents associated with more modest reductions in tourism revenues.40 Climate change also has negative impacts on tourism revenues. Tourism revenues under average floods (a 50th percentile flood area) would be slightly reduced compared to a BAU of no further impact from climate change. Projected declines in tourism revenues under smaller-than-average (10th percentile) and larger-than-average (90th percentile) flood areas would be more sizeable (Figure 33). For instance, in low flood years, climate change is projected to reduce tourism revenues by 6 to 7 percent. In years where floods are below average in size, the high growth scenario results in lower tourism revenues due to further reductions in Delta inflows, while the low growth scenario is associated with less severe impacts to tourism as upstream water withdrawals are smaller. While the results suggest that in those years that experience higher-than-average flood areas, high development is in fact beneficial (given that high water withdrawals reduce flood area to be closer to typical), this finding 38 See Annex A for modelling details. 39 See Annex A for modelling details. A low development scenario assumes little new infrastructure development in the basin, with some expansion of water abstractions for domestic water supply, livestock, and subsistence agriculture. In contrast, a high development scenario assumes more development, including for domestic water supply and expansion in irrigation, as well as oil and gas exploration. 40 While the analysis does not quantitatively assess the joint impacts of increasing temperatures reducing tourism demand, and high and low flow years reducing Delta flood extents, the combined impacts on Botswana’s tourism sector as a result of climate change are likely to be sizeable. 45 should be interpreted cautiously: The analysis does not take into account other possible impacts, such as declines in water quality and dry season environmental flows.41 In Botswana, tourism and biodiversity intersect with important social equity challenges. Although community-based natural resource management (CBNRM) was designed to empower local communities, many residents — particularly in areas like Maun — perceive that tourism benefits primarily accrue to government and foreign operators, limiting local support and ownership (Hambira et al. 2021). Limited community participation in tourism planning, low climate literacy among stakeholders, and the underrepresentation of women and marginalized groups in governance structures exacerbate these challenges (Hambira & Saarinen 2015). These dynamics highlight the need for more inclusive climate-resilient tourism strategies that equitably distribute benefits and strengthen local adaptive capacity. Figure 33. Climate change negatively impacts tourism receipts Tourism expenditures and flooded area in the Okavango Delta, for different development and climate scenarios, 2041-2050 Source: IEc Botswana CCDR Background Report (2024). 3.4.2. The way forward: Fostering resilience in the tourism sector To realize its tourism goals, Botswana must safeguard its reputation as a world-class destination while simultaneously exploring new avenues for tourism revenue that are less reliant on its natural resources. The country's rich biodiversity and pristine landscapes have long been the cornerstone of its tourism appeal, attracting high-end eco-conscious travelers from around the globe. This model of fewer, high- end visitors is ideal for minimizing impact on the country’s landscapes. But to grow the sector, and derive more jobs from it, the country will have to diversify what it means to be a tourist in Botswana. This is particularly important as modeling shows that revenues from foreign tourists, currently mostly coming for eco-adventures, are expected to decline as a result of increasing temperatures, which officials will have little ability to mitigate. Botswana could focus on broadening its appeal beyond nature. Positioning Botswana as a prime location for conferences and expos, for example, could leverage its reputation as a safe and welcoming country with robust infrastructure, reliable potable water, and a well-developed service and hospitality 41Notably, this analysis does not consider the impact of development on minimum flows to the Delta in the dry season, which are also key for supporting biodiversity. This an area for future work. 46 sector. This strategic shift would not only attract a different segment of tourists, including those closer to home, but also stimulate economic activity across various sectors, fostering a more inclusive and sustainable tourism industry. Sustainable tourism needs to remain a central tenet; by prioritizing sustainability, Botswana would reinforce its commitment to preserving its natural heritage and position itself as a leader in eco-friendly tourism, setting a benchmark for others to follow. Botswana can strengthen its regulatory framework by implementing mandatory sustainability reporting for tourism operators, establishing a national eco- certification program, and developing a comprehensive sustainable tourism strategy. These measures would ensure that tourism activities align with climate mitigation and adaptation goals, promoting responsible practices that protect the environment while enhancing the sector's credibility. Private sector–led growth in Botswana’s travel and tourism sector can be accelerated through a strategic three-pillar approach. As outlined in the Botswana Country Private Sector Diagnostic (World Bank, 2022), unlocking the sector’s full potential requires addressing key regulatory, governance, coordination, and infrastructure challenges. First, streamlining the regulatory environment is essential — this includes simplifying licensing procedures, clarifying institutional mandates, and decentralizing tourism management to enhance efficiency and responsiveness. Second, catalyzing private investment in new products and destinations requires measures such as easing restrictions on tourism activities within concession areas (while still upholding sustainability principles) and improving tourism-related infrastructure and air connectivity to better serve emerging markets. Third, strengthening local economic linkages is critical. This can be achieved by supporting community-based tourism initiatives, connecting local suppliers with tourism enterprises, launching joint public-private marketing campaigns to attract Foreign Independent Travelers (FITs) — who typically spend more broadly across SMEs and destinations — and promoting digital transformation and foreign-local joint ventures within the sector. Together, these interventions can position Botswana as a competitive, inclusive, and resilient tourism destination, capable of delivering sustainable economic growth and broad-based benefits. Harnessing the potential of the tourism sector requires careful spatial planning. The tourism sector depends on the preservation of the Okavango Delta’s pristine environment. There is a significant potential for conflict between developing tourism in the Delta in Botswana and coal or oil exploration activities. This conflict arises from competing land uses, environmental risks, and the need to balance economic development with conservation and sustainable livelihoods. Experiences from other African countries (e.g., Uganda, DRC, Zambia) show that oil and mining activities in or near protected areas often lead to environmental degradation, loss of tourism competitiveness, and social conflict (Goffe, 2015). Integrated land use planning, clear zoning, and strong environmental safeguards are essential to mitigate this risk. Any degradation from extractive industries could undermine the sector’s competitiveness and sustainability, leading to loss of income, jobs, and community support for conservation. 47 4. Harnessing Decarbonization and Green Growth Opportunities 48 4. Harnessing Decarbonization and Green Growth Opportunities Coal plays a critical role in Botswana’s economy. Botswana holds some of Africa’s largest coal reserves, estimated at 200–212 billion tons, which are currently utilized as the primary fuel for electricity generation. Coal production in 2025 is expected to more than quadruple with respect to its 2023 value (2.24 million tons), driven by expansion of the Morupule Coal Mine (MCM) and the opening of the Masama project.42 Botswana projects to use this additional coal to expand domestic access to electricity, delivering on Vision 2036, and export the remainder, as part of its strategy to diversify output and raise foreign exchange. The future of coal remains uncertain. First, mid-to-long-term viability is increasingly challenged by regional and global shifts toward renewable energy. After having grown by more than 1.2 billion tons since 2020, global coal demand is set to plateau in the next three years, reaching around 8.87 billion tons by 2027. Second, expanding coal exports requires substantial logistics and infrastructure investments to connect production sites to export centers. Export feasibility is also limited by regulatory hurdles. At the same time, Botswana has significant renewable energy resources, particularly solar, which the country has begun integrating into its energy mix. Plans are in place to commission 336 MW of new solar capacity by 2027. While coal retains a short-term cost advantage, solar is rapidly closing the gap and may soon out-compete coal for new generation in Botswana. Botswana is actively expanding its electricity generation through both coal-fired power and renewable energy, particularly solar. In parallel, regional countries within the Southern African Power Pool (SAPP) are adding similar capacity. This trajectory raises the risk of power oversupply, with potential economic and environmental consequences. Botswana plans to commission 600 MW coal and add 1.5 GW renewables in the coming years. SAPP-wide infrastructure and generation growth may exceed demand, creating structural oversupply. Without coordinated planning, Botswana risks creating a surplus of electricity that is economically unviable and environmentally costly. Prioritizing smart investment in infrastructure, storage, and export frameworks would allow balancing better energy security with market efficiency by. The window to act is narrow—pre-emptive reforms will ensure Botswana transitions sustainably and competitively. 4.1. Renewable energy is key for expanding access to electricity and transforming Botswana into a net energy exporter Coal remains the foundation of Botswana’s electricity system. With an installed capacity of 892 MW, about 97 percent of Botswana’s electricity is generated from coal, concentrated in two coal-fired stations. With the planned retirement of the 132 MW Morupule A plant in 2027 and increasing electricity demand, Botswana has initiated construction of another 300 MW coal plant and outlined plans to develop at least 300 MW of new coal-fired power plants by 2030. There is limited standalone industrial coal use aside from power generation. The short- to medium-term potential includes IPP coal- bed methane of 10-100 MW by 2025 and up to 250 MW by 2040, according to Botswana’s 2020 Integrated Resource Plan (IRP), as well as potential opportunistic expansion (e.g. Mmamabula coalfield). While progress on access to electricity has been slow, the Government of Botswana has intensified efforts to accelerate the pace towards universal access and to address affordability issues. Only about 42 https://pubs.usgs.gov/myb/vol3/2019/myb3-2019-botswana.pdf 49 75 percent of the population has access to electricity,43 a rate that is low by global standards and relative to Botswana’s per capita income. Most rural households do not have access to electricity, hindering rural development and worsening socioeconomic inequality. In 2010, the National Electricity Standard Connection Cost (NESC) was introduced to subsidize household connections, although this has not fully addressed the affordability challenge for low-income households.44 More recently, the government announced a zero-cost connection policy that took effect in April 2024.45 Recent announcements suggest far more ambitious energy expansion goals. Historically, Botswana has relied on regional electricity imports to meet domestic demand, leveraging interconnections with Namibia, South Africa, and Zimbabwe. Botswana’s 2020 IRP outlined plans for the addition of 300 MW of coal capacity by 2026. In November 2023, the Cabinet approved an additional 300 MW of coal, thereby doubling coal capacity to 600 MW. In 2025, the government indicated it may consider the construction of a new 615 MW coal-fired power plant next to Morupule B in response to generation challenges at the plant, which would raise total coal generation capacity additions to 1215 MW. The government also announced plans to develop 1.5 GW of solar capacity by 2030. Lastly, the government is in the early stages of developing green hydrogen projects and initiatives, although these are yet to be explicitly integrated in policy documents as part of a comprehensive and articulated energy strategy. The creation of large amounts of generation capacity increases risks of excess supply. At a total of 2.7 GW of new generation, the announced capacity additions pose a substantial risk of oversupply, given the current peak demand of 670 MW, particularly in the absence of firm off-take from the regional market to absorb the additional generation. With three quarters of the population already connected to the grid, it is unclear that there will be substantial additional domestic demand for absorbing the planned capacity additions. Excess capacity creation can also result in fiscal risks, since the country will incur increased capital and operational costs associated with underutilized assets, and electricity generators may be unable to earn an adequate return on investment. In addition to the announced figures being substantially higher than those included in the country’s 2020 IRP, they are yet to be formally integrated within energy sector plans or documents. A consistent national energy policy and integration of targets within national plans can help clarify the set of planned investments and the potential sources of off-take. A planned approach is also important to provide the necessary certainty for investors, and to address the risk of excess capacity. Botswana aims for private sector-led electricity generation. The two main power generation assets that are currently operational — the 132 MW Morupule A station (which is planned for decommissioning in 2027) and the 600 MW Morupule B station — are fully owned and operated by the Botswana Power Corporation (BPC), the national power utility that is wholly owned by the government. However, the new 300 MW coal-fired power plant (expected to be commissioned by the end of 2026) is owned and operated by Jindal Steel and Power as an independent power producer (IPP). IPPs are also expected to be central to the expansion of renewable energy generation, with the IRP suggesting 1 GW of solar and wind capacity through IPPs. The government’s fiscal risk, therefore, is more likely to arise from Power Purchase Agreements (PPAs), since BPC remains responsible for all electricity transmission and distribution in the country. PPAs are often long-term contracts with fixed or minimum payments for electricity procurement, which can impose a financial burden on the government should the electricity generated by IPPs exceed demand. At present, Botswana does not mandate public disclosure of PPAs. Greater transparency in PPA terms can help ensure fair pricing for citizens, enhance governance in public spending and trust in 43 SDG7 progress report (2023). https://trackingsdg7.esmap.org/downloads. 