In 1966 at the time of independence, Botswana was ranked as one of the 20 poorest nations in the world. Since then the economy has become among the strongest in Africa, averaging an annual growth rate of more than 10% during the 1976–1991 period. This was due primarily to the discovery and exploitation of huge mineral resources, most notably diamonds. Mining has transformed the economy; Botswana is now Africa's third-largest mineral producer. The nation's infrastructure and manufacturing sector have been improved, while social services have been expanded. Job creation has been impressive as well, with formal sector employment growing at nearly 10% in the years since independence.
Growth at these high levels, especially when it is predicated on a expansion in one particular sector, is hard to sustain. Thus it is not surprising that Botswana's economy cooled down during the 1990s, but nevertheless maintained a respectable 4–5% annual expansion. The government had anticipated this slowdown in its development planning and adjusted budget items accordingly. In February 1997, the government unveiled its seventh National Development Plan, which was the blueprint for the economy through 2003. It emphasized sustained and sustainable economic diversification, encouraging private sector growth.
Unemployment is perhaps the single most troublesome factor on the economic horizon. Because of a decrease in the number of Batswana working abroad and a reorganization of parastatal enterprises, some 21% of Batswana are unemployed. Job creation has slowed to a crawl, with some estimates putting it at only 1% in recent years. The government was also forced to scale back a planned expansion of the mining sector due to a lack of skilled labor in the country. There has been a rapid population influx to the cities from rural areas, but these are largely unskilled workers whose contribution to the growth of the economy is negligible and whose presence has strained social and government services. In April 1998, in response to these factors, the administration embarked on an ambitious public sector spending program; 3.5 billion pula ( US $1 billion) was earmarked to build schools, clinics, and offices.
A growing concern across Africa is the spread of AIDS. In his annual state of the nation addresses, Mogae refers to the challenge of dealing with the epidemic. According to the United Nations (UN), Botswana has the highest rate of infection in the world, with more than 30% of all adults in Botswana infected with the virus that causes AIDS and about 50% of all nonaccidental deaths attributed to AIDS. In the 1990s, average life expectancy dropped from the mid-60s to 39 years, according to the U.S. Census Bureau. The country's workforce has been dying in frightening numbers. To combat the epidemic, Mogae has implemented a widespread program of providing AIDS medicine through the public health service. He plans to spend around US $200 million on AIDS medicine from 2002 to 2007. This initiative is the first sponsored by an African government.
Another serious issue facing the country is the international controversy over the role of diamonds in civil conflicts in Africa, especially in Democratic Republic of the Congo, that affects the market for all African diamonds.
The Mogae government continues to encourage foreign investment in the national economy and has developed partnerships with some international corporations. Diversification will depend, in part, on increasing economic investment from abroad. Economic ties to other southern African countries have proven beneficial in the past and there is no reason to expect these ties to erode in the future.