Without urgent policy shifts, Botswana is not on the path to prosperity but on the highway to stagnation, writes DOUGLAS RASBASH
The government has set its sights on Botswana becoming a high-income country by 2036, a vision that, on paper, promises prosperity and economic transformation.
But the harsh reality, backed by economic data and long-term projections, suggests that this goal is less a strategic target and more a grand delusion – a dangerous miscalculation of the country’s structural weaknesses and overreliance on a failing economic model.
For decades, economic success has been built on diamond mining, a sector that once catapulted the country from extreme poverty to upper-middle-income status. However, this golden era is fading. In Q3 2024, Botswana’s GDP shrank by 4.3% year-on-year, marking its third consecutive quarter of contraction. The biggest culprit is a reduction in mining and quarrying activity, with diamond trading suffering the sharpest fall.
Synthetic alternatives
This is not a temporary dip. Global demand for diamonds is shrinking due to synthetic alternatives, shifting consumer preferences, and economic slowdowns in key markets like China and the US.
As the government clings to the illusion of diamonds financing future growth, the numbers tell a different story: a structural decline that will accelerate economic hardship if diversification efforts remain ineffective. Per Capita GDP will be in freefall if current trends continue. Economic growth is not just slowing – it is contracting.
Instead of making progress towards high-income status, Botswana is moving in the opposite direction. The economy is increasingly reliant on public administration, wholesale & retail trade, and accommodation services, none of which generate the kind of high-value jobs and exports needed to sustain long-term prosperity.
The mirage of high-income status
For Botswana to achieve high-income status, per capita GDP must almost double from the current level of $7,329 in 2023 to $13,845 USD in the next few years. This would require sustained annual GDP growth of 7 to 10%, far beyond what Botswana has achieved in the last decade. Instead, recent trends indicate a multi-year contraction, making such growth highly improbable.
To obtain that level of growth, government rhetoric emphasises economic diversification, yet policy actions contradict reality. Despite climate change concerns, Botswana continues to double down on coal exports and fossil fuels, mostly ignoring the global shift towards renewable energy.
Let this be very clear: fossil fuels are a more expensive way to produce electricity and to transport people and goods. Our continued dependence on them is dragging the economy down. Manufacturing and agriculture remain weak and uncompetitive, unable to absorb job seekers from the shrinking mining sector.
Highly centralised
Meanwhile, technology and the 4IR – critical for modern economies – receive minimal support beyond lofty promises. The country’s reluctance to liberalise energy markets, support small-scale industrialisation, and embrace digital exports keeps it trapped in an outdated economic model.
The government remains highly centralised where local government receives just 14% of public sector spending, which is not a good strategy to breed empowerment and innovation. Simply put, the government to-date talks diversification but invests in stagnation.
The probability of achieving high income status
There has been much written about the issue over the years, but on this occasion your Gazette has attempted to model the probability of Botswana achieving high income status. For this endeavour, the well-known Monte Carlo simulation has been applied. Of course, the most important part of such modelling exercises are the assumptions made, and these are placed in the table.
When the simulation was run with the help of AI, a distribution of probabilities was produced, and this is given in the figure which shows that the highest probability would be that per capita income in 2030 would be $6,289.
This is a fall or 13% from the current GDP per capita of $7,239 pa. This is reasonable estimation, given the current economic trajectory. It could be a lot worse, considering the prospect of a tariff war depressing international trade.
A reckoning is coming
However, the harsh economic reality is that Botswana’s economic decline is accelerating. With no credible plan to replace lost diamond revenues, and with public sector spending masking deeper inefficiencies, the illusion of achieving high-income status by 2036 is a dangerous distraction.
Assuming that the structural change in the diamond market continues – as it shows every sign of so doing – the recession will be long term and structural, causing per capita incomes to fall as shown in the graph. If these trends continue, Botswana’s economy could face significant challenges by 2030, reinforcing the urgent need to diversify.
Instead of doubling down on delusions, policymakers must confront reality:
- Diversification must be real, not rhetorical. Investment should shift towards research, innovation, and out-of-the box thinking such as carbon credits as well as mega solar and data storage and away from heavy industry, transport hubs and mega projects.
- Importing talent is vital, through population building and relaxing migration, including digital nomads, not restricting movement.
- Monopolies and SOEs, which are mostly loss—making, must be broken up. The private sector needs greater participation in the economy to improve efficiency and competitiveness.
- Botswana must embrace regional and global integration. Tying the economy to outdated trade models is limiting growth. Any thoughts of protection to generate growth must be confined to the dustbin of failed strategies.
The Grand Delusion Must End
The dream of high-income status is not based on economic fundamentals but rather on political ambition and denial of reality. Without urgent policy shifts, Botswana is not on the path to prosperity – it is on the path to stagnation. The Budget must face this reality and avoid sugar-coating to improve its palatability. The electorate deserve nothing less.