44 National Electricity Standard Connection (NESC) (2015). https://www.bpc.bw/national-electricity-standard- connection. 45 2024 Budget Speech, Minister of Finance, Delivered to the National Assembly, 5th February 2024. 50 government, foster competition, and enable efficient energy markets. Open-access policies and published PPAs also enable industries to invest in renewable energy, de-risk investments, and improve cost predictability, investor confidence, and project bankability (World Bank, 2017). Publishing PPAs and related guarantees of origin helps align with international standards, facilitating cross-border trade in renewable energy and compliance with regulations such as the EU’s Carbon Border Adjustment Mechanism (World Bank, 2024e). Achieving the goals outlined in Botswana’s Vision 2036 document is feasible, even in a scenario of high demand. This CCDR modeled the Vision 2036 goal representing strong renewables build out, with a target of 50 percent of the country's generation from renewable sources by 2036. This target was subsequently extended to the modeling horizon of 2050, setting a more ambitious goal of 80 percent renewable energy generation by 2050. Vision 2036 also seeks to ensure Botswana is a net exporter of electricity to the SAPP region after 2036. This analysis considered two demand growth scenarios for Vision 2036: a reference scenario with 2.79 percent annual growth and a high-demand scenario with 3.50 percent annual growth. In both cases, the results demonstrate that achieving Vision 2036 is feasible with renewable energy generation — primarily from solar, wind, and concentrated solar power (CSP) — coupled with battery storage systems. The CCDR analysis also found that under the Vision 2036 scenario, the utilization rate of the 600 MW of coal capacity drops considerably. The modeling compared the current development plan for renewables outlined in the IRP against the Vision 2036 goal of 50 percent renewables. The comparison of the two scenarios shows that the utilization of the proposed 600 MW of coal capacity drops considerably in the Vision 2036 scenario (Figure 34). Reducing planned coal capacity additions can reduce investment costs as well as the risk of excess capacity. Furthermore, when compared against a “no new coal� scenario with 300 MW of coal instead of the announced 600 MW, the no new coal scenario shows a significant reduction in average generation costs, particularly between 2030 and 2045.46 The finding also holds true in a high demand case for the Vision 2036 scenario. Conversely, the addition of increased renewable capacity within the generation mix can enhance the resilience of the electricity system by diversifying energy sources, thereby reducing the vulnerability to disruptions associated with a single technology. Some empirical studies also show that diversified electricity systems face fewer large-scale outages and recover faster from disruptions than those with less diversity. Achieving Vision 2036 goals requires that Botswana shifts away from its dependence on coal. Meeting the goals will require accelerating wind and solar development, bringing 400 MW of wind and 1000 MW of solar online by 2040. This expansion of renewable energy needs to be accompanied by grid upgrades for effective integration of variable renewable energy (VRE) and by local transmission and distribution (T&D) network upgrades to enable rural electrification. Given its abundance of solar resources, Botswana has a huge opportunity to transition to a low variable cost source of electricity that will not create negative environmental externalities or stranded asset risks. It is also critical to ensure a just energy transition that protects vulnerable workers and communities. This includes addressing the social and economic impacts on those reliant on coal-related employment and infrastructure, such as job losses, income insecurity, and reduced access to services. A just transition framework would distribute costs and benefits fairly, offer support for retraining and new employment opportunities, and provide safety nets for affected households and small businesses (ILO 2023). Embedding these principles into Botswana’s energy strategy will help ensure that the shift to renewables is both equitable and sustainable. 46The “no new coal� scenario assumes that no additional coal will be constructed beyond IRP plans, i.e., Morupule A will be decommissioned in 2027, Morupule B will continue operations, 300 MW coal will be commissioned in 2026, but the second 300 MW will not come online. 51 Figure 34. A comparison of IRP and Vision 2036 renewable plans in a low demand scenario with 300 MW of additional coal 47 Source: World Bank staff. Coal-based capacity additions face potential transition risks. For example, it is not clear how much demand there will be for coal-based electricity in the SAPP region. In fact, countries such as South Africa are transitioning away from coal domestically and shifting toward clean energy sources. Similarly, large consumers of electricity, such as mining companies, have adopted net-zero goals, which could impact demand for coal-based electricity. One example is the De Beers Group, the co-owner of Debswana, which has adopted a target of achieving net-zero emissions across its entire value chain by 2050. In 2025, Debswana and the BPC signed a Memorandum of Agreement allowing Debswana, one of the largest domestic consumers of electricity, to buy electricity produced from renewable energy sources for its mining operations. In addition, while Botswana does not currently face exposure to the EU’s Carbon Border Adjustment Mechanism (CBAM), the potential indirect impacts of such measures, as CBAM expands its sectoral coverage or other major economies adopt similar measures, should be factored into decision-making. Lastly, a comprehensive review of implicit and explicit subsidies for the energy sector and their rationalization can help minimize distortionary effects and minimize fiscal strain from sector expansion plans. Least-cost planning can help ensure electricity is supplied to customers at the lowest possible total cost while meeting reliability requirements. Achieving Vision 2036 will require an additional investment of US$660 million from all sources, which will be partially offset by a reduction of US$120 million in fuel and operational costs.48 While the increased capital expenditure (capex) required to meet these targets is substantial (Figure 35), the potential co-benefits include improved air quality, reduced water pollution, and enhanced energy security through a more flexible and diversified grid. Furthermore, a comparison of Vision 2036 goals with 300 MW additional coal against a no new coal scenario shows that capital expenditures and fuel costs are both reduced in the latter case. Moreover, as regional and domestic mining companies, as well as manufacturing industries, increasingly seek green electricity to meet decarbonization goals and shield their export revenues from potential carbon taxation, this 47 Both scenarios reflect an additional 300 MW of coal being added in 2030 beyond the 300 MW already planned for commissioning in 2026 per the IRP. 48 Additional investment figure includes private sector financing through IPPs,but does not include elements such as investment needs for transmission or off-grid electrification. 52 investment secures their long-term competitiveness in the face of the global transition toward clean energy. Further investments may also be needed for ensuring resilience of exposed assets. As part of ongoing work dialogue to the National Energy Compact, there are efforts to estimate total funding needs from the public and private sectors. The Bank will also support the government in least-cost planning for the electricity system. Figure 35. Achieving Vision 2036 goals Botswana needs substantial additional investment Source: World Bank staff estimates based on Energy Planning Model. Grid diversification with renewable energy reduces the risk of large electricity consumers shifting to captive generation for their green electricity supply. A sensitivity analysis, named the “Captive� scenario, shows that the use of captive renewable-based generation to meet mining companies’ decarbonization goals would increase the overall system capex by US$940 million relative to a business-as-usual scenario. The analysis underscores the economic benefits of a diversified national grid capable of responding to the demand for green energy supply. In addition, a greener national energy supply can also increase the international marketability of Botswana’s diamonds, given the growing consumer demand for more eco-friendly “green� diamonds. Therefore, renewables present a robust and pragmatic approach, and together with least-cost power system planning, can enable cost- effective supply expansion. Botswana would be a net exporter of electricity by 2036 in the Vision 2036 scenario, reducing the country’s reliance on imports. For Botswana to realize its ambitions as a regional exporter, however, it will be essential to expand transmission capacity to meet growing regional demand for renewables- based electricity. A lack of transmission capacity also can constrain the growth of the renewable energy industry. Ongoing efforts, including those supported by the World Bank, are focused on identifying the key transmission upgrades needed for effective VRE integration. In addition to exporting electricity to other countries in the SAPP region, Botswana could facilitate the wheeling of energy, with the support of a suitable policy and enabling environment. Achieving universal electricity access can bring multiple benefits. Botswana aims to raise the national electricity access rate from 76 percent in 2022 to 100 percent in 2030, with a focus on rural electrification and underserved areas through a combination of on-grid and off-grid solutions. In addition to unlocking demand and reducing emissions from the use of less efficient options, energy access can enhance population resilience by providing access to basic services. Although grid-based electrification has been a cornerstone of Botswana’s universal electricity access strategy, the growing population and increasing urbanization create the need for a differentiated electrification approach for high-density urban areas and sparsely populated rural areas. While the market is still at an early stage for off-grid technologies such as solar lanterns and small solar home systems (SHS) with limited uptake through an informal market, they can be effective in remote and low-income communities. Government 53 measures such as the Off-Grid Solar Fund Program (OGSF) could address affordability challenges while ensuring sustainability. Botswana also aims to accelerate access to clean cooking to improve the lives of women and marginalized communities. Although LPG has surpassed wood as the primary source of household energy for cooking in Botswana, wood continues to be widely used by low-income urban communities and rural households for cooking. Moreover, households in Botswana commonly alternate between fuels for cooking: A reported 75 percent of modern-fuel households use wood alongside their modern- fuel stoves.49 Reasons for continued wood use include cultural customs, the costs of alternative modern fuels (and their often limited availability), the high upfront costs to purchase an LPG cylinder, and supply constraints.50 Household dependence on wood fuels has heightened deforestation pressures in some parts of the country. While the use of energy efficient cookstoves has been promoted since the mid-1980s, dissemination has been limited and the commercial availability of improved stoves in Botswana is low. Botswana thus needs a concerted planned approach to provide universal access to clean cooking and sustainable, affordable, and clean electricity, which would reduce the rural- urban disparity in energy access and deliver substantial benefits in terms of health, gender, and climate outcomes. 4.2. Policy options to harness decarbonization opportunities through renewables To attract renewable energy investors and project developers, Botswana must take decisive regulatory steps to create an optimal enabling environment. In particular, developing a clear and consistent national energy policy guided by least-cost planning principles is a critical first step for presenting a credible power sector development strategy to attract private sector investment. This includes an evaluation of energy sector expansion plans to compare the costs and benefits of meeting future demand growth through different technologies. It also is essential to elevate the visibility of renewable energy project pipelines and strengthen the grid system to ensure effective integration and dispatch of VRE. Establishing reliable procurement timelines and strengthening coordination between public entities and market participants can also mitigate risks and improve the enabling environment for private sector participation. That can reduce the financial burden on public entities and improve risk- sharing across public and private players. Ultimately, a comprehensive risk mitigation strategy will be essential to seamlessly integrate renewables into the power system, driving down energy costs while significantly increasing renewable energy deployment. A coherent and effective policy framework and supporting mechanism backed by high quality data is needed to achieve universal electricity access at the lowest cost. The plan could include a synchronized and comprehensive approach with a clear path to achieving the access goals. Ongoing efforts to develop a geospatial least cost electrification plan can pave the way to the robust design and implementation of access programs, including the use of digital technologies in enhancing access. Furthermore, a climate adaptive approach could be reflected in policies, data, institutions, behaviors, and finance. For example, in the case of clean cooking, this would include identifying populations that are most at risk of losing their source of fuel for cooking, and helping them transition to a cleaner, more efficient, safer, and more available fuel source. Identifying such populations and ensuring adoption of solutions will require data and an understanding of fuel preferences, as well as finance. A stronger grid would enable BPC to better integrate and manage the first set of renewable energy projects under development. Given the significant VRE commitments made under the IRP and 49 World Bank Group. Clean and Improved Cooking in Sub-Saharan Africa: A Landscape Report. 