A political risk analysis of Botswana
Often the most attractive investment opportunities sprout from politically troubled countries. To better gauge the profitability of investments in countries riddled with political troubles, a political risk analysis is required. Although academic studies of political risk analysis usually seek to analyse countries with severe political risks, this study seeks to diverge from the status quo. Instead, this study explores an African country known for its good political environment. Botswana presides over a reputation of good governance and a stable economy while also being one of the top diamond producers in the world. Despite this image, this study argues that there are two reasons to conduct a political risk analysis of Botswana. First, a number of ‘under-the-radar’ events suggest that the peaceful surface might conceal a troubling undercurrent that could point to future political risks. The best way to sufficiently scrutinise the validity of this concern is to conduct a political risk analysis on Botswana using indicators that would detect any troublesome undercurrents. Second, political risk analysis is about reporting on political risks that might negatively impact an investment in a seemingly profitable industry. Therefore, this study argues that political risk analysis should not be limited to countries with the worst political standings but to all countries regardless of their reputation. Even stable, prosperous countries like Botswana may hold political risks that should be scrutinised by political risk analysis. On the backdrop of the abovementioned, this study uses a synthesis of some of the foremost political risk models and applies the synthesised model, with two additional indicators, on the case of Botswana to determine exactly which contemporary political, social, or economic conditions, events and role players may pose a particular or general risk to both the political and economic stability of the country. Ultimately, the study found that at the heart of Botswana’s political risks lies the issue of water security, the staleness and dominance of the ruling party, an array of worrisome social conditions, and continued overdependence of diamonds. Although Botswana has been praised for its good governance and economy, this study found that it still presents a number of political risks and compares relatively ill to other upper- middle income countries.