Why Botswana’s Economy Is Sending Mixed Signals
BY DR DOUGLAS RASBASH
Botswana’s economy is growing again. At least that is what the latest GDP figures just published by Stats Botswana tell us. After a turbulent 2025 and a fourth-quarter contraction of 5.4%, the economy expanded by 3.5 percent during the first quarter of 2026. On paper, that sounds like the beginning of better times.
Positive GDP growth is usually associated with recovery, renewed confidence and rising prosperity. Yet across Botswana the mood feels very different. Businesses remain cautious. Households are tightening their belts. Investment continues to fall. Government is cutting expenditure. Debswana is restructuring its operations and reducing costs. Employers remain reluctant to recruit, while consumers are becoming increasingly selective about how they spend every pula. For many families, life simply does not feel like an economy in recovery.
MIXED SIGNALS
This raises an obvious question. How can an economy be growing when so few people appear to be experiencing the benefits? The answer lies not in politics, nor in public perception, but in one of the most misunderstood concepts in economics. GDP measures production. It does not necessarily measure prosperity.
That distinction is more important than many people realise. The accompanying infographic tells the story far better than the headline GDP number alone. The first thing your eye notices is the large green arrow at the top of the page. GDP increased by 3.5 percent. If that were the only statistic available, we might reasonably conclude that Botswana had entered a period of broad-based recovery.
DEMAND FALLS
But then your eye moves across the 2nd Republic Policy Think Tank’s dashboard. Household consumption fell by 3.2 percent. Business investment declined by 10.4 percent. Exports contracted by 36.5 percent. Suddenly the picture changes. Instead of looking at an economy driven by growing demand, we find an economy where almost every major indicator of demand is pointing downwards.
So where did the growth come from? The answer sits almost unnoticed in the middle of the dashboard. Inventories increased by more than P6 billion. At first glance that sounds encouraging. More goods have been produced. More diamonds have been mined. More economic activity has taken place. But inventories are simply goods that have been produced but not yet sold.
UNSOLD GROWTH
Imagine a farmer harvesting a bumper crop but leaving much of it in the barn because buyers have not yet arrived. The farmer has certainly produced more. But he has not earned more income until someone purchases the crop. The same principle applies to diamonds. If Debswana extracts another million carats, GDP immediately increases because production has occurred. But if many of those diamonds remain in storage awaiting buyers, they become inventories. They add to GDP today without generating export earnings, tax revenue or household income until they are eventually sold.
This is why economists often say that GDP measures production rather than sales. The distinction may sound technical, but its consequences are very real. It explains why positive GDP growth can coexist with weak business conditions, subdued consumer confidence and falling investment. It also explains why many Batswana are struggling to reconcile the official statistics with their own daily experience.
CAUTION SIGNALS
The behaviour of Botswana’s largest institutions reinforces this picture. If business leaders genuinely believed that demand had returned, they would be expanding factories, ordering new machinery, recruiting workers and borrowing to finance future growth. Instead, many are doing the opposite. Debswana has embarked on a significant programme of cost reduction and operational restructuring. Faced with a prolonged period of weak global diamond demand, it is focusing on efficiency, postponing selected expenditure and reshaping its workforce through voluntary separation programmes.
Government is behaving in much the same way. Rather than increasing expenditure, it has tightened spending controls, strengthened oversight of public finances and introduced measures aimed at containing the long-term growth of the public service wage bill. Neither institution is behaving irrationally. Both are responding prudently to the same economic reality.
ACTIONS MATTER
Actions often tell us more than statistics. Economists call this revealed preference. Rather than asking what organisations say, observe what they actually do. Companies expecting strong demand recruit. Companies expecting weak demand reduce costs. Governments expecting buoyant revenues expand spending. Governments expecting prolonged fiscal pressure consolidate expenditure. Both Botswana’s largest company and Botswana’s largest employer are signalling caution. That should make us equally cautious about interpreting one quarter of positive GDP growth as evidence that the economy has fully recovered.
BEYOND GDP
Fortunately, Botswana already has a better framework for measuring success. The Botswana Economic Transformation Programme is not simply about increasing GDP. It is about creating a more productive, competitive and diversified economy that generates sustainable jobs, stronger exports, higher investment and rising household incomes. Those are the indicators that ultimately matter.
If household consumption is falling, investment is declining, exports remain weak and business confidence is subdued, then the economy has not yet achieved the transformation the programme seeks. That does not diminish the importance of the recent GDP figures. Stabilising production after a difficult year is welcome. Increased output today may yet become increased exports tomorrow if international demand strengthens.
THE REAL TEST
But inventories should be viewed as a bridge, not as the destination. A warehouse full of diamonds is not prosperity. Prosperity begins when those diamonds leave the warehouse, earn foreign exchange, generate government revenue, stimulate new investment, create employment and improve household incomes. That is the difference between statistical growth and economic transformation.
Botswana has taken an encouraging first step by returning to positive production growth – at least for a single quarter. The next step is much more important. The challenge now is to convert production into sales, inventories into exports, investment into jobs and GDP into improvements that ordinary Batswana can see in their businesses, their pay packets and their communities. Until that happens, the latest GDP figures will remain exactly what many citizens already sense them to be – the growth nobody feels.