50 National Energy Policy. Government of the Republic of Botswana. 54 Botswana’s goal of becoming a net exporter, strengthening the national grid to enable the integration and management of VRE is a key priority for the country. The World Bank is collaborating with the government in this area. Investing in battery energy storage systems (BESS) would improve grid flexibility and better enable VRE integration. The government is now working to establish the first 50 MW utility-owned BESS project, which could pave the way for a pipeline of projects going forward and strengthen the enabling environment for sector investment. Botswana also has significant opportunities to reshape its role in regional electricity trade. Considering its central geographic location within the SAPP network, effective utilization of renewables could enable Botswana to become an exporter of clean energy to the region, complementing hydropower from neighboring countries such as Zambia, Angola, and Zimbabwe to foster increased regional energy stability. Suitable policy incentives can create an enabling environment for renewable energy expansion. In addition to encouraging renewable energy development by IPPs through incentives like the Renewable Energy Feed-In Tariff (REFIT) program, the government is exploring the potential role of carbon pricing and developing a policy approach for accessing carbon markets. 55 5. A People-Focused Transition: Boosting Job Creation, Human Capital Deepening, and Social Protection 56 5. A People-Focused Transition: Boosting Job Creation, Human Capital Deepening, and Social Protection 5.1. Towards an education system which is protected from and responds to climate change challenges 5.1.1. High spending in education is not matched by performance Education and skills development are key priorities in the Botswana Second Transitional National Development Plan. Youth unemployment is high but there are skill shortages in some key fields, particularly STEM, showing that the education system is not providing the skills that employers need. The shortages exist despite Botswana’s efforts to invest in education and to improve the quality of education and the efficiency and equity of spending. Similarly, despite a strong commitment to developing human capital (including with high levels of investment in education)51, Botswana is not delivering quality human capital outcomes (Monchuk et al 2024). The country’s Human Capital Index is on par with the Sub-Saharan Africa region but is considerably lower than the average for upper middle-income countries (Figure 36).52 Figure 36. Botswana lags income peers in human capital accumulation Botswana and SSA countries Human Capital Index (HCI) Source: Monchuk et al (2024), constructed from data in World Bank Human Capital Index database, 2022. Note: The HCI is a composite measure of key human capital outcomes across health (child survival, stunting, and adult survival rates) and the quantity and quality of schooling (expected years of school and harmonized test scores). Data as 2020. Despite significant progress in enrollment, learning outcomes are low compared to other upper-middle income countries. According to the 2020 HCI, expected years of schooling for Batswana go down from 8.1 to 5.1 years when adjusted for learning. Despite being one of the richest and most developed economies in the Southern and Eastern Africa Consortium for Monitoring Educational Quality (SACMEQ), Botswana is near the regional average of performance in the 2011 assessment. While there are no recent data available, Botswana placed 5th from the bottom among 40 countries in the 2015 51 According to Monchuk et al. (2024), education spending reached 7.1 percent of GDP in 2019 (although one-third of this allocation went to tertiary education) 52 The HCI calculates the contributions of health and education to worker productivity. The final index score ranges from zero to one and measures the productivity as a future worker of child born today relative to the benchmark of full health and complete education. 57 TIMMS international assessment. Both English and STEM subjects present a challenge for Batswana youth, according to the SACMEQ, TIMMS, and PIRLS data (World Bank 2019).53 Challenges with access, high repetition rates in the early grades, and poor quality of education contribute to an enrollment decline after junior secondary education. In 2019, there were 826 primary schools, 211 junior secondary schools, and 33 senior secondary schools in the country, with 50 unified schools offering both junior and senior secondary education. High rates of repetition across grades 1 to 3 slow down the rate of progression through subsequent grades. Reasons include poor quality of teaching, curricular organization, and high-stake exams (such as the Jr. Certification Exam – JCE) that affect the opportunity cost of going to school. Post-school education and training is strongly biased in favor of higher education, with relatively low enrollment in STEM fields. In 2021, the student population in post-school education and training was around 61,000, representing a gross enrollment rate of 23 percent.54 Only 11 percent of all post-school education and training enrollment is in TVET institutions, reflecting the preference for academic qualifications and the low reputation of TVET in the country. About 58 percent of students are female, making women well represented in post-school education and training. But women are underrepresented in TVET. Furthermore, enrollment in STEM fields remains modest. Only 32 percent of all post-secondary education and training students have chosen a field in engineering, manufacturing, mathematics, natural sciences, or ICT (Jutta and Dulvy 2024). Engineering programs have faced substantial challenges getting accreditation, reducing the number of options for students in engineering fields. Significant regional disparities in education inputs lead to uneven performance among students. There are regional inequities in spending per student as schools in large cities spend nearly three times more per student compared to urban villages and rural areas (Table 4). Urban schools are better equipped than rural schools (including having lower student-to-teacher ratios), adversely affecting education outcomes and opportunities for rural students (Monchuk et al. 2024). Given that rural areas are more vulnerable to climate change shocks, climate change threatens to widen inequalities and worsen the situation of already disadvantaged rural students. Table 4. Spending per student shows regional inequalities between urban and rural areas Average spending per student by level of schooling and location, 2015-16 (in BWP per year) Pre-primary Primary Junior secondary Senior secondary Cities 6,579 6,020 4,990 6,266 Urban villages 4,883 1,004 1,254 2,116 Rural 1,937 459 1,091 4,724 Source: Monchuk et al (2024). Performance is weak, especially when compared to spending. In 2020, Botswana spent 8.1 percent of GDP on education,55 considerably more than the upper middle-income countries average of 4 percent (World Bank 2022). One-third of this amount was directed to tertiary education (for subsidies to universities and bursaries or loans to students). The basic education budget was largely spent on salaries and other recurrent costs, leaving little scope for capital spending. Per pupil spending was 53 Trends in International Mathematics and Science Study (TIMMs) Assessment and Progress in International Reading Literacy Study (https://www.iea.nl/studies/ieastudies). 54 World Development Indicators. Retrieved on Sept 1, 2024. https://databank.worldbank.org/source/world- development-indicators# 55 World Development Indicators. Retrieved on Sept 1, 2024. https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS?locations=BW. 58 estimated at US$893 in primary school and US$1,693 in secondary school but was about six times that much per tertiary student. However, the high spending on universities was relatively inequitable, as only a minority of individuals could benefit, with a gross tertiary enrolment rate of only 23.4 percent (Monchuk et al. 2024). 5.1.2. Education and climate change: galvanizing behavioral change, developing new skills, and strengthening sector resilience Education and skills development is key to fostering action that supports climate change mitigation and adaptation and, at the same time, needs to be protected from extreme events. Education can galvanize behavior change at scale — not just for tomorrow, but also for today. In addition, education can unlock the skills and innovation needed to shift economies onto greener growth trajectories. At the same time, education itself needs to be protected from climate change impacts. Extreme climate events and rising temperatures are already eroding hard-won progress on schooling and learning. Climate change is causing an increase in dropouts and learning losses, which will turn into long-term inter- generational earnings losses. The climate-related erosion of education outcomes will get worse as climate change worsens, putting into jeopardy education’s powerful potential for alleviating poverty alleviation and spurring economic growth (Venegas Marin et al. 2024). Climate change impacts will disproportionately affect students in rural and least populated areas, where schools are already less equipped, with lower financing and higher student-to-teacher ratios, than urban schools. Many rural communities also face uncertainties and lack of information on resilience strategies for climate events such as floods (Toteng, 2018). Climate change thus threatens to widen existing educational disparities. Environmental planning needs to consider how citizens, particularly students and educators, could be more engaged in resilience strategies through climate education that integrates local and scientific knowledge of weather forecasting and climate adaptation, building on existing community practices (Kolawole et al. 2016). Targeted capacity-building programs are needed to prepare the workforce for emerging opportunities in green sectors such as renewable energy, sustainable agriculture, and ecotourism. These programs needs to prioritize marginalized groups and be designed to close existing gaps in access to education and training. Strengthening partnerships between educational institutions, government, and communities can also support the development of locally grounded, climate-responsive education strategies. 5.1.3. Policy options to build an education system equipped for climate change Building resilient and equitable education systems will be critical to protect human capital.56 Accomplishing this will require allocating a sufficient capital budget and prioritizing school infrastructure investments for the poorest and most climate-vulnerable areas. It also will require continuous expansion of upper secondary school infrastructure. In addition, school designs could be revised to better manage classroom temperatures in areas prone to drought or extreme heat, and to incorporate structural adjustments to minimize damage in flood prone areas. Education management for resilience is also important. This would include developing school preparedness plans for future extreme heat events, establishing early warning systems, strengthening school level management, and ensuring that teachers are trained on how to act (and how to continue teaching) in cases of extreme weather events. Botswana’s experience of managing the education system through COVID-19 pandemic, including school closures, could be leveraged to managing 56 During Tanzania HD forum in 2023, the Botswana government has already expressed interest in learning about climate resilient school infrastructure. 59 schools during climate change events. Including the consideration of climate change into the future Education and Skills Development Strategy and Plan would also help foster resilience. Priming the pipeline of technical skills will be critical to meet the country’s ambitions of transitioning to a high-income economy, tapping into higher growth sectors, transitioning to a green economy, and achieving a digital transformation. Improving overall education quality would also help the country generate more wealth and better face climate shocks. To do this, it is important to improve teaching and learning practices, establish national learning assessments (or participate in international ones) to understand the challenges students face in learning, and improve school management. Increasing educational quality would also require improvements in the internal efficiency of the general education system. This would include understanding the causes of high dropout and grade repetition rates in early primary school and addressing those causes at both the policy and implementation levels. In Botswana, one of the reasons for high repetition rates is poor student preparation for school. To address that problem, the country is investing in pre-primary school education. For the high dropout rates, causes include the poor quality of education, the lack of secondary (especially senior secondary) schools, and teenage pregnancy.57 Other recommendations for improving the education system include a stronger focus on teaching STEM and ensuring that students master these subjects. Potentially effective measures include supporting STEM teachers through in-service and pre-service training; incentivizing students, especially girls, to enroll in STEM subjects; modernizing STEM curricula and programs; and providing sufficient teaching and learning materials and lab equipment. It would also be important to ensure equitable opportunities for students from poorer backgrounds and to create clear vertical pathways and partnerships to progress to tertiary education, both higher and TVET, and inform students about post general education opportunities. Finally, transforming tertiary education (higher education and TVET) is also crucial to meet Botswana’s ambitions.58 Key recommendations include: • Align tertiary education with Botswana development objectives. Programs could be reoriented to produce graduates with skills in digital technologies, engineering, project management, technical tasks, and other STEM areas. Programs could also integrate 21st century and socio- emotional skills, such as problem solving, critical thinking, and teamwork, and develop the teaching cadre in those areas, while strengthening partnerships with training centers and universities in Africa and around the world. • Strengthen partnerships with private sector. It would be critical to create partnerships between TVET training centers and universities on one side and industry on the other. Private sectors could be actively involved both in design and delivery of the programs to ensure the relevance of the skills that students acquire. These may take the forms of employer-involving councils at national levels, sector skills councils for quality assurance, or public/private partnerships at the campuses of skills development institutions. Partnerships in the forms of internships, incubation centers, joint R&D, and innovations could be established. • Refocus service supply in line with market needs. Botswana could thoroughly review its post- school education and training to achieve alignment with current and future workforce and skills needs. This may require a number of interventions, such as (i) building strong skills needs assessment processes that are industry-driven; (ii) focusing investments on lower level skills 57 See AFW Regional Education Strategy and AFE Education Business Plan for best practices to improve efficiency. 58 Recommendations in this section draw heavily on Jutta and Dulvy (2024). 60 development (such as artisan level); (iii) incentivizing participation in VTCs, brigades, and other skills development centers, particularly for youths from poor and vulnerable households; (iv) strengthening entrepreneurship education and training in skills development; and (v) rationalizing skills development provision to increase efficiency and access. • Strengthen work-based learning (WBL). Botswana could revitalize WBL to create more relevant learning opportunities for its youth. It could (i) re-establish a regulatory base and support infrastructure for WBL; (ii) strengthen incentives for companies to offer learning places through the HRDF; (iii) actively encourage TVET institutions to find appropriate and tailor-made solutions to integrate work and learning, including forms of training with production in the rural areas; and (iv) consider possibilities to incentivize smaller companies to participate in WBL. • Create performance incentives for TVET institutions. In line with the ideas of the ETSSP, Botswana could introduce a management reform process for public skills development institutions leading to financial and operational autonomy. Institutions can increase capacities and performance by institutionalizing linkages with employers, and the government could consider incentivizing and regulating such linkages. • Support green and digital skills and increase the use of technology. The energy transition offers enormous job opportunities for Botswana’s youth and will require massive investments into green skills development. Botswana could start filling data and information gaps by conducting green skills and jobs needs and gap assessments. Furthermore, the job creation potential from digital skills development could be unlocked. Transforming the skills space at all levels towards digital skills requires dedicated investments in new programs and the overhaul of curricula and interventions to increase digital literacy. Existing digital approaches to promote jobs and entrepreneurship development, such as job-searching platforms, e-hubs to incubate and promote innovation, ICT academies, and information platforms, must be further disseminated to be available across the country. Technology-based teaching and learning and service delivery could be further reinforced. • Improve coordination, monitoring, and evaluation. Establishing institutionalized coordination structures addressing the entire space of skills and job promotion and integrating public and non-public providers and stakeholders need to be high priorities. This would also include fine- tuning institutional roles and responsibilities that sometimes appear to overlap. Botswana could develop and implement a comprehensive M&E strategy to accompany any further expansion and reform of skills development and job promotion. The strategy must define institutional responsibilities designed with a focus on results and outcomes. It could also capture and bring together information on skills development and employment promotion. 5.2. A social protection system that is more efficient, progressive and able to respond to climate change challenges Social protection programs could mitigate the impacts of climate shocks on poor and vulnerable households. Poorer populations and more vulnerable groups (women, children, the disabled, and the elderly) tend to bear the brunt of the impacts from climate change because they are often more exposed and vulnerable and have fewer resources (savings, insurance, social protection) to cope with and adapt to those impacts (Hallegatte et al. 2017). Regular and reliable social assistance reduces vulnerabilities to shocks by reducing poverty, inequality, and food insecurity, along with the need for harmful negative coping mechanisms (Asfaw and Davis 2018, Barca et al. 2015; Dammert et al. 2018; Hill, Skoufias, and Maher 2019). Over the last decade there has been widespread interest in and development of social protection programs that respond to climate shocks and provide emergency cash or in-kind assistance to help affected households cope and recover (often referred to as “adaptive� social protection (Bowen et al. 2020), especially in highly exposed and vulnerable countries in Sub-Saharan 61 Africa. The World Bank (2023) emphasizes the importance of increasing the shock responsiveness of Botswana’s social protection systems, for example through stronger disaster risk management (DRM) frameworks that include financing for preparing for and responding to these events. Social protection programs can also facilitate a just transition by ensuring that people whose livelihoods are at risk from net-zero policies are adequately protected and connected to new opportunities. With the right policies and investments, the move towards a greener economy will generate new jobs in the renewable energy sector, environmental services, and the circular economy, among others (ILO 2018). At the same time, mitigation-focused net-zero policies in line with the Paris Agreement present transition risks (and opportunities) for households. Social protection and labor programs are necessary to cushion welfare losses during the transition period and help workers and households adjust to new economic contexts. Carefully designed active labor market policies can underpin the reskilling and upskilling of workers, both young and old, and support a transition to new jobs, potentially in new occupations or sectors (Rigolini, 2021). 5.2.1. Botswana’s Social Protection System: a wide range of programs that are key for poverty alleviation but that could be made more efficient and effective Botswana operates a wide range of social protection interventions incorporating social insurance, social assistance, and labor market and employment support programs (Figure 37). Botswana has a mature social protection system with a long history of providing centrally funded, locally delivered social protection programs. It provides four types of support: (i) contributory pensions to insure against drops in income during old age; (ii) non-contributory social safety nets; (iii) active labor market programs to enhance youth employability and workers’ skills; and (iv) scholarships and sponsorships for students in tertiary education. Social protection responses to disasters are dominated by the ex-post expansion of feeding programs. For example, the social protection response to COVID-19 included delivering food packages to nearly two-thirds of households and expanding feeding programs in schools. Figure 37. Social protection interventions include social insurance, social assistance, and labor market programs. Notes: MYESCD (Ministry of Youth Empowerment, Sport & Culture Development): MOPAGPA (Presidential Affairs, Governance & Public Administration); MLGRD (Ministry of Local Government & Rural Development); MELSD (Ministry of Employment, Labour Productivity & Skills Development). Source: Draft National Social Protection Framework, January 2018. 62 Social protection transfers represent an important proportion of total household consumption for the poorest quintile. Social assistance programs increase household consumption for the poor, particularly those who are eligible for several programs. Social protection programs have a significant positive impact on poverty and inequality: it is estimated that without them, Botswana’s poverty rate would increase from 16 percent to 23 percent, while the poverty gap would rise from 4.6 percent to 7.9 percent. The social assistance programs have wide coverage. It is estimated that 56 percent of the total population and 79 percent of the poor are covered by social assistance programs. The overall coverage rate is twice the average for assistance programs in Sub-Saharan Africa and higher than in other upper middle-income countries by almost 13 percentage points. It is estimated that 56 percent of the total population and 79 percent of the poor are covered by social assistance programs. The overall coverage rate is twice the average for assistance programs in Sub-Saharan Africa and higher than in other upper middle-income countries by almost 13 percentage points. Reflecting a mature social protection system with wide coverage, but also inefficiencies, spending on social protection is far above peers. In FY 2019/20, spending on social protection is estimated to have reached 2.7 percent of GDP, far above the average of 1.7 percent of GDP in upper-middle income countries. Of these expenditures, 1.1 percent of GDP was used for contributory pension programs for public employees (which reached 5.5 percent of the population) and 1.6 percent of GDP was spent on non-contributory social assistance programs, of which the Tertiary Sponsorships Program represented 1.1 percent of GDP. The remaining programs are considerably smaller in amount (less than 0.5 percent of GDP) and coverage (less than 2.5 percent of the population). Despite improvements, the implementation of social protection remains fragmented, with overlapping programs implemented across multiple institutions. The absence of a centralized administrative management information system (MIS) makes it difficult to track the benefits received by each household, leading to a number of detected inefficiencies, including “double-dipping� (beneficiaries receiving more than one benefit), leakages (many beneficiaries are non-poor), and poor targeting (many poor households do not receive social welfare benefits). Programs also use a mixture of paper-based and computerized systems for selection, registration, and transfer delivery and shifting to a single delivery system using Visa cards that can hold cash and in-kind benefits has only just started. These weaknesses impair appropriate monitoring and evaluation, ultimately hampering the effectiveness of the system. Targeting can be improved. In spite of wide coverage, the poorest population is excluded from the social protection system: It is estimated that only 24 percent of those in the poorest quintile are covered by any type of social protection program. That’s because (i) the Botswana Public Officers Pension Fund exclusively covers ex-civil servants (who are unlikely to be in the poorest quintile), and (ii) the labor market programs cover only a very small portion of the population. The most effective program in the fight against poverty is the Old-Age Pension (which also reaches the non-poor), followed by the Primary School Feeding Program. The tertiary grants and sponsorships program has the highest budget allocation of all social protection programs, but half of its beneficiaries belong to the wealthiest two quintiles. 63 5.2.2. The social protection system provides a strong foundation for climate adaptation but reforms could raise household resilience Disaster management benefits from highly inclusive decision mechanisms at all levels, guaranteeing multisectoral coordination for shock response. The National Committee on Disaster Management (NCDM) is an interministerial committee responsible for national DRM policy formulation and coordination. The NCDM includes the Ministry of Local Government and Rural Development (MLGRD), which operates many of the largest social protection programs. The NCDM makes recommendations to the Office of the President for national policies, plans, and strategies related to disaster risk reduction and for funding disaster preparedness and relief activities. The inclusion of all ministries on the national and district-level DRM committees provides a good basis for multisectoral coordination. MLGRD is particularly important, as its social workers are the first responders at the village and district levels and often undertake post-disaster damage and needs assessment in emergencies. This structure puts the MLGRD in a key position in the management of ex post disaster response activities. The ministry is also in a good position to support ex ante risk mitigation actions. While Botswana’s social protection system provides a strong foundation for climate adaptation, it could be enhanced to better respond to climate change. The social protection system could support adaptation, resilience building, and response to climatic shocks and be better integrated with the DRM and climate change adaptation sectors. Readiness related to social protection could be organized in four key areas: (i) strategy, institutional arrangements, and partnerships; (ii) programs and delivery systems; (iii) data and information systems; and (iv) financing. i) Strategy, institutional arrangements, and partnerships Although social protection is not enshrined in the Constitution, the government of Botswana has many legal and policy instruments related to social protection. They include the Vision 2036 strategic document and the National Development Plan 11. It is now important to ensure that these documents integrate the impacts of climate change. There is also a need to identify issues of climate change commonality among sector policies to enhance synergies, facilitate cost effectiveness, and avoid duplication of efforts. The 2020 National Social Protection Framework (NSPF) introduces a comprehensive set of goals and objectives for the social protection system. Key priorities include creating a more harmonized and coordinated system which will better address vulnerabilities, including those generated by climate change risks. The creation of a social registry would allow better targeting of social assistance, and more comprehensive monitoring and evaluation. While the framework makes limited mention to adapting current programs in response to climate change, the NSPF explicitly mentions, without providing details, disasters as one of many risks facing all age groups and considers “disaster relief� to be a potential social protection program. In addition, the government may wish to consider strengthening its capacities to reduce and build community resilience to disasters. Botswana has committed to international risk reduction initiatives such as the Hyogo Framework for Action and the Africa Regional Strategy for Disaster Risk Reduction. The DRM strategy recognizes disaster risk reduction as a frontline defense in adapting to the impacts of climate change and is included in the Botswana Climate Change Policy. Private sector companies operating in rural areas, such as the mining industry, could contribute more to mining-affected communities’ climate resiliency. Many major mining companies are doing this but in an ad hoc manner. A comprehensive regulatory approach would ensure consistency across the industry. The global nature of climate change requires the exchange and sharing of data, information, and expertise at regional and international levels to enhance responses. In the case of social protection, 64 lessons learned, and best practices, could be accessed through international cooperation and networking, enabling Botswana to benefit from available information, data, expertise, and financing opportunities. The strategies and action plans for climate change adaptation and mitigation in Botswana could be based on national and international evidence, as informed by research findings. For example, the evidence could help inform changes to building codes and practices, including green construction. ii) Programs and delivery systems Programs could be rationalized, bringing savings that could allocated to social protection schemes for mitigating the impacts of climate change. For example, the Vulnerable Group Feeding Program, which provides take-home rations to vulnerable children aged six months to five years, has not reduced the country’s stubbornly high malnutrition rates. A 2019 study conducted by UNICEF recommended improvements to increase its effectiveness. Temporary income support would help alleviate the impacts of climate shocks. In the years when drought risk is high, the MLGRD leads to drought and household food security vulnerability assessment of affected districts. The assessment typically recommends expanding the following programs: (i) the vulnerable groups feeding programs (usually via health centers); (ii) school and other feeding programs; and (iii) the Ipelegeng public works program. Within Botswana’s fiscal consolidation strategy, the government may want to consider a temporary income support program for those affected by climate shocks. The program would be cash based and supported by common systems for registration, targeting, payment, and grievances. This program could supply immediate cash (and food) to affected households. It would be scalable and adjusted to the impacts of the shock. It could benefit from the design and implementation of the “temporary� component of the Destitute Persons Program. Implementing micro-projects at a local level could reduce the impacts of climate change. Microprojects could be selected at the local level and would address specific areas of vulnerability, including by maintaining or building infrastructure. They could include water, sanitation, and drainage systems, for example. They could also protect against floods or capture water during the rainy season. Indigenous adaptation mechanisms could be considered to determine their effectiveness and replicability. This program could be enhanced with accompanying investments in training, skills, and intermediation in jobs related to climate adaptation. Mining sector social investment projects could help in this area. While the emphasis is on climate adaptation, there are also green growth opportunities. The temporary income support program or the micro-projects outlined above could create jobs and help decrease the carbon intensity of the economy. Support programs also could help promote renewable energy development or other “green� sectors. Poor and rural populations are the most vulnerable to climate change because rural populations are extremely reliant on natural resources. It is common for women from rural communities to be responsible for fetching water and cooking. Children in rural areas are affected by water-based illnesses, which could increase because of climate change. Climate change is also expected to disproportionately affect vulnerable groups such as the poor, people living with disabilities, people living with HIV, the elderly, and marginalized communities. To address these issues, Botswana’s Climate Change Policy needs to ensure that women and other vulnerable groups are empowered and participate meaningfully in the planning, testing, and roll out of adaptation and mitigation activities. iii) Data and information systems Creating a Single Social Registry and including climate-related data would improve effectiveness. Currently, Botswana has multiple social protection management information systems (MISs), reflecting the fragmented nature of programs operating across different government departments. The systems 65 vary in their sophistication, from paper-based lists to digitized databases, and each has its own registration system. That limits the ability to aggregate or cross-reference beneficiaries across programs. The development of a Single Social Registry of beneficiaries for Botswana is a key commitment in the NDP and a priority in the NSPF. The effort started in 2016 and rolled out to four pilot districts in 2020. When fully operational, the Single Social Registry will allow the government to better respond to shocks. The registry will allow the government to reach all households affected by disasters. It could be used to increase benefits under existing programs or to expand the programs to include additional beneficiaries. In addition, by linking households’ hazard, exposure, and vulnerability to climate-related risks, a national registry that includes climate-related data would make it possible to analyze the impacts of common disasters on household vulnerabilities. Information systems on disaster risk and household vulnerability could be strengthened. The Department of Meteorological Services in the Ministry of Environment, Natural Resources Conservation, and Tourism produces regular agrometeorological information products, but the capacity to utilize and apply these to assess disaster risk is limited. The latest disaster risk assessments for each district in Botswana were completed in 2010. Disaster risk assessment and integrated DRM plans could be updated. Early warning systems are led by nongovernmental agencies, primarily the Southern African Development Community (SADC) and the UN. iv) Financing The government of Botswana has no explicit budget lines allocated to DRM. Technically, the NDMO is entitled to endorse and recommend ex-ante DRM funding for costs related to disaster preparedness and capacity building from the Ministry of Finance. Likewise, in case of more significant disasters, the NCDM could make a recommendation to the Cabinet for additional funding or ask to make a wider appeal for more funding from the SADC or from international humanitarian and relief organizations, among others. A 2020 review by the United Nations Office for Disaster Risk Reduction determined that about US$200 million per year (about 1 percent of GDP) could be categorized as DRM expenditure. Between 2013 and 2019, all disaster or shock response expenditures were financed by local or sectoral departments, through budget reallocations. Most expenditure is related to land management, water and sanitation, or agriculture. Public-private sector partnerships with companies that are rurally based and that already have disaster preparedness plans, such as the mining industry, could be encouraged. 5.2.3 Policy options to build resilience in the social protection system Policy options to strengthen strategy, institutional arrangements, and partnerships • Integrate the impacts of climate change in the legislation and policy documents related to social protection. • Develop updated and relevant DRM legislation and policies, including a strategy for disaster risk reduction, placing greater emphasis on investments that reduce risks and build resilience to climate change. Integrate social protection with early warning and early action systems to allow for pre-emptive assistance and proactive measures to mitigate the impact of disasters. • Exchange and share information related to climate change adaptation and mitigation programs and social protection activities. 66 Policy options to strengthen programs and delivery systems • Build public awareness and strengthen human and institutional capacity to address climate change. • Implement a social protection expenditure review to reallocate inefficient programs and incorporate parametric triggers for cash transfers during droughts or floods to enhance climate resilience. This review would seek to rationalize the existing social safety net to avoid administrative duplication and inefficiencies and, depending on needs assessments, consider allocating the savings to social protection schemes aimed at mitigating the impact of climate change. • Consider implementing a temporary income support program to respond to climate-induced shocks in affected areas. • Consider implementing micro-projects at a local level to reduce the impact of climate change. • Ensure that the safety nets which mitigate the impacts of climate change are sensitive to gender and vulnerable groups. Policy options to strengthen data and information systems • Accelerate the rollout of the Single Social Registry to all households, particularly those who are regularly disaster-affected, and link the Single Social Registry to all relevant social protection programs using digitized and interoperable MISs. The Registry could also be linked to the MISs of other government services (for example, health or unemployment programs). The Single Social Registry could be linked with a robust payment system architecture to enable easy and timely payments to those affected by climate-related shocks. • Undertake systematic disaster risk and vulnerability assessments for all parts of the country. The assessments could examine current and projected risks arising from climate change and could feed into national DRM strategies and policies, as well as into integrated district DRM plans. • Use disaster risk and vulnerability assessments to identify the key early warning data required to monitor disaster risk and assess the likely impacts of shocks. The government of Botswana could work with the SADC or other subregional players to adopt or develop simple but robust methodologies to combine information on recurrent climatic shocks with poverty and vulnerability data to better respond to the challenges. Policy options to improve financing of climate-resilient social protection • Reorient spending on social protection toward programs that reach the poorest households. Review current program expenditures and consider reallocations away from regressive programs, such as the tertiary grants and sponsorships program. • Undertake a review of disaster- and climate-related risks and their potential associated costs as a precursor to the development of a national disaster risk financing strategy. By developing the capacity to calculate costs of disaster risk ex ante, the government will be in a better position to devise strategies and plans that more efficiently allocate resources to climate change preparedness, mitigation, and response interventions. • Using information collected as part of disaster risk and vulnerability assessments, undertake further analytical work to model and quantify ex ante the costs of climate change. Analyses could focus on consumption, asset loss, and financial resilience of poor households, and be used to inform responses to the upcoming climate challenges. • Provide adequate financing to climate change adaptation, disaster-risk management, and preparedness and mitigation measures, and consider contingent allocations earmarked to mitigate the impacts of climate shocks, including disaster response. 67 6. Financing the Transition Towards a Resilient Green Growth Path 68 6. Financing the Transition Towards a Resilient Green Growth Path 6.1. Climate finance needs Botswana’s revised NDC (2024) estimated financing needs at US$6.2 billion59 (US$1 bn/year) for adaptation and mitigation, with half of the efforts conditional on international financing. As mentioned in Chapter 2, the current NDC emphasizes the use of domestic funds to finance adaptation measures, while mitigation is mostly conditional on international support or commercial financing. Most mitigation efforts focus on energy decarbonization, mainly with solar60 and wind energy, while adaptation efforts focus on water management. Accounting for current climate finance investments of US$93 million per year,61 the climate finance gap would be about US$907 million per year. Analysis conducted for this CCDR builds on the analysis of adaptation investment needs in Chapter 1 and extends it to critical sectors where resilient infrastructure is needed, such as DRM and transportation, using a mix of country-specific, regional, and global studies. That analysis shows that investment needs would be at similar levels for the period 2025-30, and significantly lower thereafter (Table 5). Although investment requirements are significantly larger for the period 2025-30, half of the investment requirements are in the energy sector, where there is high potential for private sector participation. These numbers should be taken with caution: they are based on the world experience and may differ significantly in Botswana.62 59 As mentioned in chapter 2, these financing needs estimates do not include infrastructure investment needs and will be updated based to the National Adaptation Plan (Botswana’s Second Nationally Determined Contributions to the Paris Agreement of the United Nations Framework Convention on Climate Change, Government of Botswana 2024). 60 Botswana indeed has a very high rate of solar irradiation of 3200h of sunshine per year, comparable to the State of California, which is a very competitive market, making solar energy a promising renewable energy source for Botswana. 61 Botswana, Climate Policy Initiative. 62 Values are discounted using a standard rate of 6 percent. These estimates are meant to be indicative only as although they rely on state-of-the art methodologies, there is inherent uncertainty about climate change impacts, and sufficient knowledge on the optimal investment levels to minimize them, given also that technologies keep improving over time. There are also weaknesses in the data, such as coarse spatial resolution models, the use of global cost curves and stylized service standards. local unit prices, technology choices, settlement patterns, and electricity tariffs could shift costs significantly. 69 Table 5. Climate adaptation investment needs in key sectors through 2050 Potential for 2025-2030 2030-2040 2040-2050 private sector Sector participation Percent Percent Percent USD bn. USD bn. USD bn. GDP GDP GDP Agriculture Public private Irrigation 0.01 0.01 0.02 0.01 0.04 0.01 mix Private sector Livestock 0.03 0.03 0.09 0.03 0.18 0.05 led Urban Infrastructure /DRM Urban 2.54bn 0.2 Public flooding Riverine 0.74bn 0.7 Public flooding Resilient Transportation Networks Potential for Roads 0.28 0.24 0.40 0.15 0.47 0.12 private sector participation Potential for Bridges 0.11 0.10 0.20 0.08 0.24 0.06 private sector participation WASH (Water, Sanitation and Hygiene) Safely managed Public and 0.9 0.7 water and private sanitation Energy Cooling Private sector (Labor and 0.01 0.01 0.03 0.01 0.06 0.02 led heat stress Power Public private system 2.6 2.1 mix transition TOTAL 5.03 3.49 1.83 0.58 2.08 0.56 Note: Totals reflect the equal distribution of urban infrastructure investments across the three time periods. Source: World Bank staff. Given the high carbon intensity of the grid, corporations and Small and Medium Enterprises (SMEs) have considerable scope to decarbonize their operations. Industry (mainly mining) and transportation respectively represent 15 percent and 43 percent of Botswana’s total energy consumption. Reducing the carbon intensity of the grid, therefore, can enable these sectors to decrease the emissions resulting from their operations.63 Many large-scale mining companies have committed to reducing their carbon footprints. Botswana’s private sector increasingly recognizes the economic potential of climate-aligned investments but faces persistent barriers, particularly in access to finance. As per the recent Climate Change Readiness Report (IFC, 2025), access to finance and achieving satisfactory returns on investment are the most significant obstacles, reflecting the need for improved funding mechanisms and clearer economic incentives. While some of the larger companies are engaging in pilot projects and exploring green business models, many small and medium-sized enterprises report difficulty in securing 63 For instance, electricity consumption represents 96 percent of the GHG emissions of the Morupule mine. Annual report, Morupule coal mine, 2022. 70 capital, citing high upfront costs, a lack of tailored financial products, and limited public-private risk- sharing mechanisms. Botswana’s private sector investment needs are significant and diverse, and overcoming key constraints will be crucial to unlock private sector potential. Survey responses and focus group discussions indicate that most private sector investment needs fall in the range of US$300,000 to just over US$700,000. These investments would include solar photovoltaic systems and battery storage; water-efficient irrigation systems and technologies; energy-efficient and climate-smart equipment for manufacturing and processing; waste-to-energy and recycling infrastructure; sustainable building materials and retrofitting for green buildings; electrification of transport systems; and technologies for water reuse, harvesting, and efficiency. Improving access to finance, clarifying policy frameworks, and enhancing the bankability of green projects will be essential to transition from pilot-scale initiatives to commercially scalable climate solutions. 6.2. Financial sector engagement and funding sources available The financial sector engagement in financing infrastructure projects, including renewable energy, can be expanded. The funding of infrastructure projects has long relied on government budget, with limited involvement of the private sector through public-private partnership (PPP) projects. A pipeline of 17 projects has been identified and 3 of those are close to market tender. In cases where they are involved, banks and insurance companies are mostly financing multinational companies with large projects (60 MW-100 MW), but they lack the technical capacity to analyze the projects. Pension funds are externalizing their assets management to specialized investment managers, but their investments in alternative energies remain marginal.64 For instance, BPOPF had 7 percent of its total assets in unlisted investments as of December 2023; however, none of these are in the renewable energy sector – mainly due to the poor structuring of the projects proposed. Strengthening the government’s ability to access global climate funds could also channel finance into Botswana’s green economy, including renewable energy. The Ministry of Finance (MOF) could undertake a detailed analysis of possible concessional and semi-concessional resources, assessing the scale of available funds, the ease of access, whether Botswana would be eligible, and the financial terms. While the range of such resources may be limited for Botswana as a high middle-income country, the Ministry of Finance does not currently maximize its access to multilateral development bank financing for lower cost external financing.65 Concessional funds could be unlocked through direct co-financing of MDB loans. These could provide long-term finance and targeted subsidies. Additionally, blended finance instruments such as concessional credit, first loss guarantees, partial portfolio guarantees, could crowd in private capital by derisking or lowering the breakeven of climate-related investments. Such blended financing can support PPPs and other climate-related projects. Government institutions, such as the National Development Bank of Botswana, could play a critical implementing role. As a small institution (with only about US$108 million in total assets as of March 2024)66, the Bank would need to build capacity and 64 BPOPF has one participation in a coal-based methane company. Methane has a greater climate warming potential than Co2 but has a shorter lifespan of around 100 years (against thousands of years for Co2). 65 For reference, a USD loan from IBRD of 12 years with a five-year grace period would be 4.79 percent fixed rate as of May 9, 2025, versus 5.16 percent fixed for similarly rated countries (BBB+) as Botswana, and Botswana may pay a higher premium for an external bond issue since it has not issued Eurobonds before. 66 See the 2024 Annual Report for further details: https://www.ndb.bw/sites/default/files/downloads/2023- 2024%20NDB%20Annual%20Report.pdf. 71 scale up operations. But utilizing existing institutions would likely be more efficient than creating new government-owned funds or enterprises. Botswana can also explore mobilizing donor funds via sustainability-linked loans (SLLs). Such loans offer lower interest (or performance-based grants) when key performance targets, such as decarbonization or sustainability goals, are met. Also, the MOF could consider an offshore sovereign sustainable (or sustainability-linked) bond or loan with credit enhancement structured to improve the pricing and tenor of the debt.67 In the case of an SLL or SLB, the MOF can raise needed funds in a flexible format in terms of how the money is deployed, but at the same time commit to ambitious climate-related targets that incentivize strong performance. Botswana can also explore raising funds for climate investments, and building financial system appetite for sustainable assets, by issuing green and sustainability-linked bonds. Botswana has a large financial sector, comprising 130 percent of GDP, and a very large portion of this is in the pension system (54 percent of GDP). The domestic capital markets are relatively small and illiquid. So it may be possible to tap the institutional investor funds through green and sustainable financing instruments issued by the sovereign, or by state-owned entities and corporations. Green bonds and other financing mechanisms could attract investment in areas like renewable energy, energy efficiency, and smart grid technologies. In addition, developing bankable projects would increase investor confidence to encourage international investment in green and sustainable local currency financing, the MOF may explore ways in which it can backstop currency risk to mitigate against volatility in the Pula against hard currencies such as the US$ and EUR. This could provide a form of hedge for investors to take longer-term Pula risk, given that the currency is not actively traded with no real swap market for managing currency risk. Worth noticing, the GoB approach to its statutory domestic debt limit constrains the issuance of innovative financing, but alternative solutions could also be explored. On the current trajectory, the total debt limit could be breached within a couple of years. This could restrict the issuance of innovative financing instruments. Raising the debt limit would not be wise while the budget is on an unsustainable trajectory, making crucial to move towards serious fiscal consolidation and enhance PFM practices. Green and sustainable bonds have just started to be listed on the Botswana Stock Exchange. The Botswana Stock Exchange (BSE) has set up a conducive environment for sustainable issuances, such as a GSS framework, and has reduced listing fees for issuers.68 Interest in such issuances is growing in the banking sector, and a first sustainable bond was listed in October 2023.69 This issuance has, however, not rewarded the issuer with a lower yield (a green premium, or “greenium�) 70. This can be explained by investors’ lack of trust in the green credentials of the bonds issued, and in the absence of a bidding framework or taxonomy of activities. The government, which has recently increased the ceiling on its debt issuance program, envisages to stimulate this market by issuing green bonds within the next two years. Carbon markets are still nascent in Botswana and do not yet have a proper framework. Botswana has only two projects currently registered on the Verra and Gold Standard platforms (an AFOLU and a pico- solar project); both are under validation. The 2021 Climate Change Policy articulated plans for exploring international carbon markets and for considering the potential for domestic carbon pricing instruments, such as a carbon tax or an Emissions Trading Scheme. The government now is developing a strategy 67 Given the sovereign has not issued external debt in the recent past, enhancement may have value despite the country’s investment grade credit rating. See S&P Global’s latest credit rating assessment of Botswana of March 14, 2025, at: https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3338146. 68 It offers a 25 percent discount, with third party verification fees. 69 ABSA has issued P47.4 Million (US$ 3.5 million) under its P2.0 Billion MTN Programme 70 See “Identifying greenium�, UNDP. 72 for participating in carbon markets that could provide greater clarity for participants and unlock an additional source of revenue for low-carbon projects, especially in rural areas (off-grid projects). In addition, the government may explore participation in other environmental attribute certificate markets, such as those for international renewable energy credits. A final area of consideration in financing is contingency funding for unforeseen climate shocks. The country has a long history of floods and droughts, but the magnitude, frequency, and impacts of these events are increasing.71 The MOF, therefore, can consider developing a more robust layered approach to covering these risks. The approach can include basic budget allocations for high frequency, low damage events; arranging contingent funding from institutions like MDBs to provide resources to backstop government programs (or a dedicated fund) to cover medium risk, medium damage events; and paying premiums on catastrophe insurance to cover high damage, low-frequency climate-induced events. Again, MDB financing could be used to cover such insurance premiums and help to fund the design of the new insurance products. Botswana could also join the regional insurance body, the African Risk Capacity (ARC).72 6.3. Policy options to unlock climate finance opportunities The poor development and diversification of the private sector, especially MSMEs, is hindering the implementation of Botswana’s NDC and climate investments. Most of the solutions needed to implement Botswana’s mitigation investments are outside of Botswana’s most developed economic sectors, such as mining. To date, large renewable energy projects have been implemented by large foreign companies73 or development finance institutions (DFIs. Smaller projects and solutions have been less easy to develop because of the lack of local MSMEs. Furthermore, renewable energy projects require the local presence of many actors in their value chains, including equipment importers, retailers, and maintenance providers. Green mobility also requires a number of MSMEs in its value chain, including battery procurement, maintenance, replacement, and disposal, and the provision of a network of charging stations. Improving MSMEs’ access to finance would therefore help implement Botswana climate investments. First, financial players financing MSMEs need easier access to funding. The government could study developing a lending facility to non-bank financial institutions (NBFIs) extending loans to MSMEs. The facility could also support lending from banks to NBFIs in times of liquidity crunches. Decreasing NBFIs borrowing costs could be an alternative strategy, mainly through the creation of NBFI deposit-taking status that would allow them to decrease their funding costs.74 Second, the government could explore guaranteeing direct and indirect exposure of the financial sector to MSMEs through mechanisms such as (i) a public partial portfolio guarantee on microlenders and banks’ loan books to MSMEs or (ii) a partial guarantee to banks on wholesale loans to MSME finance companies. Finally, the government could leverage the recent introduction of the Movable Property Securities Interest Act in 202175 to encourage leasing companies to finance the decarbonization of the transportation sector. In addition, alternative financing instruments could also be introduced, such as digital micro-loans,76 crowdfunding, debt platforms, or mini bonds. The government could also consider easing conditions for private equity 71 See: https://climateknowledgeportal.worldbank.org/sites/default/files/2021-05/15721- WB_Botswana%20Country%20Profile-WEB%20%281%29.pdf. 72 See: https://www.arc.int/. 73 Scatec, Botala Energy or Tlou Energy Ltd for instance. 74 Long-term finance, FSAP, IMF, 2023. We note that the new banking law (2023) seems to authorize NBFIs to apply for a deposit taking license. 75 This new allows the usage of movable collateral to access finance. 76 IFC has invested US$40 million in Peo Finance Propriety to expand access to finance for MSMEs and scale up micro loans for agricultural or home improvement activities. 73 companies by reducing taxes for investment in start-ups. For example, it could allow tax-free profits or the deduction of investments from income tax when exiting such investments. The government lacks a climate finance strategy to facilitate the development and financing of climate- resilient and mitigating infrastructure investments. A comprehensive strategy could clarify the roles of ministries and state-owned financial institutions (SOFIs) in facilitating, de-risking, financing, and owning green assets. It could identify methods for organizing the procurement of small and large bankable infrastructure projects, and for using green finance instruments (green bonds, SLLs) and public money to attract private sector investment in these projects. This strategy could also lay out a plan to strengthen the balance sheet of the SOFIs that will be designated to originate and hold green assets, and would allow them to issue green, social, and sustainable bonds with a potential guarantee from DFIs. Such a strategy would lay the groundwork for greater consistency in developing infrastructure projects. The strategy is needed to provide asset managers, who are investing on behalf of asset owners (insurance companies and pension funds), with a committed, consistent, sizable project pipeline build capacity that enables them to invest in alternative asset classes, such as infrastructure. Rural and vulnerable populations could reduce their exposure to climate risks if national disaster risk finance mechanisms were in place. Disasters such as floods and pandemics have significant impacts on rural communities and the informal sector, including micro-enterprises. These groups have limited coping options beyond personal savings, as they often lack access to labor protections, social insurance, and risk transfer mechanisms such as insurance. Uptake of insurance remains low due to high costs, limited awareness, and the absence of products tailored to the rural poor. The government could strengthen social safety nets that target the most vulnerable during shocks and implement job interventions (for example, cash-for-jobs programs). The absence of formal property deeds further exposes households to natural disasters, since people risk losing their homes while they are still repaying consumption loans used to build or improve those homes (particularly when repayments are deducted at source). A compulsory insurance premium (for example, 0.1 percent) attached to consumption loans — adjustable according to income and loan size — could be collected through a national mechanism to purchase disaster insurance from local insurers. With support from development partners and the government, the scheme could also procure parametric flood insurance to provide greater coverage in the event of a large flood. Adopting a clear strategy for the renewable energy sector would help build trust from project developers, IPPs, and investors. The government would benefit from drawing a clear roadmap to attract investors and build their confidence. It could therefore establish a consistent national energy policy with clear targets, underpinned by the principles of least cost planning. Exploring new business models and blended finance could support expanding energy access. Botswana aims to achieve universal energy access by 2030. Remote rural consumers who are yet to be connected (about 25 percent of the population) are likely to rely on distributed renewable energy solutions. Exploring new business models which diversify risks across different categories of consumers, as well as blended finance solutions that can ensure affordability of power off-take for rural households, can help achieve this important target. Given the composition of Botswana’s external debt, debt-for-climate swaps do not appear relevant for financing climate investments. Interest has grown in debt-for-climate (DFC) swaps to address both debt sustainability and nature conservation, with recent examples in Gabon and Ecuador (2023), and in Belize and Barbados (2022). Creditors provide debt relief in exchange for the government s’ commitments to undertake climate-related investments. Thanks to decades of budget surplus mostly generated by its natural resources extraction sector, Botswana currently has acceptable levels of debt (35 percent of the GDP) and external debt of US$ 3.8 billion (near 19 percent of the GDP), mostly split 74 between loans from DFIs and government loans from Kuwait and more recently, from Japan (for Covid- 19).77 Given the debt structure and its owners, as well as the complexity and costs associated with a DFC-swap, such instruments do not appear as an interesting option for Botswana. The rationalization of public assets under PFM reform could help mobilizing additional resources and alleviate public debt. Botswana could conduct and inventory assessment of the current state of existing public assets. This would allow assessing adaptation investment needs to strengthen the resilience of public sector assets but also could help exploring alternatives for selling or leasing existing public assets (such as infrastructure, land, or state-owned enterprises), which would unlock significant revenue mobilization. 77 Table VII: Medium- and Long-Term External Debt Outstanding (Ministry of Finance, 2025). 75 7. The Way Forward: Prioritized Policy Packages and Financing Action 76 7. The Way Forward: Prioritized Policy Packages and Financing Action To tackle development and climate challenges, this CCDR proposes a strategy around three main pillars: (1) Moving towards high-income country status through private sector-led economic diversification, enhancing public sector efficiency, and modernizing public services. (2) Adapting to climate change by enhancing resilience in key sectors, adopting institutional reforms, improving coordination in the public sectors, and mobilizing civil society. Stronger resilience to climate shocks also includes integrating climate goals in public spending and infrastructure expansion. (3) Harnessing opportunities for decarbonizing the economy by developing renewable energy. These pillars are complementary as there are benefits in their simultaneous implementation. Policies promoting green growth will also support economic diversification and broader-based growth, while climate-smart agriculture investments can also raise the sector’s low productivity. Measures in Pillar 1 will increase resilience to shocks by promoting higher growth and economic diversification and by creating more effective public sector services. Table 6 lists the specific policy recommendations emerging from this CCDR, grouped under the three pillars. The recommendations take into account Botswana’s institutional and regulatory capacity as well as the financing options for implementing the policy and investment packages, while emphasizing the need to leverage the role of the private sector. In addition to the three proposed pillars, specific policy actions are recommended to boost financing for climate action. The criteria for splitting recommendations into short-term (within a 1–2-year time horizon) and medium-term (over 3 to 5 years) include immediate fiscal consolidation needs, the urgency of policy actions for development and climate goals, the time required for certain reforms to produce results (such as education reforms), and the availability of reforms that entail no financial cost, consistent with the urgency of fiscal consolidation. The table also presents the entities responsible for implementing the suggested policy actions. 77 Table 6. Selected policy actions supporting the pillars to more robust and sustainable growth Pillar Priority Area Policy Recommendations Responsible Entity Short-Term (1-2 years) Medium Term (3-5 years) • Reduce the weight of the public sector wage bill by • Complete functional reviews to identify overlaps, M. of Finance; M. of setting a fiscal anchor linked to fiscal objectives; consolidate units, and redeploy staff to service Labor and Home implementing freezes or caps on allowances and delivery; (Ministry of Labor and Home Affairs) Affairs; Ministry of 1: Moving towards high-income country status through private-sector-led overtime payments; undertake payroll-personnel Local Government; reconciliation to eliminate “ghost workers� and • Reduce ad-hoc negotiations on public sector MDAs economic diversification and effective public service provision dual payees and conduct regular “proof-of life� remunerations by establishing an independent checks; (MoF and Ministry of Labor and Home arm’s length advisory mechanism to inform annual Affairs) pay adjustments (MoF) • Reduce transfers to SOEs, particularly in energy • Strengthen and upgrade FMIS (GABS) and data and transportation, and rationalize sovereign systems integration to prevent leakages, allow for Fiscal consolidation to guarantees on SOE borrowing (MoF) audit trails and improve forecasting (MoF) achieve macroeconomic • Accelerate the rollout of the Single Social Registry to all households to improve targeting, reduce stability, reduce public administrative costs and overcome fragmentation debt and replenish in social protection services (Ministry of Local fiscal buffers to Government) withstand shocks • Consolidate public investments to prioritize public high-impact productivity enhancing and resilient investments and institutionalize rigorous project appraisal, transparent selection, and systematic monitoring to lift investment efficiency and development returns (MoF) • Mandate a consolidated reporting of total compensation per position and (MDAs under coordination of MoF) • Re-organize public sector services to align it with • Provide training to fully implement the 2021 Public National Planning Improving the quality of key objectives, including climate (National Procurement Act (MoF in conjunction with the Commission; MoF; public expenditure, and Planning Commission) Public Procurement Authority) Ministry of Trade; aligning with Public Procurement Botswana’s climate • Formulate a comprehensive SOE/BOS Ownership • Introduce new technologies to facilitate intra- Authority; Ministry of agenda Policy, to rationalize the presence of public sector government cooperation and collaboration and the Telecommunications in the economy, ensure the separation between timely exchange of information to ensure and Innovation 78 commercial and non-commercial roles of SOEs, transparency as well as enhance the provision of strengthen SOE governance by adopting e-services (Ministry of Telecommunications and international best practices; improve transparency Innovation and Accountant General of MoF) and accountability by mandating the release of financial information on a regular basis, and • Mandate BOSs to embed climate objectives in assess implicit and explicit support to SOEs/BOS their decision processes for major investments, in and privately owned firms (MOF) particular to (i) avoid carbon-lock-in (i.e., long-term investment in carbon-intensive technologies); and (ii) promote the application of carbon-efficient technologies and processes (Ministry of Trade) • Improve market contestability by strengthening • Adopt a dedicated investment policy and law, MoF; Office of the regulatory oversight, reducing entry barriers and strengthen investment dispute resolution and President; Ministry of the cost of doing business: ease restrictions that deter FDI, including Trade; Ministry of facilitating work permits and lifting sector Communication and • Remove the preferential treatment of SOEs (MoF, reservations and domestic preferences in Innovation; Office of the President) procurement (Ministry of Trade). Competition Authority; BITC • Improve pro-competition regulation and ensure its • Promote synergies between MNEs and local firms implementation in key input markets that are key to transfer technologies and competencies for overall productivity and competitiveness such (Ministry of Trade) as in telecommunications, and transportation; in energy, accelerate reforms to promote private • Strengthen product standards, testing, and sector participation and pro-competition certification systems to help firms meet market regulations (Ministry of Trade; Competition requirements, promote exports and integration Authority) into value chains (Ministry of Trade) Encouraging dynamic • Simplify business registration by eliminating • Facilitate high-growth potential startups, access to firm creation and redundant permits and licenses (Ministry of Trade risk capital, business training and mentorship, and growth and BITC) skill (Ministry of Trade) • Introduce digital platforms to reduce time and cost • Improve the competitive environment by i) for starting a business (Ministry of Communication updating the Competition Act to include statutory and Innovation in coordination with (Ministry of monopolies under the remit of the Law, such as Trade and BITC) utility markets, clarify and strengthen legal definitions (eg. abuse of dominance, introduce • Embark on a trade reform agenda to move away market share thresholds, and sanctions for abuse from an import substitution tilt and lift bans, of dominance) and limit ministerial discretion in quotas, including in FDI, and high “infant industry� granting exemptions and influence in merger tariffs in food products to shift firms’ focus from control decisions; ii) providing the Competition and the small domestic market to exports; work within Consumer Authority with adequate resources to SACU to reduce relatively high external tariffs on enforce competition rules, extend its many intermediate inputs that raise production competencies to subsidy oversight, and enhance costs, particularly in manufacturing (Ministry of the use of dawn raids, fines and settlements as Trade) deterrence mechanisms 79 • Upgrade core infrastructure and logistics by • Use new technologies to improve urban planning Ministry of Transport accelerating private sector participation in and facilitate information flows; develop specific and Infrastructure; transport and electricity to reduce costs and initiatives to link poor urban communities to MoF; Ministry of reliability bottlenecks, promote competitiveness markets (physical and digital) (Ministry of Lands; Telecommunications and export growth (Ministry of Transport and Ministry of Local Government and Ministry of and Innovation; Infrastructure and MoF) Telecommunications and Innovation) Ministry of Lands; Enhancing connectivity Ministry of Local • Explore the possibility of establishing agreements Government with Low Earth Orbit (LEO) satellite providers to provide an additional fail-safe layer of connectivity during climate-induced disruptions that affect fiber or mobile network (Ministry of Telecommunications and Innovations • Develop smart partnerships with the private sector • Allocate sufficient capital budget for equitable Ministry of Higher to enhance workplace-based learning (WBL) adaptation investments in school infrastructure Education, Research, (Ministry of Higher Education, Research, Science (MoF and Ministry of Basic Education) Science and and Technology) Technology; Human • Strengthen foundations of learning (early Resources • Scale up successful pilot programs in high demand childhood education, early grade reading and Development Council; Developing skills in the labor market (Human Resources math) (Ministry of Basic Education) MoF; Ministry of Basic Development Council) Education • Open training programs with private providers focused on skills for the future (digital, green skills, STEM related fields, medical work; as well as entrepreneurship and soft skills) (Ministry of Basic Education) • Improve digital financial services (DFS) by • Implement the National Entrepreneurship Policy MoF; Bank of developing fast payment services through the and e-commerce strategies (Ministry of Trade) Botswana; Ministry of payment switch (MoF and Bank of Botswana) Trade; NBFIRA • Implement the financial inclusion roadmap • Implement targeted reforms to foster competition Improving access to in the SME credit market for example by finance establishing an arm’s-length wholesale facility to provide funding to regulated non-bank lenders (and banks as needed) for MSME on-lending; pair it with TA to help lenders design MSME-focused products and improve risk management (MoF, Bank of Botswana in coordination with NBFIRA) 80 • Ensure that adaptation responses embed local • Introduce comprehensive, overarching, and Ministry of concerns, vulnerabilities, and capacities (MDAs) integrative framework legislation that defines Environment and multi-sector responsibilities in climate change Tourism; MoF; Bank of • Develop Green Finance Frameworks: Create policy, the institutional architecture, governance Botswana: Stock guidelines to facilitate green bonds, green loans, mechanisms, promotes coordination among Exchange; Ministry of and other innovative financing mechanisms to actors and creates oversight mechanisms Basic Education; attract private capital to climate-related projects (Ministry of Environment and Tourism) Ministry of (MoF in cooperation with the Bank of Botswana telecommunications; and Stock Exchange) • Strengthen civil society’s role in climate action Ministry of Minerals; (Ministry of Environment, Ministry of Basic MDAs. Institutional • Enhance strong intra and intersectoral Education, in cooperation with climate NGOs) strengthening coordination to implement climate-smart actions (MDAs under the leadership of the Ministry of • Expand and improve early warning systems for Environment and Tourism) extreme weather events, ensuring that vulnerable populations receive timely and accurate • Encourage the private sector to provide climate information to prepare and respond effectively, risks management strategies to the communities reducing disaster-related casualties and fostering where they operate as part of their emergency long-term climate adaptation. (Ministry of preparedness (Ministry of Environmental and Environment and Tourism in cooperation with Ministry of Minerals) Ministry of Telecommunications) • Reduce non-revenue water. Early assessments • Strengthen institutional coordination in line with Ministry of Water and suggest this may require capital investments of the National Water Security Strategy; (Ministry of Human Settlements; approximately $147 million (CAPEX) and additional Environment and Tourism) MoF; Ministry of 2: Adapting to climate change and $16 million/year (OPEX), assuming 1 Mm³/year of Environment and water saved in key areas such as Lobatse and • Establish a National Water Fund to mobilize and Tourism; Ministry of Molepolole pool resources from public-private partnerships Local Government strengthening resilience (PPPs), concessional financing, and climate funds. • Scale up wastewater reuse and resource recovery. The Fund should be designed to support strategic Improve groundwater development and investments in water security, improve allocation management. Interventions such as wellfield efficiency, and bridge financing gaps for Water developments are estimated at $10 million in infrastructure rehabilitation, new storage, and CAPEX and additional $1 million/year in OPEX adaptation measures identified in national strategies (Ministry of Water and Human • Implement demand management incentives Settlements, MoF) • Strengthen real-time data systems • Improve water security by restoring wetlands, protect catchments (M. of Environment, M. Water, M. of Local Government) • Improve storage and water quality by managed aquifer recharge 81 • Promote private sector investment in sustainable • Promote farmers’ adoption of climate-smart Ministry of Agriculture irrigation systems taking into consideration water agricultural technologies and practices needs and spatial availability • Mainstream the use of digital-assisted decision • Promote and support uptake by farmers of support tools in extension service provision sustainable management schemes for natural resources (water, rangelands, and fodder) for • Scale-up adoption of improved feed management sustainable development of the livestock sector to reduce enteric fermentation in cattle • Review grazing by-laws in communal rangelands • Promote uptake of sustainable options for with the objective of establishing or revive livestock waste management (e.g. use of Agriculture implementation of rotational grazing plans on biodigesters) communal rangelands • Integrate indigenous knowledge on climate • Develop a prioritized and costed sectoral level adaptation and locally adapted solutions climate adaptation and mitigation framework • Enhance strong intra and inter sectoral coordination of the implementation of climate- smart actions • Diversify tourism offerings beyond luxury • Strengthen the sector’s regulatory framework by Ministry of experiences to attract middle-income customers introducing mandatory sustainability reporting, Environment and by promoting ecotourism and cultural tourism; establishing a national eco-certification program Tourism in cooperation for tourism operators, and developing a national with Ministries of • Foster partnerships with local communities to sustainable tourism strategy aligned with climate Transportation and develop and manage tourism initiatives mitigation and adaptation goals Energy • Invest in climate-resilient infrastructure and Tourism implement sustainable water management practices in key tourist areas such as the Okavango Delta (Ministry of Environment and Ministry of Local Government • Strengthen marketing efforts to highlight Botswana's unique attractions and improve accessibility to these destinations 82 • Review the legislation and policy documents • Develop a DRM strategy that integrates social Ministry of Local related to social protection to integrate the protection with early warning systems (M. of Government and impacts of climate change Environment and Tourism and M. Local Traditional Affairs; Government) Ministry of • Implement a social protection expenditure review Environment and to reallocate inefficient programs and incorporate • Link the Single Social Registry to a robust Tourism) Social protection parametric triggers for cash transfers during payments system to enable easy and timely droughts or floods to enhance climate resilience. payments, including those affected by climate This review would seek to rationalize the existing shocks social safety net to avoid administrative duplication and reallocate funding towards the poorest households • Improve climate literacy by combining local and • Create inclusive spaces for community input, Ministry of Basic scientific knowledge in education programs and drawing on traditional leadership and local Education; Ministry of create inclusive spaces for community input, knowledge. Promote women’s leadership and Local Government and drawing on traditional leadership and local ensure climate policies reflect their roles and Traditional Affairs, knowledge (Ministry of Basic Education, Ministry of needs. Coordinate across sectors and engage civil Ministry of Agriculture; Local Government and Traditional Affairs, Ministry society in inclusive climate action. Improve climate Ministry of of Agriculture; Ministry of Environment and literacy by combining local and scientific Environment and Tourism) knowledge in education programs (Ministry of Tourism; Ministry of Social development Education, Ministry of Environment and Tourism, Gender Affairs; Ministry • Support smallholder farmers and pastoralists with Ministry of Agriculture; Ministry of Gender Affairs) of Water; Ministry of resources and incentivize the use of good Minerals, Green practices and indigenous knowledge (Ministry of • Ensure fair water access and address resource- Technology and Energy Agriculture). related conflicts (Ministry of Water) Security • Develop inclusive, transparent systems for equitable and sustainable green mineral use (Ministry of Minerals, Green Technology and Energy Security) 83 • Evaluate coal expansion plans and compare costs • Invest in grid upgrades and transmission and Ministry of Energy and benefits of meeting future demand growth distribution (T&D) infrastructure to enable through renewables effective integration of VRE • Develop a coherent national energy policy • Create a pipeline of BESS investments that can consistent with least-cost planning principles to ensure system reliability provide a credible strategy for electricity sector development that can attract private investment 3: Harnessing green growth opportunities Energy • Enhance the visibility of renewable energy project pipelines; establish reliable procurement timelines; strengthen coordination between public entities and market participants to diversify the electricity mix and enhance resilience of the system • Accelerate achievement of universal and affordable access to electricity based on geospatial least cost planning • Explore co-benefits in increasing agriculture output Ministry of Agriculture while reducing emissions intensity by promoting sustainable herd increase through adopting optimal carrying capacity; promoting the use of methane-reducing technologies, including low- methane breeds exploring genetic and breeding improvements in cattle; and promoting carbon Agriculture sequestration in landscapes, which can offset emissions at source • Conduct an in-depth study of the vulnerability of the different economic sectors to physical and transition risks and explore genetic and breeding improvements in cattle 84 • Develop a climate finance strategy that clarifies • Improve MSMEs access to finance by institutional roles, organizes procurement for guaranteeing microlenders/SME finance infrastructure projects, defines the government’s companies/banks through public partial portfolio strategy to attract private investments, leverages guarantee on their exposure to MSMEs or by green finance instruments such as bonds, and partially guaranteeing banks on their wholesale strengthens the balance-sheet of SOFIs identified lending to microlenders (MoF, Bank of Botswana, to own and finance climate infrastructure projects Ministry of Trade) 4: Develop climate finance • Review and approve the Green Social and • Explore solutions to limit the transfer of physical Sustainable Framework introduce by the Botswana risks implied by the deduction at source Stock Exchange for GSS bonds listing as part of the mechanism from the financial sector to financial sector development strategy households such as a national scheme subscribing insurance against floods through a • Issue guidelines to help the financial sector to systematic small contribution on consumption understand and assess climate risk exposure loans (see examples for mandatory earthquake insurance FSEC, Morocco; DASK insurance in Türkiye) (NBFIRA and MoF) • Explore the creation of rules to streamline climate risks into the investment strategy of pension funds and insurance companies to incentivize them to invest in climate change resilient assets, including listed sustainable finance bonds (social, green, blue, conservation). 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